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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended April 3, 2004
OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to ________
COMMISSION FILE NO. 0-17541
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PRESSTEK, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 02-0415170
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
55 EXECUTIVE DRIVE, HUDSON, NEW HAMPSHIRE 03051-4903
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(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (603) 595-7000
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(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 10, 2004, there were 34,393,309 shares of the registrant's common
stock, $.01 par value per share, outstanding.
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PRESSTEK, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets as of April 3, 2004 (unaudited) and
January 3, 2004 3
Statements of Operations for the three months ended April
3, 2004 and March 29, 2003 (unaudited)
4
Statements of Cash Flows for the three months ended April
3, 2004 and March 29, 2003 (unaudited)
5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
Item 4. Controls and Procedures 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRESSTEK, INC.
APRIL 3, January 3,
BALANCE SHEETS 2004 2004
(In thousands, except share and per share data) (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 31,608 $ 28,196
Accounts receivable, net of allowance for losses
of $1,754 and $1,892 in fiscal 2004 and 2003, respectively 16,010 14,922
Inventories 11,853 12,354
Other current assets 1,883 1,064
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Total current assets 61,354 56,536
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PROPERTY, PLANT AND EQUIPMENT, NET 44,099 45,732
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OTHER ASSETS:
Patent application costs and license rights, net 3,247 3,419
Other 1,420 841
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Total other assets 4,667 4,260
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TOTAL $ 110,120 $ 106,528
===================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 2,143 $ 2,143
Accounts payable 6,828 4,750
Accrued expenses 6,003 7,131
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Total current liabilities 14,974 14,024
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LONG-TERM DEBT, NET OF CURRENT PORTION 11,786 12,321
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
1,000,000 shares; no shares issued or outstanding -- --
Common stock, $.01 par value; authorized 75,000,000 shares;
issued and outstanding 34,367,517 shares at
April 3, 2004, 34,202,175 shares at January 3, 2004 344 342
Additional paid-in capital 99,045 97,769
Comprehensive loss (47) (47)
Accumulated deficit (15,982) (17,881)
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Total stockholders' equity 83,360 80,183
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TOTAL $ 110,120 $ 106,528
===================================================================================================================================
See accompanying notes to financial statements
3
PRESSTEK, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
APRIL 3, March 29,
FOR THE THREE MONTHS ENDED 2004 2003
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REVENUE:
Product sales $ 23,113 $ 21,289
Royalties and fees from licensees 201 1,153
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Total revenue 23,314 22,442
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COSTS AND EXPENSES:
Cost of products sold 14,532 12,952
Research and product development 1,676 1,950
Sales, marketing and customer support 3,138 2,854
General and administrative 2,268 2,744
Special charges (credit) (296) --
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Total costs and expenses 21,318 20,500
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INCOME FROM OPERATIONS 1,996 1,942
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OTHER INCOME (EXPENSE), NET:
Interest, net (15) (153)
Other, net (82) 1
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Total other income (expense), net (97) (152)
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INCOME BEFORE INCOME TAXES 1,899 1,790
PROVISION FOR INCOME TAXES -- --
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NET INCOME $ 1,899 $ 1,790
===================================================================================================================================
EARNINGS PER SHARE - BASIC $ 0.06 $ 0.05
===================================================================================================================================
EARNINGS PER SHARE - DILUTED $ 0.05 $ 0.05
===================================================================================================================================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC 34,266 34,142
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 35,149 34,186
===================================================================================================================================
See accompanying notes to financial statements
4
PRESSTEK, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
APRIL 3, March 29,
FOR THE THREE MONTHS ENDED 2004 2003
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CASH FLOWS - OPERATING ACTIVITIES:
Net Income $ 1,899 $ 1,790
Adjustments to reconcile net income to net cash provided by
operating activities:
Special charges (credit) (296) --
Depreciation and amortization 2,120 2,202
Provision for warranty and other costs 255 854
Provision for losses on accounts receivable (85) 455
Changes in operating assets and liabilities:
Accounts receivable (1,003) (2,105)
Inventories 632 1,232
Other current assets (819) (94)
Accounts payable 2,078 (490)
Accrued expenses (1,072) 357
Other non-current assets (645) (55)
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Net cash provided by operating activities 3,064 4,146
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CASH FLOWS - INVESTING ACTIVITIES:
Property, plant and equipment purchases (395) (373)
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Net cash used in investing activities (395) (373)
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CASH FLOWS - FINANCING ACTIVITIES:
Net proceeds from stock issuance 1,278 46
Repayments of term loan (535) (283)
Repayments of lease line of credit -- (472)
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Net cash provided by (used in) financing activities 743 (709)
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INCREASE IN CASH AND CASH EQUIVALENTS 3,412 3,064
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 28,196 17,563
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CASH AND CASH EQUIVALENTS END OF PERIOD $ 31,608 $ 20,627
===================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period
for:
Interest $ 109 $ 224
===================================================================================================================================
Income taxes $ -- $ --
===================================================================================================================================
See accompanying notes to financial statements
5
PRESSTEK, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
APRIL 3, 2004
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
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NATURE OF BUSINESS - Presstek, Inc. ("Presstek", or "the Company") is a
manufacturer, developer and marketer of digital laser imaging and chemistry-free
plate technologies for the printing and graphic arts industries. Presstek's
products and applications incorporate its patented direct imaging ("DI(R)"),
technologies and consumables for computer-to-plate, ("CTP") and direct-to-press
applications. The Company's subsidiary, Lasertel, Inc. ("Lasertel") is engaged
in the manufacture and development of high-powered laser diodes for the Company
and external customers.
