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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO ________
COMMISSION FILE NO. 0-17541
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PRESSTEK, INC.
--------------
(Exact name of registrant as specified in its charter)
DELAWARE 02-0415170
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
55 EXECUTIVE DRIVE, HUDSON, NEW HAMPSHIRE 03051-4903
----------------------------------------------------
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (603) 595-7000
--------------
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of August 9, 2001, there were 34,110,906 shares of the registrant's common
stock, $.01 par value per share, outstanding.
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PRESSTEK, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets as of June 30, 2001 (unaudited) and
December 30, 2000 3
Statements of Operations for the three and six months
ended June 30, 2001 and July 1, 2000 (unaudited) 4
Statements of Cash Flows for the three and six months
ended June 30, 2001 and July 1, 2000 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 17
PART II OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRESSTEK, INC.
June 30 December 30
BALANCE SHEETS 2001 2000
(In thousands, except share data) (UNAUDITED)
----------------------------------------------------------------------- --------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,724 $ 11,972
Accounts receivable, net of allowance for losses of $2,778
and $2,842 in fiscal 2001 and 2000, respectively 21,052 16,946
Inventories 18,106 12,045
Advances to suppliers 5,332 6,455
Other current assets 1,408 1,147
----------------------------------------------------------------------- --------- ---------
Total current assets 48,622 48,565
----------------------------------------------------------------------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT, NET 63,573 60,248
----------------------------------------------------------------------- --------- ---------
OTHER ASSETS:
Patent application costs and license rights, net 4,820 4,885
Other 1,963 2,204
----------------------------------------------------------------------- --------- ---------
Total other assets 6,783 7,089
----------------------------------------------------------------------- --------- ---------
TOTAL $ 118,978 $ 115,902
======================================================================= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 2,269 $ --
Current portion of long-term debt 2,270 1,989
Accounts payable and accrued expenses 8,366 8,476
Accrued salaries and employee benefits 1,863 1,686
Deferred revenues 2,729 2,559
Net current liabilities of discontinued operations 1,444 1,568
----------------------------------------------------------------------- --------- ---------
Total current liabilities 18,941 16,278
----------------------------------------------------------------------- --------- ---------
LONG-TERM DEBT, NET OF CURRENT PORTION 15,245 16,481
----------------------------------------------------------------------- --------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized 1,000,000 shares;
no shares issued or outstanding -- --
Common stock, $.01 par value; authorized 75,000,000 shares;
issued and outstanding 34,104,581 shares at June 30, 2001;
34,027,981 shares at December 30, 2000 341 340
Additional paid-in capital 97,255 96,685
Accumulated deficit (12,804) (13,882)
----------------------------------------------------------------------- --------- ---------
Total stockholders' equity 84,792 83,143
----------------------------------------------------------------------- --------- ---------
TOTAL $ 118,978 $ 115,902
======================================================================= ========= =========
See notes to financial statements
3
PRESSTEK, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three and Six Months Ended
(In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------------------------- ---------------------- ----------------------
June 30 July 1 June 30 July 1
2001 2000 2001 2000
----------------------------------------------------- -------- -------- -------- --------
REVENUES:
Product sales $ 24,908 $ 18,390 $ 48,549 $ 35,497
Royalties and fees from licensees 2,223 2,826 4,347 4,754
----------------------------------------------------- -------- -------- -------- --------
Total revenues 27,131 21,216 52,896 40,251
----------------------------------------------------- -------- -------- -------- --------
COSTS AND EXPENSES:
Cost of products sold 15,991 11,089 31,433 21,747
Research and product development 3,430 4,145 6,365 8,704
Sales, marketing and customer support 3,435 3,050 6,575 4,715
General and administrative 3,819 2,364 6,891 4,225
----------------------------------------------------- -------- -------- -------- --------
Total costs and expenses 26,675 20,648 51,264 39,391
----------------------------------------------------- -------- -------- -------- --------
INCOME FROM OPERATIONS 456 568 1,632 860
----------------------------------------------------- -------- -------- -------- --------
OTHER INCOME (EXPENSE), NET:
Interest income (expense), net (312) 9 (530) 108
Other, net (39) 56 (24) 56
----------------------------------------------------- -------- -------- -------- --------
Total other income (expense), net (351) 65 (554) 164
----------------------------------------------------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES 105 633 1,078 1,024
PROVISION FOR INCOME TAXES -- 65 -- 65
