form10k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-K
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R
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ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended January 2, 2010
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or
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£
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TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period
from to
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_____________________________
Commission
File No. 0-17541
PRESSTEK,
INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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02-0415170
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.Employer
Identification No.)
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10
Glenville Street, Greenwich, Connecticut 06831
(Address
of principal executive offices including zip code)
Registrant’s
telephone number, including area code:
(203)
769-8056
Securities registered pursuant
to Section 12(b) of the Act:
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Title
Of Each Class
[Missing Graphic Reference]
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Name
Of Each Exchange On Which Registered
[Missing Graphic Reference]
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Common
stock, par value $0.01 per share
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The
NASDAQ Global Market
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Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes £ No
R
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes £ No
R
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 R No
£
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes £ No
£
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. R
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. (See definition of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act).
Large
accelerated filer £ Accelerated
filer £ Non-accelerated
filer £ Smaller
reporting company R
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes£ No
R
The
aggregate market value of common stock held by non-affiliates of the registrant
as of July 4, 2009 was $35,825,788.
The
number of shares outstanding of the registrant’s common stock as of March 18,
2010 was 36,854,802.
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Documents
Incorporated by Reference
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Portions
of the registrant’s definitive proxy statement to be delivered to stockholders
in connection with the Annual Meeting of Stockholders scheduled for June 2, 2010
are incorporated by reference into Part III.
PRESSTEK,
INC.
ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED
JANUARY 2, 2010*
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PAGE
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Item
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Business.
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Risk
Factors.**
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Unresolved
Staff Comments.
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Properties.
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Legal
Proceedings.
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Item
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
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Selected
Financial Data.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
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Quantitative
and Qualitative Disclosures About Market Risk.
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Financial
Statements and Supplementary Data.
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure.
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Controls
and Procedures.
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Other
Information.
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Item
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Directors,
Executive Officers and Corporate Governance.
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Executive
Compensation.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
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Certain
Relationships and Related Transactions, and Director
Independence.
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Principal
Accountant Fees and Services.
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Item
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Exhibits
and Financial Statement Schedules.
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Signatures.
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*
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Capitalized
terms not defined herein shall have the same meanings ascribed to them in
the Glossary of Item 1.
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**
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See
Part I – Item 1A for cautionary statements regarding forward-looking
statements included in this Annual Report on Form
10-K.
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General
Presstek,
Inc. and its subsidiaries (collectively, “Presstek,” “we,” “us,” “our,” or the
“Company”) maintain principal executive offices at 10 Glenville Street,
Greenwich, CT 06831. The Company’s website is www.presstek.com.
Presstek
was organized as a Delaware corporation in 1987. The Company is a leading
manufacturer and marketer of environmentally-friendly digital-based offset
printing solutions. These products are engineered to provide a streamlined
workflow that shortens the print cycle time, reduces overall production costs,
and meets the market’s increasing demand for fast turnaround high-quality color
printing. Presstek’s former subsidiary, Lasertel, Inc. (“Lasertel”),
manufactures semiconductor laser diodes for Presstek and external customer
applications. This subsidiary is classified as a discontinued
operation. As discussed further in this report, on March 5, 2010, Presstek sold
Lasertel to SELEX Galileo Inc. (SELEX). As a subsidiary of SELEX and in
accordance with a supply agreement established between Lasertel and Presstek on
March 5, 2010, Lasertel will manufacture and supply semiconductor laser diodes
to Presstek.
Our
products include DI®
digital offset presses, computer-to-plate (“CTP”) systems, workflow solutions,
chemistry-free printing plates, no preheat thermal CTP plates and a complete
line of prepress and press room consumables. We also offer a range of technical
services for our customers.
On March
5, 2010, Presstek sold Lasertel to SELEX Galileo Inc. (SELEX); please refer to
Note 21 of the Notes to the Consolidated Financial Statements included in this
Annual Report on Form 10-K. As a subsidiary of SELEX, and in accordance with a
supply agreement established between Lasertel and Presstek on March 5, 2010,
Lasertel will manufacture and supply semiconductor laser diodes to Presstek for
an initial period of three years.
Background
Since its
incorporation in 1987 Presstek has served the commercial print segment of the
graphics communications industry by offering innovative digital offset printing
solutions for commercial printing applications. We:
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invented
the technology that enables DI®
presses;
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invented
chemistry-free printing plates;
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have
significantly streamlined the print production
workflow;
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have
helped transition offset printing from a craft-based manual process to an
automated manufacturing process;
and
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plan
to continue to innovate by providing high quality fully integrated digital
solutions and services.
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Primary
Markets
Presstek
serves the global print market. The two primary opportunities for Presstek’s
solutions lie in the commercial and in-plant segments.
Commercial
markets include companies that provide printing and print-related services, such
as design, prepress, and bindery, on a print-for-pay basis. Many firms in the
commercial printing industry have some type of process expertise or geographic
focus. This market is further segmented by employee size and by equipment
capability (e.g. format size or type of equipment).
The
in-plant market includes departments that provide copying and printing services
to support the primary business of a company or organization. These are
companies whose primary business includes anything other than printing (e.g.,
insurance, manufacturing, financial services, education, or
government).
Historically,
Presstek has primarily served smaller commercial printers with less than 20
employees as well as the in-plant printing market. However, recent
and planned new products introductions have enabled the company to also serve
the needs of larger commercial printers.
Presstek
believes that new product developments will enable equipment placements in
select vertical markets such as mailing and fulfillment and small format
packaging.
Market
Trends
The
printing market is shifting to increasingly faster production of smaller order
quantities (shorter runs of 5,000 copies or less) with an increasing use of
color. Key trends include the following:
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45%
of all printed work in the world is short-run and time
sensitive;
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33%
of all print jobs are expected to require a 24-hour
turnaround;
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80%
of four-color jobs are now produced in runs of less than 5,000;
and
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Approximately
90% of digital printing is non-personalized, and can be produced on a
DI®
press
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Providing
Solutions for New Market Requirements
Presstek
offers a range of products to meet these changing market demands including
DI®
digital offset presses and chemistry-free CTP systems. Presstek’s 34DI® and
52DI® presses
incorporate Presstek’s ProFire® Excel
laser imaging technology, unique press design, and thermal plates to create an
optimized solution for press runs from 250 to 20,000 sheets.
Market
studies indicate the number of print jobs with run lengths of 20,000 and below
are increasing, while the frequency of longer run length jobs is decreasing.
DI®
presses fit well into print businesses that are experiencing this trend. These
businesses, which include commercial print shops, quick printers, franchise
shops, digital printers and in-plants, utilize DI®
presses to profitably meet this run length requirement, according to research
from industry consulting firm InfoTrends.
Presstek’s
DI®
presses are automated print production systems. Digital files are sent to the
offset printing press where all four printing plates (one for each color) are
imaged on-press in precise register, resulting in a highly streamlined digital
workflow that is designed to allow the fastest way to finished offset press
sheets.
With our
CTP solutions, digital files are sent directly from the prepress workflow to the
plate-imaging device; the plates are imaged off line, and then mounted on a
conventional offset press. Presstek introduced the concept of chemistry-free
printing to the market and this more environmentally friendly and efficient
manner of producing offset printing plates remains an important focus of our
marketing activities.
Presstek
also offers two open platform CTP plates. The first, Aurora Pro is a
chemistry-free plate that offers run lengths of up to 20,000. Aurora Pro is
designed for printers that support the short-run color market and want to offer
environmentally friendly printing. It operates on a range of external drum,
830nm platesetters manufactured and sold by Eastman Kodak Company
(“Kodak”), DaiNippon Screen Mfg., Ltd. (“Screen”), Heidelberger Druckmashinen AG
(“Heidleberg”) and more. The second, Aeon, is a no preheat thermal
plate that offers run lengths to 200,000 and up to a 1,000,000 with an optional
post-bake. Aeon is targeted to the mid and large commercial print market. Both
Aurora Pro and Aeon work on a range of external drum 830nm platesetters from
various manufacturers and are compatible with Presstek’s Compass and Dimension
Pro CTP solutions.
Organizational
Structure
To better
address the worldwide print market, Presstek has aligned its resources into
three strategic product lines. This structure allows the Company to continue to
focus on its traditional base of small commercial and in-plant customers, while
expanding the range of products it can bring to market around the world. This
structure is also designed to better position the Company to more effectively
address the needs of larger commercial printers. These strategic product lines
are:
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Digital
Printing, which includes DI® digital offset presses, digital toner
presses, inkjet printers, consumables and
workflow;
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CTP,
which is responsible for digital platemaking systems, consumables and
workflow; and
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Traditional,
which operates as a graphic arts dealer for Presstek products such as
polyester CTP platemaking and other partners’ products for our
customers.
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Geographic
Structure
Presstek
supplies equipment, service and supplies to support the worldwide print market;
currently 66% of Presstek’s revenues come from the United States, 12% from the
United Kingdom and 22% from other various countries. To facilitate growth we
have established three sales regions to bring integrated solutions to local
markets. The three sales regions are:
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EAME
(Europe, Africa, Middle East);
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Americas
(North America and Latin America);
and
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Our Business
Segments
Commencing
with the second quarter of the fiscal year to end January 1, 2011 (“Fiscal
2010”), the Company’s reports filed with the SEC will reflect that the Company
conducts business in one industry segment as a result of its sale of Lasertel on
March 5, 2010. Prior to March 5, 2010, we conducted business in two
segments as reflected in this report: the Presstek segment, and the Lasertel
segment. The Presstek segment is primarily engaged in the development,
manufacture, sales, distribution, and servicing of digital offset printing
solutions for the graphic arts industries. Lasertel is primarily engaged in the
manufacture and development of high-powered laser diodes for a variety of
industry segments.
On
September 24, 2008, the Company’s Board of Directors approved a plan to market
the Lasertel subsidiary for sale. The financial statements have been restated to
reflect the Lasertel segment as discontinued operations as presented in this
Annual Report on Form 10-K.
For an
analysis of our assets by business segment as well as revenue from
sales to external customer and long-lived assets by geographic area, see Note 16
of the Notes to the Consolidated Financial Statements included in this Annual
Report on Form 10-K.
The
Presstek Segment
The
Presstek segment provides research, new product development, systems
integration, equipment manufacturing and plate manufacturing. It also serves as
the center for marketing, sales and service for our digital offset printing
solutions as well as the distribution of our third-party products.
Our
products are sold to end-user customers through either our direct sales force,
our dealer channel, or through original equipment manufacturer (“OEM”) partners.
We also have an established portfolio of pressroom supplies and consumables
which is sold through our direct sales channel and our web
storefront.
Presstek-branded
equipment is serviced either by our direct service organization or by our dealer
channel. Our direct service organization primarily serves customers located in
the United States, Canada, and the United Kingdom.
Manufacturing
At our
165,000 square-foot facility in Hudson, New Hampshire, we (i)manufacture
ProFire®
Digital Media, PearlDry® Plus,
and PearlDry®
printing plates, (ii) assemble the ProFire® Excel
imaging kits that are incorporated into 34DI®
and 52DI®
presses, (iii) assemble the Dimension® Excel
series, Vector FL52 and the ABDick®-branded
Digital PlateMaster®
system, and (iv) conduct finishing operations for a portion of our
aluminum-based Presstek Aeon CTP plates.
Plate
manufacturing at our Hudson facility uses vacuum deposition technology to create
ultra-thin imaging layers. We have a state-of-the-art solution coater capable of
handling aqueous or solvent-based fluids with best available environmental
controls throughout the process. Polyethylene terephthalate substrates are
laminated to aluminum webs (“spools”) using electron beam curing technology.
This eliminates the need for environmental emissions from a drying process. We
utilize full converting capability, which provides high-speed slitting,
spooling, formatting and final packaging. The Hudson facility also includes
finishing operations for our DI plates and our Aeon CTP plates.
At our
100,000 square-foot facility located in South Hadley, Massachusetts, we
manufacture aluminum-based printing plates, including chemistry-free
Presstek-branded Anthem® Pro,
Freedom® Pro
and Aurora® Pro
digital printing plates. The aluminum plate manufacturing includes in-line
graining, anodizing, silicating, and multiple layer coatings. Raw aluminum is
processed into lithographic printing plates for digital markets.
Distribution
Our sales
strategy is designed to emphasize the distribution of Presstek’s DI®
presses and CTP solutions and related consumables, as well as a full
portfolio of conventional products. These products are offered to customers
through our direct sales force, independent graphic arts dealers and strategic
OEM partners. We have an established distribution networks in North America,
Europe and Asia Pacific. In 2009 we expanded our dealer network in our EAME and
Asia Pacific regions to 43 and 15 dealers, respectively. We plan to
continue to strengthen our position by growing our dealer network on a global
basis.
Service
and Support
Presstek
also has an established service organization throughout the United States,
Canada and the United Kingdom to service its equipment. In other regions,
Presstek authorized dealers are the primary source of service, with Presstek
providing training and advanced technical support.
The
Lasertel Segment
Lasertel
is a developer and manufacturer of high-powered laser diodes. These diodes are
used in Presstek’s DI®
presses and the Dimension Excel Series of CTP systems. Lasertel also provides
laser diodes to external customers for applications in different industries,
such as defense, medical, and graphics. Lasertel operates in a leased 40,000
square-foot facility located in Tucson, AZ. Lasertel is a vertically integrated
manufacturer of laser diode-based components and systems.
Strategy
Our
vision is to be a leading provider of digital solutions to the global graphic
communications industry. Our business strategy is to offer innovative digital
imaging and plate technologies that address the opportunities of today and
tomorrow in the graphic arts and commercial printing markets across the
globe.
This
strategy includes several imperatives:
1. Focus on the growth of our
consumables product line.
Presstek
provides digital offset solutions that aid printers in meeting the changing
needs of today’s market – shorter run lengths, faster turn-around times, and
more color. Our DI®
presses and CTP solutions use our chemistry-free printing plates. With our
direct sales force and network of dealers, we feel we are well positioned to
expand our installed base of these solutions. A key step in growing our
consumables business is to develop printing plates that can be imaged on
non-Presstek manufactured devices. The first step in executing this “open
systems” strategy was the launch in late 2008 of Aurora® Pro,
our open-platform, chemistry-free printing plate, which is designed to be used
on thermal CTP systems marketed by other manufacturers. In 2009 we introduced
Aeon, a thermal CTP plate having length of runs of approximately 200,000
impressions unbaked, and 1,000,000 impressions with post-baking. By marketing a
printing plate capable of longer run lengths, the Company is able to pursue
larger customers, which is an important element of the Company’s strategy. We
are also focused on stemming the erosion of our traditional consumables sales
(ink, pressroom and proofing supplies, etc.) and believe that we can help
achieve this goal by selling these products along with our digital
plates.
2.
Emphasize attractive market segments.
Large
print providers were the first to adopt digital technology, and they have driven
the digital transformation of the commercial printing market. Today the benefits
of a digital workflow are well understood and all segments of the commercial
print market are adopting digital technologies. With our range of digital
solutions and the strength of our direct sales and service force, as well as our
dealer network, we are focusing on the following market segments:
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a.
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Commercial
printers. Printers need to increase their production capacity,
level of productivity and output quality while improving profitability.
Many commercial printers, particularly small and mid size printers
(generally those with less than 20 employees) have demonstrated success
with our digital offset products. These printers are often acquiring their
first four-color offset press when they acquire a Presstek product.
However, Presstek is also enhancing and growing its product offerings to
provide similar benefits to larger printers. DI®
presses are engineered to produce print runs between 250 and 20,000 images
at a very high quality with a very low cost per page. Since market demands
are shifting to require an increasing number of jobs with run lengths in
this range, it is leaving a gap in the production portfolio of many larger
commercial print shops. They can efficiently produce very short-runs (less
than 250) on their toner devices, and runs of 20,000 or more on their
conventional offset presses. Larger print shops, however, can
be more profitable producing a run of 250 to 20,000 on a Presstek’s
DI®.
Presstek believes that larger printers will increasingly look at DI®
presses to fill this production gap in their equipment
portfolio.
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Digital printers and
copy shops. These facilities that primarily operate toner-based
digital printing equipment, are acquiring DI®
presses as complementary devices. They are using DI®
presses for jobs that require run lengths greater than 250 copies, a
higher level of quality, or a substrate (coated stock, thick stock,
plastics, etc.) that cannot be effectively produced on a toner-based
device. They are also combining digital toner devices and DI®
presses into one workflow to create certain print jobs more profitably.
For example, they may produce a high quality four-color direct mail piece
on the DI®
press, then add a personalized message or pURL (personal URL) using their
toner device. The result is a high-quality personalized piece affordably
produced.
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c.
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In-plant print shops
that operate within corporations, colleges and universities and government
agencies. These print shops are attracted to the ease-of-use,
compact footprint and environmentally responsible nature of our solutions.
It is becoming increasingly important that these shops be self sustaining.
The productivity, efficiency and versatility of Presstek solutions helps
in-plants reach this goal.
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3.
Focus on key growth areas.
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a.
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Growth within the
existing market segments that Presstek serves today. Historically
Presstek has served print shops with less than 20 employees, and this
segment makes up approximately 75% of the industry (i.e., number of
printers). Many of these printers have not yet fully embraced digital
printing technologies. In addition, owners of existing DI®
presses and CTP systems will be looking to add capacity or to upgrade
their capabilities (i.e., upgrade a 34DI®
press to a 52DI®
press, a 52DI to a 52DI-AC or 52DI-UV, a semi-automated CTP system
to a fully automated solution, or add Latitude a PDF workflow
solution).
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b.
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Growth up-market to
larger print shops. As print buyers request more jobs in the 500 to
20,000 run length range with faster turnaround times, larger shops often
need to outsource these jobs or run them inefficiently on their larger
offset presses or toner presses. A Presstek DI®
press is a good solution for these shops, because it allows them to bridge
the production gap between the high-end of toner devices (~500) and the
low-end of conventional offset presses (~20,000). DI® presses also use
offset ink and print on standard paper (as well as many other substrates)
so output is easily matched to the production of larger presses. The
DI®
press may also open up new applications for the larger print
shop.
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c.
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Growth of CTP
consumables. It is estimated that the worldwide digital offset
printing plate market in fiscal 2008 was $3.9 billion. This market is
expected to grow by as much as 36% to $5.3 billion by 2012 based on
research from Vantage Strategic Marketing. Presstek plans to further
penetrate this large consumables market by aggressively marketing its
expanding range of CTP plates. These plates will work on both Presstek and
third party imaging devices. Aurora Pro and Aeon are examples of products
that fit into this area of growth.
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d.
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Growth in geographic
regions. The largest portion of Presstek’s sales has historically
come from the United States and Canada. The largest portion of the
worldwide print market, however, is outside North America. Presstek has
established three sales regions; Americas, EAME, and Asia Pacific, to
establish proper distribution by region and to help develop solutions that
fit each market’s specific
requirements.
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4.
Enable customers to better compete by offering diverse range of
products.
Because
our goal is to provide high quality, fully integrated digital solutions and
services that form an all-encompassing relationship with our customers, we
deliver solutions that allow printers to differentiate their print businesses in
a competitive marketplace. Presstek’s products can be divided into two primary
categories: DI®
presses and plates and CTP systems, along with the supplies and services that
they require. Ease of use, environmentally friendly chemistry-free imaging, and
a small footprint are common benefits of the two product lines.
Our
DI®
presses, the Presstek 52DI® and
Presstek 34DI®,
allow printers to offer high-quality offset printing on a wide range of
substrates at run lengths starting at 250 sheets for a highly competitive cost
per sheet. DI®
presses are able to do this because of their short make-ready time and reduction
of production steps, which is possible because of three Presstek
technologies—laser imaging, press design, and DI® plate
technology—working in unison to create an optimized printing system. In
September 2009, Presstek launched the 52DI-AC, adding a fully integrated aqueous
coater to the 52DI platform. Aqueous coating further enhances DI
capability by allowing customers to add an aqueous based coating that enhances
not only the cosmetics of the printed sheet (satin, matte and gloss finishes);
but also the durability, since the coating protects the image when handled or
mailed. The fast drying tendency of aqueous coating also facilitates faster
turnaround time allowing jobs to be quickly moved to the bindery
process.
Presstek
offers a full range of CTP systems, from a two-page polyester system to an
eight-page fully automated thermal plate system. In December 2009, Presstek
launched Aeon, an aluminum based no preheat thermal plate that provides added
durability for larger, high production environments. Aeon, a
chemical-based plate, is a longer run plate solution with the capability of
printing over 200,000 impressions unbaked and as many as one million impressions
with an optional post bake.
Presstek
has also expanded its workflow offerings by partnering with third parties. This
allows users to better implement Presstek’s DI® and
CTP solutions while improving the flow of jobs through production. An example of
this is the agreement signed with EskoArtwork Odystar to offer a PDF
workflow solution; Presstek markets this product as Latitude.
5.
Provide solutions that meet the growth in demand for short-run, fast turnaround
high-quality color printing.
Much of
the print industry’s decline in shipment volume has been in long-run printed
documents. Short-run printing is actually mainstream. Short-run printing weighs
on the capital base that was purchased to produce long-run printing, and until
that installed base is replaced, profits are negatively affected. Presstek has a
unique opportunity and position in the reshaping of the printing industry's
workflow and production methods. Presstek as a company, and print as a medium,
are at a fascinating crossroads of technology, market opportunities, and
competition. The Company's products allow printers to compress their workflow to
eliminate costly steps, leveraging the modern content creator’s capabilities to
make better, richer, and more predictable printable files, according to market
research commissioned by Presstek and conducted by industry consultant Dr.
Joseph Webb of Strategies for Management.
6.
Provide environmentally responsible solutions.
Our
thermally imaged chemistry-free plate technologies are designed to provide both
a streamlined workflow and an environmentally responsible solution. Not only are
we contributing to a cleaner and safer printing operation, environmental
responsibility is sound business practice in that our DI® and
CTP solutions reduce labor needs, reduce space requirements, eliminate
plate-oriented waste disposal, and result in fewer manufacturing process
errors.
Technology
Imaging
Technology
Presstek
developed the imaging technology for the world's first DI®
press. Since 1987, we have continuously improved on this technology. Today we
offer our fourth generation of imaging technology which we call ProFire®
Excel. The ProFire® Excel
system has three major components: the laser diode system, made up
of four-beam laser diodes and laser drivers; the integrated motion system that
controls the placement of the laser diodes; and the digital controller and data
server. The image data board of the ProFire® Excel
controls 16-micron diodes with patented Image Plus technology. Among the
advantages of Image Plus is a writing mode that increases image quality while
significantly reducing moiré patterns in standard screen sets, allowing for a
range of FM (stochastic) screening options.
The laser
diodes that we use for our imaging system are manufactured by Lasertel. Lasertel
manufactures epitaxial wafers, which are subsequently processed into chips or
bars. Lasertel then assembles these devices into fiber-coupled modules called
multiple emitter packages (“MEPs”), which contain four lasers per module. These
MEPs are then sent to our manufacturing facility in Hudson, New Hampshire. We
assemble Lasertel-manufactured laser imaging modules into imaging kits that are
designed for DI® press
or Dimension Excel CTP units. These kits are then incorporated into DI®
printing presses, by our manufacturing partner, or into CTP systems assembled at
our Hudson, New Hampshire facility.
Before
direct-to-plate imaging, platemaking and prepress activities had occurred
separately in the printing operation, primarily using analog film-based
technology, chemical processing and manual skill-based processes. Conventional
or analog printing plates are produced using labor-intensive and
chemical-intensive, multi-step processes. By consolidating or eliminating
process steps required to prepare a digital file for printing, Presstek’s
DI®
presses and CTP systems deliver efficiencies that allow increased print
productivity at a lower cost and with better quality than conventional offset
methods. At the same time, by imaging chemistry-free plates, Presstek products
eliminate the reliance on the chemical processing that is generally associated
with imaging traditional printing plates. In addition to being more efficient to
operate, our solutions are more environmentally responsible than traditional
methods of printing. The result is higher quality, faster turnaround offset
printing with a lower cost of operation that is also environmentally
safe.
Plate
Technology
We
manufacture digital printing plates for both on-press imaging with DI®
presses and off-press imaging with CTP printing applications. Presstek
manufactured plates are based on our patented chemistry-free thermal imaging
technology. Our printing plates respond to heat generated by high-powered lasers
(thermal imaging) using ablation and sub-ablation processes.
Thermal
ablation refers to the process in which the thermal laser ablates (removes)
areas of the emulsion while the plate is being imaged. This is the method
employed in Presstek’s plates. Plates that are imaged using thermal ablation
typically consist of a basic substrate such as a grained aluminum plate or
polyester, an oleophilic (ink receptive) imaging layer, and an ink-rejecting
micro porous hydrophilic (water receptive) layer. The
high-powered laser of the imaging system selectively burns tiny holes in the
thin plate coating, causing it to burst away from the base. This technique thus
requires the imaging system to be equipped with a means of collecting the
debris, typically a vacuum with filters. The result is a high-contrast image
that can be examined and measured prior to mounting on a printing
press.
DI®
Presses
Presstek
52DI®
Press
The
Presstek 52DI®
is a landscape format 52cm direct-to-press machine with a maximum sheet size of
20.47” x 14.76.” The 52DI®
has a maximum image area of 20.07” x 14.17,” one of the largest in its class.
This press is highly automated and designed to deliver superior economics and
faster turnaround times, require lower skilled operators and reduce paper waste.
The Presstek 52DI®
images all four chemistry-free printing plates on press in 4.5 minutes in
precise register at 2540 dpi and supports up to 300 lpi and FM screening. The
press design which features Zero Transfer Printing technology, results in
consistent quality, an exceptionally fast make-ready time and reliable handling
across a wide range of substrates. The 52DI®
has a maximum operating speed of 10,000 full size sheets per hour which is the
equivalent of 20,000 letter-sized sheets.
Presstek
52DI®-AC Press
The
Presstek 52DI®-AC
builds on the precise registration, high-quality output, and automation of the
Presstek 52DI by adding an in-line aqueous coater. With the Presstek 52DI®-AC,
coating is applied to sheets in one pass through the press without drying
problems. Anilox metering precisely measures and controls the amount of coating
being applied, reducing waste and further enhancing the quality of the printed
sheet. Flood and spot coatings can be applied in a variety of finishes including
matte, dull, satin and gloss. The entire printing operation is automated— from
plate advancing and imaging to printing and coating—in one compact, easy-to-use
press. High quality results are easy to achieve, and print providers will be
able to produce more jobs per shift. The 52DI®-AC
offers the same format size and resolution as the 52DI.
Presstek
34DI®
Press
The
Presstek 34DI®
is a portrait format 34cm direct-to-press machine with a maximum sheet size of
13.39” x 18.11” and a maximum image area of 12.99” x 17.22”. This press is
highly automated and designed to deliver superior economics, faster turnaround
times, require lower skilled operators and reduce paper waste. The Presstek
34DI®
images all four chemistry-free printing plates on press in 4.5 minutes in
precise register at 2540 dpi and supports up to 300 lpi and FM screening. The
press’ design, using Zero Transfer Printing technology, results in consistent
quality, an exceptionally fast make-ready time and reliable handling across a
wide range of substrates. The 34DI®
has a maximum operating speed of 7,000 full size sheets per hour which is the
equivalent of 14,000 letter-sized sheets.
Both the
Presstek 52DI®
and 34DI®
can be equipped with the DI® Ultra
Violet (“UV”) option. The UV option converts a standard DI® press
to a UV press. UV presses are well suited for printing on non-porous materials
such as plastics and foils.
DI® Plates
ProFire®
Digital Media
ProFire®
Digital Media is designed to work as a system with the laser imaging and press
components of ProFire® and
ProFire® Excel
enabled DI®
presses (such as the Presstek 34DI®
and 52DI®).
ProFire®
Digital Media for DI®
presses is rated for 20,000 impressions. It is manufactured with an
ink-accepting polyester base layer, a middle layer of titanium, and a top layer
of silicone. During imaging, the heat from lasers removes the top two layers of
the plate, exposing the ink receptive polyester layer. Areas that remain covered
with the top layer of silicone will repel the ink. The imaging process is a
highly consistent, heat sensitive, physical reaction without the variables of
exposure and chemistry. The result is sharper and better-defined details and
halftone dots. When operating with ProFire® Excel imaging-enabled
presses, the Presstek 52DI®
and 34DI®,
ProFire®
Digital Media supports 300lpi and FM screening.
PearlDry® Plus
Formulated
in a similar fashion as ProFire®
Digital media, PearlDry® Plus
is designed to work in conjunction with previous generation DI®
presses. In conjunction with Presstek’s direct-to-press imaging, PearlDry® Plus
allows presses to produce a high resolution, 21 micron spot and supports print
quality up to 200-line screen. For DI®
applications PearlDry® Plus
is delivered in polyester-based spools. PearlDry® Plus
is rated for 20,000 impressions.
PearlDry®
PearlDry® is
used for direct-to-press applications that require an aluminum-backed plate such
as the 74Karat press manufactured by Koenig & Bauer, AG of Germany (“KBA”).
The plate uses a specially formulated silicone material that is coated over the
metalized infrared absorbing layer that is then bonded to an aluminum
base.
CTP
Products
Compass
Series
The
Compass Series of platesetters includes the 4-page Compass 4000 Series and the
8-page Compass 8000 Series. These highly productive platesetters range in
production speeds from 15 to 38 plates per hour. Presstek Compass platesetters,
imaging up to 250 lpi (100 l/cm), are optimized for use with Presstek’s Aurora
Pro and Aeon thermal plates. They also image a range of other low energy (830 nm
laser) third-party thermal plates. Users can add several options to further
increase automation and productivity; including single or multiple cassette
autoloaders and in-line standard or custom plate punches.
Dimension
Pro Series
Presstek’s
Dimension Pro Series of platesetters are entry-level to mid-range CTP solutions
that image thermal plates. The Dimension Pro 800 eight-page platesetter images
plates up to 45” x 33”, at speeds of up to 15 plates per hour and the Dimension
Pro 400 four-page platesetter images plates up to 33” x 39”, at speeds of up to
43 plates per hour. Presstek’s Aeon, Aurora Pro and Anthem® Pro
plates are well suited for the Dimension Pro Series. Recently we
announced autoloader capability for four- and eight-page platesetters which will
improve customer capability enabling them to leave the device
unattended.
Dimension
Excel Series
The
Dimension Excel Series of platesetters are CTP imaging devices that are
engineered to image our chemistry-free Anthem® Pro
thermal plates in an A2 (4-page) format size. The Dimension Excel is available
in both standard (Dimension425) and automated (Dimension450-AL) configurations.
The standard model offers operator attended throughput of up to 11 plates per
hour, while automated models provide an operating speed of up to 17 plates an
hour without any operator intervention.
Vector
The
Vector FL52 platesetter is a CTP imaging system that is engineered to image our
chemistry-free Freedom thermal plates. The Vector FL52 is a two-page (52 cm and
under) metal CTP system that can produce up to 16 plates per hour.
DPM Pro
400
The
Presstek DPM Pro 400 is an easy-to-use, fully automated, high resolution
polyester plate CTP system that produces up to 78 plates an hour. It is designed
for use with small-format presses and supports plate widths up to 16.31"
(414mm). The DPM Pro 400 is more economical to use, environmentally-friendly,
and compact than comparable choices. It also features an advanced internal plate
processor. The DPM Pro 400’s automation, speed, and low cost of operation help
make a business more efficient.
Digital PlateMaster®
Digital
PlateMaster®
(“DPM”) is an easy-to-use platesetter that is equipped with an integrated
Harlequin RIP and uses conventional polyester-based plates. DPM is designed for
use with small-format portrait presses. The internal plate processor and
daylight-loading materials cassette help facilitate plate production. DPM also
supports paper-based printing plates.
CTP
Plates
Anthem® Pro
Anthem® Pro
delivers improved print performance with the addition of Presstek's exclusive
PRO graining technology. Anthem® Pro
plates feature our patented polymer-ceramic technology and combine ablative
imaging and chemistry-free cleaning (a simple water wash) with run lengths of up
to 100,000 impressions. The Anthem® Pro
plate runs with a wide range of fountain chemistry and inks.
Freedom
Pro
The
Freedom Pro plate operates in conjunction with Presstek’s Vector FL52 CTP
solution. Like our Anthem® Pro
plate, Freedom Pro requires only a simple wash with water before printing. The
unique surface structure of the plate results in a fast make-ready and greater
ink/water latitude. In addition, Freedom Pro accommodates a wide range of inks
and fountain solutions.
Aurora
Pro
Aurora
Pro is Presstek’s first chemistry-free CTP thermal plate designed to operate
with thermal CTP systems from other manufacturers. This further extends the
opportunity for printers to leverage innovative Presstek chemistry-free
technology with their existing installed base of CTP systems, eliminating the
need to purchase, store and dispose of toxic chemicals.
Aeon
Aeon is a
high resolution no preheat thermal CTP plate that offers run lengths to 200,000
without baking; an optional post-bake will enable runs of up to one million.
Aeon is a versatile product that operates in 830 nm external drum platesetters.