The Company operates in two reportable segments, the Digital Imaging Products
segment and the Lasertel segment. The Digital Imaging Products segment is
primarily engaged in the development, manufacture and sale of patented digital
imaging systems and printing plate technologies for CTP and direct-to-press
applications. The Lasertel segment is primarily engaged in the manufacture and
development of high-powered laser diodes for Presstek and other customers.
BASIS OF PRESENTATION - The financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The unaudited financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The financial information included in this quarterly report should be read in
conjunction with the Company's audited financial statements and related notes
thereto for the fiscal year ended January 3, 2004. The January 3, 2004
information has been derived directly from the annual financial statements. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included and all such adjustments were normal and
recurring. Operating results for the three months ended April 3, 2004 are not
necessarily indicative of the results that may be expected for the fiscal year
ending January 1, 2005.
FISCAL YEAR - The Company operates and reports on a 52 or 53-week fiscal year
ending on the Saturday closest to December 31. Accordingly, the financial
statements include the thirteen-week periods ended April 3, 2004 ("the first
quarter of fiscal 2004") and March 29, 2003 ("the first quarter of fiscal
2003").
USE OF ESTIMATES - The Company prepares its financial statements in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities and
related disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during
the reporting period. The Company evaluates its estimates, including those
related to product returns, inventories, income taxes, warranty obligations, and
litigation on an on-going basis. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
REVENUE RECOGNITION - The Company recognizes revenue when persuasive evidence of
an agreement exists, delivery has occurred or services have been rendered, the
price to the customer is fixed or determinable, collection is reasonably
assured, and no future services are required.
6
The Company records revenue for product sales net of estimated returns, which
are adjusted periodically, based upon historical rates of return. Revenue and
related royalties for products sold where installation is not required is
recorded at the time of shipment. Revenue for products that require
installation, for which the installation is not deemed inconsequential, is
recognized upon completion of installation and customer acceptance. Revenue
related to service maintenance agreements is recognized ratably over the
duration of the particular contract. Certain fees and other reimbursements are
recognized as revenue when the related services have been performed or the
revenue otherwise earned. Deferred revenue includes certain customer advances
received as a result of the Company's distribution agreements. This revenue is
recognized as product is shipped or services are performed. The Company may
enter into multiple element arrangements. When equipment, consumables,
installation and maintenance agreements are contained in a single arrangement,
revenue is allocated to the various elements based upon the fair market value of
each element. Fair market value is generally determined based upon the price
charged when the element is sold separately.
STOCK-BASED COMPENSATION - The Company accounts for stock options and other
equity instruments granted to employees under the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), as permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). APB 25 provides for
compensation cost to be recognized over the vesting period of the options based
on the difference, if any, between the fair market value of the Company's stock
and the option price on the grant date. As the Company has only issued fixed
term stock option grants at or above the quoted market price on the date of the
grant, there is no compensation expense recognized in the accompanying financial
statements. The Company adopted the disclosure provisions of SFAS 123, which
requires the Company to provide pro forma disclosure of net income and earnings
per share as if the optional fair value method had been applied to determine
compensation costs for the Company's stock-based compensation plans.
Accordingly, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated in the following table:
APRIL 3, March 29,
(In thousands except per share data) 2004 2003
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Net income, as reported $ 1,899 $ 1,790
Less:
Total stock-based employee compensation expense (572) (669)
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Pro forma net income $ 1,327 $ 1,121
=========================================================================================
Net income per common share, as reported:
Basic $ 0.06 $ 0.05
=========================================================================================
Diluted $ 0.05 $ 0.05
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Pro forma net income per common share:
Basic $ 0.04 $ 0.03
=========================================================================================
Diluted $ 0.04 $ 0.03
=========================================================================================
The above pro forma net income and net income per share do not consider any
related tax benefit from option exercises in the first quarters of fiscal 2004
and 2003.
The Company used the Black-Scholes option-pricing model to estimate the fair
value of $5.99 and $3.22 for each stock option issued in the first quarters of
fiscal 2004 and 2003, respectively, using the following weighted average
assumptions:
APRIL 3, 2004 March 29, 2003
--------------------------------------------------------------------------
Dividend yield NONE None
Expected volatility 69.79% 73.62%
7
Risk free interest rate 3.35% 3.15%
Expected option life 5.50 6.59
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS - In December 2003, the Staff of the
Securities and Exchange Commission issued Staff Accounting Bulletin No. 104,
"Revenue Recognition", which amends SAB 101, "Revenue Recognition in Financial
Statements." SAB 104's primary purpose is to rescind accounting guidance
contained in SAB 101 related to multiple-element revenue arrangements,
superseded as a result of the issuance of EITF 00-21, "Accounting for Revenue
Arrangements with Multiple Deliverables." Additionally, SAB 104 rescinds the
SEC's Revenue Recognition in Financial Statements Frequently Asked Questions and
Answers, or FAQ, issued with SAB 101 that had been codified in SEC Topic 13,
"Revenue Recognition." Selected portions of the FAQ have been incorporated into
SAB 104. While the wording of SAB 104 has changed to reflect the issuance of
EITF 00-21, the revenue recognition principles of SAB 101 remain largely
unchanged by the issuance of SAB 104. Adoption of this standard had no material
impact on our financial statements.