----------------------------------------------------- -------- -------- -------- --------
NET INCOME $ 105 $ 568 $ 1,078 $ 959
===================================================== ======== ======== ======== ========
EARNINGS PER SHARE - BASIC $ 0.00 $ 0.02 $ 0.03 $ 0.03
===================================================== ======== ======== ======== ========
EARNINGS PER SHARE - DILUTED $ 0.00 $ 0.02 $ 0.03 $ 0.03
===================================================== ======== ======== ======== ========
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING - BASIC 34,101 32,601 34,083 32,581
===================================================== ======== ======== ======== ========
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING - DILUTED 34,662 34,106 34,641 34,153
===================================================== ======== ======== ======== ========
See notes to financial statements
4
PRESSTEK, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
June 30 July 1
FOR THE SIX MONTHS ENDED 2001 2000
-------------------------------------------------------------------------------- -------- --------
CASH FLOWS - OPERATING ACTIVITIES:
Net Income $ 1,078 $ 959
Adjustments to reconcile income from continuing operations to net cash
provided by (used in) operating activities of continuing operations:
Depreciation and amortization 4,323 3,156
Provision for warranty and other costs 983 385
Provision for losses on accounts receivable 600 520
Other, net 66 50
Changes in operating assets and liabilities, net of effects from acquisitions:
Increase in accounts receivable (4,708) (2,964)
Increase in inventories (6,061) (2,770)
Decrease (increase) in advances to suppliers and other current assets 862 (2,306)
Increase (decrease) in accounts payable and accrued expenses (1,090) 69
Increase in accrued salaries and employee benefits 177 259
Increase (decrease) in deferred revenue 170 (100)
-------------------------------------------------------------------------------- -------- --------
Net cash used in operating activities of continuing operations (3,600) (2,742)
Net cash used in operating activities of discontinued operations (124) (85)
-------------------------------------------------------------------------------- -------- --------
Net cash used in operating activities (3,724) (2,827)
-------------------------------------------------------------------------------- -------- --------
CASH FLOWS - INVESTING ACTIVITIES:
Purchases of property, plant and equipment (7,319) (5,229)
Increase in other assets (91) (303)
-------------------------------------------------------------------------------- -------- --------
Net cash used in investing activities (7,410) (5,532)
-------------------------------------------------------------------------------- -------- --------
CASH FLOWS - FINANCING ACTIVITIES:
Net proceeds from sale of common stock 571 1,004
Proceeds under line of credit 2,269 --
Proceeds under mortgage term loan -- 5,959
Repayments of mortgage term loan (375) (272)
Repayments of lease line of credit (579) (230)
-------------------------------------------------------------------------------- -------- --------
Net cash provided by financing activities 1,886 6,461
-------------------------------------------------------------------------------- -------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (9,248) (1,898)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 11,972 18,653
-------------------------------------------------------------------------------- -------- --------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 2,724 $ 16,755
================================================================================ ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for:
Interest $ 694 $ 444
================================================================================ ======== ========
Income taxes $ 46 $ 55
================================================================================ ======== ========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued in exchange for consulting services rendered $ -- $ 2,488
================================================================================ ======== ========
See notes to financial statements
5
PRESSTEK, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2001
1. BASIS OF PRESENTATION
---------------------
Presstek, Inc. ("Presstek", or "the Company") is a manufacturer, developer, and
marketer of non-photographic, digital imaging and printing plate technologies
for the printing and graphic arts industries. Presstek's products and
applications incorporate PEARL(R) and DI(R) digital imaging technologies and
utilize PEARL consumables for computer-to-plate ("CTP") and direct-to-press
applications. The Company's patented DI and PEARL thermal laser diode product
family enables its customers to produce high quality, full-color lithographic
printed materials more quickly and cost efficiently than conventional processes.
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The financial
information included in the quarterly report should be read in conjunction with
the Company's audited financial statements and related notes thereto for the
fiscal year ended December 30, 2000. The December 30, 2000 information has been
derived directly from the annual financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included and all such adjustments were normal and recurring. Operating
results for the three and six months ended June 30, 2001 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 29, 2001.