In the pressroom the Aeon plate provides excellent ink/water balance and
durability making it the ideal solution for a broad range of printing
applications
Workflow
Products
Latitude
Presstek
Latitude is a scalable, highly automated and advanced prepress workflow solution
powered by EskoArtwork Odystar. Based on native PDF 1.7 format, it supports the
latest standards in JDF and Certified PDF. It offers a complete range of
prepress tools, from preflight, PDF certification and automated document
correction all the way to advanced trapping, imposition, proofing and screening.
It is designed to automate the daily work in a prepress production environment.
In addition to driving output devices, it provides extremely flexible workflow
tools that automate many processes and communications.
Momentum
RIP
Momentum
RIP is designed to drive Presstek’s CTP and DI®
systems as well as ABDick branded CTP systems. Momentum comes complete with
input and output mechanisms that allow flexibility for controlling jobs.
Momentum is based on Harlequin RIP technology.
Momentum
Pro Integrated
Presstek
Momentum Pro is a fully integrated workflow and RIP. Building on Momentum RIP
technology, the Momentum Pro workflow is designed to streamline and automate the
production process using Certified PDF tools. The workflow can be used as a
centralized PDF creation and preflight system, ensuring consistent output to
multiple devices. Momentum Pro is a simple, easy-to-use and affordable PDF
workflow solution for small to mid-size printers.
PathWay
Presstek
PathWay is a web-to-print business solution powered by Press-sense. It is
designed to create a customer-driven, automated workflow that allows printers to
receive, process, print and deliver orders in one low-cost, streamlined
operation. It is an end-to-end process that facilitates document creation,
customization, quoting, ordering, printing and delivery. PathWay is an ideal way
for printers to attract and retain customers, expand the geographic reach of
their business, respond to the on demand marketplace, and grow sales
volume—while increasing the productivity and profitability of their
business.
Laser
Diode Products
The
graphic arts industry continues to demand a high degree of speed, imaging
resolution and accuracy without increasing costs. Our high-powered laser diodes
are designed to achieve greater imaging power, uniformity and reliability with a
low unit cost for the diode array. Writing speed and accuracy are increased,
without increasing space and costs, by combining four fiber channels into a
single optical module. These diodes also incorporate a number of packaging
innovations that reduce the size of the device and facilitate incorporation into
the ProFire® Excel
imaging module. These products relate to our Lasertel subsidiary which was sold
on March 5, 2010.
Competition
The
markets for our products are characterized by evolving industry standards and
business models, rapid software and hardware technology developments and
frequent new product introductions. Our future success will depend on our
ability to enhance our existing products, introduce new products in a timely and
cost-effective manner, meet changing customer needs, extend our core technology
into new applications, and anticipate and respond to emerging standards,
business models and other technological changes.
We
believe that our patented technologies, other intellectual property, thermal
plate manufacturing facilities, strategic alliances, distribution network and
knowledge of the marketplace puts us in a strong position to compete in today’s
market. Several other companies, however, address markets in which our products
are used and have products that are competitive.
Most of
the companies marketing competitive products, or with the potential to do so,
are well established, have substantially greater financial, marketing and
distribution resources than Presstek and its subsidiaries, and have established
records in the development, sale and servicing of products. There can be no
assurance that any of our products or any products incorporating our technology
will be able to compete successfully in the future.
DI®
Presses
Potential
competition for DI®
presses comes from several areas including manufacturers of high-end
electrophotographic technology and manufacturers of conventional offset printing
presses.
Manufacturers
of high-end electrophotographic technology include, among others, Canon Inc.,
Hewlett Packard Company, Ricoh Company, Ltd., Kodak, and Xerox Corporation.
These electrophotographic imaging systems use either liquid or dry toners to
create one to four (or more) color images on paper and typically offer
resolutions of between 400 and 1200 dots per inch. These technologies are
generally best suited for ultra-short-runs of less than 250 copies or for
printing variable data.
Manufacturers
of conventional offset printing presses include Heidelberg, KBA, Sakurai USA,
Inc., Ryobi Limited (“Ryobi”), Manroland AG, and others. The level of automation
on new presses is improving and when combined with an automated CTP system an
effective workflow can be established. We believe that conventional offset is
best suited for production runs of 20,000 or longer. The quality of print from a
conventional offset press will depend on the skill of the operator as well as
the process the print establishment uses to deliver the plate to the
press.
Screen
offers the TruePress 344 press. This press is an A3 four color digital offset
press that prints up to 7,000 impressions per hour with a conventional wet
offset process.
The
Presstek 34DI® also
competes against the Ryobi 3404DI for end user sales. Ryobi is an OEM partner of
Presstek and the Ryobi 3404DI uses Presstek’s imaging technology, printing
plates and press design.
VIM
Technologies, Ltd., an Israeli company (“VIM”), has been selling a plate for
DI®
presses. During 2009, in an action initiated by the Company against
VIM and several of its North American dealers, the United States International
Trade Commission ruled that the VIM printing plates infringe Presstek’s valid
and enforceable patents and banned the importation of the VIM plates into the
United States. Also during 2009, the Regional Court in
Dusseldorf, Germany ruled that the VIM plates infringe Presstek’s valid and
enforceable patents, and ordered VIM plate sales in Germany
halted. VIM is currently appealing this German ruling and is also
pursuing a separate action in Germany seeking to have the Presstek European
patents declared unenforceable.
These
competitive plates could have an impact on Presstek’s revenue. They 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.
Computer-to-Plate
Most of
the major companies in the industry have developed or sourced off-press CTP
imaging systems. Potential competitors in this area include, among others, Agfa,
Kodak, Screen, Fuji Photo Film Co., Ltd. (“Fuji”), and Heidelberg, combinations
of these companies, and other smaller or lesser-known companies. Many of these
devices utilize printing plates that require a post-imaging photochemical
developing step and/or other post processing steps such as post bake
treatment.
We are
seeing competition from printing plate companies that manufacture, or have the
potential to manufacture, digital thermal plates. Such companies include, among
others, Agfa, Kodak, and Fuji. Some companies, including Agfa, Kodak, and Fuji,
have announced or released plates that reportedly eliminate the need for post
image chemical processing.
Products
incorporating our technologies can also be expected to face competition from
products using conventional methods of creating and printing plates and
producing printed product. While these methods are considered to be more costly,
less efficient and not as environmentally conscious as those we implement, they
do offer their users the ability to continue to employ their existing means of
print and plate production. Companies offering these more traditional means and
methods are also refining these technologies to make them more acceptable to the
market.
Supplies
The broad
portfolio of equipment, supplies, and service added to our portfolio through the
acquisition of assets of the A.B. Dick Company (the “A.B. Dick Acquisition”) has
several competitors. In addition to those mentioned above, competitors include
for Prepress: ECRM and RIPit; for Press: Ryobi, Hamada, Xerox Corporation, Canon
Inc., Ricoh Company, Ltd., and Hewlett Packard Company; for Service: General
Binding Corp., Kodak, Service On Demand and some independent providers; for
Dealers: Xpedx, Pitman and Fuji Graphic Systems.
Patents, Trademarks and
Proprietary Rights
Our
general policy has been to seek patent protection for those inventions and
improvements likely to be incorporated into our products and services or where
proprietary rights will improve our competitive position. As of January 2, 2010,
our worldwide patent portfolio included over 400 patents. We believe these
patents, which expire from 2010 through 2026, are material in the aggregate to
our business. We have applied for and are pursuing applications for 7 additional
U.S. patents and 22 foreign patents. We have registered, or applied to register,
certain trademarks in the U.S. and other countries, including Presstek, DI®,
Dimension, ProFire®,
Anthem®,
Aeon, and PearlDry®. We
anticipate that we will apply for additional patents, trademarks, and
copyrights, as deemed appropriate.
We rely
on proprietary know-how and employ various methods to protect our source code,
concepts, trade secrets, ideas and the documentation of our proprietary software
and laser diode technology. Such methods, however, may not afford complete
protection and there can be no assurance that others will not independently
develop such know-how or obtain access to our know-how, software codes,
concepts, trade secrets, ideas, and documentation.
We also
protect our intellectual property by instituting legal proceedings against
parties suspected of infringing on the Company’s legally protected patent and
trademark rights.
Research and
Development
Research
and development expenses related to our continued development of products
incorporating DI® and
CTP technologies, were $5.0 million, $5.1 million and $5.0 million in fiscal
2009, fiscal 2008 and fiscal 2007, respectively. These research and development
expenditures are related to the continuing operations of the Presstek
segment. Additionally, the Company capitalizes costs related to the
design and development of prototypes by third parties that incorporate Presstek
products and technology. Capitalized development costs were $1.1
million, $0.1 million and $0.2 million in fiscal 2009, fiscal 2008 and fiscal
2007, respectively.
Environmental
Protection
The
Company is subject to various laws and governmental regulations concerning
environmental matters. In the United States, federal laws and state regulatory
programs having an impact on the Company include; the Toxic Substances Control
Act; the Resource Conservation and Recovery Act; the Clean Air Act;, the Clean
Water Act; and the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
It is the
Company’s policy to carry out its business activities in a manner consistent
with sound health, safety and environmental management practices, and to comply
with applicable health, safety and environmental laws and regulations. The
Company continues to engage in programs for environmental, health and safety
protection and control.
Based
upon information presently available, future costs associated with environmental
compliance are not expected to have a material effect on the Company's capital
expenditures, results of operations or competitive position. Such costs,
however, could be material to results of operations in a particular future
quarter or year.
Backlog
We sell
our products under standard sales orders and dealer contracts. Customer orders
are generally filled within a short time period, and therefore our backlog, at
any point in time, is minimal.
Employees
At
January 2, 2010, we had 539 employees worldwide. Of these, 27 are engaged
primarily in engineering, research and development; 131 are engaged in sales and
marketing; 220 are engaged in service and customer support; 98 are engaged
primarily in manufacturing, manufacturing engineering and quality control; and
63 are engaged primarily in corporate management, administration and
finance.
Available
Information
Financial
and other information about us is available on our website, www.presstek.com. We make
available, free of charge on our website, our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as
reasonably practicable after we electronically file such material with, or
furnish it to, the U.S. Securities and Exchange Commission (the
“SEC”).
Glossary
Set forth
below is a glossary of certain terms used in this Annual Report on Form
10-K:
|
A1
|
a
printing term referring to a standard paper size capable of printing eight
8.5” x 11” pages on a sheet of paper
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A2
|
a
printing term referring to a standard paper size capable of printing four
8.5” x 11” pages on a sheet of paper
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A3/B3
|
a
printing term referring to a standard paper size capable of printing two
8.5” x 11” pages on a sheet of paper
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Ablation
|
a
controlled detachment/vaporization caused by a thermal event, this process
is used during the imaging of Presstek’s PEARL and Anthem®
Pro consumables
|
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Bindery
|
operations
done after printing an image. Can include punching, folding, perforating,
trimming and slitting.
|
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Computer-to-plate
(CTP)
|
a
general term referring to the exposure of lithographic plate material from
a digital database, off-press
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DI®
|
Presstek’s
registered trademark for direct-to-press imaging systems that allow image
carriers (film and plates) to be imaged from a digital database, on and
off-press
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Dots
per inch (dpi)
|
a
measurement of the resolving power or the addressability of an imaging
device
|
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FM
screening
|
referred
to as stochastic screening. A process that converts images into small dots
of variable spacing rather than regularly spaced dots or lined screens.
This technique of laying down halftone dots can produce superior color
results.
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Infrared
|
light
lying outside of the visible spectrum beyond its red-end, characterized by
longer wavelengths; used in our thermal imaging process
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Lithography
|
printing
from a single plane surface under the principle that the image area
carries ink and the non-image area does not, and that ink and water do not
mix
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Off-press
|
making
a printing plate from either an analog or digital source independent of
the press on which it will be used
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On-press
|
the
use of Presstek’s direct imaging technologies to make a plate directly
from a digital file on the press
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PEARL
|
the
name associated with Presstek’s first generation laser imaging
technologies and related products and consumables
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ProFire®
and ProFire®
Excel
imaging
systems
|
the
Presstek components required to convert a conventional printing press into
a direct imaging press, including laser diode arrays, computers,
electronics
|
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Platemaking
|
the
process of applying a printable image to a printing
plate
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Prepress
|
graphic
arts operations and methodologies that occur prior to the printing
process; typically these include photography, scanning, image assembly,
color correction, exposure of image carriers (film and/or plate), proofing
and processing
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Ryobi
3404DI
|
an
A3 format size four-color sheet-fed press, incorporating Presstek’s dual
plate cylinder concept and PearlDry®
Plus spooled plates, a joint development effort between Ryobi and
Presstek
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Semiconductor
laser diode
|
a
high-powered, infrared imaging technology employed in the DI®
imaging systems
|
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Short-run
markets/printing
|
a
graphic arts classification used to denote an emerging growth market for
lower print quantities
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Thermal
|
a
method of digitally exposing a material via the heat generated from a
laser beam
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Vacuum
deposition process
|
a
technology to accurately, uniformly coat substrates in a controlled
environment
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Waterless
|
a
lithographic printing method that uses dry offset printing plates and inks
and does not require a dampening
system
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Certain
of the statements contained in this Annual Report on Form 10-K (other than the
historical financial data and other statements of historical fact), including,
without limitation, statements as to management’s expectations and beliefs, are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Exchange Act. Words such as “believe(s),”
“should,” “plan,” “expect(s),” “project(s),” “anticipate(s),” “may,” “likely,”
“potential,” “opportunity” and similar expressions identify forward-looking
statements. Forward-looking statements are made based upon management’s good
faith expectations and beliefs concerning future developments and their
potential effect upon the Company. There can be no assurance that future
developments will be in accordance with such expectations or that the effect of
future developments on the Company will be those anticipated by
management.
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 those
discussed below, as well as those discussed elsewhere in this Annual Report on
Form 10-K. 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 Annual Report on Form
10-K.
Significant
factors that could cause actual results to differ materially from management’s
expectations or otherwise impact the Company’s financial condition or results of
operations include, without limitation, the following:
Current economic conditions and
market disruptions may adversely affect the Company’s business and results of
operations. Adverse
economic conditions in the United States and internationally, leading to reduced
capital spending, may adversely impact our business.
A
substantial portion of our business depends on our customers’ demand for our
products and services, the overall economic health of our current and
prospective customers, and general economic conditions. As widely reported,
financial markets throughout the world have been experiencing extreme disruption
in the past two years, including extreme volatility in securities prices,
severely diminished liquidity and credit availability, rating downgrades of
certain investments and declining valuations of others, failure and potential
failures of major financial institutions and unprecedented government support of
financial institutions and large businesses. These developments and the
related general economic downturn have and will adversely impact the Company’s
business and financial condition in a number of ways, including impacts beyond
those typically associated with other recent downturns in the U.S. and foreign
economies. The slowdown has caused reduced capital spending by end users,
which has already adversely affected and may continue to adversely affect the
Company’s product sales. Additional cost reduction actions may be
necessary which would lead to additional restructuring charges. The tightening
of credit in financial markets and the general economic downturn has, and will
likely continue to, adversely affect the ability of the Company’s customers,
suppliers, outsource manufacturers and channel partners (e.g., dealers and
resellers) to obtain financing for significant purchases. The tightening could
result in a decrease in or cancellation of orders for the Company’s products and
services, could negatively impact the Company’s ability to collect its accounts
receivable on a timely basis, could result in additional reserves for
uncollectible accounts receivable being required, and in the event of continued
contraction in the Company’s sales, could lead to dated inventory and require
additional reserves for obsolescence. Significant volatility and
fluctuations in the rates of exchange for the U.S. dollar against currencies
such as the euro, the British pound and the Japanese yen could negatively impact
the Company’s customer pricing, purchase price of sourced product, and adversely
affect the Company’s results.
The
Company is unable to predict the duration and severity of the current economic
downturn and disruption in financial markets or their effects on the Company’s
business and results of operations, but the consequences may be materially
adverse and more severe than other recent economic slowdowns.
We
are substantially dependent on our manufacturing and distribution relationships
to develop and grow our business. The loss or failure of one or more of these
partners could significantly harm our business.
Our
business strategy includes working with manufacturing and distribution partners
to produce our products on an OEM basis and to aid in developing new market
channels for our products. We are dependent on many of these partners for future
sales of both existing and planned products. This means that the timetable for
finalizing development, commercialization and distribution of both existing and
planned products is dependent upon the needs and circumstances of our partners.
Any delay in meeting production and distribution targets with our partners may
harm our relationships with them and may cause them to terminate their
relationship with us. Our partners may not develop markets for our products at
the pace or in the manner we expect, which may have an adverse effect on our
business. They may also terminate their relationships with us for circumstances
beyond our control, including factors unique to their businesses or their
business decisions, or due to factors associated with the current global
economic downturn. In addition, we may mutually agree with one or more of our
partners to terminate our relationship with them for a variety of reasons. We
cannot be assured that the termination of any of our relationships with our
manufacturing and distribution partners will not have an adverse impact on our
business in the future.
If
we are unable to manage acquisitions successfully it could harm our financial
results, business and prospects.
As part
of our business strategy, we may expand our business through the acquisition of
other businesses. We will need to integrate acquired businesses with our
existing operations. We cannot be assured that we will effectively assimilate
the business or product offerings of acquired companies into our business or
product offerings. Integrating the operations and personnel of acquired
companies into our existing operations may result in difficulties and expense,
disrupt our business or divert management’s time and attention. If we are unable
to successfully integrate future acquisitions, it could adversely impact our
competitiveness and profitability. Acquisitions involve numerous other risks,
including potential exposure to unknown liabilities of acquired companies and
the possible loss of key employees and customers of the acquired business. In
connection with acquisitions or joint venture investments outside the U.S., we
may be subject to the risk of foreign currency fluctuations
Our
business strategy may include the licensing or acquisition of technologies,
which entail a number of risks.
As part
of our strategy to grow our business, we may license technologies from third
parties. We may not be successful in integrating the acquired technology into
our existing business to achieve the desired results.
Our
lengthy and variable sales cycle makes it difficult for us to predict when or if
sales will occur and therefore we may experience an unplanned shortfall in
revenues.
Many of
our products have a lengthy and unpredictable sales cycle that contributes to
the unpredictability of our operating results; this issue has been compounded by
the economic downturn. Customers view the purchase of our products as a
significant capital outlay and, therefore, a strategic decision. As a result,
customers generally evaluate these products and determine their impact on
existing infrastructure over a lengthy period of time. The sale of our products
may be subject to delays if the customer has lengthy internal budgeting,
approval and evaluation processes. The severe economic downturn has
significantly impacted this decision-making process of many of our customers and
prospective customers, and some businesses are either deferring or canceling
significant capital purchasing decisions due to the uncertainty of their own
financial futures. If revenues anticipated during a particular period are not
realized or are delayed, we may experience a shortfall in anticipated revenues,
which could have an adverse effect on our business, results of operations and
financial condition.
We
face risks associated with our efforts to expand into international
markets.
We intend
to continue expanding our global sales operations and enter additional
international markets in order to increase market awareness and acceptance of
our line of products and generate increased revenues, which will require
significant management attention and financial resources. International sales
are subject to a variety of risks, including difficulties in establishing and
managing international distribution channels, in serving and supporting products
sold outside the United States and in translating products and related materials
into foreign languages. International operations are also subject to
difficulties in collecting accounts receivable, staffing and managing personnel
and enforcing intellectual property rights. Other factors that can adversely
affect international operations include fluctuations in the value of foreign
currencies and currency exchange rates, changes in import/export duties and
quotas, introduction of tariff or non-tariff barriers and economic or political
changes in international markets.
If our
international sales increase, our revenues may also be affected to a greater
extent by seasonal fluctuations resulting from lower levels of sales that
typically occur during the summer months in Europe and other parts of the world.
There can be no assurance that these factors will not have an adverse effect on
our business, results of operations and financial condition.
We
have experienced losses in the past, could incur substantial losses in the
future, and may not be able to maintain profitability.
The
Company has sustained significant losses in prior periods. The ability of the
Company to generate profits in fiscal year 2010 and beyond is dependent upon its
ability to generate revenues and effectively manage costs. We may need to
generate significant increases in revenues to generate profits, and we may not
be able to do so. If our revenues grow more slowly than we anticipate or
decrease, or if our operating expenses increase more than we expect or cannot be
reduced in the event of lower revenues, our business will be adversely affected.
Even if we maintain profitability in the future on a quarterly or annual basis,
we may not be able to sustain or increase such profitability year to
year.
We
have intangible assets, and if we are required to write-down any of these
assets, it would reduce our net income, which in turn could have a material
adverse effect on our results of operations.
We have
intangible assets. Intangible assets with estimated lives and other long-lived
assets are reviewed for impairment when events or changes in circumstances
indicate that the carrying amount of an asset or asset group may not be
recoverable in accordance with FASB Accounting Standards Codification Topic 360,
(originally issued as SFAS No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets (“SFAS 144”)). Recoverability of intangible assets with
estimated lives and other long-lived assets is measured by comparison of the
carrying amount of an asset or asset group to future net undiscounted pretax
cash flows expected to be generated by the asset or asset group. If these
comparisons indicate that an asset is not recoverable, the Company will
recognize an impairment loss for the amount by which the carrying value of the
asset or asset group exceeds the related estimated fair value. Reductions in our net
income caused by the write-down of any of these intangible assets could
materially and adversely affect our results of operations.
Our
quarterly revenues and operating results are likely to fluctuate
significantly.
Our
quarterly revenues and operating results are sometimes difficult to predict,
have varied in the past, and are likely to fluctuate significantly in the
future. We typically realize a significant percentage of our revenues for a
fiscal quarter in the third month of the quarter. Accordingly, our quarterly
results may be difficult to predict prior to the end of the quarter. In
addition, we base our current and future expense levels in part on our estimates
of future revenues. Our expenses are largely fixed in the short-term and we may
not be able to adjust our spending quickly if our revenues fall short of our
expectations. Accordingly, a revenue shortfall in a particular quarter would
have an adverse effect on our operating results for that quarter. In addition,
our quarterly operating results may fluctuate for many reasons, including,
without limitation:
|
·
|
a
long and unpredictable sales cycle;
|
|
·
|
changes
in demand for our products and consumables, including seasonal
differences;
|
|
·
|
changes
in the mix of our products and consumables;
and
|
|
·
|
the
continued global economic downturn.
|
The
current capital and credit market conditions may adversely affect our access to
capital, cost of capital and business operations.
The
general economic and capital market conditions in the United States and other
parts of the world have deteriorated significantly over the past two years, and
have adversely affected access to capital and increased the cost of capital. If
these conditions continue or become worse, our future cost of debt and equity
capital and access to capital markets could be adversely affected. In this
regard, the Company has recently established a new three year credit
line. However, if the need arises for additional financing, any
inability to obtain adequate financing from debt and/or equity sources could
force us to self-fund capital expenditures and strategic initiatives, forgo some
opportunities, or possibly discontinue certain operations.
Our
activities are restricted by the terms of our credit agreement.
Under the
terms of the Company’s credit agreement, we are restricted in our ability to
enter into certain transactions, and to make certain investments and capital
expenditures above established levels. These restrictions, among
others in the credit agreement, may restrict our ability to meet our growth and
financial performance targets. Certain financial performance metrics
required in the credit agreement may not be attainable, which may result in a
default under the credit agreement. Such a default could have a
material adverse effect on our business, results of operations and financial
condition.
We
are dependent on third party suppliers for critical components and certain
products. Our inability to maintain an adequate supply for these critical
components and important products could adversely affect us.
We are
dependent on third-party suppliers for critical components and certain important
products. Our demand for these components may strain the ability of our third
party suppliers to deliver such components and products in a timely manner. For
example, we have a requirement for advanced technology laser diodes for use in
products incorporating our direct-to-press technology. If we are unable for any
reason to secure an uninterrupted source of critical components at prices
acceptable to us, our operations could be materially adversely
affected. Although an important element of our recent sale of the
Lasertel business to SELEX was a laser diode supply agreement with the Company,
there can be no assurance that the supplier will become a dependable provider of
laser diodes and satisfy the Company’s supply requirements. Examples of
important products provided by third party suppliers would be Aeon, certain
platesetters, and various consumables products such as film and printer
supplies. There can be no assurance that we will be able to obtain alternative
suppliers should our current supply channel prove inadequate.
Our
manufacturing capabilities may be insufficient to meet the demand for our
products.
If demand
for our products grows beyond our expectations, our current manufacturing
capabilities may be insufficient to meet this demand, resulting in production
delays and a failure to deliver products in a timely fashion. We may be forced
to seek alternative manufacturers for our products. There can be no assurance
that we will successfully be able to do so. As we introduce new products, we may
face production and manufacturing delays due to technical and other unforeseen
problems. Any manufacturing delay could have a material adverse effect on our
business, the success of any product affected by the delay, and our
revenue.
In
addition, many of our manufacturing processes are sophisticated and demand
specific environmental conditions. Although we take precautions to avoid
interruptions in manufacturing and to ensure that the products that are
manufactured meet our exacting performance standards, our yields may be affected
by difficulties in our manufacturing processes. If such an effect occurs, it
could increase manufacturing costs, detrimentally impacting margins, or cause a
delay in the finishing and shipping of products.
New
products may not be commercially successful and may not gain market
acceptance.
As part
of the Company’s strategy, we have introduced several new products during the
past two years. Achieving and maintaining market acceptance for any product
requires substantial marketing and distribution efforts and expenditure of
significant sums of money and allocation of significant resources. We may not
have sufficient resources to achieve and maintain market acceptance of new
products. Additionally, there can be no assurance that our existing product
offerings will achieve and maintain market acceptance or that any of our other
current products or any future products that we may develop or any future
products produced by others that incorporate our technologies will achieve
market acceptance or become commercially successful. If these product offerings
do not achieve anticipated market acceptance, we may not achieve anticipated
revenue and profitability.
If
we fail to maintain an effective system of internal and disclosure controls, we
may not be able to accurately report our financial results or prevent fraud. As
a result, investors may lose confidence in our financial reporting and
disclosures.
The
Sarbanes-Oxley Act of 2002 and SEC rules require that management report annually
on the effectiveness of our internal control over financial reporting. Among
other things, management must conduct an assessment of our internal control over
financial reporting to allow management to report on, and our independent
registered public accounting firm to audit, the effectiveness of our internal
control over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act.
Management’s
Report on Internal Control over Financial Reporting included in this Annual
Report on Form 10-K, concludes that as of January 2, 2010 our internal control
over financial reporting was effective. Although we exercise
significant efforts to maintain effective controls, our continued assessment, or
the subsequent assessment by our independent registered public accounting firm,
may reveal deficiencies in our internal control over financial reporting and our
disclosure controls or procedures, some of which may require disclosure in
future reports.
Although
we have remediated the material weakness reported in our 2008 Annual Report on
Form 10-K, if we discover other deficiencies it may adversely impact our ability
to report accurately and in a timely manner our financial condition and results
of operations in the future, which may cause investors to lose confidence in our
financial reporting. Moreover, effective internal and disclosure controls are
necessary to produce accurate, reliable financial reports and to detect and
prevent fraud.
Our
success is partially dependent on our ability to maintain and protect our
proprietary rights.
Our
future success will depend, in part, upon our intellectual property, including
patents, trademarks, trade secrets, proprietary know-how, source codes and
continuing technological innovation. We have been issued a number of U.S. and
foreign patents and we intend to register for additional patents where we deem
appropriate. We also hold several registered trademarks and we may register
additional trademarks where we deem appropriate. There can be no assurance,
however, as to the issuance of any additional patents or trademarks or the
breadth or degree of protection that our patents, trademarks or other
intellectual property may afford us. The steps we have taken to protect our
intellectual property may not adequately prevent misappropriation or ensure that
others will not develop competitive technologies or products. Further, the laws
of certain territories in which our products are or may be developed,
manufactured or sold, may not protect our products and intellectual property
rights to the same extent as the laws of the United States.
There is
rapid technological development in the electronic image reproduction industry,
resulting in extensive patent filings and a rapid rate of issuance of new
patents. Although we believe that our technology has been independently
developed and that the products we market do not infringe the patents or violate
the proprietary rights of others, it is possible that such infringement of
existing or future patents or violation of proprietary rights may
occur.
In this
regard, third parties may in the future assert claims against us concerning our
existing products or with respect to future products under development by us. In
such event, we may be required to modify our product designs or obtain a
license. No assurance can be given that we would be able to do so in a timely
manner, upon acceptable terms and conditions or even at all. The failure to do
any of the foregoing could have a material adverse effect on our business,
results of operations and financial condition. Furthermore, we have agreements
with several of our partners which require us to indemnify the partner from
claims made by third parties against them concerning our intellectual property,
and to defend the validity of the patents or otherwise ensure the technology’s
availability to the partner. The costs of an indemnification claim under any
such agreement could have a material adverse effect on our
business.
We have
taken, are currently taking, and may take in the future, legal action to protect
our patent and trademark rights from infringement by others. We have also
defended actions brought against us relating to the validity of our patent
rights. In the course of pursuing or defending any of these actions we could
incur significant costs and diversion of our resources. Due to the competitive
nature of our industry, it is unlikely that we could increase our product prices
to cover such costs. There can be no assurance that we will have the financial
or other resources necessary to successfully defend a patent infringement or
proprietary rights violation action. Moreover, we may be unable, for financial
or other reasons, to enforce our rights under any patents we may own. Such
litigation is costly and is subject to uncertain results that could have a
material effect on our business, results of operations and financial
condition.
We also
rely on proprietary know-how and employ various methods to protect the source
codes, concepts, trade secrets, ideas and documentation relating to our
proprietary software and laser diode technology. Such methods, however, may not
afford complete protection and there can be no assurance that others will not
independently develop such know-how or obtain access to our know-how or software
codes, concepts, trade secrets, ideas and documentation. Although we have and
expect to have confidentiality agreements with our employees and appropriate
vendors, there can be no assurance, however, that such arrangements will
adequately protect our trade secrets and proprietary know-how.
We
use hazardous materials in the production of many of our products at our various
manufacturing facilities.
As a
manufacturing company, we are subject to environmental, health and safety laws
and regulations, including those governing the use of hazardous materials. The
cost of compliance with environmental, health and safety regulations is
substantial. Some of our business activities involve the controlled use of
hazardous materials and we cannot eliminate the risk or potential liability of
accidental contamination, release or injury from these materials. In the event
of an accident or environmental discharge, we may be held liable for any
resulting damages, which may exceed our financial resources and the limits of
any insurance coverage, and our production of plates could be delayed
indefinitely, which could materially harm our business, financial condition and
results of operations.
We
face competition in the sale of our products.
We
compete with manufacturers of conventional presses and products utilizing
existing plate-making technology, as well as presses and other products
utilizing new technologies, including other types of direct-to-plate solutions
such as companies that employ electrophotography as their imaging technology.
Canon Inc., Hewlett Packard Company, Kodak and Xerox Corporation are companies
that have introduced color electrophotographic copier products. Various
companies are marketing product versions manufactured by these
companies.
We also
compete with stand-alone CTP imaging devices for single and multi-color
applications. Most of the major corporations in the graphic arts industry have
developed and are marketing off press CTP imaging systems. To date, devices
manufactured by our competitors, for the most part, utilize printing plates that
require a post imaging photochemical developing step, and in some cases, also
require a heating process. Competitors in this area include, among others, Agfa
Gevaert N.V., Screen, Heidelberg and Kodak.
We also
have competition from plate manufacturing companies that manufacture printing
plates, including digital thermal plates. These companies include Agfa Gevaert
N.V., Kodak and Fuji. The introduction of a competitive plate could reduce the
revenue generated by Presstek and could have a material adverse effect on our
business, results of operations and financial condition.
Products
incorporating our technologies can also be expected to face competition from
conventional methods of printing and creating printing plates. Most of the
companies marketing competitive products, or with the potential to do so, are
well established, have substantially greater financial, marketing and
distribution resources than us and have established reputations for success in
the development, sale and service of products. There can be no assurance that we
will be able to compete successfully in the future.
While we
believe we have strong intellectual property protection covering many of our
technologies, there is no assurance that the breadth or degree of such
protection will be sufficient to prohibit or otherwise delay the introduction of
competitive products or technologies. The introduction of competitive products
and technologies may have a material adverse effect on our business, results of
operations and financial condition.
We
may not be able to adequately respond to changes in technology affecting the
printing industry.
The
printing and publishing industry has been characterized in recent years by rapid
and significant technological changes and frequent new product introductions.
Current competitors or new market entrants could introduce new or enhanced
products with features, which render our technologies, or products incorporating
our technologies, obsolete or less marketable. Our future success will depend,
in part, on our ability to respond to changing technology and industry standards
in a timely and cost-effective manner. We may not be successful in effectively
using new technologies, developing new products or enhancing our existing
products and technology on a timely basis. Our new technologies or enhancements
may not achieve market acceptance. Our pursuit of new technologies may require
substantial time and expense.
We may
need to license new technologies to respond to technological change. These
licenses may not be available to us on terms that we can accept. Finally, we may
not succeed in adapting our products to new technologies as they
emerge.
Changes
in accounting standards could affect our financial results.
New
accounting standards or pronouncements that may become applicable to us from
time to time, or changes in the interpretation of existing standards and
pronouncements, could have a significant effect on our reported results for the
affected periods.