2. INVENTORIES
-----------
Inventories consisted of the following at April 3, 2004 and January 3, 2004:
(In thousands) APRIL 3, 2004 January 3, 2004
---------------------------------------------------------------------------
Raw materials $ 2,593 $ 2,782
Work in process 3,360 2,939
Finished goods 5,900 6,633
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Total inventories $ 11,853 $ 12,354
===========================================================================
3. PROPERTY, PLANT AND EQUIPMENT, NET
----------------------------------
Property, plant and equipment, net consisted of the following at April 3, 2004
and January 3, 2004:
(In thousands) APRIL 3, 2004 January 3, 2004
--------------------------------------------------------------------------------------------
At cost:
Land and improvements $ 2,038 $ 2,038
Buildings and leasehold improvements 24,518 24,518
Production equipment and other 47,055 46,931
Office furniture and equipment 4,871 4,831
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78,482 78,318
Less accumulated depreciation (34,383) (32,586)
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Total, property, plant and equipment, net $ 44,099 $ 45,732
============================================================================================
All property and equipment is pledged as security for long-term debt. See Note
5.
8
4. ACCRUED EXPENSES
----------------
Accrued expenses consisted of the following at April 3, 2004 and January 3,
2004:
(In thousands) APRIL 3, 2004 January 3, 2004
--------------------------------------------------------------------------
Accrued payroll and benefits $ 1,533 $ 2,154
Accrued warranty 1,048 935
Accrued special charges 593 1,055
Accrued royalties 1,107 1,057
Other current liabilities 1,722 1,930
--------------------------------------------------------------------------
Total accrued expenses $ 6,003 $ 7,131
==========================================================================
5. LONG-TERM DEBT
--------------
Long-term debt consisted of the following at April 3, 2004 and January 3, 2004:
(In thousands) APRIL 3, 2004 January 3, 2004
--------------------------------------------------------------------------
Mortgage term loans $ 13,929 $ 14,464
Less current portion (2,143) (2,143)
--------------------------------------------------------------------------
Total long-term debt,
net of current portion $ 11,786 $ 12,321
==========================================================================
6. INCOME TAXES
------------
The Company did not record a provision for federal or state income tax as a
result of the utilization of federal net operating loss carryforwards, and the
utilization of state tax credits for the first quarter of fiscal 2004. The
Company did not record a provision for federal or state income tax as a result
of the utilization of net operating loss carryforwards for the first quarter of
fiscal 2003.
7. EARNINGS PER SHARE
------------------
The calculation of basic and diluted earnings per share at April 3, 2004 and
March 29, 2003 is as follows:
(In thousands, except per share data) APRIL 3, 2004 March 29, 2003
--------------------------------------------------------------------------
==========================================================================
Net income $ 1,899 $ 1,790
==========================================================================
Weighted average common shares
outstanding - Basic 34,266 34,142
Weighted average common stock
equivalents 883 44
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Weighted average common shares
outstanding - Diluted 35,149 34,186
==========================================================================
Earnings per share - Basic $ 0.06 $ 0.05
==========================================================================
Earnings per share - Diluted $ 0.05 $ 0.05
==========================================================================
Options to purchase 846,915 and 3,576,727 shares of common stock at exercise
prices ranging from $4.93 to $26.94 per share were outstanding during a portion
of the first quarters of fiscal 2004 and 2003, respectively, but were not
included in the computation of diluted earnings per share as the exercise prices
of the options were greater than the average market price of the common shares.
9
8. COMPREHENSIVE INCOME
--------------------
Comprehensive income is comprised of net income and all changes in stockholder's
equity except those due to investments by owners and distributions to owners.
For the first quarters of fiscal 2004 and 2003, comprehensive income was
comprised solely of net income.
9. SEGMENT INFORMATION
-------------------
The following table presents a summary of the Company's operations by segment
for the first quarters ended April 3, 2004 and March 29, 2003:
DIGITAL IMAGING
(In thousands) PRODUCTS LASERTEL INTER-SEGMENT TOTAL
- -------------------------------------------------------------------------------------------------------
FIRST QUARTER ENDED APRIL 3, 2004
- ---------------------------------------
REVENUE $ 22,774 $ 1,356 $ (816) $ 23,314
INCOME (LOSS) FROM OPERATIONS 3,244 (1,248) - 1,996
TOTAL ASSETS 95,800 14,320 - 110,120
First quarter ended March 29, 2003
- ---------------------------------------
Net revenue $ 22,167 $ 1,745 $ (1,470) $ 22,442
Income (loss) from operations 3,015 (1,073) - 1,942
Total assets 88,041 15,559 - 103,600
10. DISCONTINUED PROGRAMS AND SPECIAL CHARGES
-----------------------------------------
In fiscal 2002, as a result of various repositioning programs, the Company
recorded a charge of $3.7 million to cost of products sold and $6.0 million in
special charges. These charges included inventory, equipment and other asset
write-downs, severance and fringe benefit costs, executive and other contractual
obligations.
In fiscal 2003 the Company expanded its repositioning actions to reduce costs,
which had been initiated in the second quarter of fiscal 2002. As a result, the
Company recorded a charge of $550,000, primarily related to severance and fringe
benefit costs associated with the reduction of approximately forty-three
employees.
In the first quarter of fiscal 2004, the Company reversed $296,000 in excess
special charges related to severance and fringe benefits accrued in fiscal 2003
and 2002, as a result of lower fringe benefit costs.