In April 2000 the Company incorporated an Arizona subsidiary, Lasertel, Inc.
("Lasertel") for the purpose of securing its supply of laser diodes. Lasertel is
located in the former Delta V Technologies, Inc. ("Delta V") facility in Tucson,
Arizona. Delta V was discontinued in fiscal 1999. Lasertel operates as a
subsidiary of Presstek, and is primarily engaged in the manufacture and
development of the Company's high-powered laser diodes.
The Company operates and reports on a 52/53 week fiscal year ending on the
Saturday closest to December 31. Accordingly, the financial statements include
the thirteen week period ended June 30, 2001 ("the second quarter of fiscal
2001") and July 1, 2000 ("the second quarter of fiscal 2000"), and the twenty
six week period ended June 30, 2001 ("the first six months of fiscal 2001") and
July 1, 2000 ("the first six months of fiscal 2000").
The Company operates in two reportable segments, the Digital Imaging Products
segment and the Lasertel segment. The Digital Imaging Products segment is
primarily engaged in the development, manufacture and sales of proprietary
digital imaging systems and printing plate technologies for CTP and
direct-to-press applications. The Lasertel segment is primarily engaged in the
manufacture and development of Presstek's high-powered laser diodes. See Note 8
of notes to the financial statements.
2. INVENTORIES
-----------
Inventories are valued at the lower of cost or market value, with cost
determined using the first-in, first-out method. At June 30, 2001 and December
30, 2000, inventories consisted of the following:
June 30 December 30
(In thousands) 2001 2000
------------------------- ---------------------- ----------------------
Raw materials $ 4,969 $ 3,800
Work in process 5,716 5,082
Finished goods 7,421 3,163
------------------------- ---------------------- ----------------------
Total $ 18,106 $ 12,045
========================= ====================== ======================
6
3. PROPERTY, PLANT AND EQUIPMENT, NET
----------------------------------
Property, plant and equipment, at cost consisted of the following at June 30,
2001 and December 30, 2000:
June 30 December 30
(In thousands) 2001 2000
-------------------------------------- ------------- -------------
Land and improvements $ 2,038 $ 2,038
Buildings and leasehold improvements 26,928 26,711
Production equipment and other 52,772 44,610
Equipment in process 5,285 6,450
-------------------------------------- ------------- -------------
87,023 79,809
Less accumulated depreciation (23,450) (19,561)
-------------------------------------- ------------- -------------
$ 63,573 $ 60,248
====================================== ============= =============
4. EARNINGS PER SHARE
------------------
Basic earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted
earnings per share is computed giving effect to all diluted potential common
shares that were outstanding during the period. Diluted potential common shares
consist of the incremental common shares issuable upon exercise of stock options
and warrants.
The following represents the calculation of basic and diluted earnings per share
for the three and six months ended June 30, 2001 and July 1, 2000:
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
June 30 July 1 June 30 July 1
(In thousands, except per share data) 2001 2000 2001 2000
------------------------------------ -------- -------- -------- --------
Net income $ 105 $ 568 $ 1,078 $ 959
==================================== ======== ======== ======== ========
Weighted average common shares
outstanding - Basic 34,101 32,601 34,083 32,581
Effect of assumed conversion
of stock options 561 1,505 558 1,572
------------------------------------ -------- -------- -------- --------
Weighted average common shares
outstanding - Diluted 34,662 34,106 34,641 34,153
==================================== ======== ======== ======== ========
Earnings per share - Basic $ 0.00 $ 0.02 $ 0.03 $ 0.03
==================================== ======== ======== ======== ========
Earnings per share - Diluted $ 0.00 $ 0.02 $ 0.03 $ 0.03
==================================== ======== ======== ======== ========
Options and warrants to purchase 1,614,001 and 1,634,001 shares of common stock
at exercise prices ranging from $11.75 to $26.94 per share were outstanding
during a portion of the second quarter and first six months of fiscal 2001,
respectively, but were not included in the computation of diluted earnings per
share as the exercise prices of the options and warrants were greater than the
average market price of the common shares. These options and warrants, which
expire from January 2, 2002 through June 11, 2001, were all outstanding at June
30, 2001.