The
loss or unavailability of our key personnel would have a material adverse effect
on our business.
Our
success is largely dependent on the personal efforts of our senior management
team. The loss or interruption of the services of any or all of these
individuals could have an adverse effect on our business and prospects. Our stock price
has been and could continue to be extremely volatile.
The
market price of our common stock has been subject to significant fluctuations.
The securities markets have experienced, and may experience in the future,
significant price and volume fluctuations that could adversely affect the market
price of our common stock without regard to our operating performance. In
addition, the trading price of our common stock could be subject to significant
fluctuations in response to:
|
·
|
actual
or anticipated variations in our quarterly operating
results;
|
|
·
|
significant
announcements by us or other industry
participants;
|
|
·
|
changes
in national or regional economic
conditions;
|
|
·
|
changes
in securities analysts’ estimates for us, our competitors or our industry,
or our failure to meet analysts’ expectations;
and
|
|
·
|
general
market conditions.
|
These
factors may materially and adversely affect our stock price, regardless of our
operating performance.
None.
The
following table summarizes our significant occupied properties:
|
Location(1)
|
|
Functions
|
|
Square
footage (approximate)
|
|
Ownership
status/
lease
expiration
|
|
|
|
|
|
|
|
|
|
Hudson,
NH
|
|
Manufacturing,
research and development, marketing, demonstration activities,
administrative and customer support
|
|
165,000
|
|
Owned
|
|
|
|
|
|
|
|
|
|
South
Hadley, MA (two buildings)
|
|
Manufacturing,
research and development, administrative support
|
|
100,000
|
|
Owned
|
|
|
|
|
|
|
|
|
|
Tucson,
AZ(2)
|
|
Manufacturing,
research and development, administrative support
|
|
40,000
|
|
Lease
expires in July 2018
|
|
|
|
|
|
|
|
|
|
Greenwich,
CT
|
|
Corporate
headquarters, executive offices
|
|
11,500
|
|
Lease
expires in May 2013
|
|
|
|
|
|
|
|
|
|
Des
Plaines, IL
|
|
Distribution
center
|
|
127,000
|
|
Lease
expires in February 2013
|
|
|
|
|
|
|
|
|
|
Heathrow,
United Kingdom
|
|
European
headquarters, sales, service
|
|
20,000
|
|
Lease
expires in November 2020, with an option to cancel in November
2010
|
|
|
|
|
|
|
|
|
|
Rungis,
France
|
|
Presstek
France SAS headquarters
|
|
600
|
|
Lease
expires in May 2010 with automatic renewal, terminated with 3 months
notice
|
|
|
|
|
|
|
|
|
(1) Our
Presstek segment utilizes the facilities in New Hampshire, Massachusetts,
Connecticut, Illinois, France and the United Kingdom.
(2) Our
discontinued Lasertel segment utilized the facilities in
Arizona. This lease was transferred to Lasertel in connection with
the March 5, 2010 sale of Lasertel.
In
addition to the properties referenced above, we also lease a number of small
sales and marketing offices in the United States and internationally. We believe
that our existing facilities are adequate for our needs for at least the next
twelve months.
All of
the properties we own are pledged as security for our credit facility; please
refer to Note 8 of the Notes to the Consolidated Financial Statements included
in this Annual Report on Form 10-K.
We
believe that our existing facilities are well maintained, in good operating
condition and are adequate for our current and expected future
operations.
On
September 10, 2008, a purported shareholder derivative claim against certain
current and former directors and officers of the Company was filed in the United
States District Court for the District of New Hampshire. The complaint alleges
breaches of fiduciary duty by the defendants and seeks unspecified damages. On
September 25, 2008, the parties reached agreement on a settlement of the claim
in the amount of $150,000, subject to receipt of Court approval. On
January 21, 2010 final judgment was entered by the Court approving the
settlement and dismissing the case.
In
February 2008 we filed a complaint with the ITC against VIM and its
manufacturing partner Hanita Coatings for infringement of Presstek’s patent and
trademark rights. Presstek also sued four U.S. based distributors of VIM
products: Spicers Paper, Inc., Guaranteed Service & Supplies, Inc., Ohio
Graphco Inc., and Recognition Systems Inc., as well as one Canadian based
distributor, AteCe Canada. The Company has settled with Ohio Graphco Inc., which
has agreed to cease the importation, use and sale of VIM plates and also agreed
to cooperate with the ITC in its investigation of VIM’s alleged patent
infringement. Presstek sought, among other things, an order from the ITC
forbidding the importation and sale of the VIM printing plates in the United
States; such an order would be enforced at all U.S. borders by the U.S. Customs
Service. On November 30, 2009 the ITC determined that VIM infringed Presstek’s
valid and enforceable patents and ordered that the importation of the infringing
VIM products into the United States be banned. The ITC order took
effect on January 30, 2010 following a required 60-day Presidential review
period. In April 2008 we filed a Complaint against VIM in the
Regional Court in Dusseldorf, Germany German court for patent
infringement. In April 2009, the Regional Court found Presstek's European
patents to be infringed by VIM's illegal plates. The Court ordered VIM and a
German distributor named as a defendant in the action to cease all sales of
infringing VIM printing plates. The German court ruled that VIM is liable to
Presstek for damages, including damages relating to all VIM plate sales in
Germany dating back to 2003. VIM has appealed this decision. In
addition, VIM initiated a separate German court proceeding seeking to have the
Company’s European patents declared invalid, and the Company is contesting this
action.
On March
14, 2007, the U.S. Securities and Exchange Commission (“SEC”) initiated an
informal investigation into the Company and its present and former officers,
directors, employees, partners, subsidiaries, and/or affiliates for possible
violations of federal securities laws including Section 10(b) of the Exchange
Act and Rule 10b-5 promulgated thereunder, Section 17(a) of the Securities Act
of 1933 (the “Securities Act”), Section 13(a) of the Exchange Act, and
Regulation FD, in connection with the Company’s announcement of preliminary
financial results for the third quarter of 2006. A formal order of
investigation was subsequently issued on January 10, 2008. The
Company is cooperating fully with the SEC in its investigation. On March 9, 2010
the Company settled this matter. While the Company did not admit or
deny any wrongdoing, it agreed to pay a civil penalty of $400,000 and further
agreed not to violate certain federal securities laws in the future. This
settlement is subject to court approval.
Presstek
is a party to other litigation that it considers routine and incidental to its
business however it does not expect the results of any of these actions, nor the
settlement actions as noted above, to have a material adverse effect on its
business, results of operation or financial condition.
Our
common stock is quoted on The NASDAQ Global Market under the symbol “PRST”. The
following table sets forth the high and low closing sales prices per share of
common stock for each full quarterly period within the two most recently
completed fiscal years as reported by The NASDAQ Global Market.
|
|
|
High
|
|
|
Low
|
|
|
Fiscal
year ended January 2, 2010
|
|
|
|
|
|
|
|
First
quarter
|
|
$ |
3.56 |
|
|
$ |
1.38 |
|
|
Second
quarter
|
|
$ |
2.39 |
|
|
$ |
1.10 |
|
|
Third
quarter
|
|
$ |
2.42 |
|
|
$ |
1.17 |
|
|
Fourth
quarter
|
|
$ |
2.61 |
|
|
$ |
1.64 |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year ended January 3, 2009
|
|
High
|
|
|
Low
|
|
|
First
quarter
|
|
$ |
5.12 |
|
|
$ |
4.28 |
|
|
Second
quarter
|
|
$ |
6.57 |
|
|
$ |
4.00 |
|
|
Third
quarter
|
|
$ |
6.28 |
|
|
$ |
4.48 |
|
|
Fourth
quarter
|
|
$ |
5.64 |
|
|
$ |
1.18 |
|
On March
18, 2010, there were 2,142 holders of record of our common stock. The closing
price of our common stock was $4.08 per share on March 18, 2010.
Dividend
Policy
To date,
we have not paid any cash dividends on our common stock. Under the terms of our
credit agreement, we are prohibited from declaring or distributing dividends to
shareholders. The payment of cash dividends in the future is within the
discretion of our Board of Directors, and will depend upon our earnings, capital
requirements, financial condition and other relevant factors, including the
current prohibition on such dividends described above. The Board of Directors
does not intend to declare any cash dividends in the foreseeable future, but
instead intends to retain all earnings, if any, for use in our business
operations.
Issuer Purchases of Equity
Securities
We did
not repurchase any of our equity securities during fiscal 2009.
The
selected consolidated financial data set forth below should be read in
conjunction with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” included as Part II Item 7 of this Annual Report on
Form 10-K and our consolidated financial statements and notes thereto included
in Part II Item 8 of this Annual Report on Form 10-K. On December 28, 2006, the
Audit Committee of the Company’s Board of Directors ratified a plan submitted by
management to terminate production in South Hadley, Massachusetts of
Precision-branded analog plates used in newspaper applications. The results of
operations for all periods presented include the analog newspaper business as
discontinued operations. On September 24, 2008, the Company’s Board
of Directors approved a plan to market the Lasertel subsidiary for sale. On
March 5, 2010, Presstek sold Lasertel to SELEX Galileo Inc. The results of
operations for the years ended December 29, 2007 and January 3, 2009 have been
restated to reflect the Lasertel segment as discontinued operations. The
historical results provided below are not necessarily indicative of future
results.
|
(in
thousands, except per-share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year ended
|
|
|
|
|
January
2,
|
|
|
January
3,
|
|
|
December
29,
|
|
|
December
30,
|
|
|
December
31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
134,458 |
|
|
$ |
193,252 |
|
|
$ |
246,573 |
|
|
$ |
258,936 |
|
|
$ |
255,344 |
|
|
Cost
of revenue
|
|
|
92,266 |
|
|
|
124,511 |
|
|
|
177,346 |
|
|
|
181,799 |
|
|
|
172,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
42,192 |
|
|
|
68,741 |
|
|
|
69,227 |
|
|
|
77,137 |
|
|
|
83,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
4,975 |
|
|
|
5,144 |
|
|
|
4,969 |
|
|
|
5,320 |
|
|
|
6,452 |
|
|
Sales,
marketing and customer support
|
|
|
24,967 |
|
|
|
29,937 |
|
|
|
39,194 |
|
|
|
39,451 |
|
|
|
39,808 |
|
|
General
and administrative
|
|
|
21,912 |
|
|
|
25,496 |
|
|
|
33,172 |
|
|
|
18,879 |
|
|
|
20,135 |
|
|
Amortization
of intangible assets
|
|
|
926 |
|
|
|
1,084 |
|
|
|
2,168 |
|
|
|
2,697 |
|
|
|
2,388 |
|
|
Restructuring
and special charges (credits)
|
|
|
1,684 |
|
|
|
2,108 |
|
|
|
2,714 |
|
|
|
5,481 |
|
|
|
874 |
|
|
Goodwill
impairment
|
|
|
19,114 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total
operating expenses
|
|
|
73,578 |
|
|
|
63,769 |
|
|
|
82,217 |
|
|
|
71,828 |
|
|
|
69,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
(31,386 |
) |
|
|
4,972 |
|
|
|
(12,990 |
) |
|
|
5,309 |
|
|
|
13,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense), net
|
|
|
(1,389 |
) |
|
|
938 |
|
|
|
(1,254 |
) |
|
|
(984 |
) |
|
|
(1,345 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes
|
|
|
(32,775 |
) |
|
|
5,910 |
|
|
|
(14,244 |
) |
|
|
4,325 |
|
|
|
12,134 |
|
|
Provision
(benefit) for income taxes
|
|
|
16,334 |
|
|
|
2,780 |
|
|
|
(3,889 |
) |
|
|
(9,891 |
) |
|
|
2,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(49,109 |
) |
|
|
3,130 |
|
|
|
(10,355 |
) |
|
|
14,216 |
|
|
|
9,407 |
|
|
Loss
from discontinued operations, net of income tax
|
|
|
(740 |
) |
|
|
(2,606 |
) |
|
|
(1,849 |
) |
|
|
(4,472 |
) |
|
|
(3,321 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(49,849 |
) |
|
$ |
524 |
|
|
$ |
(12,204 |
) |
|
$ |
9,744 |
|
|
$ |
6,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$ |
(1.34 |
) |
|
$ |
0.09 |
|
|
$ |
(0.29 |
) |
|
$ |
0.40 |
|
|
$ |
0.27 |
|
|
Income
(loss) from discontinued operations
|
|
|
(0.02 |
) |
|
|
(0.08 |
) |
|
|
(0.05 |
) |
|
|
(0.13 |
) |
|
|
(0.10 |
) |
|
|
|
$ |
(1.36 |
) |
|
$ |
0.01 |
|
|
$ |
(0.34 |
) |
|
$ |
0.27 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$ |
(1.34 |
) |
|
$ |
0.09 |
|
|
$ |
(0.29 |
) |
|
$ |
0.40 |
|
|
$ |
0.26 |
|
|
Income
(loss) from discontinued operations
|
|
|
(0.02 |
) |
|
|
(0.08 |
) |
|
|
(0.05 |
) |
|
|
(0.13 |
) |
|
|
(0.09 |
) |
|
|
|
$ |
(1.36 |
) |
|
$ |
0.01 |
|
|
$ |
(0.34 |
) |
|
$ |
0.27 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
36,744 |
|
|
|
36,596 |
|
|
|
36,199 |
|
|
|
35,565 |
|
|
|
35,153 |
|
|
Diluted
|
|
|
36,744 |
|
|
|
36,605 |
|
|
|
36,199 |
|
|
|
35,856 |
|
|
|
35,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
|
|
January
2,
|
|
|
January
3,
|
|
|
December
29,
|
|
|
December
30,
|
|
|
December
31,
|
|
|
|
|
|
2010 |
|
|
|
2009 |
|
|
|
2007 |
|
|
|
2006 |
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital (this excludes discontinued operations)
|
|
$ |
19,324 |
|
|
$ |
34,670 |
|
|
$ |
35,337 |
|
|
$ |
43,151 |
|
|
$ |
37,558 |
|
|
Total
assets
|
|
$ |
104,535 |
|
|
$ |
157,513 |
|
|
$ |
192,827 |
|
|
$ |
198,014 |
|
|
$ |
181,487 |
|
|
Total
debt and capital lease obligations
|
|
$ |
17,910 |
|
|
$ |
16,489 |
|
|
$ |
35,535 |
|
|
$ |
37,572 |
|
|
$ |
35,643 |
|
|
Stockholders'
equity
|
|
$ |
56,848 |
|
|
$ |
102,531 |
|
|
$ |
106,892 |
|
|
$ |
111,237 |
|
|
$ |
98,633 |
|
The
following Management’s Discussion and Analysis should be read in connection with
“Item 1. Business”, “Item 1A. Risk Factors”, “Item 6. Selected Financial Data”,
“Item 7A. Quantitative and Qualitative Disclosures about Market Risks” and the
Company’s Consolidated Financial Statements and Notes thereto included in this
Annual Report on Form 10-K. Certain terms used in the discussion below are
defined in Item 1 of this Annual Report on Form 10-K.
Overview of the
Company
The
Company is a provider of high-technology, digital-based printing solutions to
the commercial print segment of the graphics communications industry. The
Company designs, manufactures and distributes proprietary and non-proprietary
solutions aimed at serving the needs of a wide range of print service providers
worldwide. Our proprietary digital imaging and advanced technology consumables
offer superior business solutions for commercial printing focusing on the
growing need for short-run, high quality color applications. We have helped to
lead the industry’s transformation from analog print production methods to
digital imaging technology. We are a leader in the development of advanced
printing systems using digital imaging equipment, workflow and consumables-based
solutions that economically benefit the user through streamlined operations and
chemistry-free, environmentally responsible solutions. We are also a leading
sales and service channel across a broadly served market in the small to
mid-sized commercial, quick and in-plant printing segments.
Presstek’s
business model is a capital equipment and consumables model. In this model,
approximately two-thirds of our revenue is recurring revenue. Our model is
designed so that each placement of either a DI® press
or a CTP system generally results in recurring aftermarket revenue for
consumables and service. We also provide consumables for use on equipment
purchased by end users from other manufacturers and suppliers.
Through
our various operations, we:
|
·
|
provide
advanced digital print solutions through the development, manufacture, and
sourcing of digital laser imaging equipment and advanced technology
chemistry-free and chemistry based printing plates, which we call
consumables, for commercial and in-plant print providers targeting the
growing market for high quality, fast turnaround short-run color
printing;
|
|
·
|
are
a leading sales and services company delivering Presstek digital solutions
and solutions from other manufacturing partners through our direct sales
and service force and through distribution partners
worldwide;
|
|
·
|
through
our Lasertel subsidiary, we manufacture semiconductor solid state laser
diodes for Presstek imaging applications and for use in external
applications (as previously discussed the Company sold Lasertel to SELEX
on March 5, 2010); and
|
|
·
|
manufacture
and distribute printing plates for conventional print
applications.
|
We have
developed the enabling technology for DI®
digital offset presses. DI®
presses are Presstek’s proprietary system by which digital images are
transferred directly onto printing plates that are already mounted on press. Our
advanced DI®
presses are a waterless, easy to use, high quality printing press that is fully
automated and provides our users with competitive advantages over alternative
print technologies. We believe that our DI®
digital offset presses, in combination with our proprietary printing plates and
streamlined workflow, produces a superior offset printing solution. By combining
advanced digital technology with the reliability and economic advantages of
offset printing, we believe our customers are better able to grow their
businesses, generate higher profits and better serve the needs of their
customers.
Similar
digital imaging technologies are used in our CTP systems. Our Presstek segment
also designs and manufactures CTP systems that incorporate our technology to
image our chemistry-free printing plates. Our chemistry-free digital imaging
systems enable customers to produce high-quality, full color lithographic
printed materials more quickly and cost effectively than conventional methods
that employ more complicated workflows and toxic chemical processing. This
results in reduced printing cycle time and lowers the effective cost of
production for commercial printers. Our solutions make it more cost effective
for printers to meet the increasing demand for shorter print runs, higher
quality color and faster turn-around times.
We have
executed a major transformation in the way we go to market. In the past, we had
been reliant on OEM partners to deliver our business solutions to customers.
Today, more than 90% of our sales are through our own distribution
channels.
In
addition to marketing, selling and servicing our proprietary digital products,
we also market, sell and service traditional (or analog) products for the
commercial print market. This analog equipment is manufactured by third party
strategic partners and the analog consumables are manufactured by either us or
our strategic partners. The addition of these non-proprietary products and our
ability to directly sell and service them was made possible by the A.B. Dick
acquisition and Precision acquisition, which we completed in 2004.
We
currently have two reporting segments: (i) Presstek and (ii) Lasertel. On
September 24, 2008, the Board of Directors approved a plan to market the
Lasertel subsidiary for sale; as such the Company has presented the results of
operations of this subsidiary within discontinued operations. On March 5, 2010,
the Lasertel subsidiary was sold to SELEX as previously discussed. Commencing
with the second quarter of the Fiscal 2010, the Company’s reports filed with the
SEC will reflect that the Company conducts business in one industry segment as a
result of its sale of Lasertel on March 5, 2010. A description of the
types of products and services provided by each business segment
follows.
|
·
|
Presstek is primarily
engaged in the development, manufacture, sourcing, sale and servicing of
our business solutions using patented digital imaging systems and patented
printing plate technologies. We also provide traditional analog systems
and related equipment and supplies for the graphic arts and printing
industries.
|
|
·
|
Lasertel manufactures
and develops high-powered laser diodes and related laser
products.
|
We
generate revenue through three main sources: (i) the sale of our equipment and
related workflow software, including DI®
presses and CTP devices; (ii) the sale of our proprietary and non-proprietary
consumables and supplies; and (iii) the servicing of offset printing systems and
analog and CTP systems and related equipment.
Strategy
Our
business strategy is centered on maximizing the sale of consumable products,
such as printing plates, and therefore our business efforts focus on the sale of
“consumable burning engines” such as our DI®
presses and CTP devices, as well as the servicing of customers using our
business solutions. Our strategy centers on increasing the number of our DI® and
CTP units, which increases the demand for our consumables.
To
complement our direct sales efforts, in certain territories, we maintain
relationships with key press manufacturers such as Ryobi, Heidelberg, and KBA,
who market printing presses and/or press solutions that use our proprietary
consumables.
Another
method of growing the market for consumables is to develop and distribute
consumables that can be imaged by non-Presstek devices. In addition to expanding
the base of our DI® and
CTP units, an element of our focus is to reach beyond our proprietary systems
and penetrate the installed base of CTP devices in all market segments with our
thermal plate offerings. The first step in executing this strategy was the
launch of our Aurora Pro chemistry-free printing plate designed to be used with
CTP units manufactured by other thermal CTP device manufacturers. In December,
2009 we introduced Aeon, a no preheat thermal CTP plate that offers run lengths
to 200,000 without baking. We continue to work with other CTP manufacturers to
qualify our consumables on their systems. We believe this shift in strategy
fundamentally enhances our ability to expand and control our
business.
Since
2007, management has been taking steps to improve the Company’s cost structure
and strengthen its balance sheet in order to enable Presstek to improve
profitability and strengthen its overall financial position. Our reduced cost
levels and balance sheet improvements to date are, in large part, the result of
our cost reduction initiatives as described in more detail below, as well as a
continuing focused effort to review and manage working capital.
2009
Highlights
In fiscal
2009, deteriorating worldwide economic conditions caused significant volatility
in many markets which adversely impacted our business. Overall commercial print
industry volume was reduced as companies cut back on general advertising and
promotional materials, and uncertainty regarding the economy and tightening
credit markets led to delays in capital purchase decisions. As a
result of this volatility, as well as continuing erosion due to technological
changes impacting our traditional product business, revenues in fiscal 2009 of
$134.5 million were down $58.8 million, or 30.4%, compared to the prior
year.
Management
Objectives
Our
vision is to provide high quality, fully integrated digital solutions and
services that enable us to form an all-encompassing relationship with our
customers. Our business strategy is to offer innovative digital imaging and
plate technologies that address the opportunities of today and tomorrow in the
graphic arts and commercial printing markets across the globe.
This
strategy includes several imperatives: (1) focus on the growth of our
consumables product line; (2) emphasize attractive market segments such as
larger print providers; (3) focus on growing existing segments such as print
shops with less than 20 employees, (4) enable customers to better compete by
offering a more diverse range of products; (5) continue to expand solutions that
meet the growth in demand for short-run, fast turnaround high-quality color
printing; and (6) provide environmentally responsible solutions through our
application of technology.
Cost
Reduction Initiatives
During
August 2009 the Company initiated cost reductions to generate approximately $10
million of annualized savings. Presstek incurred one-time costs of
approximately $1.7 million related to these actions. As part of these
initiatives, the Company reduced its global workforce across all levels of the
organization by approximately 85 positions, or fourteen
percent. Additional cost actions resulted in the elimination of the
401(k) company matching contribution and furloughs in certain of the Company’s
operating areas. These programs have been essentially completed as of
the end of fiscal 2009.
In the
fourth quarter of fiscal 2007, we announced our Business Improvement Plan (BIP).
The plan involved virtually every aspect of the business and included pricing
actions, improved manufacturing efficiencies, increased utilization of field
service resources, right-sizing of operating expenses, and cash flow
improvements driven by working capital reductions and the sale of selected real
estate assets.
The
Company has made significant improvements to its cost structure as a result of
these cost reduction initiatives. Since the second quarter of 2007,
headcount has been reduced by 27%; leased facilities have been consolidated;
operating expenses, excluding special charges, have been reduced from $21.5
million in the second quarter of fiscal 2007 to $11.5 million in the fourth
quarter of fiscal 2009, a decline of 47%; working capital has decreased from
$39.8 million at June 30, 2007 to $19.3 million at January 2, 2010; total debt
decreased 55% to 17.9 million; and the Company completed the sale of its real
estate located in Tucson, AZ for $8.75 million in fiscal 2008 and the sale of
its Lasertel subsidiary for $8.0 million in cash, certain net working capital
adjustments and, in addition, Presstek was able to retain approximately $2.0
million of laser diode inventory.
Internal
Review
Beginning
in the third quarter of fiscal 2007, we commenced a self-initiated internal
review of certain practices and procedures surrounding inventory, accounts
receivable and commercial receivable terms. We conducted a worldwide review of
accounts receivable; conducted a worldwide physical inventory to assess the
existence and valuation of inventory; and reviewed revenue practices surrounding
the commercial terms granted in certain transactions, resulting in an enhanced
revenue recognition policy. The culmination of these actions resulted in
increased professional fees during the latter part of fiscal 2007 and a negative
impact to revenue in the fourth quarter of fiscal 2007 and the first quarter of
fiscal 2008 largely due to the disruption in our European operations related to
the business reviews, as well as tightened commercial receivable
terms.
General
We
operate and report on a 52- or 53-week, fiscal year ending on the Saturday
closest to December 31. Accordingly, the consolidated financial statements
include the financial reports for the 52-week fiscal year ended January 2, 2010,
which we refer to as “fiscal 2009”, the 53-week fiscal year ended January 3,
2009, which we refer to as “fiscal 2008” and the 52-week fiscal year ended
December 29, 2007, which we refer to as “fiscal 2007”.
We intend
the discussion of our financial condition and results of operations that follows
to provide information that will assist in understanding our consolidated
financial statements, the changes in certain key items in those financial
statements from year to year, and the primary factors that accounted for those
changes, as well as how certain accounting principles, policies and estimates
affect our consolidated financial statements.
The
discussion of results of operations at the consolidated level is presented
below.
Result of
Operation
Results
of operations in dollars and as a percentage of revenue were as follows (in
thousands of dollars):
|
|
|
Fiscal
year ended
|
|
|
|
|
January
2, 2010
|
|
|
January
3, 2009
|
|
|
December
29, 2007
|
|
|
|
|
|
|
|
%
of
revenue
|
|
|
|
|
|
%
of
revenue
|
|
|
|
|
|
%
of
revenue
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
$ |
19,646 |
|
|
|
14.6 |
|
|
$ |
52,716 |
|
|
|
27.2 |
|
|
$ |
87,674 |
|
|
|
35.6 |
|
|
Consumables
|
|
|
85,741 |
|
|
|
63.8 |
|
|
|
106,027 |
|
|
|
54.9 |
|
|
|
119,931 |
|
|
|
48.6 |
|
|
Service
and parts
|
|
|
29,071 |
|
|
|
21.6 |
|
|
|
34,509 |
|
|
|
17.9 |
|
|
|
38,968 |
|
|
|
15.8 |
|
|
Total
revenue
|
|
|
134,458 |
|
|
|
100.0 |
|
|
|
193,252 |
|
|
|
100.0 |
|
|
|
246,573 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
23,916 |
|
|
|
17.8 |
|
|
|
45,818 |
|
|
|
23.7 |
|
|
|
80,137 |
|
|
|
32.5 |
|
|
Consumables
|
|
|
46,765 |
|
|
|
34.8 |
|
|
|
53,270 |
|
|
|
27.5 |
|
|
|
65,587 |
|
|
|
26.6 |
|
|
Service
and parts
|
|
|
21,585 |
|
|
|
16.0 |
|
|
|
25,423 |
|
|
|
13.2 |
|
|
|
31,622 |
|
|
|
12.8 |
|
|
Total
cost of revenue
|
|
|
92,266 |
|
|
|
68.6 |
|
|
|
124,511 |
|
|
|
64.4 |
|
|
|
177,346 |
|
|
|
71.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
42,192 |
|
|
|
31.4 |
|
|
|
68,741 |
|
|
|
35.6 |
|
|
|
69,227 |
|
|
|
28.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
4,975 |
|
|
|
3.7 |
|
|
|
5,144 |
|
|
|
2.6 |
|
|
|
4,969 |
|
|
|
2.0 |
|
|
Sales,
marketing and customer support
|
|
|
24,967 |
|
|
|
18.6 |
|
|
|
29,937 |
|
|
|
15.5 |
|
|
|
39,194 |
|
|
|
15.9 |
|
|
General
and administrative
|
|
|
21,912 |
|
|
|
16.3 |
|
|
|
25,496 |
|
|
|
13.2 |
|
|
|
33,172 |
|
|
|
13.4 |
|
|
Amortization
of intangible assets
|
|
|
926 |
|
|
|
0.7 |
|
|
|
1,084 |
|
|
|
0.6 |
|
|
|
2,168 |
|
|
|
0.9 |
|
|
Restructuring
and other charges
|
|
|
1,684 |
|
|
|
1.3 |
|
|
|
2,108 |
|
|
|
1.1 |
|
|
|
2,714 |
|
|
|
1.1 |
|
|
Goodwill
impairment
|
|
|
19,114 |
|
|
|
14.2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total
operating expenses
|
|
|
73,578 |
|
|
|
54.8 |
|
|
|
63,769 |
|
|
|
33.0 |
|
|
|
82,217 |
|
|
|
33.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
(31,386 |
) |
|
|
(23.4 |
) |
|
|
4,972 |
|
|
|
2.6 |
|
|
|
(12,990 |
) |
|
|
(5.3 |
) |
|
Interest
and other income (expense), net
|
|
|
(1,389 |
) |
|
|
(1.0 |
) |
|
|
938 |
|
|
|
0.5 |
|
|
|
(1,254 |
) |
|
|
(0.5 |
) |
|
Income
(loss) from continuing operations before income taxes
|
|
|
(32,775 |
) |
|
|
(24.4 |
) |
|
|
5,910 |
|
|
|
3.1 |
|
|
|
(14,244 |
) |
|
|
(5.8 |
) |
|
Provision
(benefit) for income taxes
|
|
|
16,334 |
|
|
|
12.1 |
|
|
|
2,780 |
|
|
|
1.4 |
|
|
|
(3,889 |
) |
|
|
(1.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(49,109 |
) |
|
|
(36.5 |
) |
|
|
3,130 |
|
|
|
1.6 |
|
|
|
(10,355 |
) |
|
|
(4.2 |
) |
|
Loss
from discontinued operations, net of income taxes
|
|
|
(740 |
) |
|
|
(0.6 |
) |
|
|
(2,606 |
) |
|
|
(1.3 |
) |
|
|
(1,849 |
) |
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(49,849 |
) |
|
|
(37.1 |
) |
|
$ |
524 |
|
|
|
0.3 |
|
|
$ |
(12,204 |
) |
|
|
(4.9 |
) |
Fiscal
2009 Compared to Fiscal 2008
Revenue
Consolidated
revenues were $134.5 million in 2009, compared to $193.3 million in the prior
year. The decline in revenues was driven primarily by the impact of
the deterioration in the global economy, the continuing decline in our
traditional lines of business, and an unfavorable change in foreign currency
exchange rates. Overall, sales of Presstek’s “growth” portfolio of
products, defined as 34DI and 52DI digital offset solutions and the Presstek
family of chemistry-free CTP solutions, decreased $40.0 million, or 40% in 2009
compared to the prior year.
Equipment
revenues were $19.6 million in 2009 compared to $52.7 million in the prior
year. Equipment sales were significantly impacted by the
deterioration of the economy and were consistent with declines in global capital
equipment markets. Potential customers delayed purchasing decisions
and lenders delayed financing commitments in anticipation of a continuing
sluggish economy. Gross revenue of growth portfolio DI presses and
peripherals declined from $42.0 million in 2008 to $15.7 million in the current
year. Gross revenue of our remaining growth portfolio of equipment,
Dimension Excel, Dimension Pro, Compass, and Vector platesetters, declined from
$9.2 in 2008 to $4.3 million in the current year. Equipment sales of
our “traditional” line of products, defined as QMDI presses, polyester CTP
platesetters, and conventional equipment, were also lower in 2009 compared to
2008 due to the sluggish economy as well as the ongoing transition of our
customer base from analog to digital technologies. Gross revenues
from our traditional line of equipment products declined from $6.0 million in
2008 to $2.8 million in the current year. As a percentage of total
equipment revenue, net sales of growth portfolio products increased to 89.8% of
revenue in fiscal 2009 from 88.9% of revenue in fiscal 2008.
Consumables
product revenues declined from $106.0 million in 2008 to $85.7 million in the
current year due primarily to lower sales of our “traditional” portfolio of
consumables as well as the negative impact of the deterioration in the
economy. Sales of Presstek’s traditional plate products, consisting
of QMDI, other DI, and polyester plates, declined from $41.6 million in 2008 to
$32.1 million in the current year, while sales of other traditional consumables
products declined from $27.5 million to $22.6 million in the
year. Sales of Presstek’s “growth” portfolio of consumables,
defined as 52DI, 34DI, and chemistry-free CTP plates, declined from $37.0
million in 2008 to $31.0 million in the current year, reflecting underutilized
capacity in the printing markets resulting from the slow economy as well as
customer inventory reductions. Overall sales of Presstek’s growth
portfolio of DI plates declined from $18.9 million in 2008 to $16.7 million in
2009. Sales of chemistry-free CTP plates declined by 20% in 2009 from $18.1
million in 2008.
Service
and parts revenues were $29.1 million in 2009 reflecting a decrease of $5.4
million, or 16%, from the prior year. The decrease is due primarily
to lower parts revenues resulting from the transition of our customer base from
analog to digital solutions as well as lower equipment usage and installations
due to the sluggish economy.