The following table summarizes the accrued balances related to the discontinued
programs and special charges at April 3, 2004 and January 3, 2004:
ADJUSTMENT UTILIZATION
BALANCE AT THROUGH THROUGH BALANCE AT
(In thousands) JANUARY 3, 2004 APRIL 3, 2004 APRIL 3, 2004 APRIL 3, 2004
- ----------------------------------------------------------------------------------------------------------------------------
Executive contractual obligations $ 699 $ (24) $ (163) $ 512
Severance and fringe benefits 356 (272) (3) 81
- ----------------------------------------------------------------------------------------------------------------------------
Total accrued special charges and
discontinued programs $ 1,055 $ (296) $ (166) $ 593
============================================================================================================================
The cumulative cash paid by the Company at April 3, 2004 as a result of the
forgoing repositioning actions totaled $4.6 million. The Company anticipates the
remaining payments related to the discontinued programs and special charges will
be completed by May 2005.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995:
Certain statements contained in this Quarterly Report on Form 10-Q constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, including statements regarding our expectations
for our financial and operating performance in 2004 and beyond; the adequacy of
internal cash and working capital for our operations; the strength of our
various strategic partnerships (both on manufacturing and distribution); our
ability to secure other strategic alliances and relationships; our expectations
regarding Presstek's strategy for growth; our expectations and plans regarding
market penetration, including the strength and scope of our distribution
channels and our expectations regarding sales of DI presses in Europe; our
expectations regarding our new OEM relationships with Heidelberg Druckmaschinen,
AG, ("Heidelberg"); our expectations regarding the sale of our products and use
of our technology including pricing; our expectations regarding the manufacture
and performance of existing, planned and recently introduced products; the
effects, market acceptance, or pricing of competitive products, including the
impact of a competitive plate product introduced by a strategic partner or other
competitor in the marketplace; the placement of orders for direct imaging kits;
our expectations regarding the effects and benefits of the Company's
streamlining of operations and reductions in force; the market success of, and
benefits achieved by the use of new products; and the expected effect of
adopting recently issued accounting standards, among others. Such
forward-looking statements involve a number of known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors that could cause or contribute to such differences include, but are not
limited to, our dependency on our strategic partners (both for manufacturing and
distribution); uncertainty surrounding patent protection; shortages of critical
or sole-source component supplies; the availability and quality of Lasertel's
laser diodes; manufacturing constraints or difficulties (as well as
manufacturing difficulties experienced by our sub-manufacturing partners and
their capacity constraints); the impact of general market factors in the print
industry generally and the economy as a whole; market acceptance of and demand
for our products and resulting revenues; the introduction and market acceptance
of competitive products; risk and impact of litigation; and other risks detailed
in the Company's reports on file with the Securities and Exchange Commission,
including its Annual Report on Form 10-K for the fiscal year ended January 3,
2004 filed on March 18, 2004, as well as those discussed elsewhere in this
report. The words "looking forward," "looking ahead," "believe(s)," "should,"
"plan," "expect(s)," "project(s)," "anticipate(s)," "may," "likely,"
"potential," "opportunity" and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date the statements were
made; and readers are advised to consider such forward-looking statements in
light of the risks set forth below. Presstek undertakes no obligation to update
any forward-looking statements contained in this Quarterly Report on Form 10-Q.
OVERVIEW
Presstek is a developer, manufacturer, and marketer of digital laser imaging and
chemistry-free plate technologies for the printing and graphic arts industries.
Presstek's products and applications incorporate its patented Direct Imaging
("DI(R)") technologies and consumables for direct-to-press and computer-to-plate
("CTP") applications. Presstek's DI technology enables "direct to press" or
on-press imaging, whereby the printing plates are imaged on the press directly
from digital files, bypassing numerous prepress procedures and chemical
processes in preparing jobs for presswork. Our imaging technology also enables
computer-to-plate or off-press imaging whereby operators of conventional
printing presses
11
image plates directly from digital files to a CTP device. The printer then uses
these imaged plates on a traditional printing press, but without the chemical
processes required for conventional plates.
Our patented DI thermal laser diode product family enables customers to produce
high quality, full-color lithographic printed materials more quickly and cost
effectively than conventional methods. Presstek's patented DI, CTP and plate
products eliminate photographic darkrooms, film, and toxic chemical processing,
which results in reduced printing cycle time, lowers the effective cost of
production for commercial printers. Presstek solutions make it easier for
printers to meet increasing customer demand for shorter print runs, faster
turnaround times and improved cost competitiveness, with an environmentally
friendly process that avoids the chemicals associated with plate development.
Our DI technologies are marketed to leading press manufacturers to be
incorporated into their direct imaging presses, and used in our Dimension(R)
series of CTP systems. Our patented ProFire(R) laser imaging system, and our
recently introduced ProFire Excel imaging system, represent the next generation
technology which can be adapted to many DI presses and CTP devices. Presstek's
Dimension CTP systems incorporate the ProFire(R) system and use our
chemistry-free printing plates, Applause(R) and Anthem(R).
Lasertel, Inc. ("Lasertel"), a subsidiary of Presstek, is primarily engaged in
the manufacture and development of high-powered laser diodes. Lasertel's
products include semiconductor lasers and active components for the graphics and
defense industries. Lasertel offers high-powered laser diodes in both standard
and customized configurations, including chip on sub-mount, un-mounted bars, and
fiber-coupled devices, to support various applications.
We operate in two reportable segments, the Digital Imaging Products segment and
the Lasertel segment. The Digital Imaging Products segment is primarily engaged
in the development, manufacture and sale of patented digital imaging systems and
printing plate technologies for direct-to-press, or on-press, applications and
CTP, or off-press, applications. The Lasertel segment is primarily engaged in
the development and manufacture of high-powered laser diodes for use by Presstek
and for sale to external customers.
We generate revenue through four main sources: the sale of our equipment,
including DI presses, CTP devices, and imaging kits incorporated by leading
press manufacturers into direct imaging presses for the graphic arts industry;
the sale of high-powered laser diodes for the industrial and defense industries;
the sale of our proprietary consumables; and license agreements with
manufacturers that incorporate our technology into their products. Our business
strategy is centered on maximizing the sale of consumable products, and
therefore our business efforts focus on the sale of "consumable burning engines"
such as our DI presses and CTP devices. We rely on partnerships with press
manufacturers such as Ryobi, Heidelberg and KBA to manufacture presses that use
our proprietary consumables. We also rely on distribution partners, such as KPG
and A.B. Dick, to sell and distribute press and CTP systems and the related
proprietary consumable products.
Historically we have been reliant on Heidelberg for a material share of our
revenue. In fiscal 2002, we initiated a process to evaluate our resources and
strategically re-focus the business. During this re-alignment, we concluded to
reposition and rescale our resources, and implemented cost savings programs in
fiscal 2002 and 2003 to return to profitability. We expanded our strategic
relationships with other press manufacturers and distributors such as Ryobi,
KBA, and KPG to develop and distribute presses that incorporate our imaging
technology and use our proprietary consumables, so as to lessen our reliance on
any one partner. We established a relationship with A.B. Dick to sell Presstek
CTP devices and consumables under their brand name. We are working with other
CTP manufacturers to qualify our consumables on their systems. We believe this
shift in strategy fundamentally enhances Presstek's ability to expand and
control its business. In the first quarter of 2004, we've continued the growth
of our new technology business, which consists of all business other than the
Quickmaster DI platform products, and are focused on expanding our digital
product and services offerings.
12
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
GENERAL
Presstek's Management's Discussion and Analysis of Financial Condition and
Results of Operations are based upon our consolidated financial statements,
which have been prepared in accordance with generally accepted accounting
principles as adopted in the United States. The preparation of these financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, and related disclosure of contingent
assets and liabilities, and the reported amounts of revenue and expenses during
the reporting period. On an on-going basis, Presstek evaluates its estimates,
including those related to product returns, allowances for doubtful accounts,
inventories, long-lived assets, warranty obligations, and litigation. Presstek
bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements. Presstek's significant accounting policies are presented
in Note 1 of our financial statements in our Annual Report on Form 10-K for the
fiscal year ended January 3, 2004, filed with the Securities Exchange Commission
on March 18, 2004.
REVENUE RECOGNITION
We recognize revenue when persuasive evidence of an agreement exists, delivery
has occurred or services have been rendered, the price to the customer is fixed
or determinable, collection is reasonably assured, and no further services are
required.
We record revenue for product sales net of estimated returns, which are adjusted
periodically, based upon historical rates of return. Revenue and related
royalties for products sold where installation is not required is recorded at
the time of shipment. Revenue for products that require installation, for which
the installation is not deemed inconsequential, is recognized upon completion of
installation and customer acceptance. Revenue related to service maintenance
agreements is recognized ratably over the duration of the particular contract.
Certain fees and other reimbursements are recognized as revenue when the related
services have been performed or the revenue otherwise earned. Deferred revenue
includes certain customer advances received as a result of our distribution
agreements. This revenue is recognized as product is shipped or services are
performed. We may enter into multiple element arrangements. When equipment,
consumables, installation and maintenance agreements are contained in a single
arrangement, revenue is allocated to the various elements based upon the fair
market value of each element. Fair market value is generally determined based
upon the price charged when the element is sold separately.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Presstek evaluates its accounts receivable on an ongoing basis and establishes
an allowance for doubtful accounts based on specific customer circumstances and
on its historical rate of write-offs. We include any accounts receivable
balances that are determined to be uncollectible, along with a general reserve,
in an overall allowance for doubtful accounts. After all attempts to collect a
receivable have failed, the receivable is written off against the allowance.
While we believe the allowance for doubtful accounts as of April 3, 2004 is
adequate, actual write-offs might exceed the recorded allowance.
13
PRODUCT WARRANTIES
Presstek warrants its products against defects in material and workmanship for
various periods, determined by the product, generally from a period of ninety
days to a period of one year from the date of installation. We provide for the
estimated cost of product warranties at the time revenue is recognized. While we
engage in product quality programs and processes, our warranty obligation is
affected by product failure rates, material usage and service costs incurred in
correcting a product failure. Should actual product failure rates, material
usage or service costs differ from our estimates, revisions to the estimated
warranty liability would be required.
INVENTORY VALUATION
Inventories are valued at the lower of cost or net realizable value, with cost
determined using the first-in, first-out method. We assess the recoverability of
inventory to determine whether adjustments for impairment are required.
Inventory that is in excess of future requirements is written down to its
estimated value based upon forecasted demand for its products. If actual demand
is less favorable than what has been forecasted by management, additional
inventory write-downs may be required.
LONG-LIVED ASSETS
Long-lived assets, such as intangible assets and property and equipment, are
evaluated for impairment when events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When any such
impairment exists, the related assets will be written down to fair value.
RESULTS OF OPERATIONS
REVENUE
Revenue for the first quarter of fiscal 2004 of $23.3 million consisted of
product sales, customer support revenue, royalties and license fees. Revenue for
the first quarter of fiscal 2004 increased $872,000 or 4%, compared to $22.4
million for the first quarter of fiscal 2003.
Product sales for the Digital Imaging Products segment, including the sale of
equipment and consumables, were $22.6 million for the first quarter of fiscal
2004, an increase of $1.6 million or 7% as compared to $21.0 million for the
first quarter of fiscal 2003. The increase in product sales was due primarily to
volume increases in sales of our CTP Dimension and press products, partially
offset by decreases in shipments of direct imaging systems to Heidelberg for use
in the Quickmaster DI.