Cost
of Revenue
Consolidated
cost of product, consisting of costs of material, labor and overhead, shipping
and handling costs and warranty expenses, was $70.6 million in 2009 compared to
$99.1 million in the prior year. The overall decrease in product cost
was due primarily to lower revenues, offset partially by the negative impacts of
foreign exchange, reduced productivity in equipment and digital plate
manufacturing caused by lower production levels and a 2009 inventory
adjustment. Cost of product in 2009 includes a charge of $2.7
million related to lower production volume levels in our equipment manufacturing
plant and the impact of a change in certain product
strategies.
Consolidated
cost of service and parts declined from $25.4 million in 2008 to $21.6 million
in 2009. These amounts represent the cost of spare parts, labor and
overhead associated with the ongoing service of products. The
reduction in overall cost is due primarily to lower field service expenses
resulting from cost reduction initiatives, as well as lower
revenues.
Gross
Profit
Gross
profit as a percentage of product revenues was 32.9% in 2009 compared to 37.6%
in 2008. Gross profit has been negatively impacted in 2009 by
unfavorable changes in foreign currency exchange rates and the negative impact
of reduced manufacturing productivity due to the volume reductions from the
deterioration of the global economy.
Gross
profit as a percentage of service revenues was 25.7% in 2009 compared to 26.3%
in 2008.
Research
and Development
Research
and development expenses primarily consist of payroll and related expenses for
personnel, parts and supplies, and contracted services required to conduct our
equipment and consumables development efforts. Research and
development expenses were $5.0 million in fiscal 2009 compared to $5.1 million
in the prior year.
Sales,
Marketing and Customer Support
Sales,
marketing and customer support expenses primarily consist of payroll and related
expenses for personnel, advertising, trade shows, promotional expenses, and
travel costs associated with sales, marketing and customer support
activities.
Sales,
marketing and customer support expenses decreased from $29.9 in fiscal 2008 to
$25.0 million in 2009. Favorable expense levels were due primarily to
lower payroll and consulting related costs resulting from cost reduction actions
as well as reduced commission expense due to lower sales. In
addition, 2008 expense includes the impact of the DRUPA trade show which only
occurs once every four years.
General
and Administrative
General
and administrative expenses are primarily comprised of payroll and related
expenses, including stock compensation, for personnel and contracted
professional services necessary to conduct our general management, finance,
information systems, human resources, legal and administrative
activities.
General
and administrative expenses were $21.9 million in 2009 compared to $25.5 million
in the prior year. Favorable expense levels in 2009 were due in large
part to lower payroll related costs and lower legal and other professional
services fees, offset somewhat by higher bad debt expenses resulting from the
impact of the sluggish economy.
Amortization
of Intangible Assets
Amortization
expense was $0.9 million in fiscal 2009 compared to $1.1 million in
2008. These expenses relate to intangible assets recorded in
connection with the Company’s 2004 A.B. Dick acquisition, patents and other
purchased intangible assets.
Restructuring
and Other Charges
Consolidated
restructuring and other charges of $1.7 million in fiscal 2009 decreased from
$2.1 million in fiscal 2008. Expenses incurred during 2009 relate to
certain cost reduction efforts in the Company’s United States and United Kingdom
operations. The majority of these expenses are expected to be fully
paid by next year. In 2008 the Company recognized $2.1 million of
restructuring and other related costs associated with our Business Improvement
Plan as well as charges related to the impairment of long-lived assets located
at our South Hadley, Massachusetts facility.
Goodwill
Based on events including the decline
in the Company’s stock price during the second quarter of 2009 and the unstable
economic and credit conditions impacting the Company’s business, the Company
identified a triggering event that caused management to test goodwill for
impairment as of July 4, 2009. After completing step one of the impairment test,
the Company determined that the estimated fair value of its reporting unit was
less than the carrying value of the reporting unit, requiring the completion of
the second step of the impairment test. To measure the amount of impairment,
Topic 350 prescribes that the Company determine the implied fair value of
goodwill in the same manner as if the Company had acquired the reporting unit.
Specifically, the Company must allocate the fair value of the reporting unit to
all of the assets of that unit, including unrecognized intangible assets, in a
hypothetical calculation that would yield the implied fair value of goodwill.
The impairment loss is measured as the difference between the book value of the
goodwill and the implied fair value of the goodwill computed in step two. Upon
completion of step two of the analysis, the Company wrote off the entire
goodwill balance, resulting in an impairment loss of $19.1 million in the
quarter ended July 4, 2009. The Company had no goodwill balance remaining as of
January 2, 2010.
The
goodwill impairment charge is non-cash in nature and does not affect the
company’s liquidity, cash flows from operating activities or debt covenants and
will not have a material impact on future operations.
Interest
and Other Income (Expense), Net
Consolidated
interest and other income (expense), net, was an expense of $1.4 million in 2009
compared to income of $0.9 million in 2008. The increase in expense is comprised
primarily of an unfavorable swing in foreign currency impacts of $2.3 million,
$0.4 million related to the estimated SEC penalty (See Note 12) and $0.3 million
related to forbearance fees (See Note 8), offset partially by $1.2 million of
proceeds from favorable resolution of an insurance contract lawsuit
settlement.
Provision
(Benefit) for Income Taxes
Our
effective tax rate was (49.8) % in fiscal 2009 and 47.0% in fiscal 2008.
The variance from the federal statutory rate for fiscal 2009 was primarily due
to an increase in the valuation allowance provided against our net deferred tax
assets in the United States. Based on our evaluation, pursuant to FASB
Accounting Standards Codification Topic 740 (originally issued as Financial
Accounting Standards No. 109, “Accounting for Income Taxes”), the Company
recorded a valuation allowance of $16.8 million against fiscal 2008 net U.S.
deferred tax assets. The Company recorded a fiscal 2009 valuation allowance of
$11.3 million against net U.S. deferred tax assets, mainly attributable to
current year net operating losses, for which no fiscal 2009 tax benefit was
recorded. However, if future events differ from expectations, an increase or
decrease of the valuation allowance may be required. A change in the valuation
occurs if there is a change in management’s assessment of the amount of net tax
deferred assets that is expected to be realized in the
future.
Fiscal
2008 Compared to Fiscal 2007
Revenue
Consolidated
revenues were $193.3 million in fiscal 2008, a decrease of $53.3 million, or
21.6%, from $246.6 million in fiscal 2007, due in large part to deterioration in
the global economy, as well as the continuing decline in our traditional lines
of business. Specifically, sales of Presstek’s “growth” portfolio of products,
defined as 34DI® and
52DI®
digital offset solutions and the Presstek family of chemistry free CTP
solutions, decreased $24.3 million, or 20.3%, from $119.8 million in fiscal 2007
to $95.5 million in fiscal 2008. The global economic issues have heavily
impacted the sale of capital equipment, particularly to smaller size printers.
It has also resulted in lower volumes of printed materials, and thus impacted
consumable and service revenues. Sales of Presstek branded DI®
plates increased by $0.9 million, or 5%, during 2008, as the number of DI®
installations continues to grow.
Equipment
revenues were $52.7 million in fiscal 2008 compared to $87.7 million in fiscal
2007, a decrease of $35.0 million, or 39.9%, resulting primarily from the impact
of the global economic downturn. In addition, European sales were negatively
impacted in the first quarter of fiscal 2008 due to a disruption in operations
related to the
Company’s
business reviews conducted in the fourth quarter of fiscal 2007. Revenues from
the sale of DI®
equipment in fiscal 2008 of $42.0 million reflect a decrease of $22.0 million,
or 34.4%, compared to 2007. Unit sales of DI®
presses declined from 177 in fiscal 2007 to 126 in fiscal 2008. Sales of our
remaining growth portfolio of equipment, Presstek’s CTP platesetters and Vector
machines, declined from $13.1 million in fiscal 2007 to $9.2 million in fiscal
2008. Equipment sales of our “traditional” line of products, defined as
QMDI®
presses, polyester CTP platesetters, and conventional equipment, were all lower
in fiscal 2008 compared to 2007 due primarily to the ongoing transition of our
customer base to more modern digital technologies. As a percentage of total
equipment revenue, net sales of growth portfolio products increased from 82.5%
of revenue in fiscal 2007 to 88.9% of revenue in fiscal 2008.
Consumable
product revenues decreased from $119.9 million in fiscal 2007 to $106.0 million
in fiscal 2008, a reduction of $13.9 million, or 11.6%. The decrease in revenues
resulted primarily from the anticipated decline in Presstek’s “traditional
portfolio” of product, defined as QMDI®
plates, other DI®
plates, polyester plates, and conventional consumables, and was consistent with
industry trends. Sales of traditional plates declined from $47.2 million in
fiscal 2007 to $38.9 million in fiscal 2008, a decrease of 17.6%. Sales of
conventional consumables declined from $35.2 million in fiscal 2007 to $30.2
million in fiscal 2008. Presstek’s “growth portfolio” of consumables, defined as
52DI, 34DI, and chemistry-free CTP plates, declined slightly (from $37.5 million
in fiscal 2007 to $37.0 million in fiscal 2008) due to lower print volumes
related to the economic slowdown. Sales of 52DI®
plates, however, increased 84% from $1.6 million in fiscal 2007 to $2.9 million
in fiscal 2008.
Service
and parts revenues declined from $39.0 million in fiscal 2007 to $34.5 million
in fiscal 2008, a decrease of 11.4%. Lower revenues resulted primarily from the
anticipated shift away from our less profitable legacy service base which, in
the short term, is declining faster than our digital service business is
accelerating. In addition, lower print volume, as mentioned above, also had a
negative impact on service revenue.
Cost
of Revenue
Consolidated
cost of revenue was $124.6 million in fiscal 2008, a decrease of $52.7 million,
or 29.7%, compared to fiscal 2007.
Cost of
product, consisting of costs of material, labor and overhead, shipping and
handling costs and warranty expenses, was $99.2 million in fiscal 2008 compared
to $145.7 million in fiscal 2007. In fiscal 2007, the Company recorded $6.0
million of charges consisting primarily of $2.3 million for the write-off of
excess and obsolete inventory, $2.5 million of inventory write-downs related to
the Vector TX52, $0.6 million of warranty-related expenses, and $0.6 million of
other adjustments. Lower cost of sales was primarily due to reduced sales
volume, benefits resulting from our BIP including manufacturing productivity
improvements, procurement savings, and rationalization of our service business,
the impact of favorable product mix and lower freight costs.
Cost of
service in fiscal 2007, was $31.6 million, including a $1.1 million write down
of field service parts inventory, compared to $25.4 million in fiscal 2008.
These amounts represent the costs of spare parts, labor and overhead associated
with the ongoing service of products. Service costs in fiscal 2008 were
favorably impacted by the improved utilization of the field service organization
in North America, as well as improved controls over the field service parts
inventory. These actions were the result of our BIP which included a realignment
of our service organization in reaction to a declining analog revenue
base.
Gross
Profit
Consolidated
gross profit as a percentage of total revenue was 35.5% in fiscal 2008 compared
to 28.1% in fiscal 2007. The year over year improvement is driven by several
factors, including favorable product mix, benefits from the BIP, the improvement
of numerous operating disciplines which negatively impacted our 2007 results
(ex. excess and obsolete inventory, field service parts inventory charges) and
the absence in fiscal 2008 of significant warranty charges recorded during 2007
related to product portfolio changes.
Gross
profit as a percentage of product revenue was 37.5% in fiscal 2008 compared to
29.8% in fiscal 2007. This improvement reflects the benefits described in the
previous paragraph. 2008 margins were also favorably impacted by a higher mix of
DI®
revenues, which are predominately higher margin products than our CTP and
traditional lines of business, as well as improved production efficiencies in
our plate manufacturing.
Gross
profit as a percentage of service revenue was 26.3% in fiscal 2008 compared to
18.9% in fiscal 2007. Service margins in 2007 were negatively impacted by
charges for losses on field service parts inventory of $1.1 million. Higher
service margins in fiscal 2008 also reflect the impact of cost savings resulting
from our BIP.
Research
and Development
Research
and development expenses consist primarily of payroll and related expenses for
personnel, parts and supplies, and contracted services required to conduct our
equipment, consumables and laser diode development efforts.
Research
and development expenses of $5.1 million in fiscal 2008 were essentially
unchanged from $5.0 million in the prior year period.
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 associated with sales, marketing and customer support
activities.
Consolidated
sales, marketing and customer support expenses were $29.9 million in fiscal 2008
compared to $39.2 million in fiscal 2007, a decrease of $9.3 million, or 23.6%.
Lower expenses in fiscal 2008 were due primarily to the favorable impact of our
BIP, lower advertising costs, and lower commission expense resulting from lower
sales volume.
General
and Administrative
Consolidated
general and administrative expenses consist primarily of payroll and related
expenses for personnel and contracted professional services necessary to conduct
our finance, information systems, legal, human resources and administrative
activities. General and Administrative costs also include stock based
compensation expenses, as well as bad debt reserves.
General
and administrative expenses were $25.4 million in fiscal 2008 compared to $33.2
million in the comparable prior year period, a decrease of $7.8 million, or
23.6%. The decrease resulted from lower litigation costs and legal fees of $2.8
million and $0.7 million of lower stock compensation related to stock option
grants to officers, directors and employees. In addition, 2007 included a
one-time $1.5 million restricted stock grant to our CEO and $2.1 million of
audit and accounting costs related to an extensive worldwide review
of inventory and receivables, as well as certain European business processes and
revenue recognition practices. This was partially offset by
additional bad debt expense incurred in fiscal 2008 resulting from the impact of
worsening global economic conditions.
Amortization
of Intangible Assets
Amortization
expense of $1.1 million in fiscal 2008 declined from $2.2 million in the
comparable prior year period. These expenses relate to intangible assets
recorded in connection with the Company’s 2004 acquisition of assets of the A.B.
Dick Company, patents and other purchased intangible assets. The year over year
decline in amortization resulted primarily from the A.B. Dick name and A.B. Dick
patents, which became fully amortized during the third quarter of fiscal
2007.
Restructuring
and Other Charges
Consolidated
restructuring and other charges of $2.1 million in fiscal 2008 decreased from
$2.7 million in fiscal 2007. Expenses incurred in fiscal 2008 include
restructuring costs related to the implementation of our BIP, severance and
separation expenses of employment contracts of former executives and other
employees, and costs related to the transfer of certain corporate functions from
the Hudson, New Hampshire facility to the Greenwich, Connecticut facility.
Expenses incurred in fiscal 2007 include restructuring costs related to the
implementation of our BIP, and cost of severance and separation expenses for
employment contracts of former executives.
Interest
and Other Income (Expense), Net
Consolidated
net interest and other income in fiscal 2008 was $0.9 million compared to
expense of $1.3 million in the comparable prior year period. The year-over-year
improvement was due primarily to a $1.2 million reduction in interest expense
resulting from lower debt levels, and increased foreign currency transaction
gains of $0.9 million.
Provision
(Benefit) for Income Taxes
Our
effective tax rate was 47.0% in fiscal 2008 and 27.3% in fiscal
2007. The variance from the federal statutory rate for fiscal 2007
was primarily to state income tax benefits and for fiscal 2008 was primarily due
to the reversal of valuation allowance provided against our net deferred tax
assets in the U.S.
Discontinued
Operations
The
Company accounts for its discontinued operations under the provisions of FASB
Accounting Standards Codification Topic 360, (originally issued as SFAS No. 144,
Accounting for Impairment or Disposal of Long-Lived Assets (“SFAS 144”)).
Accordingly, results of operations and the related charges for discontinued
operations have been classified as “Loss from discontinued operations, net of
income taxes” in the accompanying Consolidated Statements of Operations. Assets
and liabilities of discontinued operations have been reclassified and reflected
on the accompanying Consolidated Balance Sheets as “Assets of discontinued
operations” and “Liabilities of discontinued operations”. For comparative
purposes, all prior periods presented have been reclassified on a consistent
basis.
Lasertel
On
September 24, 2008, the Board of Directors approved a plan to sell the Lasertel
subsidiary as the Lasertel business is not a core focus for the Presstek
graphics business. On March 5, 2010, Presstek sold Lasertel to SELEX
as previously discussed. As a subsidiary of SELEX, and in accordance with a
supply agreement established between Lasertel and Presstek on March 5, 2010,
Lasertel will manufacture and supply semiconductor laser diodes to Presstek for
an initial period of three years. The Company has presented the results of
operations of this subsidiary within discontinued operations, classified the
assets as “Assets of discontinued operations” and liabilities as “Liabilities of
discontinued operations”.
Lasertel
incurred a loss of $0.7 million during fiscal 2009, as compared to a loss of
$2.7 million during 2008. The 2009 loss includes a non-cash impairment charge of
$1.4 million, and $0.9 million of legal fees related to the negotiation and
signing of a definitive agreement to sell the business. The major increase in
revenue from fiscal 2008 to fiscal 2009 is increased sales to certain key
customers in Europe and a rebound in sales to the Chinese market.
Results
of operations of the discontinued business of Lasertel consist of the following
(in thousands, except per-share data):
|
|
|
January
2, 2010
|
|
|
January
3, 2009
|
|
|
December
29, 2007
|
|
|
Revenue
|
|
$ |
13,488 |
|
|
$ |
8,686 |
|
|
$ |
8,270 |
|
|
Profit
(loss) before other charges
|
|
|
1,621 |
|
|
|
(4,336 |
) |
|
|
(2,924 |
) |
|
Impairment
charge
|
|
|
(1,428 |
) |
|
|
- |
|
|
|
- |
|
|
Transaction
costs related to sale
|
|
|
(933 |
) |
|
|
- |
|
|
|
- |
|
|
Loss
before income taxes
|
|
|
(740 |
) |
|
|
(4,336 |
) |
|
|
(2,924 |
) |
|
Provision
(benefit) for income taxes
|
|
|
-- |
|
|
|
(1,637 |
) |
|
|
(1,129 |
) |
|
Net
loss from discontinued operations
|
|
$ |
(740 |
) |
|
$ |
(2,699 |
) |
|
$ |
(1,795 |
) |
|
Loss
per diluted share
|
|
$ |
(0.02 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.05 |
) |
Assets
and liabilities of the discontinued business of Lasertel consist of the
following (in thousands):
|
|
|
January
2, 2010
|
|
|
January
3, 2009
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
585 |
|
|
$ |
369 |
|
|
Receivables,
net
|
|
|
2,938 |
|
|
|
2,187 |
|
|
Inventories
|
|
|
3,774 |
|
|
|
4,478 |
|
|
Other
current assets
|
|
|
212 |
|
|
|
134 |
|
|
Property,
plant & equipment, net
|
|
|
4,377 |
|
|
|
5,263 |
|
|
Intangible
assets, net
|
|
|
696 |
|
|
|
899 |
|
|
Other
noncurrent assets
|
|
|
42 |
|
|
|
-- |
|
|
Total
assets
|
|
$ |
12,624 |
|
|
$ |
13,330 |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
729 |
|
|
$ |
884 |
|
|
Accrued
expenses
|
|
|
459 |
|
|
|
448 |
|
|
Deferred
gain
|
|
|
4,015 |
|
|
|
4,370 |
|
|
Total
Liabilities
|
|
$ |
5,203 |
|
|
$ |
5,702 |
|
Loss from
discontinued operations (net of income taxes) as shown on the Consolidated
Statements of Operations for fiscal 2008 and fiscal 2007 include a profit of $93
thousand and a loss of $54 thousand related to the discontinued analog newspaper
business of Precision Lithograining Corp.
Liquidity and Capital
Resources
We
finance our operating and capital investment requirements primarily through cash
flows from operations and borrowings. At January 2, 2010, we had $5.8 million of
cash and cash equivalents and $19.3 million of working capital, compared to $4.7
million of cash and cash equivalents and $34.7 million of working capital at
January 3, 2009.
Continuing
Operations
Our
operating activities provided $0.2 million of cash generation in fiscal 2009.
Cash generated during the year from lower inventory of $6.6 million and a
decrease in accounts receivable of $4.6 million was essentially offset by a net
loss from continuing operations of $3.4 million after adjustments for non-cash
write off of goodwill, valuation allowance of the deferred income taxes,
depreciation, amortization, provisions for warranty costs and accounts
receivable allowances, stock compensation expense, and loss on disposal of
assets. Cash flows were further negatively impacted by a decrease of $0.8
million in deferred revenue, a decrease of $2.1 million in accounts payable, and
a decrease of $4.7 million in accrued expenses. The changes in accrued expenses
and accounts payable were due mainly to the timing of transactions and related
payments. The decreases in inventory and accounts receivable levels
were due primarily to declining sales and a continuing focused effort to manage
working capital.
We used
$1.8 million of net cash for investing activities during fiscal 2009 primarily
comprised of additions to property, plant and equipment and capitalized
technology development expenditures. Our additions to property, plant and
equipment relate primarily to production equipment and investments in our
infrastructure.
Our
financing activities provided $1.7 million of cash, comprised primarily of $5.5
million of net borrowings offset by $4.1 million of cash repayments on our term
loan. The term loan was fully repaid as of January 2, 2010.
Discontinued
Operations
Operating
activities of discontinued operations used $1.7 million in cash in fiscal 2009.
Cash used in operating activities came from a net loss, after adjustments for an
asset impairment charge of $1.4 million and other non-cash addbacks in addition
to working capital usages which were mainly inventory related.
Investing
activities of discontinued operations is made up of $0.3 million of cash used
for additions of fixed assets.
Sale-Leaseback
On July
14, 2008, the Company completed a sale-leaseback transaction of its property
located in Tucson, Arizona (the “Property”). The Company sold the Property to an
independent third party for approximately $8.75 million, or $8.4 million net of
expenses incurred in connection with the sale, resulting in a gain of
approximately $4.6 million. Concurrent with the sale, the Company entered in to
an agreement to lease a portion of the property back from the purchaser for a
term of 10 years. The lease, which management deemed to be an operating lease,
has approximately $5.1 million in future minimum lease payments. The gain
associated with the transaction was deferred at the inception of the arrangement
and is being amortized ratably over the lease term.
Subsequent
to, and independent of, the sale and leaseback of the Property, the Board of
Directors of the Company approved an action for the sale of the Lasertel
business as addressed in Note 3. As such, the operations of Lasertel
have been presented as discontinued operations. Included within the
liabilities of discontinued operations is the aforementioned deferred gain
associated with the Arizona property in which Lasertel conducts its operations.
The related amortization of the gain is included in “Income (loss) from
discontinued operations, net of tax”.
As part
of the sale of Lasertel to SELEX on March 5, 2010, the buyer assumed all of the
Company’s obligations under the lease.
Liquidity
The
primary sources of the Company’s liquidity are (i) cash generated by the
Company’s operations and (ii) a $25 million Revolving Credit and Security
Agreement with a term that expires on March 5, 2013 (the “Revolver”). The
Company entered into the Revolver on March 5, 2010 and repaid the line of credit
which was in existence at January 2, 2010. The Company utilizes its sources
of liquidity to fund current operations and make capital and other investments
in support of the business.
While the
Company has historically generated positive cash from operations, as a result of
the downturn in the world economy primarily during 2008 and 2009, the Company
has experienced difficulty during the second and third fiscal quarters of 2009
in generating positive cash flows and was reliant upon its ability to access its
then current credit facility to cover the negative gap in its cash needs.
The Company was not in compliance with certain financial covenants of its then
existing line of credit agreement and on October 1, 2009 entered into a
Forbearance Agreement with its lenders. See Note 8 for further discussion. This
trend reversed itself in the fourth fiscal quarter of 2009 when the Company
generated positive adjusted EBITDA of $1.1 million and reduced its debt net of
cash by $ 4.2 million primarily as a result of positive cash flow from
operations. In addition to the BIP implemented in 2007 and 2008, management
implemented additional cost reduction initiatives in 2009 that have
significantly reduced the Company’s operating costs. These actions are
intended to facilitate further profitability and the generation of positive cash
flows on a recurring quarterly basis once the global economy reflects
significant signs of improvement and the Company’s revenues increase. Because
much of the Company’s revenue generation is dependent upon decisions by its
customers to make significant capital equipment purchases which have been
stifled by current economic conditions, the Company is unable to predict when or
if the Company’s revenues will grow substantially in order to support the
generation of positive cash flows from operations and increased liquidity on a
regular recurring basis.
Under the
terms of the Revolver, the Company is able to borrow, repay and re-borrow an
amount, not to exceed $25 million, that is based upon a percentage of the
Company’s eligible trade accounts receivables and inventory (inventory has a
sub-limit of $10 million), as defined in the Revolver (the “Formula
Amount”). Based upon the Formula Amount, less a required availability
reduction of $3.5 million, the Company’s available credit as of March 8, 2010,
was $12.4 million. As of January 2, 2010, the Company’s outstanding
indebtedness under its then current credit facility was $17.9 million and its
available cash on hand as of January 2, 2010 was $5.8 million, resulting in a
debt net of cash balance of $12.1million. On March 5, 2010, the Company
sold its Lasertel subsidiary for $8.0 million in cash, certain net working
capital adjustments and, in addition, Presstek was able to retain approximately
$2.0 million of laser diode inventory, and used the net cash proceeds of this
transaction to reduce outstanding indebtedness. Accordingly, the Company
believes that the Company’s available credit under the Revolver provides
sufficient liquidity to support the Company’s current needs through at least the
next 12 months. However, if the Company is unable to generate
positive cash flow from operations, and if it becomes reliant upon available
credit capacity under the Revolver to fill a negative cash flow gap, then the
amount of available credit under the Revolver may be insufficient to support the
Company’s liquidity needs. Additionally, under the terms of the Revolver,
beginning with the fourth fiscal quarter of 2010 the Company is required to meet
a minimum fixed charge coverage ratio requirement of not less than 1.0 to
1.0. The Company’s inability to satisfy this requirement may result in a
default under the Revolver and the elimination of available
liquidity.
During
the past two years, the Company has generated liquidity through the sale of a
non-strategic asset and business. In 2008 the Company sold its property
located in Tucson, Arizona that was used by the Company’s former Lasertel
subsidiary, for $8.75 million. The Company used the net proceeds of this
sale to reduce debt. On March 5, 2010, the Company sold Lasertel for $8.0
million in cash, certain net working capital adjustments and, in addition,
Presstek was able to retain approximately $2.0 million of laser diode
inventory, and it used the net cash proceeds to reduce debt.
The Company has other assets that it could seek to monetize in order to generate
liquidity, most notably its office and manufacturing facility in Hudson, New
Hampshire that the Company has recently as of the second quarter of fiscal 2009
marketed for a potential sale-leaseback transaction.
The
weighted average interest rate on the Company’s short-term borrowings was 7.25%
at January 2, 2010.
We
believe that existing funds, cash flows from operations, and cash available from
the Revolver and other sources as discussed above will be sufficient to satisfy
cash requirements through at least the next 12 months. There can be no
assurance, however, that the Company will be able to generate positive cash
flows, achieve financial performance sufficient to maintain compliance with the
terms of the Revolver or be able to generate liquidity through the sale of
additional assets.
Contractual
Obligations
Our
contractual obligations at January 2, 2010 consisted of the following (in
thousands):
|
|
|
|
|
|
Payments
due by period
|
|
|
|
|
Total
|
|
|
Less
than one year
|
|
|
One
to three years
|
|
|
Three
to five years
|
|
|
Five
or more years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
secured credit facilities
|
|
$ |
17,911 |
|
|
$ |
17,911 |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
$ |
-- |
|
|
Purchase
commitments
|
|
|
2,106 |
|
|
|
2,106 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
Royalty
obligation
|
|
|
4,724 |
|
|
|
696 |
|
|
|
1,392 |
|
|
|
1,014 |
|
|
|
1,622 |
|
|
Operating
leases
|
|
|
10,086 |
|
|
|
2,323 |
|
|
|
3,951 |
|
|
|
1,549 |
|
|
|
2,263 |
|
|
Total
contractual obligations
|
|
$ |
34,827 |
|
|
$ |
23,036 |
|
|
$ |
5,343 |
|
|
$ |
2,563 |
|
|
$ |
3,885 |
|
In fiscal
2000, we entered into an agreement with Fuji, whereby minimum royalty payments
to Fuji are required based on specified sales volumes of our A3 format size
four-color sheet-fed DI presses. The agreement provides for total royalty
payments to be no less than $6 million and not greater than $14 million over the
life of the agreement. As of January 2, 2010, the Company had paid Fuji $9.3
million related to this agreement.
From time
to time we have engaged in sales of equipment that is leased by or intended to
be leased by a third party purchaser to another party. In certain situations, we
may retain recourse obligations to a financing institution involved in providing
financing to the ultimate lessee in the event the lessee of the equipment
defaults on its lease obligations. In certain such instances, we may refurbish
and remarket the equipment on behalf of the financing company, should the
ultimate lessee default on payment of the lease. In certain circumstances,
should the resale price of such equipment fall below certain predetermined
levels, we would, under these arrangements, reimburse the financing company for
any such shortfall in sale price (a “shortfall payment”). The maximum contingent
obligation under these shortfall payment arrangements is estimated to be $1.2
million at January 2, 2010 of which $0.5 million relating to full recourse
arrangements is reflected in deferred revenue on the Company’s balance sheet at
January 2, 2010.
Our
discontinued Lasertel segment utilized facilities in Arizona. This
operating lease, included above, was transferred to Lasertel in connection with
the March 5, 2010 sale of the Lasertel Subsidiary.
Effect
of Inflation
Inflation
has not had a material impact on our financial conditions or results of
operations.
Net
Operating Loss Carryforwards
At
January 2, 2010, we had net operating loss carryforwards for tax purposes
totaling $90.9 million, of which $61.5 million resulted from stock option
compensation deductions for U.S. federal tax purposes and $29.4 million resulted
from operating losses. To the extent that net operating losses resulting from
stock option compensation deductions result in reduction of current taxes
payable, the benefit will be credited directly to additional paid-in capital.
The Company’s ability to utilize its net operating loss and credit carryforwards
may be limited in the future if the Company experiences an ownership change, as
defined by the Internal Revenue Code. An ownership change involves an increase
of more than 50 percentage points in stock ownership by one or more 5%
shareholders over a three year period.
Critical
Accounting Policies and Estimates
General
Our
Management’s Discussion and Analysis of Financial Condition and Results of
Operations is 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 and liabilities and related disclosure of contingent assets and
liabilities at the date of the financial statements. Estimates and assumptions
also affect the amount of reported revenue and expenses during the period.
Management believes the most judgmental estimates include those related to
product returns; warranty obligations; allowances for doubtful accounts;
slow-moving and obsolete inventories; income taxes; the valuation of goodwill,
intangible assets, long-lived assets and deferred tax assets; stock-based
compensation and litigation. We base our estimates and assumptions on historical
experience and various other appropriate factors, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
and the amounts of revenue and expenses that are not readily apparent from other
sources. Actual results could differ from those estimates.
We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements. For a complete discussion of our accounting policies, see Note 2 to
our consolidated financial statements appearing elsewhere herein.
Revenue
Recognition
The
Company recognizes revenue principally from the sale of products (equipment,
consumables, laser diodes) and services (equipment maintenance contracts,
installation, training, support, and spare parts). Revenue is recognized when
persuasive evidence of a sales arrangement exists, delivery has occurred or
services have been rendered, the price to the customer is fixed or determinable
and collection is reasonably assured. In accordance with Staff Accounting
Bulletin (“SAB”) No. 104 Revenue Recognition (“SAB
104”) and FASB Accounting Standards Codification Topic 605-25 Multiple-Element
Arrangements (originally issued as Emerging Issues Task Force (“EITF”) Issue
00-21 Revenue Arrangements
with Multiple Deliverables ), when a sales arrangement contains multiple
elements, such as equipment and services, revenue is allocated to each element
using the residual method.
Product
revenue
End-Users - Under the Company’s standard
terms and conditions of sale of equipment, title and risk of loss are
transferred to end-user customers upon completion of installation and revenue is
recognized at that time, unless customer acceptance is uncertain or significant
deliverables remain. Sales of other products, including printing plates, are
generally recognized at the time of shipment.
OEMs - Product revenue and
any related royalties for products sold to Original Equipment Manufacturers
(“OEM”) are recognized at the time of shipment as installation is not required
and title and risk of loss generally pass at shipment. OEM contracts do not
generally include price protection or product return rights; however, the
Company may elect, in certain circumstances, to accept returns of
product.
Distributors - Revenue for
product sold to distributors, whereby the distributor is responsible for
installation, is recognized at shipment, unless other revenue recognition
criteria have not been met. Revenue for product sold to distributors under
contracts which involve Company installation of equipment is recognized upon
installation, unless end-user customer acceptance is uncertain, significant
deliverables remain, or other revenue recognition criteria have not been met.
Except in cases of contract termination (which may include limited product
return rights), distributor contracts do not generally include price protection
or product return rights; however, the Company may elect, in certain
circumstances, to accept returns of product.
Service and parts
revenue
Revenue
for installation services, including time and material billings, are recognized
as services are rendered. Revenue associated with maintenance or extended
service agreements is recognized ratably over the contract period. Revenue
associated with training and support services is recognized as services are
rendered. Certain fees and other reimbursements are recognized as revenue when
the related services have been performed or the revenue is otherwise
earned.