Revenue generated from the sale of consumable products was $13.0 million for the
first quarter of fiscal 2004, a decrease of $647,000 or 5%, as compared to $13.6
million in the first quarter of fiscal 2003. This decrease in revenue is
primarily the result of volume decreases of our Quickmaster DI consumables, as
well as price reductions on sales of these consumable through select dealers in
our European distribution channel. This decrease was partially offset by volume
increases in consumable products for all product platforms other than the
Quickmaster DI platform. Consumable sales under our agreements with Heidelberg
and its distributors was $2.7 million for the first quarter of fiscal 2004, a
decrease of $2.9 million or 52%, as compared to $5.6 million in the first
quarter of fiscal 2003.
Royalties and fees from licensees for the first quarter of fiscal 2004 were
$201,000, a decrease of $952,000, or 83%, as compared to $1.2 million for the
first quarter of fiscal 2003. This decrease relates primarily to a decrease in
royalties as a result of decreased shipments to Heidelberg of direct imaging
kits used in the Quickmaster DI. Heidelberg has indicated that as a result of
the global economic slowdown, it has an inventory of direct imaging kits on hand
to support its production requirements. We currently
14
believe that orders for direct imaging kits will resume sometime in late fiscal
2004, however, there can be no assurance that any orders will be received.
Revenue generated under our agreements with Heidelberg and its distributors was
$3.1 million for the first quarter of fiscal 2004, a decrease of $4.7 million or
60%, as compared to $7.8 million in the first quarter of fiscal 2003. Revenue
from Heidelberg represented 13% and 35% of total revenue for the first quarters
of fiscal 2004 and 2003, respectively.
In July 2003, we entered into OEM consumable supply agreements with Heidelberg
and Heidelberg USA that provide us with certain preferred supplier rights, which
vary based on territory, time period and sales volume. Under the terms of the
OEM agreements, which include minimum volume commitments from Heidelberg and
Heidelberg USA, we will manufacture and supply Heidelberg branded consumable
plate products for the Heidelberg Quickmaster DI press. Shipments to Heidelberg
of the branded consumable product began in August 2003. Heidelberg is also
marketing a competitive plate product as an alternative to Presstek's PEARLdry
for the Quickmaster DI. The introduction of a competitive plate could reduce the
revenue generated by Presstek under its agreements with Heidelberg including the
OEM consumables supply agreements entered into in July 2003. It could also lead
to downward pricing pressure on our full line of spooled consumable products,
which could have a material adverse effect on our business, results of
operations and financial condition.
Revenue for the Lasertel segment was $540,000 for the first quarter of fiscal
2004, an increase of $265,000 or 96% as compared to $275,000 for the first
quarter of fiscal 2003. This increase is primarily the result of increased
product sales to external customers for defense industry applications.
COST OF PRODUCTS SOLD
Cost of products sold consists of the cost of material, labor and overhead,
shipping and handling costs and warranty expenses.
Cost of products sold for the Digital Imaging Products segment was $13.3 million
or 58% of revenue for the first quarter of fiscal 2004, an increase of $1.0
million or 9%, as compared to $12.2 million or 54% of revenue for the first
quarter of fiscal 2003. This increase relates primarily to increased production
costs driven by increased sales volume. Gross margin as a percentage of total
revenue for the Digital Imaging Products segment was 42% for the first quarter
of fiscal 2004, as compared to 46% for the first quarter of fiscal 2003. The
decrease in gross margin for the first quarter of fiscal 2004 was primarily the
result of the reduction in sales of direct imaging systems to Heidelberg for use
in the Quickmaster DI, price reductions related to consumables used in the
Quickmaster DI, and product mix.
Cost of products sold for the Lasertel segment was $1.3 million for the first
quarter of fiscal 2004, an increase of $536,000 or 73% as compared to $733,000
for the first quarter of fiscal 2003. The increase relates primarily to lower
absorption of labor and overhead costs as a result of inventory reductions.
RESEARCH AND PRODUCT DEVELOPMENT
Research and product development expenses consist primarily of payroll and
related expenses for personnel, parts and supplies, and contracted services
required to conduct our equipment, consumables and high-powered laser diode
product development efforts.
Research and product development expenses for the Digital Imaging Products
segment were $1.5 million or 7% of revenue for the first quarter of fiscal 2004,
a decrease of $171,000, as compared to $1.7 million or 8% of revenue for the
comparable period in fiscal 2003. This decrease is primarily as a result of
reduced expenditures for salaries and benefits as a result of headcount
reductions in the second quarter of 2003, offset in part by an increased
purchases of parts and supplies related to new product introductions. Presstek's
product development cycle centers around major industry trade shows, and as a
15
result, our research and product development expenses vary in accordance with
our product development cycle.
Research and product development expenses for the Lasertel segment were $167,000
for the first quarter of fiscal 2004, a decrease of $103,000 as compared to
$270,000 for the comparable period in fiscal 2003. This decrease is primarily
the result of a reduction in purchased parts and supplies related to Lasertel's
research and product development activities.
SALES, MARKETING AND CUSTOMER SUPPORT
Sales, marketing and customer support expenses consist primarily of payroll and
related expenses for personnel, advertising, trade shows, promotional expenses,
and travel costs related to our sales, marketing and customer support
activities.
Sales, marketing and customer support expenses for the Digital Imaging Products
segment were $3.0 million or 13% of revenue for the first quarter of fiscal
2004, an increase of $241,000, as compared to $2.8 million, or 13% of revenue
for the comparable period in fiscal 2003. The increase relates primarily to
increased salaries and benefits as a result of head count increases in the first
quarter of fiscal 2004, as well as increased professional and contracted
services to support promotional activities directed at product distribution.
Sales and marketing expenses for our Lasertel segment were $111,000 for the
first quarter of fiscal 2004, an increase of $43,000, as compared to $68,000 for
the comparable period in fiscal 2003. This increase was primarily related to
increased professional services and travel costs as a result of trade show and
other promotional activities.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of payroll and related
expenses for personnel, and contracted professional services necessary to
conduct our finance, information systems, human resources and administrative
activities.
General and administrative expenses for the Digital Imaging Products segment
were $2.0 million or 9% of revenue for the first quarter of fiscal 2004, a
decrease of $440,000, as compared to $2.5 million or 11% of revenue for the
comparable period in fiscal 2003. This decrease relates primarily to a decrease
in bad debt expense, as well as decreases in professional services, and salaries
and benefits.
General and administrative expenses for the Lasertel segment were $242,000 in
the first quarter of fiscal 2004, a decrease of $36,000, as compared to $278,000
for the comparable period in fiscal 2003. This decrease relates primarily to a
decrease in salaries and benefits.
DISCONTINUED PROGRAMS AND SPECIAL CHARGES
In fiscal 2002, as a result of various repositioning programs, the Company
recorded a charge of $3.7 million to cost of products sold and $6.0 million in
special charges. These charges included inventory, equipment and other asset
write-downs, severance and fringe benefit costs, executive and other contractual
obligations.
In fiscal 2003 the Company expanded its repositioning actions to reduce costs,
which had been initiated in the second quarter of fiscal 2002. As a result the
Company recorded a charge of $550,000, primarily related to severance and fringe
benefit costs associated with the reduction of approximately forty-three
employees.
16
In the first quarter of fiscal 2004, the Company reversed $296,000 in excess
special charges related to severance and fringe benefits accrued in fiscal 2003
and 2002, as a result of lower fringe benefit costs.
OTHER INCOME (EXPENSE), NET
Other income (expense), net consists primarily of net interest and other
miscellaneous income (expense).
Interest expense, net was $15,000 for the first quarter of fiscal 2004, a
decrease of $138,000 as compared to interest expense, net of $153,000 for the
first quarter of fiscal 2003. Interest income was $94,000 for the first quarter
of fiscal 2004, an increase of $23,000, as compared to $71,000 for the first
quarter of fiscal 2003, primarily as a result of increased cash balances
available for investment. Interest expense was $109,000 for the first quarter of
fiscal 2004, a decrease of $115,000, as compared to $224,000 for the first
quarter of fiscal 2003, primarily as a result of lower average debt balances and
lower interest rates on borrowings.
PROVISION FOR INCOME TAXES
We did not record a provision for federal or state income tax as a result of the
utilization of federal net operating loss carryforwards, and the utilization of
state tax credits for the first quarter of fiscal 2004. We did not record a
provision for federal or state income tax as a result of the utilization of net
operating loss carryforwards for the first quarter of fiscal 2003.
NET INCOME
As a result of the foregoing, we had net income of $1.9 million for the first
quarter of fiscal 2004, as compared to net income of $1.8 million for the first
quarter of fiscal 2003.
LIQUIDITY AND CAPITAL RESOURCES
We finance our operating and capital investment requirements primarily through
cash flows from operations and borrowings. At April 3, 2004, we had cash and
cash equivalents of $31.6 million and working capital of $46.4 million as
compared to cash and cash equivalents of $28.2 million and working capital of
$42.5 million at January 3, 2003. The increase in cash and cash equivalents of
$3.4 million for the first quarter of fiscal 2004 was primarily due to net cash
provided by operating and financing activities of $3.8 million, offset by
$395,000 in cash used in investing activities.
Net cash provided by operating activities was $3.1 million for the first quarter
of fiscal 2004. The primary sources of cash from operating activities were net
income of $1.9 million, non-cash charges of depreciation, amortization and other
charges of $2.0 million, and a decrease in working capital and non-current
assets of $829,000.
Net cash used in investing activities was $395,000 for the first quarter of
fiscal 2004, and consisted primarily of additions to property, plant and
equipment used in the business.
Net cash provided by financing activities was $743,000 for the first quarter of
fiscal 2004, and consisted primarily of cash received from the exercise of stock
options in the amount of $1.3 million, offset by payments on mortgage term
loans.
In October 2003, we replaced our existing credit facilities, entering into a
$50.0 million senior secured credit facility jointly with two lenders. This new
credit facility includes a $35.0 million revolving line of credit (the
"Revolver") and a $15.0 million term loan (the "Term Loan"). These credit
facilities are secured by all our assets, and bear interest, at our election, at
either the prime rate or the LIBOR rate, plus an applicable margin based on
certain financial ratios, ranging from a minimum of 0.25% to a maximum of 2.5%.
17
The Revolver is a five-year loan, expiring in September 2008, under which we may
borrow a maximum of $35.0 million, reduced by the amount of all letters of
credit outstanding. Advances under the Revolver may be used to finance working
capital requirements, capital expenditures, and future acquisitions as permitted
under the loan agreement. At April 3, 2004, we had $35.0 million available under
the revolving line of credit loan, reduced by $5.5 million outstanding under
standby letters of credit.
The Term Loan is a five-year loan in the amount of $15.0 million. Under the Term
Loan, principal and interest payments are due in nineteen quarterly installments
of $535,714 plus interest, with a final payment of all remaining principal and
accrued and unpaid interest due on September 30, 2008. At April 3, 2004, the
effective interest rate was 2.36%. Proceeds from the Term Loan were used to
re-finance all debt outstanding under our previous credit facilities.