Leases
The
Company may offer customer financing to assist customers in the acquisition of
Presstek products. At the time a financing transaction is consummated, which
qualifies as a sales-type lease, the Company records equipment revenue equal to
the net present value of future lease payments. Any remaining balance is
recognized as finance income using the effective interest method over the term
of the lease. Leases not qualifying as sales-type leases are accounted for as
operating leases. The company recognizes revenue from operating leases on an
accrual basis as the rental payments become due.
Multiple element
arrangements
In
accordance with SAB 104 and Topic 605-25, when a sales arrangement contains
multiple elements, such as equipment, consumables or services, revenue is
allocated to each element using the residual method.
Rights of
return
A general
right of return or cancellation does not exist once product is delivered to the
customer; however, the Company may elect, in certain circumstances, to accept
returns of product. Product revenues are recorded net of estimated returns,
which are adjusted periodically, based upon historical rates of
return.
Shipping and
handling
The
Company accounts for shipping and handling fees passed on to customers as
revenue. Shipping and handling costs are reported as components of cost of
revenue.
Allowance
for Doubtful Accounts
The
Company’s accounts receivable are customer obligations due under normal trade
terms, carried at face value less an allowance for doubtful accounts. The
Company evaluates its allowance for doubtful accounts on an ongoing basis and
adjusts for potential credit losses when it determines that receivables are at
risk for collection based upon the length of time receivables are outstanding,
past transaction history and various other criteria. Receivables are written off
against reserves in the period they are determined to be
uncollectible.
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 market
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.
Goodwill
and Intangible Assets
In order to complete the two-step
goodwill impairment tests as required by FASB Accounting Standards Codification
Topic 350 Intangibles-Goodwill and Other (originally issued as “SFAS 142, Goodwill and Other
Intangible Assets”), the
Company identifies its reporting units and determines the carrying value of each
reporting unit by assigning the assets and liabilities, including the existing
goodwill and intangible assets, to those reporting units. In accordance with the
provisions of Topic 350, the Company designates reporting units for purposes of
assessing goodwill impairment. Topic 350 defines a reporting unit as the lowest
level of an entity that is a business and that can be distinguished, physically
and operationally and for internal reporting purposes, from the other
activities, operations, and assets of the entity. Goodwill is assigned to
reporting units of the Company that are expected to benefit from the synergies
of the acquisition. Based on the provisions of Topic 350, the Company has
determined that it has one reporting unit in continuing operations for purposes
of goodwill impairment testing.
The
Company’s impairment review is based on a combination of the income approach,
which estimates the fair value of the Company’s reporting units based on a
discounted cash flow approach, and the market approach which estimates the fair
value of the Company’s reporting unit based on comparable market multiples.
The average fair
value is then reconciled to the Company’s market capitalization with an
appropriate control premium. The discount rate utilized in the discounted cash
flows analysis in the quarter ended July 4, 2009 (the last time this analysis
was performed) was approximately 16%, reflecting market based estimates of
capital costs and discount rates adjusted for a market participant’s view with
respect to execution, concentration, and other risks associated with the
projected cash flows of the individual reporting units. The peer companies used
in the market approach are primarily the major competitors. The Company’s
valuation methodology requires management to make judgments and assumptions
based on historical experience and projections of future operating
performance. The Company’s policy is to perform its annual goodwill
impairment test on the first business day of the third quarter of each fiscal
year.
Based on events
including the decline in the Company’s stock price during the second
quarter of 2009 and the unstable economic and credit conditions impacting the
Company’s business, the Company identified a triggering event that caused
management to test goodwill for impairment as of July 4, 2009. After completing
step one of the impairment test, the Company determined that the estimated fair
value of its reporting unit was less than the carrying value of the reporting
unit, requiring the completion of the second step of the impairment test. To
measure the amount of impairment, Topic 350 prescribes that the Company
determine the implied fair value of goodwill in the same manner as if the
Company had acquired the reporting unit. Specifically, the Company must allocate
the fair value of the reporting unit to all of the assets of that unit,
including unrecognized intangible assets, in a hypothetical calculation that
would yield the implied fair value of goodwill. The impairment loss is measured
as the difference between the book value of the goodwill and the implied fair
value of the goodwill computed in step two. Upon completion of step two of the
analysis, the Company wrote off the entire goodwill balance, resulting in an
impairment loss of $19.1 million in the quarter ended July 4, 2009. The Company
had no goodwill balance remaining as of January 2, 2010.
The
goodwill impairment charge is non-cash in nature and does not affect the
company’s liquidity, cash flows from operating activities or debt covenants and
will not have a material impact on future operations. Based on our market
capitalization relative to the Company’s net assets any possible changes in the
assumptions in the goodwill impairment test would not change our
conclusion.
Intangible
assets with estimated lives and other long-lived assets are reviewed for
impairment when events or changes in circumstances indicate that the carrying
amount of an asset or asset group may not be recoverable in accordance with FASB
Accounting Standards Codification Topic 360, Property Plant and Equipment
(originally issued as SFAS No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets (“SFAS 144”)). Recoverability of intangible
assets with estimated lives and other long-lived assets is measured by
comparison of the carrying amount of an asset or asset group to future net
undiscounted pretax cash flows expected to be generated by the asset or asset
group. If these comparisons indicate that an asset is not recoverable, the
Company will recognize an impairment loss for the amount by which the carrying
value of the asset or asset group exceeds the related estimated fair value.
Estimated fair value is based on either discounted future pretax operating cash
flows or appraised values, depending on the nature of the asset. The Company
determines the discount rate for this analysis based on the expected internal
rate of return of the related business and does not allocate interest charges to
the asset or asset group being measured. Considerable judgment is required to
estimate discounted future operating cash flows.
Patents
represent the cost of preparing and filing applications to patent the Company’s
proprietary technologies, in addition to certain patent and license rights
obtained in the Company’s acquisitions or other related transactions. Such costs
are amortized over a period ranging from five to seven years, beginning on the
date the patents or rights are issued or acquired.
From time
to time, the Company enters into agreements with third parties under which the
party will design and prototype a product incorporating Presstek products and
technology. The capitalized costs associated with rights or intellectual
property under these agreements will be amortized over the estimated sales
life-cycle and future cash flows of the product. The Company does not amortize
capitalized costs related to either patents or purchased intellectual property
until the respective asset has been placed into service.
The
Company amortizes license agreements and loan origination fees over the term of
the respective agreement.
The
amortizable lives of the Company’s other intangible assets are as
follows:
|
Trade
names
|
|
|
2 –
3 |
|
years
|
|
Customer
relationships
|
|
|
2 –
10 |
|
years
|
|
Software
licenses
|
|
|
3 |
|
years
|
|
Non-compete
covenants
|
|
|
5 |
|
years
|
Stock-Based
Compensation
The
Company adopted the fair value recognition provisions of FASB Accounting
Standards Codification Topic 718, Stock Compensation, (originally adopted by the
Company in January 1, 2006, as SFAS 123R Share-Based Payment, as amended (SFAS
123R)), using the
modified prospective method., We recognize the fair
value of stock compensation in our consolidated financial statements over the
requisite service period, generally on a straight-line basis for time-vested
awards. Under the fair value recognition provisions of Topic 718,
stock-based compensation cost is measured at the grant date based on the value
of the award and is recognized as expense over the service period. Further, we
have elected under Topic 718 to recognize the fair value of awards with pro-rata
vesting on a straight-line basis. Previously, we had followed Accounting
Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations, which resulted in the accounting
for employee share options at their intrinsic value in the consolidated
financial statements.
Under Topic 718, our stock-based
compensation is affected by our stock price as well as valuation assumptions,
including the volatility of our stock price, expected term of the option,
risk-free interest rate and expected dividends. We utilize the Black-Scholes
valuation model for estimating the fair value on the date of grant of employee
stock options. We estimate volatility primarily using the historical volatility
of Presstek common stock over the expected term. Any
changes in these assumptions may materially affect the estimated fair value of
the stock-based award.
Accounting
for Income Taxes
The
process of accounting for income taxes involves calculating our current tax
obligation or refund and assessing the nature and measurements of temporary
differences resulting from differing treatment of items for tax and accounting
purposes. These differences and our net operating loss (“NOL”) and credit
carryforwards, result in deferred tax assets and liabilities. In each period, we
assess the likelihood that our deferred tax assets will be recovered from
existing deferred tax liabilities or future taxable income in each jurisdiction.
To the extent we believe that we would not meet the test that recovery is “more
likely than not”, we would establish a valuation allowance. To the extent that
we establish a valuation allowance or change this allowance in a period, we
would adjust our tax provision or tax benefit in the consolidated statement of
operations. We use our judgment to determine our provision or benefit for income
taxes, including estimates associated with uncertain tax positions and any
valuation allowance recorded against our deferred tax assets based on the weight
of all positive and negative factors, including cumulative trends in
profitability.
We have
accumulated U.S. federal and state income tax NOL carryforwards, research and
experimentation tax credit carryforwards and alternative minimum tax credit
carryforwards. In the second quarter of fiscal 2009, we established a valuation
allowance on a deferred tax asset on our balance sheet primarily representing
NOLs from our U.S. operations.
We
continually assess our ability to utilize our NOL and tax credit carryforwards
in future periods and record any resulting adjustments that may require the
establishment or reduction of a valuation allowance against net deferred tax
assets. The future impact on net income may therefore be positive or negative,
depending on the net result of
such
adjustments. In fiscal 2009, the Company established a full valuation allowance
against its U.S. and state net deferred tax assets.
Based
upon a review of historical operating performance through 2009, and our
expectation that we will generate profits in our international operations in the
foreseeable future, we continue to believe it is more likely than not that the
international deferred tax assets, net of valuation allowance, will be fully
realized.
Recently
Issued Accounting Standards
FASB
Accounting Standards Codification Topic 820 (originally issued as Financial
Accounting Standards No. 157, “Fair Value Measurements”, (“SFAS 157”) for
non-financial assets) was amended in August 2009.
Please
see Note 2.
FASB
Accounting Standards Codification Topic 105 (originally issued as SFAS No. 168,
“The FASB Accounting Standards Codifications and the Hierarchy of Generally
Accepted Accounting Principles- A replacement of FASB Statement No. 162”) was
issued in June 2009. The Codification has become the single source of
authoritative generally accepted accounting principles (“GAAP”) recognized by
the FASB to be applied by nongovernmental entities and will supersede all
existing FASB, AICPA, EITF pronouncements and related literature. The
Codification does not replace or affect guidance issued by the SEC or its staff
for public entities in their filings with the SEC. This statement is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009. The adoption of the Codification did not have a
material impact on the Company’s financial results.
FASB
Accounting Standards Codification Topic 855 (originally issued as SFAS No. 165,
“Subsequent Events”) was issued in May 2009 and amended by ASU 2010-09 in
February 2010. This statement establishes principles and disclosure
requirements for events or transactions occurring after the balance sheet date
but before financial statements are issued or available to be issued. This
statement requires that an SEC filer evaluate subsequent events through the date
the financial statements are issued. Some nonrecognized subsequent events may be
such that they must be disclosed to keep the financial statements from being
misleading. For such events an entity should disclose the nature of
the event and an estimate of its financial effect, or a statement that an
estimate cannot be made. The Company adopted these provisions for the
interim period ending July 4, 2009. The adoption of these provisions did not
have a material impact on the Company’s disclosure practices.
FASB
Accounting Standards Codification Topic 805 (originally issued as SFAS
No. 141 (R), Business Combinations) was issued in December 2007. This
statement replaces SFAS 141, Business Combinations, but retains the fundamental
requirements of the statement that the acquisition method of accounting be used
for all business combinations and for an acquirer to be identified for each
business combination. The statement seeks to improve financial
reporting by establishing principles and requirements for how the
acquirer:
a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase option and c) determines what
information to disclose. This statement is effective prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008. The Company will apply the provisions of SFAS 141(R) to any
acquisition after January 3, 2009.
FASB
Accounting Standards Codification Topic 805 (originally issued as FASB Staff
Position (FSP) FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies” (FSP FAS
141(R)-1)) was issued in April 2009. This FSP clarifies and amends FAS
No. 141(R) regarding the initial recognition, measurement, accounting
and disclosure of assets and liabilities that arise from contingencies in a
business combination. Assets and liabilities that arise from a contingency
that can be measured at the date of the acquisition shall be recorded at fair
value. FSP FAS 141(R)-1 is effective for all acquisitions completed in
annual years beginning on or after December 15, 2008. The adoption of
FSP FAS 141(R)-1 will impact any future acquisitions made by the
Company.
In October 2009, the FASB issued
Accounting Standards Update (“ASU”) 2009-13, Revenue Recognition
(Topic 605) – Multiple-Deliverable
Revenue Arrangements. This
guidance modifies the fair value requirements of FASB ASC subtopic
605-25, Revenue
Recognition-Multiple Element Arrangements, by allowing the use of the “best
estimate of selling price” in addition to vendor specific objective evidence and
third-party evidence for determining the selling price of a deliverable. This
guidance establishes a selling price hierarchy for determining the selling price
of a deliverable, which is based on: (a) vendor-specific objective
evidence, (b) third-party evidence, or (c) estimates. In addition, the
residual method of allocating arrangement consideration is no longer permitted.
ASU 2009-13 is effective for fiscal years beginning on or after June 15,
2010. We have not yet completed our evaluation of the impact of this Standard on
our Consolidated Financial Statements.
In
January 2010, the FASB issued ASU 2010-06 Fair Value Measurement and
Disclosures (Topic 820)—Improving Disclosures about Fair
Value Measurements. This guidance modifies Fair Value
Measurements and Disclosures (Subtopic 820-10) by requiring additional
disclosures. This guidance establishes (a) a new disclosure
requirement for transfers in and out of Level 1 and Level 2, (b) a requirement
to separately disclose amounts of significant transfers in and out of Level 1
and 2 fair value measurements, (c) a requirement for a reconciliation of
activity, (d) clarification on level of disaggregation. An entity needs to
disclose fair value measurement between asset and liability classes, and (e)
disclosure related to input and valuation techniques for Level 2 and Level 3
fair value measurements. ASU 2010-06 is effective for fiscal years beginning
after December 15, 2010 and for interim periods within those fiscal
years. We have not yet completed our evaluation of the impact of this
Standard on our Consolidated Financial Statements.
Off-Balance
Sheet Arrangements
We do not
participate in transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities (“SPEs”), which would have been
established for the purpose of facilitating off-balance sheet arrangements or
other contractually narrow or limited purpose. As of January 2, 2010, we were
not involved in any unconsolidated SPE transactions.
We are
exposed to a variety of market risks, including changes in interest rates
primarily as a result of our borrowing activities, commodity price risk, and to
a lesser extent, our investing activities and foreign currency
fluctuations.
Our
borrowings are in variable rate instruments, with interest rates tied to either
the Prime Rate or the LIBOR. A 100 basis point change in these rates would have
an impact of approximately $0.2 million on our annual interest expense, assuming
consistent levels of floating rate debt with those held at the end of fiscal
2009.
Commodity
price movements create a market risk by affecting the price we must pay for
certain raw materials. The Company purchases aluminum for use in manufacturing
consumables products and is embedded in certain components we purchase from
major suppliers. From time to time, we enter into agreements with certain
suppliers to manage price risks within a specified range of prices; however, our
suppliers generally pass on significant
commodity
price changes to us in the form of revised prices on future purchases. The
Company has not used commodity forward or option contracts to manage this market
risk.
The
Company operates foreign subsidiaries in Canada, Europe and Asia and is exposed
to foreign currency exchange rate risk inherent in our sales commitments,
anticipated sales, anticipated purchases and assets and liabilities denominated
in currencies other than the U.S. dollar. Presstek routinely evaluates whether
the foreign exchange risk associated with its foreign currency exposures acts as
a natural foreign currency hedge for other offsetting amounts denominated in the
same currency. The Company has not hedged the net assets or net income of its
foreign subsidiaries. In addition, certain key customers and strategic partners
are not located in the United States. As a result, these parties may be subject
to fluctuations in foreign exchange rates. If their home country currency were
to decrease in value relative to the U.S. dollar, their ability to purchase and
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,
certain major 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 U.S.
dollar, could cause fluctuations in supply pricing which could have an adverse
effect on our business.
The Board
of Directors and Stockholders
Presstek,
Inc.:
We have
audited the accompanying consolidated balance sheets as of January 2, 2010 and
January 3, 2009 of Presstek, Inc. and subsidiaries (the Company) and the related
consolidated statements of operations, changes in stockholders’ equity and
comprehensive income (loss), and cash flows for each of the fiscal years in the
three-year period ended January 2, 2010. In connection with our audits of the
consolidated financial statements, we also have audited financial statement
schedule II. These consolidated financial statements and financial statement
schedule are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of January 2,
2010 and January 3, 2009, and the results of their operations and their cash
flows for each of the fiscal years in the three-year period ended January 2,
2010, in conformity with U.S. generally accepted accounting principles.
Also in our opinion, the related financial statement schedule II, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial
reporting as of January 2, 2010, based on criteria established in Internal
Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 24,
2010 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
/s/ KPMG
LLP
New York,
New York
March 24,
2010
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRESSTEK,
INC. AND SUBSIDIARIES
|
|
|
|
|
|
(in
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
January
2,
|
|
|
January
3,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
5,843 |
|
|
$ |
4,738 |
|
|
Accounts
receivable, net
|
|
|
22,605 |
|
|
|
30,759 |
|
|
Inventories
|
|
|
30,378 |
|
|
|
37,122 |
|
|
Assets
of discontinued operations
|
|
|
12,624 |
|
|
|
13,330 |
|
|
Deferred
income taxes
|
|
|
243 |
|
|
|
7,066 |
|
|
Other
current assets
|
|
|
2,598 |
|
|
|
4,095 |
|
|
Total
current assets
|
|
|
74,291 |
|
|
|
97,110 |
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
24,307 |
|
|
|
26,015 |
|
|
Goodwill
|
|
|
- |
|
|
|
19,114 |
|
|
Intangible
assets, net
|
|
|
4,316 |
|
|
|
4,174 |
|
|
Deferred
income taxes
|
|
|
1,140 |
|
|
|
10,494 |
|
|
Other
noncurrent assets
|
|
|
481 |
|
|
|
606 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
104,535 |
|
|
$ |
157,513 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Current
portion of long-term debt and capital lease obligation
|
|
$ |
- |
|
|
$ |
4,074 |
|
|
Line
of credit
|
|
|
17,910 |
|
|
|
12,415 |
|
|
Accounts
payable
|
|
|
9,887 |
|
|
|
12,060 |
|
|
Accrued
expenses
|
|
|
8,049 |
|
|
|
13,261 |
|
|
Deferred
revenue
|
|
|
6,497 |
|
|
|
7,300 |
|
|
Liabilities
of discontinued operations
|
|
|
5,203 |
|
|
|
5,702 |
|
|
Total
current liabilities
|
|
|
47,546 |
|
|
|
54,812 |
|
|
|
|
|
|
|
|
|
|
|
|
Other
long-term liabilities
|
|
|
141 |
|
|
|
170 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
47,687 |
|
|
|
54,982 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (See Note 19)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value, 1,000,000 shares authorized, no shares
issued
|
|
|
- |
|
|
|
- |
|
|
Common
stock, $0.01 par value, 75,000,000 shares authorized, 36,854,802
and
|
|
|
|
|
|
|
|
|
|
36,637,181
shares issued and outstanding at January 2, 2010 and
|
|
|
|
|
|
|
|
|
|
January
3, 2009, respectively
|
|
|
368 |
|
|
|
366 |
|
|
Additional
paid-in capital
|
|
|
120,005 |
|
|
|
117,985 |
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(3,810 |
) |
|
|
(5,954 |
) |
|
Accumulated
deficit
|
|
|
(59,715 |
) |
|
|
(9,866 |
) |
|
Total
stockholders' equity
|
|
|
56,848 |
|
|
|
102,531 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$ |
104,535 |
|
|
$ |
157,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
|
PRESSTEK,
INC. AND SUBSIDIARIES
|
|
|
|
|
|
(in
thousands, except per-share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year ended
|
|
|
|
|
January
2,
|
|
|
January
3,
|
|
|
December
29,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
$ |
19,646 |
|
|
$ |
52,716 |
|
|
$ |
87,674 |
|
|
Consumables
|
|
|
85,741 |
|
|
|
106,027 |
|
|
|
119,931 |
|
|
Service
and parts
|
|
|
29,071 |
|
|
|
34,509 |
|
|
|
38,968 |
|
|
Total
revenue
|
|
|
134,458 |
|
|
|
193,252 |
|
|
|
246,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
23,916 |
|
|
|
45,818 |
|
|
|
80,137 |
|
|
Consumables
|
|
|
46,765 |
|
|
|
53,270 |
|
|
|
65,587 |
|
|
Service
and parts
|
|
|
21,585 |
|
|
|
25,423 |
|
|
|
31,622 |
|
|
Total
cost of revenue
|
|
|
92,266 |
|
|
|
124,511 |
|
|
|
177,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
42,192 |
|
|
|
68,741 |
|
|
|
69,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
4,975 |
|
|
|
5,144 |
|
|
|
4,969 |
|
|
Sales,
marketing and customer support
|
|
|
24,967 |
|
|
|
29,937 |
|
|
|
39,194 |
|
|
General
and administrative
|
|
|
21,912 |
|
|
|
25,496 |
|
|
|
33,172 |
|
|
Amortization
of intangible assets
|
|
|
926 |
|
|
|
1,084 |
|
|
|
2,168 |
|
|
Restructuring
and other charges
|
|
|
1,684 |
|
|
|
2,108 |
|
|
|
2,714 |
|
|
Goodwill
impairment
|
|
|
19,114 |
|
|
|
- |
|
|
|
- |
|
|
Total
operating expenses
|
|
|
73,578 |
|
|
|
63,769 |
|
|
|
82,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss)
|
|
|
(31,386 |
) |
|
|
4,972 |
|
|
|
(12,990 |
) |
|
Interest
and other income (expense), net
|
|
|
(1,389 |
) |
|
|
938 |
|
|
|
(1,254 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before income taxes
|
|
|
(32,775 |
) |
|
|
5,910 |
|
|
|
(14,244 |
) |
|
Provision
(benefit) for income taxes
|
|
|
16,334 |
|
|
|
2,780 |
|
|
|
(3,889 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(49,109 |
) |
|
|
3,130 |
|
|
|
(10,355 |
) |
|
Loss
from discontinued operations, net of income taxes
|
|
|
(740 |
) |
|
|
(2,606 |
) |
|
|
(1,849 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(49,849 |
) |
|
$ |
524 |
|
|
$ |
(12,204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$ |
(1.34 |
) |
|
$ |
0.09 |
|
|
$ |
(0.29 |
) |
|
Loss
from discontinued operations
|
|
|
(0.02 |
) |
|
|
(0.08 |
) |
|
|
(0.05 |
) |
|
|
|
$ |
(1.36 |
) |
|
$ |
0.01 |
|
|
$ |
(0.34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$ |
(1.34 |
) |
|
$ |
0.09 |
|
|
$ |
(0.29 |
) |
|
Loss
from discontinued operations
|
|
|
(0.02 |
) |
|
|
(0.08 |
) |
|
|
(0.05 |
) |
|
|
|
$ |
(1.36 |
) |
|
$ |
0.01 |
|
|
$ |
(0.34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
36,744 |
|
|
|
36,596 |
|
|
|
36,199 |
|
|
Dilutive
effect of stock options
|
|
|
- |
|
|
|
9 |
|
|
|
- |
|
|
Weighed
average shares outstanding - diluted
|
|
|
36,744 |
|
|
|
36,605 |
|
|
|
36,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
|
PRESSTEK,
INC. AND SUBSIDIARIES
|
|
|
|
|
|
AND
COMPREHENSIVE INCOME (LOSS)
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
other
|
|
|
earnings
|
|
|
|
|
|
|
|
Common
stock
|
|
|
paid-in
|
|
|
comprehensive
|
|
|
(accumulated
|
|
|
|
|
|
|
|
Shares
|
|
|
Par
value
|
|
|
capital
|
|
|
income
(loss)
|
|
|
deficit)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 30, 2006
|
|
|
35,662 |
|
|
$ |
357 |
|
|
$ |
108,769 |
|
|
$ |
297 |
|
|
$ |
1,814 |
|
|
$ |
111,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
903 |
|
|
|
9 |
|
|
|
3,126 |
|
|
|
- |
|
|
|
- |
|
|
|
3,135 |
|
|
Foreign
currency translation adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
735 |
|
|
|
- |
|
|
|
735 |
|
|
Share
based compensation
|
|
|
- |
|
|
|
- |
|
|
|
3,989 |
|
|
|
- |
|
|
|
- |
|
|
|
3,989 |
|
|
Net
income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(12,204 |
) |
|
|
(12,204 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 29, 2007
|
|
|
36,565 |
|
|
|
366 |
|
|
|
115,884 |
|
|
|
1,032 |
|
|
|
(10,390 |
) |
|
|
106,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
72 |
|
|
|
- |
|
|
|
298 |
|
|
|
- |
|
|
|
- |
|
|
|
298 |
|
|
Foreign
currency translation adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,986 |
) |
|
|
- |
|
|
|
(6,986 |
) |
|
Share
based compensation
|
|
|
- |
|
|
|
- |
|
|
|
1,803 |
|
|
|
- |
|
|
|
- |
|
|
|
1,803 |
|
|
Net
income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
524 |
|
|
|
524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 3, 2009
|
|
|
36,637 |
|
|
|
366 |
|
|
|
117,985 |
|
|
|
(5,954 |
) |
|
|
(9,866 |
) |
|
|
102,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
218 |
|
|
|
2 |
|
|
|
318 |
|
|
|
- |
|
|
|
- |
|
|
|
320 |
|
|
Foreign
currency translation adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,144 |
|
|
|
- |
|
|
|
2,144 |
|
|
Share
based compensation
|
|
|
- |
|
|
|
- |
|
|
|
1,702 |
|
|
|
- |
|
|
|
- |
|
|
|
1,702 |
|
|
Net
income (loss)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(49,849 |
) |
|
|
(49,849 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 2, 2010
|
|
|
36,855 |
|
|
$ |
368 |
|
|
$ |
120,005 |
|
|
$ |
(3,810 |
) |
|
$ |
(59,715 |
) |
|
$ |
56,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss) is calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
2,
|
|
|
January
3,
|
|
|
December
29,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
2009 |
|
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
|
|
|
$ |
(49,849 |
) |
|
$ |
524 |
|
|
$ |
(12,204 |
) |
|
|
|
|
|
|
|
|
|
Adjustments
to accumulated other comprehensive income
|
|
|
|
|
|
|
2,144 |
|
|
|
(6,986 |
) |
|
|
735 |
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
|
|
|
|
$ |
(47,705 |
) |
|
$ |
(6,462 |
) |
|
$ |
(11,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
|
PRESSTEK,
INC. AND SUBSIDIARIES
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year ended
|
|
|
|
|
January
2,
|
|
|
January
3,
|
|
|
December
29,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2007
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(49,849 |
) |
|
$ |
524 |
|
|
$ |
(12,204 |
) |
|
Add
loss from discontinued operations
|
|
|
740 |
|
|
|
2,606 |
|
|
|
1,849 |
|
|
Income
(loss) from continuing operations
|
|
|
(49,109 |
) |
|
|
3,130 |
|
|
|
(10,355 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
from
continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
3,807 |
|
|
|
4,519 |
|
|
|
5,564 |
|
|
Amortization
of intangible assets
|
|
|
926 |
|
|
|
1,084 |
|
|
|
2,168 |
|
|
Restructuring
and other charges
|
|
|
1,684 |
|
|
|
1,686 |
|
|
|
2,714 |
|
|
Impairment
|
|
|
19,114 |
|
|
|
422 |
|
|
|
- |
|
|
Provision
for warranty costs
|
|
|
(384 |
) |
|
|
40 |
|
|
|
3,517 |
|
|
Provision
for accounts receivable allowances
|
|
|
2,685 |
|
|
|
1,915 |
|
|
|
1,671 |
|
|
Stock
compensation expense
|
|
|
1,702 |
|
|
|
1,803 |
|
|
|
3,989 |
|
|
Loss
on disposal of assets
|
|
|
80 |
|
|
|
127 |
|
|
|
572 |
|
|
Changes
in operating assets and liabilities, net of effects from business
acquisitions and divestures:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
4,564 |
|
|
|
8,556 |
|
|
|
6,841 |
|
|
Inventories
|
|
|
6,621 |
|
|
|
7,049 |
|
|
|
(2,082 |
) |
|
Other
current assets
|
|
|
(55 |
) |
|
|
546 |
|
|
|
(2,137 |
) |
|
Deferred
income taxes
|
|
|
16,177 |
|
|
|
1,081 |
|
|
|
(6,187 |
) |
|
Other
noncurrent assets
|
|
|
(3 |
) |
|
|
(219 |
) |
|
|
98 |
|
|
Accounts
payable
|
|
|
(2,083 |
) |
|
|
(5,336 |
) |
|
|
(8,736 |
) |
|
Accrued
expenses
|
|
|
(4,749 |
) |
|
|
(11,460 |
) |
|
|
7,364 |
|
|
Deferred
revenue
|
|
|
(758 |
) |
|
|
219 |
|
|
|
(816 |
) |
|
Net
cash provided by operating activities from continuing
operations
|
|
|
219 |
|
|
|
15,162 |
|
|
|
4,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
(724 |
) |
|
|
(1,777 |
) |
|
|
(2,514 |
) |
|
Business
acquisitions, net of cash acquired
|
|
|
- |
|
|
|
- |
|
|
|
(119 |
) |
|
Investment
in patents and other intangible assets
|
|
|
(1,068 |
) |
|
|
(146 |
) |
|
|
(204 |
) |
|
Net
cash used in investing activities from continuing
operations
|
|
|
(1,792 |
) |
|
|
(1,923 |
) |
|
|
(2,837 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
proceeds from issuance of common stock
|
|
|
320 |
|
|
|
298 |
|
|
|
3,135 |
|
|
Repayments
of term loan and capital lease
|
|
|
(4,074 |
) |
|
|
(11,461 |
) |
|
|
(7,037 |
) |
|
Net
borrowings (repayments) under line of credit agreement
|
|
|
5,495 |
|
|
|
(7,585 |
) |
|
|
5,000 |
|
|
Net
cash provided by (used in) financing activities from continuing
operations
|
|
|
1,741 |
|
|
|
(18,748 |
) |
|
|
1,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by (used in) discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
(1,731 |
) |
|
|
(3,514 |
) |
|
|
273 |
|
|
Investing
activities
|
|
|
(339 |
) |
|
|
7,240 |
|
|
|
(532 |
) |
|
Financing
activities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Net
cash provided by (used in) discontinued operations
|
|
|
(2,070 |
) |
|
|
3,726 |
|
|
|
(259 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
3,007 |
|
|
|
(6,037 |
) |
|
|
824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
1,105 |
|
|
|
(7,820 |
) |
|
|
3,011 |
|
|
Cash
and cash equivalents, beginning of year
|
|
|
4,738 |
|
|
|
12,558 |
|
|
|
9,547 |
|
|
Cash
and cash equivalents, end of year
|
|
$ |
5,843 |
|
|
$ |
4,738 |
|
|
$ |
12,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
1,094 |
|
|
$ |
1,605 |
|
|
$ |
3,106 |
|
|
Cash
paid for income taxes
|
|
$ |
49 |
|
|
$ |
727 |
|
|
$ |
236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
PRESSTEK,
INC.
1.
NATURE OF THE BUSINESS
Presstek,
Inc. and its subsidiaries (collectively, the “Company”) is a market-focused
company primarily engaged in the design, manufacture, sales and service of
high-technology digital imaging solutions to the graphic arts industry
worldwide. The Company is helping to lead the industry’s transformation from
analog print production methods to digital imaging technology. The Company is a
leader in the development of advanced printing systems using digital imaging
equipment and consumables-based solutions that economically benefit the user
through a streamlined workflow and both chemistry based and chemistry-free,
environmentally responsible operations. The Company is also a leading sales and
service channel in the small to mid-sized commercial, quick and in-plant
printing markets, and moving into the large-sized printing markets through an
expansion of its product portfolio.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
and Basis of Presentation
The
consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
The
Company has made certain organizational realignments in order to more closely
align its financial reporting with its current business structure. The Lasertel
segment has been presented as discontinued operations since the third quarter of
fiscal 2008 as the operations were being held for sale. On March 5,
2010, Presstek sold the Lasertel subsidiary to SELEX Galileo Inc. (SELEX), see
Note 21.
The
Company’s operations are currently organized into two business segments:
Presstek and Lasertel. The Presstek segment is primarily engaged in the
development, manufacture, sale and servicing of the Company’s patented digital
imaging systems and patented printing plate technologies as well as traditional,
analog systems and related equipment and supplies for the graphic arts and
printing industries, primarily serving the short-run, full-color market segment.
The Lasertel segment manufactures and develops high-powered laser diodes and
related laser products for the Presstek segment and for sale to external
customers and as stated above is now presented as discontinued
operations.