Under the terms of the Revolver and Term Loan, we are required to meet various
financial covenants on a quarterly and annual basis, including maximum funded
debt to EBITDA and minimum fixed charge coverage covenants. As of April 3, 2004,
we were in compliance with all financial covenants.
We have future contractual payment obligations through 2010 that primarily
relate to debt, royalty, executive contracts and operating leases. The following
table represents our future commitments at April 3, 2004 and January 3, 2004:
(In thousands) APRIL 3, 2004 January 3, 2004
--------------------------------------------------------------------------
Credit facilities $ 13,929 $ 14,464
Royalty obligation 10,767 11,147
Executive contractual obligations 2,681 2,999
Lease agreements 159 186
--------------------------------------------------------------------------
Total contractual obligations $ 27,536 $ 28,796
==========================================================================
Our anticipated capital expenditures for fiscal 2004 are approximately $3.0
million, and primarily relate to the purchase of capital equipment to be used in
the production of our DI and CTP equipment and consumable products.
Heidelberg is marketing a competitive plate product as an alternative to
Presstek's PEARLdry for the Quickmaster DI. The introduction of a competitive
plate could reduce the revenue generated by Presstek under its agreements with
Heidelberg including the OEM consumables supply agreements entered into in July
2003. It could also lead to downward pricing pressure on our full line of
spooled consumable products, which could have a material adverse effect on our
business, results of operations and financial condition.
We believe that existing funds, cash flows from operations, and cash available
under our Revolver should be sufficient to satisfy working capital requirements
and capital expenditures through the next twelve months. There can be no
assurance, however, that we will not require additional financing, or that such
additional financing, if needed, will be available on acceptable terms.
EFFECT OF INFLATION
Inflation has not had, and is not expected to have, a material impact upon our
operations.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------
We are exposed to market risk from changes in interest rates primarily as a
result of our borrowing activities, and to a lesser extent, our investing
activities. Our long-term borrowings are in variable rate instruments, with
interest rates tied to either the prime rate or the London Interbank Offered
Rate ("LIBOR"). A 100 basis point change in these rates would have an impact of
approximately $150,000 on our annual interest expense, assuming consistent
levels of floating rate debt with those held as of the end of fiscal 2003. In
the fourth quarter of fiscal 2003, we entered into interest rate floors and caps
to manage net exposure to interest rate fluctuations related to our borrowings.
We have some exposure to foreign currency exchange rate risk as a limited number
of our sales and purchase transactions are denominated in the European euro and
the Japanese yen. In addition, some of our customers and strategic partners are
not located in the United States, and are themselves subject to fluctuations in
foreign exchange rates. If the home country currency of these customers and
strategic partners were to decrease in value relative to the United States
dollar, their ability to purchase and/or market our products could be adversely
affected and our products may become less competitive to them. This may have an
adverse impact on our business. Likewise, some of our suppliers are not located
in the United States and thus, such suppliers are subject to foreign exchange
rate risks in transactions with us. Decreases in the value of their home country
currency versus that of the United States dollar could cause fluctuations in
supply pricing which could have an adverse effect on our business.
ITEM 4. CONTROLS AND PROCEDURES.
------------------------
(a) Evaluation of Disclosure Controls and Procedures
As of April 3, 2004, we have, under the supervision and with the participation
of the Presstek's management, including its Chief Executive Officer and Chief
Financial Officer evaluated the effectiveness of Presstek's disclosure controls
and procedures pursuant to Rule 13a-15(b) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Based upon that
evaluation, Presstek's Chief Executive Officer and Chief Financial Officer
concluded that, as of the April 3, 2004 Presstek's disclosure controls and
procedures are effective in ensuring that material information relating to
Presstek (including its consolidated subsidiaries) required to be disclosed by
Presstek in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms, including ensuring
that such material information is accumulated and communicated to Presstek's
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Controls
There were no changes in Presstek's internal controls or in other factors that
could significantly affect Presstek's controls in the quarter ended April 3,
2004 that has materially affected, or is reasonably likely to affect our
internal control over financial reporting.
19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
See Part I - Item 3 of the Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 2004 filed with the Commission on March 18, 2004 for a
description of certain legal proceedings involving the Company. All of such
information is hereby incorporated by reference in response to this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-4(a) of the Exchange Act (furnished herewith).
31.2 Certification of Chief Financial Officer and Principal
Accounting Officer pursuant to Rule 13a-4(a) of the Exchange
Act (furnished herewith).
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(furnished herewith).
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(furnished herewith).
(b) Reports on Form 8-K
A Form 8-K was filed on March 30, 2004 furnishing information pursuant
to Item 5 relating to the press release of Presstek, dated March 30,
2004 announcing the death of Director John B. Evans.
A Form 8-K was filed on February 26, 2004 furnishing information
pursuant to Item 9 and 12 relating to the press release of Presstek,
dated February 26, 2004 reporting Presstek's financial results for the
fourth quarter and fiscal year ended January 3, 2004.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRESSTEK, INC.
(Registrant)
Date: May 13, 2004 /s/ Edward J. Marino
-------------------------------------------------
By: Edward J. Marino
President and Chief Executive Officer
(Principal Executive and Duly Authorized Officer)
Date: May 13, 2004 /s/ Moosa E. Moosa
-------------------------------------------------
By: Moosa E. Moosa
Vice President - Finance,
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
21
EXHIBIT INDEX
No. Description
--- -----------
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-4(a) of the Exchange Act (furnished herewith).
31.2 Certification of Chief Financial Officer and Principal Accounting
Officer pursuant to Rule 13a-4(a) of the Exchange Act (furnished
herewith).
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(furnished herewith).
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(furnished herewith).