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 presented
herein include the financial results for the 53-week fiscal year ended January
2, 2010 (“fiscal 2009”), the 52-week fiscal year ended January 3, 2009 (“fiscal
2008”) and the 52-week fiscal year ended December 29, 2007 (“fiscal
2007”).
Use of
Estimates
The
Company prepares its financial statements in accordance with U.S. generally
accepted accounting principles (“U.S. GAAP”). The preparation of these financial
statements requires management to make estimates and assumptions that affect
reported amounts and related disclosures. Management believes the most
judgmental
estimates
include those related to product returns; warranty obligations; allowance for
doubtful accounts; slow-moving and obsolete inventories; income taxes; the
valuation of goodwill, intangible assets, long-lived assets and deferred tax
assets; stock-based compensation; and litigation. The Company bases its
estimates and judgments on historical experience and various other appropriate
factors, the results of which form the basis for making judgments about the
carrying values of assets and liabilities and the amounts of revenues and
expenses that are not readily apparent from other sources. Actual results could
differ from those estimates.
Revenue
Recognition
The
Company recognizes revenue principally from the sale of products (equipment,
consumables, laser diodes) and services (equipment maintenance contracts,
installation, training, support, and spare parts). Revenue is recognized when
persuasive evidence of a sales arrangement exists, delivery has occurred or
services have been rendered, the price to the customer is fixed or determinable
and collection is reasonably assured. In accordance with Staff Accounting
Bulletin (“SAB”) No. 104 Revenue Recognition (“SAB
104”) and FASB Accounting Standards Codification Topic 605-25 Multiple-Element
Arrangements (originally issued as Emerging Issues Task Force (“EITF”) Issue
00-21 Revenue Arrangements
with Multiple Deliverables ), when a sales arrangement contains multiple
elements, such as equipment and services, revenue is allocated to each element
using the residual method.
Product
revenue
End-Users - Under the Company’s standard
terms and conditions of sale of equipment, title and risk of loss are
transferred to end-user customers upon completion of installation and revenue is
recognized at that time, unless customer acceptance is uncertain or significant
deliverables remain. Sales of other products, including printing plates, are
generally recognized at the time of shipment.
OEMs - Product revenue and
any related royalties for products sold to Original Equipment Manufacturers
(“OEM”) are recognized at the time of shipment as installation is not required
and title and risk of loss pass at shipment. OEM contracts do not generally
include price protection or product return rights; however, the Company may
elect, in certain circumstances, to accept returns of product.
Distributors - Revenue for
product sold to distributors, whereby the distributor is responsible for
installation, is recognized at shipment, unless other revenue recognition
criteria have not been met. Revenue for product sold to distributors under
contracts which involve Company installation of equipment is recognized upon
installation, unless end-user customer acceptance is uncertain, significant
deliverables remain, or other revenue recognition criteria have not been met.
Except in cases of contract termination (which may include limited product
return rights), distributor contracts do not generally include price protection
or product return rights; however, the Company may elect, in certain
circumstances, to accept returns of product.
Service and parts
revenue
Revenue
for installation services, including time and material billings, are recognized
as services are rendered. Revenue associated with maintenance or extended
service agreements is recognized ratably over the contract period. Revenue
associated with training and support services is recognized as services are
rendered.
Leases
The
Company may offer customer financing to assist customers in the acquisition of
Presstek products. At the time a financing transaction is consummated, which
qualifies as a sales-type lease, the Company records equipment revenue equal to
the net present value of future lease payments. Any remaining balance is
recognized as finance income using the effective interest method over the term
of the lease. Leases not qualifying as sales-type leases are accounted for as
operating leases. The company recognizes revenue from operating leases on an
accrual basis as the rental payments become due.
Multiple element
arrangements
In
accordance with SAB 104 and Topic 605-25, when a sales arrangement contains
multiple elements, such as equipment, consumables or services, revenue is
allocated to each element using the residual method.
Rights of
return
A general
right of return or cancellation does not exist once product is delivered to the
customer; however, the Company may elect, in certain circumstances, to accept
returns of product. Product revenues are recorded net of estimated returns,
which are adjusted periodically, based upon historical rates of
return.
Shipping and
handling
The
Company accounts for shipping and handling fees passed on to customers as
revenue. Shipping and handling costs are reported as components of cost of
revenue.
Fair Value of Financial
Instruments
The
Company adopted Accounting FASB Accounting Standards Codification Topic 820,
Fair Value Measurements and Disclosures (originally issued as
SFAS No. 157, Fair
Value Measurements), for financial assets and financial liabilities in
the first quarter of fiscal 2008. In accordance with Topic 820, the Company
deferred application until January 4, 2009, in relation to
nonrecurring nonfinancial assets and nonfinancial liabilities including goodwill
impairment testing, asset retirement obligations, long-lived asset impairments
and exit and disposal activities.
Cash and Cash
Equivalents
Cash and
cash equivalents include savings deposits, certificates of deposit and money
market funds that have original maturities of three months or less and are
classified as cash equivalents.
Concentration of Credit
Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash equivalents and accounts receivable. The Company
may invest in high-quality money market instruments, securities of the U.S.
government, and high-quality corporate issues. Accounts receivable are generally
unsecured and are derived from the Company’s customers located around the world.
The Company performs ongoing credit evaluations of its customers and maintains
an allowance for doubtful accounts.
Accounts Receivable, Net of
Allowances
The
Company’s accounts receivable are customer obligations due under normal trade
terms, carried at face value less allowances for doubtful accounts and sales
returns. The Company evaluates its allowances on an ongoing basis and adjusts
for potential uncollectible amounts when it determines that receivables are at
risk for collection based upon the length of time receivables are outstanding,
past transaction history and various other criteria. Receivables are written off
against the allowance in the period they are determined to be
uncollectible.
Inventories
Inventories
include material, direct labor and related manufacturing overhead, and are
stated at the lower of cost (determined on a first-in, first-out basis) or net
realizable value. The Company assesses 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 net realizable
value based upon forecasted demand for its products. If actual demand is less
favorable than what has been forecasted by management, additional inventory
impairments may be required.
Property, Plant and
Equipment, Net
Property,
plant and equipment are stated at cost and are depreciated using a straight-line
method over their respective estimated useful lives. Leasehold improvements are
amortized over the shorter of the remaining term of the lease or the life of the
related asset. The estimated useful lives assigned to the Company’s other
property, plant and equipment categories are as follows:
|
Buildings
and improvements
|
|
|
25
– 30 |
|
years
|
|
Production
equipment and other
|
|
|
5 –
10 |
|
years
|
|
Office
furniture and equipment
|
|
|
3 –
7 |
|
years
|
|
Software
|
|
|
5 |
|
years
|
The
Company periodically reviews the remaining lives of property, plant and
equipment as a function of the original estimated lives assigned to these assets
for purposes of recording appropriate depreciation expense. Factors that could
impact the estimated useful life of a fixed asset, in addition to physical
deterioration from the passage of time and depletion, include, but are not
limited to, plans of the enterprise and anticipated use of the
assets.
Acquisitions
In
accordance with the purchase method of accounting, the fair values of assets
acquired and liabilities assumed are determined and recorded as of the date of
the acquisition. Any excess of the purchase price over the estimated
fair value of the net assets acquired is recorded as goodwill.
Intangible Assets and
Goodwill
Intangible
assets consist of patents, intellectual property, license agreements and certain
identifiable intangible assets resulting from business combinations, including
trade names, customer relationships, non-compete covenants, software licenses
and loan origination fees.
Patents
represent the cost of preparing and filing applications to patent the Company’s
proprietary technologies, in addition to certain patent and license rights
obtained in the Company’s acquisitions or other related transactions. Such costs
are amortized over a period ranging from five to seven years, beginning on the
date the patents or rights are issued or acquired.
From time
to time, the Company enters into agreements with third parties under which the
party will design and prototype a product incorporating Presstek’s existing
products and technology and provide Presstek with the rights of distribution and
relevant intellectual property.. The capitalized costs associated with rights or
intellectual property under these agreements will be amortized over the
estimated sales life-cycle and future cash flows of the product. The Company
does not amortize capitalized costs related to either patents or purchased
intellectual property until the respective asset has been placed into service.
Capitalized development costs were $1.1 million, $0.1 million and $0.2 million
in fiscal 2009, fiscal 2008 and fiscal 2007, respectively.
At
January 2, 2010 and January 3, 2009, the Company had recorded $0.3 million and
$0.4 million, of costs related to patents and intellectual property not yet in
service.
The
Company amortizes license agreements and loan origination fees over the term of
the respective agreement.
The
amortizable lives of the Company’s other intangible assets are as
follows:
|
Trade
names
|
|
|
2 –
3 |
|
years
|
|
Customer
relationships
|
|
|
2 –
10 |
|
years
|
|
Software
licenses
|
|
|
3 |
|
years
|
|
Non-compete
covenants
|
|
|
5 |
|
years
|
Goodwill
is recorded when the consideration paid for acquisitions exceeds the fair value
of net tangible and identifiable intangible assets acquired. In accordance with
FASB Accounting Standards Codification Topic 350 (Topic 350)
Intangibles-Goodwill and Other (originally issued as “SFAS 142, Goodwill and
Other Intangible Assets”), goodwill is not amortized, but rather, is tested at
least annually for impairment at the reporting unit level. The Company has no
goodwill recorded as of January 2, 2010 and had an existing balance in goodwill
aggregating $19.1 million at January 3, 2009 related to the A.B. Dick
Acquisition and Precision acquisition.
Impairment of Goodwill and
Long-Lived Assets
In
accordance with the provisions of Topic 350, goodwill is tested at least
annually, on the first business day of the third quarter, for impairment, or
more frequently, if indicators of potential impairment arise. The Company’s
impairment review is based on a fair value test. The Company uses its judgment
in conducting ongoing assessments of whether goodwill may have become impaired
between annual impairment tests. Indicators such as unexpected adverse business
conditions, economic factors, unanticipated technological change or competitive
activities, loss of key personnel and acts by governments and courts may signal
that an asset has been impaired. Should the fair value of goodwill, as
determined by the Company at any measurement date, fall below its carrying
value, a charge for impairment of goodwill will be recorded in the
period.
In order
to complete the two-step goodwill impairment tests as required by Topic 350, the Company identifies its
reporting units and determines the carrying value of each reporting unit by
assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units. In accordance with the provisions
of Topic 350, the Company designates reporting units for purposes of assessing
goodwill impairment.
Based on
events including the decline in the Company’s stock price during the
second quarter of 2009 and the unstable economic and credit conditions impacting
the Company’s business, the Company identified a triggering event
that caused management to test goodwill for impairment as of July 4,
2009. The result of the two-step goodwill impairment test was a $19.1 million
impairment charge recognized in the second quarter of 2009 that eliminated all
recorded goodwill from the Company’s financial statements. See Note 7 for
further discussion.
Intangible
assets with estimated lives and other long-lived assets are reviewed for
impairment when events or changes in circumstances indicate that the carrying
amount of an asset or asset group may not be recoverable in accordance with FASB
Accounting Standards Codification Topic 360, Property Plant and Equipment
(originally issued as SFAS No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets). Recoverability of intangible assets with
estimated lives and other long-lived assets is measured by comparison of the
carrying amount of an asset or asset group to future net undiscounted pretax
cash flows expected to be generated by the asset or asset group. If these
comparisons indicate that an asset is not recoverable, the Company will
recognize an impairment loss for the amount by which the carrying value of the
asset or asset group exceeds the related estimated fair value. Estimated fair
value is based on either discounted future pretax operating cash flows or
appraised values, depending on the nature of the asset. The Company determines
the discount rate for this analysis based on the expected internal rate of
return of the related business and does not allocate interest charges to the
asset or asset group being measured. Considerable judgment is required to
estimate discounted future operating cash flows.
Product
Warranties
The Company warrants its products
against defects in material and workmanship for various periods generally from a
period of ninety days to one year from the date of installation or shipment. The
Company’s typical warranties require it to repair or replace defective products
during the warranty period at no cost to the customer. The Company provides for
the estimated cost of product warranties, based on historical experience, at the
time revenue is recognized. The Company periodically assesses the adequacy of
its recorded warranty liability and adjusts the amounts as necessary. The
estimated liability for product warranties could differ materially from future
actual warranty costs.
Claims and
Litigation
The
Company evaluates claims for damages and records its estimate of liabilities
when such liabilities are considered probable and an amount or range can
reasonably be estimated.
Research and Development
Costs
Research
and development costs include payroll and related expenses for personnel, parts
and supplies, and contracted services. Research and development costs are
charged to expense when incurred.
Advertising
Costs
Advertising
costs are expensed as incurred and are reported as a component of Sales,
marketing and customer support expenses in the Company’s Consolidated Statements
of Operations. Advertising expenses were $0.6 million in fiscal 2009, $0.8
million in fiscal 2008 and $1.5 million in fiscal 2007.
Income
Taxes
The
process of accounting for income taxes involves calculating the current tax
obligation or refund and assessing the nature and measurements of temporary
differences resulting from differing treatment of items for tax and accounting
purposes. These differences and net operating loss (“NOL”) and credit
carryforwards, result in deferred tax assets and liabilities. In each period,
the Company assesses the likelihood that the deferred tax assets will be
recovered from existing deferred tax liabilities or future taxable income in
each jurisdiction. To the extent the Company believes that it would not meet the
test that recovery is “more likely than not”, the Company would establish a
valuation allowance. To the extent that a valuation allowance is established or
changed in a period, the Company would adjust the tax provision or tax benefit
in the consolidated statement of operations. The Company uses judgment to
determine the provision or benefit for income taxes, including estimates
associated with uncertain tax positions and any valuation allowance recorded
against deferred tax assets based on the weight of all positive and negative
factors, including cumulative trends in profitability.
The
Company has accumulated U.S. federal and state income tax NOL carryforwards,
research and experimentation tax credit carryforwards and alternative minimum
tax credit carryforwards. In the second quarter of fiscal 2009, the Company
established a valuation allowance on a deferred tax asset on the balance sheet
primarily representing NOLs from U.S. operations.
The
Company continually assesses the ability to utilize NOL and tax credit
carryforwards in future periods and record any resulting adjustments. The future
impact on net income may be positive or negative, depending on the net result of
such adjustments and charges.
Based
upon a review of historical operating performance through 2009 and expected
profits in the international operations in the foreseeable future, the Company
continues to believe it is more likely than not that the international deferred
tax assets, net of valuation allowance, will be fully realized.
Stock-Based
Compensation
The
Company adopted the fair value recognition provisions of FASB Accounting
Standards Codification Topic 718, Stock Compensation, (originally adopted by the
Company in January 1, 2006, as SFAS 123R Share-Based Payment, as amended ) using
the modified prospective method, which requires measurement of compensation cost
at fair value on the date of grant and recognition of compensation expense over
the service period for awards expected to vest. See Note 15 for
further discussion.
Comprehensive Income
(Loss)
Comprehensive
income is comprised of net income (loss), plus all changes in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources, including any foreign currency translation
adjustments, unrealized gains and losses on marketable securities, or changes in
derivative values. These changes in equity are recorded as adjustments to
accumulated other comprehensive income (loss) in the Company’s Consolidated
Financial Statements. The components of accumulated other comprehensive income
(loss) are unrealized gains or losses on foreign currency
translation.
Foreign Currency Translation
and Transactions
The
Company’s foreign subsidiaries use the local currency as their functional
currency. Accordingly, assets and liabilities are translated into U.S. dollars
at current rates of exchange in effect at the balance sheet date. The resulting
unrealized gains or losses are reported under the caption “accumulated other
comprehensive income (loss)” in the Company’s Consolidated Financial Statements.
Revenues and expenses from these subsidiaries are translated at average monthly
exchange rates in effect for the periods in which the transactions
occur.
Unrealized
gains and losses arising from foreign currency transactions are reported as a
component of Interest and other income (expense), net in the Company’s
Consolidated Statements of Operations.
Derivatives
The
Company entered into interest rate swap agreements with its lenders in October
2003, which were intended to protect the Company’s long-term debt against
fluctuations in LIBOR rates. Under the interest rate swaps LIBOR was set at a
minimum of 1.15% and a maximum of 4.25%. Because the interest rate swap
agreement did not qualify as a hedge for accounting purposes, the Company
recorded an expense of $7,550 in fiscal 2008 and income of $22,500 in fiscal
2007, to mark these interest rate swap agreements to market. The adjustment to
fair value of the interest rate swap agreement was recorded in Interest and
other income (expense). The swap agreements expired in October
2008.
Earnings (Loss) per
Share
Earnings
per share is computed under the provisions of FASB Accounting Standards
Codification Topic 260, Earnings per share, (originally issued as SFAS No. 128,
Earnings per Share).
Accordingly, basic earnings (loss) per share is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during the period. For periods in which there is net income, diluted earnings
per share is determined by using the weighted average number of common and
dilutive common equivalent shares outstanding during the period unless the
effect is antidilutive. Potential dilutive common shares consist of the
incremental common shares issuable upon the exercise of stock options and
warrants.
Approximately
4,300,000, 4,170,000 and 1,922,000 options to purchase common stock were
excluded from the calculation of diluted earnings per share for fiscal 2009,
fiscal 2008 and fiscal 2007, respectively, as their effect would be
antidilutive.
Reclassifications
Certain
amounts in prior periods have been reclassified to conform to current
presentation.
Recently Issued Accounting
Standards
FASB
Accounting Standards Codification Topic 820 (originally issued as SFAS No. 157,
“Fair Value Measurements”) was adopted by the Company in two
steps. The Company adopted this requirement for financial assets and
financial liabilities in the first quarter of fiscal 2008. The
Company adopted this requirement in relation for to nonrecurring non-financial
assets and non-financial liabilities in the first quarter of fiscal
2009. The framework requires the valuation of fair value measurements
through the following hierarchy:
Level 1-
Quoted prices in active markets for identical assets or liabilities
Level 2-
Significant inputs that are observable, either directly or
indirectly
Level 3-
Significant unobservable inputs
The
adoption of these provisions did not have a material impact on the Company’s
financial results.
FASB
Accounting Standards Codification Topic 105 (originally issued as SFAS No. 168,
“The FASB Accounting Standards Codifications and the Hierarchy of Generally
Accepted Accounting Principles- A replacement of FASB Statement No. 162”) was
issued in June 2009. The Codification has become the single source of
authoritative generally accepted accounting principles recognized by the FASB to
be applied by nongovernmental entities and will supersede all existing FASB,
AICPA, EITF pronouncements and related literature. The Codification does not
replace or affect guidance issued by the SEC or its staff for public entities in
their filings with the SEC. This statement is effective for financial
statements issued for interim and annual periods ending after September 15,
2009. The adoption of the Codification did not have a material impact on the
Company’s financial results.
FASB
Accounting Standards Codification Topic 855 (originally issued as SFAS No. 165,
“Subsequent Events”) was issued in May 2009 and amended by Accounting Standards
Update (“ASU”) 2010-09 in February 2010. This statement establishes
principles and disclosure requirements for events or transactions occurring
after the balance sheet date but before financial statements are issued or
available to be issued. This statement requires that an SEC filer evaluate
subsequent events through the date the financial statements are issued. Some
nonrecognized subsequent events may be such that they must be disclosed to keep
the financial statements from being misleading. For such events an
entity should disclose the nature of the event and an estimate of its financial
effect, or a statement that an estimate cannot be made. The Company
adopted these provisions for the interim period ending July 4, 2009. The
adoption of these provisions did not have a material impact on the Company’s
disclosure practices.
FASB
Accounting Standards Codification Topic 805 (originally issued as SFAS
No. 141 (R), Business Combinations) was issued in December 2007. This
statement replaces SFAS 141, Business Combinations, but retains the fundamental
requirements of the statement that the acquisition method of accounting be used
for all business combinations and for an acquirer to be identified for each
business combination. The statement seeks to improve financial
reporting by establishing principles and requirements for how the
acquirer:
a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase option and c) determines what
information to disclose.
This
statement is effective prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The Company will
apply the provisions of Topic 805 to any future acquisitions made by the
Company.
FASB
Accounting Standards Codification Topic 805 (originally issued as FASB Staff
Position SFAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed
in a Business Combination That Arise from Contingencies” (FSP FAS 141(R)-1)) was
issued in April 2009. This FSP clarifies and amends SFAS
No. 141(R) regarding the initial recognition, measurement, accounting
and disclosure of assets and liabilities that arise from contingencies in a
business combination. Assets and liabilities that arise from a contingency
that can be measured at the date of the acquisition shall be recorded at fair
value. FSP FAS 141(R)-1 is effective for all acquisitions completed in
annual years beginning on or after December 15, 2008. The adoption of
Topic 805 will impact any future acquisitions made by the Company.
In October 2009, the FASB issued ASU
2009-13, Revenue Recognition
(Topic 605) – Multiple-Deliverable
Revenue Arrangements. This
guidance modifies the fair value requirements of FASB ASC subtopic
605-25, Revenue
Recognition-Multiple Element Arrangements, by allowing the use of the “best
estimate of selling price” in addition to vendor specific objective evidence and
third-party evidence for determining the selling price of a deliverable. This
guidance establishes a hierarchy for determining the allocated revenue
attributable to a deliverable, which is based on: (a) vendor-specific
objective evidence, (b) third-party evidence, or (c) estimates of a
selling price. In addition, the residual method of allocating arrangement
consideration is no longer permitted. ASU 2009-13 is effective for fiscal years
beginning on or after June 15, 2010. We have not yet completed our
evaluation of the impact of this Standard on our Consolidated Financial
Statements.
In
January 2010, the FASB issued ASU 2010-06 Fair Value Measurement and
Disclosures (Topic 820)—Improving Disclosures about Fair
Value Measurements. This guidance modifies Fair Value
Measurements and Disclosures (Subtopic 820-10) by requiring additional
disclosures. This guidance establishes (a) a new disclosure
requirement for transfers in and out of Level 1 and Level 2, (b) a requirement
to separately disclose amounts of significant transfers in and out of Level 1
and 2 fair value measurements, (c) a requirement for a reconciliation of
activity, (d) clarification on level of disaggregation. An entity needs to
disclose fair value measurement between asset and liability classes, and (e)
disclosure related to input and valuation techniques for Level 2 and Level 3
fair value measurements. ASU 2010-06 is effective for fiscal years beginning
after December 15, 2010 and for interim periods within those fiscal
years. We have not yet completed our evaluation of the impact of this
Standard on our Consolidated Financial Statements.
3.
DISCONTINUED OPERATIONS
The
Company accounts for its discontinued operations under the provisions of FASB
Accounting Standards Codification Topic 360. Accordingly, results of operations
and the related charges for discontinued operations have been classified as
“Loss from discontinued operations, net of income taxes” in the accompanying
Consolidated Statements of Operations. Assets and liabilities of discontinued
operations have been reclassified and reflected on the accompanying Consolidated
Balance Sheets as “Assets of discontinued operations” and “Liabilities of
discontinued operations”. For comparative purposes, all prior periods presented
have been reclassified on a consistent basis.
Lasertel
On
September 24, 2008, the Board of Directors approved a plan to sell the Lasertel
subsidiary as the Lasertel business is not a core focus for the Presstek
graphics business. The Company has presented the results of
operations of this subsidiary within discontinued operations, classified the
assets as “Assets of discontinued operations” and liabilities as “Liabilities of
discontinued operations”. On March 5, 2010, Presstek sold Lasertel to
SELEX. See Note 21.
Lasertel
incurred a loss of $0.7 million during fiscal 2009, as compared to a loss of
$2.7 million during 2008. The 2009 loss includes a non-cash impairment charge of
$1.4 million, and $0.9 million of legal fees related to the negotiation and
signing of a definitive agreement to sell the business.
Results
of operations of the discontinued business of Lasertel consist of the following
(in thousands, except per-share data):
|
|
|
January
2, 2010
|
|
|
January
3, 2009
|
|
|
December
29, 2007
|
|
|
Revenue
|
|
$ |
13,488 |
|
|
$ |
8,686 |
|
|
$ |
8,270 |
|
|
Profit
(loss) before other charges
|
|
|
1,621 |
|
|
|
(4,336 |
) |
|
|
(2,924 |
) |
|
Impairment
charge
|
|
|
(1,428 |
) |
|
|
- |
|
|
|
- |
|
|
Transaction
costs related to sale
|
|
|
(933 |
) |
|
|
- |
|
|
|
- |
|
|
Loss
before income taxes
|
|
|
(740 |
) |
|
|
(4,336 |
) |
|
|
(2,924 |
) |
|
Provision
(benefit) for income taxes
|
|
|
-- |
|
|
|
(1,637 |
) |
|
|
(1,129 |
) |
|
Net
loss from discontinued operations
|
|
$ |
(740 |
) |
|
$ |
(2,699 |
) |
|
$ |
(1,795 |
) |
|
Loss
per diluted share
|
|
$ |
(0.02 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.05 |
) |
Assets
and liabilities of the discontinued business of Lasertel consist of the
following (in thousands):
|
|
|
January
2, 2010
|
|
|
January
3, 2009
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
585 |
|
|
$ |
369 |
|
|
Receivables,
net
|
|
|
2,938 |
|
|
|
2,187 |
|
|
Inventories
|
|
|
3,774 |
|
|
|
4,478 |
|
|
Other
current assets
|
|
|
212 |
|
|
|
134 |
|
|
Property,
plant & equipment, net
|
|
|
4,377 |
|
|
|
5,263 |
|
|
Intangible
assets, net
|
|
|
696 |
|
|
|
899 |
|
|
Other
noncurrent assets
|
|
|
42 |
|
|
|
-- |
|
|
Total
assets
|
|
$ |
12,624 |
|
|
$ |
13,330 |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
729 |
|
|
$ |
884 |
|
|
Accrued
expenses
|
|
|
459 |
|
|
|
448 |
|
|
Deferred
gain
|
|
|
4,015 |
|
|
|
4,370 |
|
|
Total
Liabilities
|
|
$ |
5,203 |
|
|
$ |
5,702 |
|
Loss from
discontinued operations (net of income taxes) as shown on the Consolidated
Statements of Operations for fiscal 2008 and fiscal 2007 include a profit of $93
thousand and a loss of $54 thousand related to the discontinued analog newspaper
business of Precision Lithograining Corp.
4.
ACCOUNTS RECEIVABLE, NET OF ALLOWANCES
The
components of accounts receivable, net of allowances, are as follows (in
thousands):
|
|
|
January
2,
2010
|
|
|
January
3,
2009
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
$ |
26,155 |
|
|
$ |
33,235 |
|
|
Less
allowances
|
|
|
(3,550 |
) |
|
|
(2,476 |
) |
|
|
|
|
22,605 |
|
|
$ |
30,759 |
|
The
activity related to the Company’s allowances for losses, returns and deductions
on accounts receivable for fiscal 2009, fiscal 2008 and fiscal 2007 is as
follows (in thousands):
|
|
|
Fiscal
2009
|
|
|
Fiscal
2008
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
$ |
2,476 |
|
|
$ |
2,538 |
|
|
$ |
2,712 |
|
|
Charged
to costs and expenses
|
|
|
2,685 |
|
|
|
1,915 |
|
|
|
1,671 |
|
|
Deductions
and write-offs
|
|
|
(1,611 |
) |
|
|
(1,977 |
) |
|
|
(1,845 |
) |
|
Balance
at end of period
|
|
$ |
3,550 |
|
|
$ |
2,476 |
|
|
$ |
2,538 |
|
5.
INVENTORIES
The
components of inventories, are as follows (in thousands):
|
|
|
January
2,
2010
|
|
|
January
3,
2009
|
|
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$ |
4,485 |
|
|
$ |
2,946 |
|
|
Work
in process
|
|
|
1,093 |
|
|
|
4,950 |
|
|
Finished
goods
|
|
|
24,800 |
|
|
|
29,226 |
|
|
|
|
$ |
30,378 |
|
|
$ |
37,122 |
|
6.
PROPERTY, PLANT AND EQUIPMENT, NET
The
components of property, plant and equipment, net, are as follows (in
thousands):
|
|
|
January
2,
2010
|
|
|
January
3,
2009
|
|
|
|
|
|
|
|
|
|
|
Land
and improvements
|
|
$ |
1,301 |
|
|
$ |
1,301 |
|
|
Buildings
and leasehold improvements
|
|
|
22,443 |
|
|
|
22,016 |
|
|
Production
and other equipment
|
|
|
44,900 |
|
|
|
42,950 |
|
|
Office
furniture and equipment
|
|
|
9,865 |
|
|
|
9,402 |
|
|
Construction
in process
|
|
|
571 |
|
|
|
1,098 |
|
|
Total
property, plant and equipment, at cost
|
|
|
79,080 |
|
|
|
76,767 |
|
|
Accumulated
depreciation and amortization
|
|
|
(54,773 |
) |
|
|
(50,752 |
) |
|
Net
property, plant and equipment
|
|
$ |
24,307 |
|
|
$ |
26,015 |
|
Construction
in process is primarily related to production equipment not yet placed into
service.
The
Company recorded depreciation expense of $3.8 million, $4.5 million and $5.6
million in fiscal 2009, fiscal 2008 and fiscal 2007, respectively. Under the
Company’s financing arrangements (See Note 8), all property, plant and equipment
is pledged as security.
7. GOODWILL AND OTHER INTANGIBLE
ASSETS
The
changes in the carrying amounts of goodwill are as follows (in
thousands):
|
Balance
at December 29, 2007
|
|
$ |
19,891 |
|
|
Purchase
accounting adjustments for prior period acquisitions
|
|
|
(777 |
) |
|
Impairment
adjustments
|
|
|
-- |
|
|
Balance
at January 3, 2009
|
|
$ |
19,114 |
|
|
Purchase
accounting adjustments for prior period acquisitions
|
|
|
-- |
|
|
Impairment
adjustments
|
|
|
(19,114 |
) |
|
Balance
at January 2, 2010
|
|
$ |
-- |
|
In order to complete the two-step
goodwill impairment tests as required by FASB Accounting Standards Codification
Topic 350 Intangibles-Goodwill and Other, the Company identifies its reporting
units and determines the carrying value of each reporting unit by assigning the
assets and liabilities, including the existing goodwill and intangible assets,
to those reporting units. In accordance with the provisions of Topic 350, the
Company designates reporting units for purposes of assessing goodwill
impairment. Topic 350 defines a reporting unit as the lowest level of an entity
that is a business and that can be distinguished, physically and operationally
and for internal reporting purposes, from the other activities, operations, and
assets of the entity. Goodwill is assigned to reporting units of the Company
that are expected to benefit from the synergies of the acquisition. Based on the
provisions of Topic 350, the Company has determined that it has one reporting
unit in continuing operations for purposes of goodwill impairment
testing.
The
Company’s impairment review is based on a combination of the income approach,
which estimates the fair value of the Company’s reporting units based on a
discounted cash flow approach, and the market approach which estimates the fair
value of the Company’s reporting unit based on comparable market multiples.
The average fair
value is then reconciled to the Company’s market capitalization with an
appropriate control premium. The discount rate utilized in the discounted cash
flows analysis in the quarter ended July 4, 2009 (the last time this analysis
was performed) was approximately 16%, reflecting market based estimates of
capital costs and discount rates adjusted for a market participant’s view with
respect to execution, concentration, and other risks associated with the
projected cash flows of the reporting unit.
The peer
companies used in the market approach are primarily the Company’s major
competitors. The Company’s valuation methodology requires management to make
judgments and assumptions based on historical experience and projections of
future operating performance. The Company’s policy is to perform its
annual goodwill impairment test on the first business day of the third quarter
of each fiscal year.
Based on events
including the decline in the Company’s stock price during the second
quarter of 2009 and the unstable economic and credit conditions impacting the
Company’s business, the Company identified a triggering event
that caused management to test goodwill for impairment as of July 4,
2009. After completing step one of the impairment test, the Company determined
that the estimated fair value of its reporting unit was less than the carrying
value of the reporting unit, requiring the completion of the second step of the
impairment test. To measure the amount of impairment, Topic 350 prescribes that
the Company determine the implied fair value of goodwill in the same manner as
if the Company had acquired the reporting unit. Specifically, the Company must
allocate the fair value of the reporting unit to all of the assets of that unit,
including unrecognized intangible assets, in a hypothetical calculation that
would yield the implied fair value of goodwill. The impairment loss is measured
as the difference between the book value of the goodwill and the implied fair
value of the goodwill computed in step two. Upon completion of step two of the
analysis, the Company wrote off the entire goodwill balance resulting in an
impairment charge of $19.1 million in the quarter ended July 4, 2009. The
Company had no goodwill balance remaining as of January 2,
2010.
The
components of the Company’s identifiable intangible assets are as follows (in
thousands):
|
|
|
January
2, 2010
|
|
|
January
3, 2009
|
|
|
|
|
Cost
|
|
|
Accumulated
amortization
|
|
|
Cost
|
|
|
Accumulated
amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents
and intellectual property
|
|
$ |
10,398 |
|
|
$ |
8,264 |
|
|
$ |
9,390 |
|
|
$ |
7,739 |
|
|
Trade
names
|
|
|
2,360 |
|
|
|
2,360 |
|
|
|
2,360 |
|
|
|
2,360 |
|
|
Customer
relationships
|
|
|
4,452 |
|
|
|
2,615 |
|
|
|
4,452 |
|
|
|
2,366 |
|
|
Software
licenses
|
|
|
450 |
|
|
|
450 |
|
|
|
450 |
|
|
|
450 |
|
|
License
agreements
|
|
|
750 |
|
|
|
405 |
|
|
|
750 |
|
|
|
368 |
|
|
Non-compete
covenants
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
Loan
origination fees
|
|
|
332 |
|
|
|
332 |
|
|
|
332 |
|
|
|
277 |
|
|
|
|
$ |
18,842 |
|
|
$ |
14,526 |
|
|
$ |
17,834 |
|
|
$ |
13,660 |
|
The
Company recorded amortization expense for its identifiable intangible assets of
$0.9 million, $1.1 million and $2.2 million in fiscal 2009, fiscal 2008 and
fiscal 2007, respectively. As of January 2, 2010, there were $1.2 million of
intellectual property and $0.3 million of patents not yet in service. Estimated
future amortization expense for the Company’s in-service patents and all other
in service identifiable intangible assets recorded by the Company at January 2,
2010, are as follows (in thousands):
|
Fiscal
2010
|
|
$ |
812 |
|
|
Fiscal
2011
|
|
|
705 |
|
|
Fiscal
2012
|
|
|
492 |
|
|
Fiscal
2013
|
|
|
472 |
|
|
Fiscal
2014
|
|
|
347 |
|
|
Thereafter
|
|
|
-- |
|
The
Company conducts ongoing assessments of whether indicators exist requiring an
impairment test of the intangible and long-lived assets. This assessment was
conducted by the Company during the year ended January 2, 2010, and it was
determined that no impairment charge was required.
8.
FINANCING ARRANGEMENTS
The
components of the Company’s outstanding borrowings are as follows (in
thousands):
|
|
|
January
2, 2010
|
|
|
January
3, 2009
|
|
|
|
|
|
|
|
|
|
|
Term
loan
|
|
$ |
-- |
|
|
$ |
4,074 |
|
|
Line
of credit
|
|
|
17,910 |
|
|
|
12,415 |
|
|
|
|
|
17,910 |
|
|
|
16,489 |
|
|
Less
current portion
|
|
|
(17,910 |
) |
|
|
(16,489 |
) |
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
$ |
-- |
|
|
$ |
-- |
|
The
Company’s Senior Secured Credit Facilities (the “Facilities”) include a $35.0
million five-year secured term loan (the “Term Loan”) and originally a $45.0
million five-year secured revolving line of credit (the
“Revolver”). The Company granted a security interest in all of its
assets in favor of the lenders under the Facilities, which consists of a group
of three banks (the “Lenders”). In addition, under the Facilities
agreement, the Company is prohibited from declaring or distributing dividends to
shareholders.
Under the
terms of the Revolver and the Term Loan, the Company is required to meet four
financial covenants on a quarterly and annual basis. As a result of the
Company’s financial performance during the quarter ended July 4, 2009, the
Company was not in compliance with two of these covenants, the maximum funded
debt to EBITDA ratio (a non-U.S. GAAP measurement that the Company defines as
earnings before interest, taxes, depreciation, amortization, and restructuring
and other charges) and minimum fixed charge coverage ratio covenants.
Under the terms of the Facilities agreement, the Company’s failure to maintain
these financial covenants represents an “Event of Default” and provides the
Lenders with certain remedies that alter the terms of the original
agreement.
On
October 1, 2009 (the “initial Forbearance Effective Date”), the credit
facilities were amended. The Forbearance Amendment Agreement (the “Forbearance”)
reduced the Revolver from $45 million to $27 million and required the Company to
pay a forbearance fee in the amount of $250,000, which extended the expiration
date from November 4, 2009 to November 30, 2009. The Company, at its option,
paid an additional $20,000 to extend the expiration date to December 15,
2009.
On
December 15, 2009, the Forbearance was amended to extend the Forbearance
expiration date from December 15, 2009 to March 31, 2010 (the “Forbearance
Termination Date”). The Amended Forbearance Agreement (the
“Amendment”) reduced the Revolver from $27 million to $25 million and required
the Company to pay a forbearance fee in the amount of $25,000 and repay the
remaining outstanding balance on the Term Loan.
From the
Forbearance Effective Date through the Forbearance Termination Date, the
interest rate applicable to all Loans shall be the Prime Rate plus (4%) per
annum; on and after the Forbearance Termination Date the definition of “Default
Rate” under the Credit Agreement shall mean the Prime Rate plus six percent (6%)
per annum. From the Forbearance Effective Date through the
Forbearance Termination Date, the Company shall not have the right to elect to
pay interest on any Loan based on the LIBOR rate. In addition, from the
Forbearance Effective Date through the Forbearance Termination Date, the Lenders
have agreed to forbear from exercising their rights and remedies under the
Facilities, including but not limited to their rights and remedies arising from
the Company's non-compliance with certain financial covenants during the second
quarter of 2009, as noted above, as well as similar covenant violations that
occurred during the third quarter of 2009.
The
Facilities are available to the Company for working capital requirements,
capital expenditures and general corporate purposes subject to restrictions
outlined in the Facilities agreement and in the Amendment.
At
January 2, 2010 and January 3, 2009, the Company had outstanding balances on the
Revolver of $17.9 million and $12.4 million, respectively, with interest rates
of 7.25% and 2.7%, respectively. At January 2, 2010, there were $0.3
million of outstanding letters of credit, thereby reducing the amount available
under the Revolver to $6.8 million at that date.
Prior to
an amendment to the Facilities in the third quarter of 2008, principal payments
on the Term Loan were payable in consecutive quarterly installments of $1.75
million, with a final settlement of all remaining principal and unpaid interest
on November 4, 2009. In the third quarter of fiscal 2008, the Company
used the net proceeds of the sale of its Arizona property to pay down the
principal balance of the term loan and entered into an amendment to the
Facilities dated July 29, 2008 which amended the payment schedule of the Term
Loan to reduce the required quarterly installments of principal to $810,000,
payable in January, March, June, and September of 2009, with no installment due
in September of 2008 and the final installment due on the earlier of the
refinancing of the Facilities or December 15, 2009 if extended by the Company
pursuant to the Amendment. As a condition of the Amended Forbearance
agreement the Term Loan was repaid in full in December 2009.
The
weighted average interest rate on the Company’s short-term borrowings was 7.25%
at January 2, 2010.
On March
5, 2010 the Company entered into a new $25 million Revolving Credit and Security
Agreement with a term that expires on March 5, 2013. See note 21 for further
details.
9.
ACCRUED EXPENSES
The
components of the Company’s accrued expenses are as follows (in
thousands):
|
|
|
January
2,
2010
|
|
|
January
3,
2009
|
|
|
|
|
|
|
|
|
|
|
Accrued
payroll and employee benefits
|
|
$ |
1,732 |
|
|
$ |
4,068 |
|
|
Accrued
warranty
|
|
|
1,260 |
|
|
|
2,102 |
|
|
Accrued
restructuring and other charges
|
|
|
405 |
|
|
|
799 |
|
|
Accrued
royalties
|
|
|
81 |
|
|
|
232 |
|
|
Accrued
income taxes
|
|
|
- |
|
|
|
282 |
|
|
Accrued
legal
|
|
|
828 |
|
|
|
2,394 |
|
|
Accrued
professional fees
|
|
|
827 |
|
|
|
1,122 |
|
|
Other
|
|
|
2,916 |
|
|
|
2,262 |
|
|
|
|
$ |
8,049 |
|
|
$ |
13,261 |
|
10.
ACCRUED WARRANTY AND DEFERRED REVENUES
Accrued
Warranty
The
Company provides for the estimated cost of product warranties, based on
historical experience, at the time revenue is recognized. Presstek warrants its
products against defects in material and workmanship for various periods,
determined by the product, generally for a period of ninety days to one year
from the date of installation. Typical warranties require the Company to repair
or replace defective products during the warranty period at no cost to the
customer. Presstek engages in extensive product quality programs and processes,
including monitoring and evaluation of component supplies; however, product
warranty terms, product failure rates, and material usage and service delivery
costs incurred in correcting a product failure may affect the estimated warranty
obligation. If actual product failure rates, material usage or service delivery
costs differ from current estimates, the Company will adjust the warranty
liability. Accruals for product warranties are reflected as a component of
accrued expenses in the Company’s Consolidated Balance Sheets.
Product
warranty activity in fiscal 2009, fiscal 2008 and fiscal 2007 is as follows (in
thousands):
|
|
|
Fiscal
2009
|
|
|
Fiscal
2008
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of year
|
|
$ |
2,102 |
|
|
$ |
3,534 |
|
|
$ |
1,729 |
|
|
Accruals
for warranties
|
|
|
(380 |
) |
|
|
40 |
|
|
|
3,517 |
|
|
Utilization
of accrual for warranty costs
|
|
|
(462 |
) |
|
|
(1,472 |
) |
|
|
(1,712 |
) |
|
Balance
at end of year
|
|
$ |
1,260 |
|
|
$ |
2,102 |
|
|
$ |
3,534 |
|
Deferred
Revenues
Deferred
revenues consist of amounts received or billed in advance for products for which
revenue recognition criteria has not yet been met or service contracts where
services have not yet been rendered. Deferred amounts are recognized as elements
are delivered or, in the case of services, recognized ratably over the contract
life, generally one year, or as services are rendered.
The
components of deferred revenue are as follows (in thousands):
|
|
|
January
2,
2010
|
|
|
January
3,
2009
|
|
|
|
|
|
|
|
|
|
|
Deferred
service revenue
|
|
$ |
5,645 |
|
|
$ |
6,507 |
|
|
Deferred
product revenue
|
|
|
852 |
|
|
|
793 |
|
|
|
|
$ |
6,497 |
|
|
$ |
7,300 |
|
11.
RESTRUCTURING AND OTHER CHARGES
A summary
of restructuring and other charges follows (in thousands):
|
|
|
January
2,
2010
|
|
|
January
3,
2009
|
|
|
December
29,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
and fringe benefits
|
|
$ |
1,518 |
|
|
$ |
691 |
|
|
$ |
1,210 |
|
|
Executive
contractual obligations
|
|
|
-- |
|
|
|
536 |
|
|
|
1,466 |
|
|
Other
exit costs
|
|
|
166 |
|
|
|
881 |
|
|
|
38 |
|
|
Total
net restructuring and other charges
|
|
$ |
1,684 |
|
|
$ |
2,108 |
|
|
$ |
2,714 |
|
In fiscal
2009 the Company recognized $1.7 million in restructuring and other charges for
cost reduction efforts related primarily to severance costs in the United States
and United Kingdom operations as part of a cost reduction program announced in
August 2009.
In fiscal
2008 the Company recognized $2.1 million in restructuring and other charges,
including severance and separation costs resulting from the implementation of
certain elements of the Business Improvement Plan (“BIP”), exit costs related to
the termination of a leased facility, severance costs incurred in the fourth
quarter, and severance and retention bonuses related to the transfer of certain
of its corporate functions from the Hudson, New Hampshire facility to the
Greenwich, Connecticut facility.
In fiscal
2007 the Company recognized $2.7 million of restructuring and other charges
consisting of expenses related to severance and separation costs under
employment contracts of former executives, as well as costs related to the
implementation of certain elements of the BIP including severance, operating
lease run-outs, and consolidation of distribution centers.
The
activity for fiscal 2009, fiscal 2008 and fiscal 2007 related to the Company’s
restructuring and other expense accruals is as follows (in
thousands):
|
|
|
Fiscal
2009 Activity
|
|
|
|
|
Balance
January
3,
2009
|
|
|
Charged
to
Expense
|
|
|
Utilization
|
|
|
Balance
January
2,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
contractual obligations
|
|
$ |
462 |
|
|
$ |
-- |
|
|
$ |
(462 |
) |
|
$ |
-- |
|
|
Severance
and fringe benefits
|
|
|
337 |
|
|
|
1,518 |
|
|
|
(1,450 |
) |
|
|
405 |
|
|
Other
exit costs
|
|
|
-- |
|
|
|
166 |
|
|
|
(166 |
) |
|
|
-- |
|
|
|
|
$ |
799 |
|
|
$ |
1,684 |
|
|
$ |
(2,078 |
) |
|
$ |
405 |
|
|
|
|
Fiscal
2008 Activity
|
|
|
|
|
Balance
December
29,
2007
|
|
|
Charged
to
Expense
|
|
|
Utilization
|
|
|
Balance
January
3,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
contractual obligations
|
|
$ |
904 |
|
|
$ |
536 |
|
|
$ |
(978 |
) |
|
$ |
462 |
|
|
Severance
and fringe benefits
|
|
|
688 |
|
|
|
691 |
|
|
|
(1,042 |
) |
|
|
337 |
|
|
Other
exit costs
|
|
|
-- |
|
|
|
881 |
|
|
|
(881 |
) |
|
|
-- |
|
|
|
|
$ |
1,592 |
|
|
$ |
2,108 |
|
|
$ |
(2,901 |
) |
|
$ |
799 |
|
|
|
|
Fiscal
2007 Activity
|
|
|
|
|
Balance
December
30,
2006
|
|
|
Charged
to
Expense
|
|
|
Utilization
|
|
|
Balance
December
29,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
contractual obligations
|
|
$ |
-- |
|
|
$ |
1,466 |
|
|
$ |
(562 |
) |
|
$ |
904 |
|
|
Severance
and fringe benefits
|
|
|
233 |
|
|
|
1,210 |
|
|
|
(755 |
) |
|
|
688 |
|
|
Other
exit costs
|
|
|
-- |
|
|
|
38 |
|
|
|
(38 |
) |
|
|
-- |
|
|
|
|
$ |
233 |
|
|
$ |
2,714 |
|
|
$ |
(1,355 |
) |
|
$ |
1,592 |
|
The
Company anticipates that payments related to the above restructuring actions
will be completed by the second quarter of 2010.
12.
INTEREST AND OTHER INCOME AND EXPENSE
The
components of Interest and other income (expense), net, in the Company’s
Consolidated Statements of Income are as follows (in thousands):
|
|
|
Fiscal
2009
|
|
|
Fiscal
2008
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
$ |
(1,163 |
) |
|
$ |
(946 |
) |
|
$ |
(2,142 |
) |
|
Interest
income
|
|
|
47 |
|
|
|
111 |
|
|
|
90 |
|
|
Other
income (expense), net
|
|
|
(273 |
) |
|
|
1,773 |
|
|
|
798 |
|
|
|
|
$ |
(1,389 |
) |
|
$ |
938 |
|
|
$ |
(1,254 |
) |
The
amount reported as Other income (expense), net, for fiscal 2009 includes a $0.4
million charge related to an SEC settlement and unrealized foreign currency
losses of $0.9 million; offset partially by $1.2 million of proceeds from
favorable resolution of an insurance contract lawsuit
settlement. Other income (expense), net for fiscal 2008 and
2007 includes $1.4 million and $0.5 million, respectively, for net unrealized
gains on foreign currency transactions.
13.
INCOME TAXES
For the
fiscal years ended January 2, 2010, January 3, 2009, and December 29, 2007,
income (loss) before income taxes from continuing operations includes the
following components (in thousands):
|
|
|
Fiscal
2009
|
|
|
Fiscal
2008
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$ |
(29,578 |
) |
|
$ |
5,296 |
|
|
$ |
(15,899 |
) |
|
Foreign
|
|
|
(3,197 |
) |
|
|
614 |
|
|
|
1,655 |
|
|
|
|
$ |
(32,775 |
) |
|
$ |
5,910 |
|
|
$ |
(14,244 |
) |
For the
fiscal years ended January 2, 2010, January 3, 2009, and December 29, 2007, the
components of provision (benefit) for income taxes from continuing operations
were as follows (in thousands):
|
|
|
Fiscal
2009
|
|
|
Fiscal
2008
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
-- |
|
|
$ |
(131 |
) |
|
$ |
138 |
|
|
State
|
|
|
(232 |
) |
|
|
293 |
|
|
|
456 |
|
|
Foreign
|
|
|
(21 |
) |
|
|
(121 |
) |
|
|
507 |
|
|
|
|
$ |
(253 |
) |
|
$ |
41 |
|
|
$ |
1,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
15,777 |
|
|
|
2,326 |
|
|
|
(4,458 |
) |
|
State
|
|
|
1,419 |
|
|
|
128 |
|
|
|
(532 |
) |
|
Foreign
|
|
|
(609 |
) |
|
|
285 |
|
|
|
(- |
) |
|
|
|
|
16,587 |
|
|
|
2,739 |
|
|
|
(4,990 |
) |
|
Provision
(benefit) for income taxes
|
|
$ |
16,334 |
|
|
$ |
2,780 |
|
|
$ |
(3,889 |
) |
A
reconciliation of the Company’s effective tax rate to the statutory federal rate
is as follows:
|
|
|
Fiscal
2009
|
|
|
Fiscal
2008
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
statutory tax rate
|
|
|
34.00 |
% |
|
|
34.00 |
% |
|
|
34.00 |
% |
|
Nondeductible
Officer’s compensation
|
|
|
(0.29 |
) |
|
|
1.90 |
|
|
|
(4.61 |
) |
|
State
tax, net of federal benefit
|
|
|
4.10 |
|
|
|
4.70 |
|
|
|
0.35 |
|
|
Other
|
|
|
(1.68 |
) |
|
|
(2.76 |
) |
|
|
(2.44 |
) |
|
Change
in valuation allowance
|
|
|
(85.98 |
) |
|
|
9.20 |
|
|
|
0.00 |
|
|
|
|
|
(49.84 |
%) |
|
|
47.04 |
% |
|
|
27.30 |
% |
During
the fiscal years ended January 2, 2010, January 3, 2009, and December 29, 2007
the Company recognized a tax benefit of approximately $0.0 million, $1.6
million, and $1.2 million, respectively, associated with the loss from
discontinued operations.
Deferred Income
Taxes
Deferred
income taxes result from net operating loss carryforwards, tax credit
carryforwards and temporary differences between the recognition of items for
income tax purposes and financial reporting purposes.
Principal
components of deferred income taxes as of January 2, 2010, January 3, 2009, and
December 29, 2007 were (in thousands):
|
|
|
January
2,
2010
|
|
|
January
3,
2009
|
|
|
December
27,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax assets
|
|
|
|
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$ |
11,426 |
|
|
$ |
5,745 |
|
|
$ |
7,439 |
|
|
Tax
credits
|
|
|
4,185 |
|
|
|
4,073 |
|
|
|
3,875 |
|
|
Warranty
provisions, litigation and other
|
|
|
7,295 |
|
|
|
8,450 |
|
|
|
6,940 |
|
|
Goodwill
impairment
|
|
|
5,632 |
|
|
|
- |
|
|
|
- |
|
|
Accumulated
depreciation and amortization
|
|
|
2,822 |
|
|
|
2,507 |
|
|
|
712 |
|
|
Gross
deferred tax assets
|
|
|
31,360 |
|
|
|
20,775 |
|
|
|
18,966 |
|
|
Valuation
allowance
|
|
|
(28,973 |
) |
|
|
(795 |
) |
|
|
(250 |
) |
|
Total
deferred tax assets
|
|
|
2,387 |
|
|
|
19,980 |
|
|
|
18,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable
and depreciable assets
|
|
|
(1,004 |
) |
|
|
(2,420 |
) |
|
|
(852 |
) |
|
Accumulated
depreciation and amortization
|
|
|
-- |
|
|
|
-- |
|
|
|
- |
|
|
Total
deferred tax liabilities
|
|
|
(1,004 |
) |
|
|
(2,420 |
) |
|
|
(852 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
deferred tax assets (liabilities)
|
|
$ |
1,383 |
|
|
$ |
17,560 |
|
|
$ |
17,864 |
|
In
assessing the ability to realize its deferred tax assets, the Company considered
historical book income, the scheduled reversal of deferred tax liabilities, and
projected future book and taxable income in making this assessment. The
valuation allowance of $29.0 million as of January 2, 2010 relates to U.S. NOLs,
temporary differences and certain federal research and development credit
carryforwards for which the Company has determined, based upon historical
results and projected future book and taxable income levels, that a valuation
allowance should be maintained.
The
Company’s net deferred tax assets include $1.1million and $0.1million related to
Presstek Europe and Presstek France net operating loss carryforwards,
respectively.
At
January 2, 2010, the Company had federal net operating loss carryforwards of
approximately $90.9 million which will expire from 2011 to
2029. Approximately $61.5 million of our net operating loss
carryforwards was generated from excess tax deductions from stock-based
compensation, the tax benefit of which (approximately $24.6 million) will be
credited to additional paid-in-capital when the deductions reduce current taxes
payable. Upon the adoption of FASB Accounting Standards Codification Topic 718,
Stock Compensation (originally adopted by the Company in January 1, 2006), the
Company netted its deferred tax asset and the related valuation allowance for
the net operating loss carryforward generated from excess tax deductions from
stock-based compensation.
At
January 2, 2010 the Company had federal research and development credit
carryforwards of approximately $3.5 million. The credit carryforwards will
expire at various dates through 2022, if not utilized. The Company’s tax credit
carryforwards include $0.3 million of federal minimum tax credits which have no
expiration and $0.4 million of state credits that fully expire in
2014.
The
Company’s ability to utilize its net operating loss and credit carryforwards may
be limited in the future if the company experiences an ownership change, as
defined by the Internal Revenue Code. An ownership change involves an increase
of more than 50 percentage points in stock ownership by one or more 5%
shareholders over a three year period.
As of
January 2, 2010 there were no undistributed earnings of foreign subsidiaries.
Losses incurred by the foreign subsidiaries for the year ended January 2, 2010
resulted in a cumulative deficit that eliminated any undistributed
earnings.
The
Company adopted FASB Accounting Standards Codification Topic 740, Income Taxes
(originally adopted by the Company on December 31, 2006, as FASB Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes” ). The adoption of Topic
740 did not have a material effect on our consolidated financial position or
results of operations. Our unrecognized tax benefits at January 2, 2010 relate
to various state jurisdictions and U.S. tax credits. A reconciliation of the
beginning and ending amount of unrecognized tax benefits is as follows (in
thousands):
|
Balance
at December 30, 2006
|
|
$ |
1,800 |
|
|
Increases
related to prior year tax positions
|
|
|
400 |
|
|
Decreases
related to prior year tax positions
|
|
|
(400 |
) |
|
Balance
at December 29, 2007
|
|
$ |
1,800 |
|
|
Increases
related to prior year tax positions
|
|
|
-- |
|
|
Decreases
related to prior year tax positions
|
|
|
(579 |
) |
|
Balance
at January 3, 2009
|
|
$ |
1,221 |
|
|
Increases
related to prior year tax positions
|
|
|
-- |
|
|
Decreases
related to prior year tax positions
|
|
|
(184 |
) |
|
Balance
at January 2, 2010
|
|
$ |
1,037 |
|
About
$0.1million of unrecognized tax benefits at January 2, 2010 would reduce income
tax expense if ultimately recognized. We do not expect any significant increases
or decreases to our unrecognized tax benefits within 12 months of this reporting
date. Subsequent to adoption, interest and penalties incurred associated with
unresolved income tax positions will be included in income tax expense. Accrued
interest and penalties are insignificant.
We
conduct business globally and, as a result, file numerous consolidated and
separate income tax returns in the U.S. federal jurisdiction and various state
and foreign jurisdictions. In the normal course of business, the Company is
subject to examination by tax authorities throughout the world, including such
major jurisdictions as the United States, United Kingdom and Canada. The Company
is subject to U.S. federal, state and local, or non-U.S. income tax examinations
for years after 2005. Carryforward attributes that were generated prior to 2005,
however may still be adjusted by a taxing authority upon examination if the
attributes have been or will be used in a future period.
14.
PREFERRED STOCK
The
Company’s certificate of incorporation empowers the Board of Directors, without
stockholder approval, to issue up to 1,000,000 shares of $0.01 par value
preferred stock, with dividend, liquidation, conversion and voting or other
rights to be determined upon issuance by the Board of Directors. No preferred
stock has been issued to date.
15.
STOCK-BASED COMPENSATION PLANS
The
Company adopted the fair value recognition provisions of FASB Accounting
Standards Codification Topic 718, Stock Compensation, (originally adopted by the
Company in January 1, 2006, as SFAS 123R Share-Based Payment, as amended), using
the modified prospective method, which requires measurement of compensation cost
at fair value on the date of grant and recognition of compensation expense over
the service period for awards expected to vest.
The
Company has equity incentive plans that are administered by the Compensation
Committee of the Board of Directors (the “Committee”). The Committee oversees
and approves which employees receive grants, the number of shares or options
granted and the exercise prices of the shares covered by each
grant.
Stock Incentive
Plans
The 2003
Stock Option and Incentive Plan (the “2003 Plan”) provides for the award of
stock options, stock issuances and other equity interests in the Company to
employees, officers, directors (including those directors who are not an
employee or officer of the Company, such directors being referred to as
Non-Employee Directors), consultants and advisors of the Company and its
subsidiaries. The 2003 Plan provides for an automatic annual grant of 7,500
stock options to all active Non-Employee Directors. A total of 2,000,000 shares
of common stock, subject to anti-dilution adjustments, have been reserved under
this plan. Any future options granted under the 2003 Plan will become
exercisable at such times and subject to such terms and conditions as the Board
of Directors or Committee may specify at the time of each grant. At January 2,
2010, there were 1,831,100 options outstanding under the 2003 Plan, and 98,500
options available for future grants under this plan. The options will expire at
various dates as prescribed by the individual option grants.
The 2008
Omnibus Incentive Plan (the “2008 Plan”), approved by the stockholders of the
Company on June 11, 2008, provides for the award of stock options, stock
issuances and other equity interests in the Company to employees, officers,
directors (including Non-Employee Directors), consultants and advisors of the
Company and its subsidiaries. A total of 3,000,000 shares of common stock,
subject to anti-dilution adjustments, have been reserved under this plan. Awards
granted under this plan may have varying vesting and termination provisions and
can have no longer than a ten year contractual life. At January 2, 2010, there
were 1,020,724 options outstanding and 1,979,276 options available for future
grants under this plan.
The
Company had previously adopted equity incentive plans that had expired as of
January 2, 2010 and, accordingly, no future grants may be issued under these
plans. These plans include the 1991 Stock Option Plan (the “1991 Plan”), which
expired on August 18, 2001; the 1994 Stock Option Plan (the “1994 Plan”), which
expired on April 8, 2004; the 1997 Interim Stock Option Plan (the “1997 Plan”),
which expired on September 22, 2002; and the 1998 Stock Option Plan (the “1998
Plan”), which expired on April 6, 2008. At January 2, 2010, there were 500
options outstanding under the 1991 Plan, 100,192 options outstanding under the
1994 Plan, 10,925 options outstanding under the 1997 Plan and 330,300 options
outstanding under the 1998 Plan.
Employee Stock Purchase
Plan
The
Company’s 2002 Employee Stock Purchase Plan (the “ESPP”) is designed to provide
eligible employees of the Company and its participating U.S subsidiaries an
opportunity to purchase common stock of the Company through accumulated payroll
deductions. The purchase price of the stock is equal to 85% of the fair market
value of a share of common stock on the first day or last day of each
three-month offering period, whichever is lower. All employees of the Company or
participating subsidiaries who customarily work at least 20 hours per week and
do not own five percent or more of the Company’s common stock are eligible to
participate in the ESPP. A total of 950,000 shares of the Company’s common
stock, subject to adjustment, have been reserved for issuance under this plan.
In fiscal 2009, fiscal 2008 and fiscal 2007, approximately 127,500, 80,300 and
65,700 shares were issued, respectively, under the ESPP. The 2009, 2008 and 2007
amounts include approximately 29,000, 27,000 and 16,000 shares in transit at
January 2, 2010, January 3, 2009 and December 29, 2007, respectively. These
shares were issued on January 8, 2010, January 5, 2009 and December 31, 2007,
respectively. At January 2, 2010, there were approximately 495,500 shares
available for issuance under this plan.
Non-Plan
Options
In fiscal
2007, the Company granted 300,000 shares of restricted common stock and stock
options for 1,000,000 shares of common stock to its Chairman, President and
Chief Executive Officer (“CEO”) under a non-plan, non-qualified stock option
agreement. The award of restricted stock vested on May 10, 2007, the effective
date of the CEO’s employment agreement with the Company. The award of stock
options vests 20% on the date of grant, and an additional 20% vests on each of
January 1, 2008, 2009, 2010 and 2011. Each portion of the option that vests will
remain exercisable for five years after the applicable vesting date. As of
January 2, 2010, 1,000,000 options remain outstanding.
Valuation
Assumptions
The fair
value of the rights to purchase shares of common stock under the Company’s ESPP
was estimated on the commencement date of the offering period using the
Black-Scholes valuation model with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
Stock
purchase right assumptions
|
|
Fiscal
2009
|
|
|
Fiscal
2008
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
0.00 |
% |
|
|
0.84 |
% |
|
|
4.03 |
% |
|
Volatility
|
|
|
110.75 |
% |
|
|
95.79 |
% |
|
|
51.77 |
% |
|
Expected
life (in years)
|
|
|
0.25 |
|
|
|
0.25 |
|
|
|
0.25 |
|
|
Dividend
yield
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Based on
the above assumptions, the weighted average fair value of the stock purchase
rights under the Company’s ESPP for fiscal 2009, 2008 and 2007 was $0.50, $1.09
and $1.30, respectively.
The fair
value of the options to purchase common stock granted in fiscal 2009, 2008 and
2007 under the 2008 Plan, 2003 Plan and 1998 Plan was estimated on the
respective grant dates using the Black-Scholes valuation model with the
following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
Stock
option assumptions
|
|
Fiscal
2009
|
|
|
Fiscal
2008
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
2.65 |
% |
|
|
2.28 |
% |
|
|
4.25 |
% |
|
Volatility
|
|
|
71.00 |
% |
|
|
60.63 |
% |
|
|
60.97 |
% |
|
Expected
life (in years)
|
|
|
5.67 |
|
|
|
5.67 |
|
|
|
5.56 |
|
|
Dividend
yield
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
The
weighted average grant date fair value of the options granted of the Company’s
common stock during fiscal years 2009, 2008 and 2007 was $1.24, $2.50 and $3.72,
respectively.
The
300,000 restricted shares of common stock with a fair value of $5 per share
granted in the second quarter of fiscal 2007 was derived by obtaining the market
value of the stock on the award date and applying a discount to that value due
to the sale restrictions imposed by Rule 144 of the U.S. Securities and Exchange
Commission (the “SEC”). The market value was calculated using the average of the
high and low trading prices on the award date multiplied by the number of
shares. A discount rate of 17.2% was estimated using a Black-Scholes put option
model with the following assumptions:
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
4.9 |
% |
|
Volatility
|
|
|
50.0 |
% |
|
Expected
life (in years)
|
|
|
1.0 |
|
|
Dividend
yield
|
|
|
-- |
|
The fair
value of the options to purchase shares of common stock under the non-plan,
non-qualified stock option agreement with the Company’s President and CEO
granted in the second quarter of fiscal 2007 was estimated on the grant date
using the Black-Scholes valuation model with the following
assumptions:
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
4.3 |
% |
|
Volatility
|
|
|
48.0 |
% |
|
Expected
life (in years)
|
|
|
4.1 |
|
|
Dividend
yield
|
|
|
-- |
|
Based on
the above assumptions, the weighted average fair value of options was
$2.58.
Expected
volatilities are based on historical volatilities of Presstek’s common stock.
The expected life represents the weighted average period of time that options
granted are expected to be outstanding giving consideration to vesting
schedules, the Company’s historical exercise patterns and the ESPP purchase
period. The risk-free rate is based on the U.S. Treasury Separate Trading of
Registered Interest and Principal of Securities rate for the period
corresponding to the expected life of the options or ESPP purchase period. The
expense calculated using the Black-Scholes method is recognized on a straight
line basis over the term of the service period. Stock-based compensation
associated with stock option grants to all officers, directors, and employees is
included as a component of “General and administrative expense” in the Company’s
Consolidated Statements of Operations. Stock based compensation expense for the
fiscal year ended January 2, 2010, January 3, 2009 and December 29, 2007 is as
follows (in thousands):
|
|
|
Fiscal
Year ended
|
|
|
Stock option plan
|
|
January
2, 2010
|
|
|
January
3,
2009
|
|
|
December
29, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
Plan
|
|
$ |
758 |
|
|
$ |
319 |
|
|
$ |
-- |
|
|
2003
Plan
|
|
|
401 |
|
|
|
718 |
|
|
|
1,379 |
|
|
1998
Plan
|
|
|
(6 |
) |
|
|
171 |
|
|
|
7 |
|
|
ESPP
|
|
|
33 |
|
|
|
79 |
|
|
|
71 |
|
|
Restricted
Stock
|
|
|
-- |
|
|
|
-- |
|
|
|
1,500 |
|
|
Non-plan,
non-qualified
|
|
|
516 |
|
|
|
516 |
|
|
|
1,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
1,702 |
|
|
$ |
1,803 |
|
|
$ |
3,989 |
|
As of
January 2, 2010, there was $2.3 million of unrecognized compensation expense
related to stock option grants. The weighted average period over which the
remaining unrecognized compensation expense will be recognized is 1.6
years.
Stock
option activity for fiscal 2007, 2008 and 2009 is summarized as
follows:
|
|
|
Shares
|
|
|
Weighted
average
exercise
price
|
|
Weighted
average remaining contractual term
|
Aggregate
intrinsic value
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 30, 2006
|
|
|
2,956,350 |
|
|
$ |
9.01 |
|
|
|
|
Granted
|
|
|
2,203,333 |
|
|
$ |
5.40 |
|
|
|
|
Exercised
|
|
|
(836,950 |
) |
|
$ |
3.36 |
|
|
|
|
Canceled/expired
|
|
|
(506,166 |
) |
|
$ |
8.29 |
|
|
|
|
Outstanding
at December 29, 2007
|
|
|
3,816,567 |
|
|
$ |
8.26 |
|
|
|
|
Granted
|
|
|
1,019,609 |
|
|
$ |
5.14 |
|
|
|
|
Exercised
|
|
|
(2,500 |
) |
|
$ |
3.60 |
|
|
|
|
Canceled/expired
|
|
|
(489,588 |
) |
|
$ |
11.10 |
|
|
|
|
Outstanding
at January 3, 2009
|
|
|
4,344,088 |
|
|
$ |
7.24 |
|
|
|
|
Granted
|
|
|
266,115 |
|
|
$ |
2.03 |
|
|
|
|
Exercised
|
|
|
-- |
|
|
$ |
-- |
|
|
|
|
Canceled/expired
|
|
|
(316,462 |
) |
|
$ |
9.20 |
|
|
|
|
Outstanding
at January 2, 2010
|
|
|
4,293,741 |
|
|
$ |
6.77 |
|
6.05
years
|
$ 0.1
million
|
|
Exercisable
at January 2, 2010
|
|
|
3,175,802 |
|
|
$ |
7.34 |
|
5.35
years
|
$ 0.0
million
|
There
were no options exercised during fiscal 2009.
The total
intrinsic value of stock options exercised during fiscal 2008 and fiscal 2007
was $0.003 million and $0.8 million, respectively.
The
following table summarizes information about stock options outstanding at
January 2, 2010:
| |
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Range of exercise prices
|
|
|
Shares
|
|
|
Weighted
average
remaining
contractual
life
(years)
|
|
|
Weighted
average exercise price
|
|
|
Shares
|
|
|
Weighted
average
exercise
price
|
|
| $ |
0.00 |
|
|
|
- |
|
|
$ |
4.96 |
|
|
|
443,082 |
|
|
|
8.04 |
|
|
|
2.81 |
|
|
|
200,350 |
|
|
|
3.13 |
|
| $ |
4.97 |
|
|
|
- |
|
|
$ |
9.92 |
|
|
|
3,517,909 |
|
|
|
6.09 |
|
|
|
6.70 |
|
|
|
2,642,702 |
|
|
|
6.97 |
|
| $ |
9.93 |
|
|
|
- |
|
|
$ |
14.88 |
|
|
|
229,750 |
|
|
|
4.16 |
|
|
|
11.28 |
|
|
|
229,750 |
|
|
|
11.28 |
|
| $ |
14.89 |
|
|
|
- |
|
|
$ |
19.85 |
|
|
|
103,000 |
|
|
|
0.40 |
|
|
|
16.12 |
|
|
|
103,000 |
|
|
|
16.12 |
|
| $ |
0.00 |
|
|
|
- |
|
|
$ |
19.85 |
|
|
|
4,293,741 |
|
|
|
6.05 |
|
|
$ |
6.77 |
|
|
|
3,175,802 |
|
|
$ |
7.34 |
|
In
addition to the plans described above, the Company’s Lasertel subsidiary has a
stock option plan, the Lasertel, Inc. 2000 Stock Incentive Plan (the “Lasertel
Plan”). The Lasertel Plan, as amended in fiscal 2001, provides for the award, to
employees and other key individuals of Lasertel and Presstek, of non-qualified
options to purchase, in the aggregate, up to 2,100,000 shares of Lasertel’s
common stock. Any future options granted under this plan will generally vest
over four years, with termination dates ten years from the date of grant. These
grants are subject to termination provisions as provided in the Lasertel Plan.
In accordance with the terms of the sale of Lasertel to SELEX, see Note 21, the
Lasertel Plan was terminated on March 5, 2010 and the option holders were paid
by SELEX from funds withheld to Presstek at closing.
16.
BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
Presstek
is a market-focused high technology company that designs, manufactures and
distributes proprietary and non-proprietary solutions to the graphic arts
industries, primarily serving short-run, full-color customers. The Company’s
operations are organized based on the market application of our products and
related services and consist of two business segments: Presstek and Lasertel.
The Presstek segment is primarily engaged in the development, manufacture, sale
and servicing of our patented digital imaging systems and patented printing
plate technologies and related equipment and supplies for the graphic arts and
printing industries, primarily serving the short-run, full-color market segment.
Lasertel manufactures and develops high-powered laser diodes for sale to
Presstek and external customers.
The
Lasertel segment has been reclassified as discontinued operations in the third
quarter of fiscal 2008 as the operations are currently held for sale. As such,
the Presstek Segment makes up the entire results of continuing operations. On
March 5, 2010, Presstek sold the Lasertel subsidiary to SELEX. See Note
21.
Total
assets information for the Company’s business segments are as follows (in
thousands):
|
|
|
January
2,
2010
|
|
|
January
3,
2009
|
|
|
|
|
|
|
|
|
|
|
Presstek
|
|
$ |
90,438 |
|
|
$ |
144,183 |
|
|
Lasertel
(assets of discontinued operations)
|
|
|
14,097 |
|
|
|
13,330 |
|
|
|
|
$ |
104,535 |
|
|
$ |
157,513 |
|
The
Company’s classification of revenue by geographic area is determined by the
location of the Company’s customer. The following table summarizes revenue
information by geographic area (in thousands):
|
|
|
Fiscal
2009
|
|
|
Fiscal
2008
|
|
|
Fiscal
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$ |
88,971 |
|
|
$ |
123,484 |
|
|
$ |
150,703 |
|
|
United
Kingdom
|
|
|
15,564 |
|
|
|
20,732 |
|
|
|
27,426 |
|
|
All
other
|
|
|
29,923 |
|
|
|
49,036 |
|
|
|
68,444 |
|
|
|
|
$ |
134,458 |
|
|
$ |
193,252 |
|
|
$ |
246,573 |
|
The
Company’s long-lived assets by geographic area are as follows (in
thousands):
|
|
|
January
2,
2010
|
|
|
January
3,
2009
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$ |
27,296 |
|
|
$ |
58,580 |
|
|
United
Kingdom
|
|
|
1,620 |
|
|
|
602 |
|
|
Canada
|
|
|
1,328 |
|
|
|
736 |
|
|
|
|
$ |
30,244 |
|
|
$ |
59,918 |
|
17.
MAJOR CUSTOMERS
No
customer accounted for greater than 10% of revenue in fiscal 2009, fiscal 2008
or fiscal 2007. During the period ending January 2, 2010 we had an
Italian distributor that that represented 10% of the Company’s accounts
receivable balance. No customer accounted for 10% or greater of the
Company’s accounts receivable balance at January 3, 2009.
18.
RELATED PARTIES
The
Company engages the services of Amster, Rothstein & Ebenstein, a law firm of
which a member of the Company’s Board of Directors is a partner. Expenses
incurred for services from this law firm were $1.3 million (including $0.5
million of pass-through expenses), $2.4 million (including $0.5 million of
pass-through expenses) and $1.1 million in fiscal 2009, fiscal 2008 and fiscal
2007, respectively.
19.
COMMITMENTS AND CONTINGENCIES
Commitments
The
Company conducts operations in certain facilities under long-term operating
leases. The Company also leases certain office and other equipment for use in
its operations. These leases expire at various dates through 2018, with various
options to renew as negotiated between the Company and its landlords. It is
expected that in the normal course of business, leases that expire will be
renewed or replaced. Rent expense under these leases, for continuing operations
was $1.6 million in fiscal 2009, $1.7 million in fiscal 2008 and $1.9 million in
fiscal 2007, and for discontinued operations was $0.6 million in fiscal 2009,
$0.3 million in fiscal 2008.
The
Company’s obligations under its non-cancelable operating leases at January 2,
2010 were as follows (in thousands):
|
|
|
Continuing
Operations
|
|
|
Discontinued
Operations
|
|
|
Fiscal
2010
|
|
$ |
1,792 |
|
|
$ |
531 |
|
|
Fiscal
2011
|
|
|
1,500 |
|
|
|
547 |
|
|
Fiscal
2012
|
|
|
1,341 |
|
|
|
563 |
|
|
Fiscal
2013
|
|
|
371 |
|
|
|
580 |
|
|
Fiscal
2014
|
|
|
- |
|
|
|
598 |
|
|
Thereafter
|
|
|
- |
|
|
|
2,263 |
|
Our
discontinued Lasertel segment utilized facilities in Arizona. This
lease was transferred to SELEX in connection with the March 5, 2010 sale of the
Lasertel Subsidiary.
The
Company entered into an agreement in fiscal 2000 with Fuji, whereby minimum
royalty payments to Fuji are required based on specified sales volumes of the
Company’s A3 format size four-color sheet-fed DI presses. The agreement provides
for total royalty payments to be no less than $6 million and not greater than
$14 million over the life of the agreement. As of January 2, 2010, the Company
had paid Fuji $9.3 million under the agreement. The Company’s maximum remaining
liability under the royalty agreement at January 2, 2010, was $4.7
million.
Contingencies
The
Company has change-in-control agreements with certain of its employees that
provide them with benefits should their employment with the Company be
terminated other than for cause or their disability or death, or if they resign
for good reason, as defined in these agreements, within a certain period of time
after the date of any change-in-control of the Company.
From time
to time the Company has engaged in sales of equipment that is leased by or
intended to be leased by a third party purchaser to another party. In certain
situations, the Company may retain recourse obligations to a financing
institution involved in providing financing to the ultimate lessee in the event
the lessee of the equipment defaults on its lease obligations. In certain such
instances, the Company may refurbish and remarket the equipment on behalf of the
financing company, should the ultimate lessee default on payment of the lease.
In certain circumstances, should the resale price of such equipment fall below
certain predetermined levels, the Company would, under these arrangements,
reimburse the financing company for any such shortfall in sale price (a
“shortfall payment”). Generally, the Company’s liability for these recourse
agreements is limited to 9.5% of the amount outstanding. The maximum amount for
which the Company was liable to the financial institutions for the shortfall
payments was approximately $1.2 million at January 2, 2010.
Litigation
On
October 26, 2006, the Company was served with a complaint naming the Company,
together with certain of its former executive officers, as defendants in a
purported securities class action suit filed in the United States District Court
for the District of New Hampshire. The suit claims to be brought on behalf of
purchasers of Presstek’s common stock during the period from July 27, 2006
through September 29, 2006. The complaint alleges, among other things, that the
Company and the other defendants violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder based on
allegedly false forecasts of fiscal third quarter and annual 2006 revenues. As
relief, the plaintiff seeks an unspecified amount of monetary damages, but makes
no allegation as to losses incurred by any purported class member other than
himself, court costs and attorneys’ fees. On September 25, 2008 the parties
reached a settlement of the action, subject to confirmatory discovery by
plaintiffs and court approval. The court approved the settlement and
entered final judgment on July 20, 2009.
On
September 10, 2008 a purported shareholder derivative claim against certain
current and former directors and officers of the Company was filed in the United
States District Court for the District of New Hampshire. The complaint alleges
breaches of fiduciary duty by the defendants and seeks unspecified damages. On
September 25, 2008 the parties reached agreement on a settlement of the claim in
the amount of $150,000, subject to receipt of court approval. On January 21,
2010 final judgment was entered by the court approving the settlement and
dismissing the case.
On
February 4, 2008, the Company received from the SEC a formal order of
investigation relating to the previously disclosed SEC inquiry regarding the
Company's announcement of preliminary financial results for the third quarter of
fiscal 2006. On March 9, 2010 the Company entered into a settlement of this
matter with the SEC. Under the terms of the settlement, the Company has agreed
to pay a civil penalty of $400,000 and to not violate certain provisions of the
federal securities laws. This is subject to federal district court
approval.
Presstek
is a party to other litigation that it considers routine and incidental to its
business however it does not expect the results of any of these actions to have
a material adverse effect on its business, results of operation or financial
condition.
20.
SALE-LEASEBACK
On July
14, 2008, the Company completed a sale-leaseback transaction of its property
located in Tucson, Arizona (the “Property”). The Company sold the Property to an
independent third party for approximately $8.75 million, or $8.4 million net of
expenses incurred in connection with the sale, resulting in a gain of
approximately $4.6 million. Concurrent with the sale, the Company entered in to
an agreement to lease a portion of the property back from the purchaser for a
term of 10 years. The lease, which management deemed to be an operating lease,
has approximately $5.1 million in future minimum lease payments. The gain
associated with the transaction was deferred at the inception of the arrangement
and is being amortized ratably over the lease term.
Subsequent
to, and independent of, the sale and leaseback of the Property, the Board of
Directors of the Company approved an action for the sale of the Lasertel
business as addressed in Note 3. As such, the operations of Lasertel
have been presented as discontinued operations. Included within the
liabilities of discontinued operations is the aforementioned deferred gain
associated with the Arizona property in which Lasertel conducts its operations.
The related amortization of the gain is included in “Income (loss) from
discontinued operations, net of tax”.
As part
of the sale of Lasertel to SELEX on March 5, 2010, the buyer assumed all of the
Company’s obligations under the lease. See Note 21.
21. SUBSEQUENT EVENTS
On March
5, 2010, Presstek sold Lasertel to SELEX Galileo Inc. (“SELEX”). The
aforementioned operations are reported in discontinued operations in the
accompanying financial statements. The sale of Lasertel to SELEX was for $8.0
million in cash, certain net working capital adjustments and, in addition,
Presstek was able to retain approximately $2.0 million of laser diodes inventory
for Presstek’s future production requirements. Lasertel, as a subsidiary of
SELEX, and in accordance with a supply agreement established between Lasertel
and Presstek on March 5, 2010, will manufacture semiconductor laser diodes for
Presstek for an initial period of three years. The net cash proceeds from this
sale were used to pay down debt. SELEX also assumed the current lease on the
Lasertel property in Tucson, Arizona.
On March
5, 2010, Presstek closed on a new $25 million revolving credit facility with PNC
Bank, N.A. The new facility with PNC Bank is a three-year revolving credit
facility which allows Presstek to borrow a percentage of the Company’s eligible
receivables and inventory, as defined in the credit facility, up to a maximum of
$25 million.
On March
9, 2010, the Company entered into a settlement (the “Settlement”) with the
United States Securities and Exchange Commission (the “Commission”), resolving
charges against the Company in a civil action filed by the Commission in the
United States District Court of Massachusetts against the Company and its former
Chief Executive Officer, Edward J. Marino, alleging violations of the
Commission’s Regulation FD and Section 13(a) of the Securities and Exchange Act
of 1934 (the "Exchange Act"). The charges resulted from the Commission’s
previously disclosed investigation concerning material non-public information
regarding the Company’s financial performance during the third quarter of
2006.
Under the
terms of the Settlement, which has been submitted for court approval, the
Company agreed to settle the Commission's charges, without admitting or denying
the allegations in the complaint, by consenting to an order that enjoins the
Company from further violations of Regulation FD and Section 13(a) of the
Exchange Act and directs it to pay a $400,000 civil penalty.
22.
QUARTERLY RESULTS (UNAUDITED)
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
34,460 |
|
|
$ |
33,510 |
|
|
$ |
33,006 |
|
|
$ |
33,482 |
|
|
Gross
profit
|
|
$ |
12,094 |
|
|
$ |
11,036 |
|
|
$ |
7,700 |
|
|
$ |
11,362 |
|
|
Income
(loss) from continuing operations
|
|
|
(1,106 |
) |
|
|
(39,869 |
) |
|
|
(6,647 |
) |
|
|
(1,487 |
) |
|
Income
(loss) from discontinued operations
|
|
|
(85 |
) |
|
|
(1,580 |
) |
|
|
706 |
|
|
|
219 |
|
|
Net
loss
|
|
$ |
(1,191 |
) |
|
$ |
(41,449 |
) |
|
$ |
(5,941 |
) |
|
$ |
(1,268 |
) |
|
Loss
per share from continuing operations – basic
|
|
|
(0.03 |
) |
|
|
(1.09 |
) |
|
|
(0.18 |
) |
|
|
(0.04 |
) |
|
Earnings
(loss) per share from discontinued operations – basic
|
|
|
(0.00 |
) |
|
|
(0.04 |
) |
|
|
0.02 |
|
|
|
0.01 |
|
|
Loss
per share – basic (1)
|
|
$ |
(0.03 |
) |
|
$ |
(1.13 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share from continuing operations – diluted
|
|
|
(0.03 |
) |
|
|
(1.09 |
) |
|
|
(0.18 |
) |
|
|
(0.04 |
) |
|
Earnings
(loss) per share from discontinued operations – diluted
|
|
|
(0.00 |
) |
|
|
(0.04 |
) |
|
|
0.02 |
|
|
|
0.01 |
|
|
Loss
per share – diluted (1)
|
|
$ |
(0.03 |
) |
|
$ |
(1.13 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
50,794 |
|
|
$ |
51,606 |
|
|
$ |
48,534 |
|
|
$ |
42,318 |
|
|
Gross
profit
|
|
$ |
18,400 |
|
|
$ |
17,465 |
|
|
$ |
16,849 |
|
|
$ |
16,027 |
|
|
Income
from continuing operations
|
|
|
887 |
|
|
|
1,003 |
|
|
|
626 |
|
|
|
614 |
|
|
Loss
from discontinued operations
|
|
|
(669 |
) |
|
|
(436 |
) |
|
|
(431 |
) |
|
|
(1,070 |
) |
|
Net
income (loss)
|
|
$ |
218 |
|
|
$ |
567 |
|
|
$ |
195 |
|
|
$ |
(456 |
) |
|
Earnings per
share from continuing operations – basic
|
|
|
0.03 |
|
|
|
0.03 |
|
|
|
0.02 |
|
|
|
0.02 |
|
|
Loss
per share from discontinued operations – basic
|
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.03 |
) |
|
Earnings
(loss) per share – basic (1)
|
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share from continuing operations – diluted
|
|
|
0.03 |
|
|
|
0.03 |
|
|
|
0.02 |
|
|
|
0.02 |
|
|
Loss
per share from discontinued operations – diluted
|
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.03 |
) |
|
Earnings
(loss) per share – diluted (1)
|
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Income
(loss) per share is computed independently for each of the quarters
presented; accordingly, the sum of the quarterly income (loss) per share
may not equal the total computed for the
year.
|
|
PRESSTEK,
INC. AND SUBSIDIARIES
|
|
|
SCHEDULE
II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
|
|
|
FROM CONTINUING
OPERATIONS
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
|
Balance
at
|
|
|
Charged
to
|
|
|
Deductions
|
|
|
Balance
at
|
|
|
|
|
beginning
|
|
|
costs
and
|
|
|
and
|
|
|
end
|
|
|
|
|
of
period
|
|
|
expenses
|
|
|
write-offs
|
|
|
of
period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for losses on accounts receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$ |
2,476 |
|
|
$ |
2,685 |
|
|
$ |
(1,611 |
) |
|
$ |
3,550 |
|
|
2008
|
|
$ |
2,538 |
|
|
$ |
1,915 |
|
|
$ |
(1,977 |
) |
|
$ |
2,476 |
|
|
2007
|
|
$ |
2,712 |
|
|
$ |
1,671 |
|
|
$ |
(1,845 |
) |
|
$ |
2,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves
for excess and obsolete inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$ |
9,066 |
|
|
$ |
3,052 |
|
|
$ |
(2,517 |
) |
|
$ |
9,601 |
|
|
2008
|
|
$ |
13,530 |
|
|
$ |
437 |
|
|
$ |
(4,901 |
) |
|
$ |
9,066 |
|
|
2007
|
|
$ |
13,868 |
|
|
$ |
5,255 |
|
|
$ |
(5,593 |
) |
|
$ |
13,530 |
|
Not
applicable
|
(a)
|
Evaluation
of Disclosure Controls and
Procedures
|
The
Company carried out, under the supervision and with the participation of the
Company’s management, including the Company’s Chief Executive Officer and Chief
Financial Officer, an evaluation of the effectiveness of the design and
operation of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended). Based on their evaluation, the Company’s Chief Executive
Officer and its Chief Financial Officer concluded that, as of January 2, 2010,
the Company’s disclosure controls and procedures were effective to ensure that
the information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms.
(b)
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for
establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rule 13a-15(f) under the Securities
Exchange Act of 1934, as amended. Under the supervision of management and
with the participation of our management, including our CEO and CFO, we
conducted an evaluation of the effectiveness of our internal control over
financial reporting as of January 2, 2010 based on the framework
in Internal
Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation, we
concluded that our internal control over financial reporting was effective as of
January 2, 2010.
KPMG LLP,
the independent registered public accounting firm that audited the financial
statements included in this Annual Report on Form 10-K, has issued an
attestation report, which is included elsewhere within this Form 10-K, on
the effectiveness of Presstek’s internal control over financial
reporting.
(c) Remediation
of Previously Disclosed Material Weakness
As of
January 3, 2009, management identified that the Company did not maintain a
sufficient complement of personnel with the appropriate level of experience and
training in the application of U.S. generally accepted accounting principles
(“U.S. GAAP”) to analyze, review, and monitor the accounting for significant or
non-routine transactions.
As a
result of the material weakness described above, management concluded that our
internal control over financial reporting was not effective as of
January 3, 2009.
During
2009, management took various actions to strengthen internal controls and
improve its disclosure controls over financial reporting. As a result, we
remediated the previously reported material weakness by performing the following
remediation activities:
|
·
|
A
new Director of Tax was appointed in January 2009, and focused on building
a knowledgeable tax department in the Greenwich, Connecticut
office.
|
|
·
|
Effective
March 17, 2009, the Company established a Financial Resources Steering
Committee which developed and implemented a corrective action plan to
complete remediation of the material weakness. The Steering
Committee is headed by the Chief Financial Officer, Vice President and
Corporate Controller, and the Vice President of Human
Resources.
|
|
·
|
A
new Financial Reporting Manager was appointed to prepare SEC
filings.
|
|
·
|
The
Assistant Controller, under the direction of the Chief Financial Officer
and Vice President and Corporate Controller, has completed the process of
training new accounting personnel for the accounting functions being
transferred to the Greenwich, Connecticut
office.
|
With the
implementation of the above measures, the Company believes that it has improved
internal controls over financial reporting and that our internal control over
financial reporting was effective as of January 2, 2010.
(d) Changes
in Internal Control over Financial Reporting
Other
than the remediation of the 2008 material weakness addressed under Item 9A
(c) above, there were no changes in the Company’s internal control over
financial reporting that occurred in the fourth quarter ended January 2,
2010, that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.
Report
of Independent Registered Public Accounting Firm
The Board
of Directors and Stockholders
Presstek,
Inc.:
We have
audited Presstek, Inc. and subsidiaries’ (the Company) internal control over
financial reporting as of January 2, 2010, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company’s management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control
over Financial Reporting (Item 9A(b)). Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the
financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, Presstek, Inc. and subsidiaries maintained, in all material respects,
effective internal control over financial reporting as of January 2, 2010, based
on criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Presstek,
Inc. and subsidiaries as of January 2, 2010 and January 3, 2009, and the related
consolidated statements of operations, stockholders’ equity and comprehensive
income (loss), and cash flows for each of the fiscal years in the three-year
period ended January 2, 2010, and our report dated March 24, 2010 expressed an
unqualified opinion on those consolidated financial statements.
/s/ KPMG
LLP
New York,
New York
March 24,
2010
None.
The
information in the Proxy Statement under the captions “Executive Compensation”
and “Compensation of Directors” is incorporated herein by
reference.
The
information in the Proxy Statement under “Security Ownership of Certain
Beneficial Owners and Management” and “Securities Authorized for Issuance Under
Equity Compensation Plans Information” is incorporated herein by
reference.
The
information in the Proxy Statement under the captions “Related Person
Transactions” and “Board of Directors and Committee Independence” is
incorporated herein by reference.
The
information in the Proxy Statement under the caption “Independent Auditor Fees”
is incorporated herein by reference.
(a) (1)
Financial Statements
The
consolidated financial statements of the Company are listed in the index under
Part II, Item 8, of this Annual Report on Form 10-K.
(2)
Financial Statement Schedule
The
following financial statement schedule is filed as part of this report under
Schedule II (Valuation and Qualifying Accounts and Reserves) for the 2007 – 2009
fiscal years. All other schedules called for by Form 10-K are omitted because
they are inapplicable or the required information is contained in the
consolidated financial statements, or notes thereto, included
herein.
(3)
Exhibits
The
exhibits that are filed with this Annual Report on Form 10-K, or that are
incorporated herein by reference, are set forth in the Exhibit Index hereto,
which index is incorporated by reference herein.
Pursuant
to the requirements of Section 13 or 15(d) 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.
|
|
|
|
/s/ Jeffrey Jacobson |
|
Jeffrey
Jacobson
|
|
Chairman,
President and Chief Executive
Officer
|
Date:
March 24, 2010
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
/s/ Jeffrey Jacobson |
|
|
|
Jeffrey
Jacobson
|
Chairman,
President and Chief Executive Officer
|
March
24, 2010
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
/s/ Jeffrey A. Cook |
|
|
|
Jeffrey
A. Cook
|
Executive
Vice President and Chief Financial Officer
|
March
24, 2010
|
|
|
(Principal
Financial Officer) and Director
|
|
|
|
|
|
|
/s/ Wayne L. Parker |
|
|
|
Wayne
L. Parker
|
Vice
President – Corporate Controller
|
March
24, 2010
|
|
|
(Principal
Accounting Officer)
|
|
|
|
|
|
|
/s/ Edward E. Barr |
|
|
|
Edward
E. Barr
|
Lead
Director
|
March
24, 2010
|
|
|
|
|
|
|
|
|
|
/s/ Daniel S. Ebenstein, Esq |
|
|
|
Daniel
S. Ebenstein, Esq.
|
Director
|
March
24, 2010
|
|
|
|
|
|
|
|
|
|
/s/ Stanley E. Freimuth |
|
|
|
Stanley
E. Freimuth
|
Director
|
March
24, 2010
|
|
|
|
|
|
|
|
|
|
/s/ Dr. Lawrence Howard |
|
|
|
Dr.
Lawrence Howard
|
Director
|
March
24, 2010
|
|
|
|
|
|
|
|
|
|
/s/ Steven N. Rappaport |
|
|
|
Steven
N. Rappaport
|
Director
|
March
24, 2010
|
|
|
|
|
|
|
|
|
|
/s/ Donald C. Waite, III |
|
|
|
Donald
C. Waite, III
|
Director
|
March
24, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
Number
|
Description
|
|
Reference
|
|
|
|
|
|
|
2.1
|
(i)
Asset Purchase Agreement among Presstek, Inc., Silver Acquisitions Corp.,
Paragon Corporate Holdings, Inc., A.B. Dick Company, A.B. Dick Company of
Canada, Ltd. And Interactive Media Group, Inc., dated July 13,
2004.
|
|
Incorporated
by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K,
filed on July 13, 2004.
|
|
|
(ii)
Amendment to Asset Purchase Agreement between the Presstek, Inc. and A.B.
Dick Company dated August 20, 2004.
|
|
Incorporated
by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K,
filed on November 12, 2004.
|
|
|
(iii)
Second Amendment to Asset Purchase Agreement between Presstek, Inc. and
A.B. Dick Company dated November 5, 2004.
|
|
Incorporated
by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K,
filed on November 12, 2004.
|
|
2.2
*
|
Agreement
and Plan of Merger by and Among Selex Sensors and Airborne Systems (US)
Inc. Lt Acquisition Corp. Selex Sensors and Airborne Systems Limited
Lasertel, Inc. and the Company dated November 20, 2009.
|
|
Incorporated
by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
filed on November 25, 2009.
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of Presstek,
Inc.
|
|
Incorporated
by reference to Exhibit 3(i) to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 29, 1996.
|
|
3.2
|
By-laws
of Presstek, Inc.
|
|
Incorporated
by reference to Exhibit 3(ii) to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 30, 1995.
|
|
10.1***
|
1998
Stock Incentive Plan.
|
|
Incorporated
by reference to Exhibit A to the Company’s Definite Proxy Statement, filed
April 24, 1998.
|
|
10.2***
|
2002
Employee Stock Purchase Plan of Presstek, Inc.
|
|
Incorporated
by reference to Exhibit 4.3 to the Company’s Registration Statement on
Form S-8, filed August 9, 2002.
|
|
10.3***
|
2003
Stock Option and Incentive Plan of Presstek, Inc.
|
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended June 28, 2003.
|
|
10.4***
|
2008
Omnibus Incentive Plan.
|
|
Incorporated
by reference to Appendix A to the Company’s Definite Proxy Statement,
filed May 9, 2008.
|
|
10.5**
|
OEM
Consumables Supply Agreement by and between Presstek, Inc. and
Heidelberger Druckmaschinen, AG., dated July 1, 2003.
|
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended September 27, 2003.
|
|
10.6**
|
OEM
Consumables Supply Agreement by and between Presstek, Inc. and Heidelberg
U.S.A., Inc. dated July 1, 2003.
|
|
Incorporated
by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q for the quarter ended September 27,
2003.
|
|
Exhibit
Number
|
Description
|
|
Reference
|
| |
|
|
|
|
10.7***
|
Employment
Agreement by and between Presstek, Inc. and Jeffrey Cook dated February
27, 2007.
|
|
Incorporated
by reference to Exhibit 10(u) to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 30, 2007.
|
|
10.8***
|
Nonqualified
Stock Option Agreement by and between Presstek, Inc. and Jeffrey Cook
dated February 27, 2007.
|
|
Incorporated
by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K,
filed March 2, 2007.
|
|
10.9***
|
Employment
Agreement by and between Presstek, Inc. and Jeffrey Jacobson dated May 10,
2007.
|
|
Incorporated
by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2007.
|
|
|
(i) Amendment to Employment Agreement by and
between Presstek, Inc. and Jeffrey Jacobson dated May 13,
2009.
|
|
Filed
with this report.
|
|
|
(ii) Amendment to Employment Agreement by and
between Presstek, Inc. and Jeffrey Jacobson dated November 23,
2009.
|
|
Filed
with this report
|
|
10.10***
|
Non-Plan,
Non-qualified Stock Option Agreement by and between Presstek, Inc. and
Jeffrey Jacobson dated May 10, 2007.
|
|
Incorporated
by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form
10-Q for the quarter end March 31, 2007.
|
|
10.11***
|
Forms
of Stock Option Agreement under 2008 Omnibus Incentive
Plan.
|
|
Incorporated
by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K
for the fiscal year ended January 3, 2009.
|
|
10.12
|
(i)
Purchase and Sale Agreement and Escrow Instruction by and between
Presstek, Inc. and EJC Properties, LLLP dated April 24,
2008.
|
|
Incorporated
by reference to Exhibit 10.20(i) to the Company’s Annual Report on Form
10-K for the fiscal year ended January 3, 2009.
|
|
|
(ii)
First Amendment to Purchase and Sale Agreement and Escrow Instruction by
and between Presstek, Inc. and EJC Properties, LLLP dated June 27,
2008.
|
|
Incorporated
by reference to Exhibit 10.20(ii) to the Company’s Annual Report on Form
10-K for the fiscal year ended January 3, 2009.
|
|
|
Letter
Agreement between Presstek, Inc. and James R. Van Horn dated December 17,
2009.
|
|
Filed
with this report
|
|
10.14
|
Revolving
Credit and Security Agreement dated as of March 5, 2010 by and among PNC
Bank, National Association (as Lender and as Agent) and the
Company.
|
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
filed on March 10, 2010
|
|
21.1
|
Subsidiaries
of the Registrant.
|
|
Incorporated
by reference to Exhibit 10.21.1 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 3, 2009.
|
|
|
Consent
of KPMG LLP.
|
|
Filed
with this report.
|
|
|
Certification
of Chief Executive Officer Pursuant to Section 240.13a-14 or Section
240.15d-14 of the Securities Exchange Act of 1934, as
amended.
|
|
Filed
with this report.
|
|
|
Certification
of Chief Financial Officer Pursuant to Section 240.13a-14 or Section
240.15d-14 of the Securities Exchange Act of 1934, as
amended.
|
|
Filed
with this report.
|
|
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
Filed
with this report.
|
|
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
Filed
with this report.
|
* The
Company hereby agrees to provide the Commission, upon request, copies of any
omitted exhibits or schedules to this exhibit required by Item 601(b)(2) of
Regulation S-K.
|
**
|
The
SEC has granted Presstek’s request of confidential treatment with respect
to a portion of this exhibit.
|
|
|
***
Management contract or compensatory plan or
arrangement.
|