Options and warrants to purchase 307,250 and 306,750 shares of common stock at
an exercise price of $20.25 to $26.94 per share were outstanding during a
portion of the second quarter and first six months of fiscal 2000, respectively,
but were not included in the computation of diluted earnings per share as the
exercise prices of the options and warrants were greater than the average market
price of the common shares. These options and warrants, which expire from
February 23, 2002 through May 8, 2010, were all outstanding at July 1, 2000.
7
5. INCOME TAXES
------------
The Company did not record a provision for or a charge in lieu of United States
federal income taxes, due to tax losses incurred for the second quarter and
first six months of fiscal 2001 and fiscal 2000 prior to deductions related to
stock compensation.
The Company recorded a provision for state income taxes for the second quarter
and first six months of fiscal 2000 in the amount of $65,000.
6. DISCONTINUED OPERATIONS
-----------------------
The Company concluded the operations of Delta V at the end of fiscal 1999.
Located in Tucson, Arizona, Delta V was engaged in the development, manufacture,
and sale of vacuum deposition coating equipment for vacuum coating applications.
Delta V was reported separately as a discontinued operation in prior periods.
Net current liabilities of discontinued operations at June 30, 2001 and December
30, 2000 were $1.4 million and $1.6 million, respectively. The remaining net
current liabilities of discontinued operations represent primarily product
warranties and other liabilities related to Delta V's equipment installations.
7. COMPREHENSIVE INCOME
--------------------
Comprehensive income is comprised of net income and all changes in stockholder's
equity except those due to investments by owners and distributions to owners,
which for the Company includes unrealized gains on marketable securities. For
the second quarter and first six months of fiscal 2001 and fiscal 2000 there
were no differences between net income and comprehensive income.
8. SEGMENT INFORMATION
-------------------
The Company operates in two reportable segments, the Digital Imaging Products
segment and the Lasertel segment. The Digital Imaging Products segment is
primarily engaged in the development, manufacture and sales of its proprietary
digital imaging systems and printing plate technologies for CTP and
direct-to-press applications. The Lasertel segment is primarily engaged in the
manufacture and development of the Company's high-powered laser diodes. The
Company operated in one business segment for the first quarter of fiscal 2000.
A summary of the Company's operations by segment for the three and six months
ended June 30, 2001 and July 1, 2000 were as follows:
DIGITAL
IMAGING
(In thousands) PRODUCTS LASERTEL TOTAL
-------------------------------- -------- -------- --------
THREE MONTHS ENDED JUNE 30, 2001
Revenues $ 27,128 $ 3 $ 27,131
Inter-segment sales -- 624 624
Income (loss) from operations 3,312 (2,856) 456
THREE MONTHS ENDED JULY 1, 2000
Revenues $ 21,216 $ -- $ 21,216
Inter-segment sales -- -- --
Income (loss) from operations 1,011 (443) 568
8
SIX MONTHS ENDED JUNE 30, 2001
Revenues $ 52,893 $ 3 $ 52,896
Inter-segment sales -- 1,212 1,212
Income (loss) from operations 7,277 (5,645) 1,632
SIX MONTHS ENDED JULY 1, 2000
Revenues $ 40,251 $ -- $ 40,251
Inter-segment sales -- -- --
Income (loss) from operations 1,303 (443) 860
9. OTHER INFORMATION
-----------------
In March 2000, the Company entered into an agreement with the plaintiffs in
several class actions lawsuits consolidated under the common caption "Bill
Berke, et al. v. Presstek, Inc., et al." in the United States District Court,
District of New Hampshire to settle the class action lawsuit. The Company also
executed a memorandum of understanding with respect to the settlement of the
derivative lawsuits, filed on behalf of the Company, one in the Chancery Court
of the State of Delaware and the other in the United States District Court,
District of New Hampshire. Under the terms of the class action settlement, $22.0
million, in the form of 1,245,246 shares of the Company's common stock, was to
be paid to the class. The Company issued 437,196 of such shares during the
fourth quarter of fiscal 2000, and issued 808,050 of such shares during the
first quarter of fiscal 2001. In the memorandum of understanding in the
derivative litigation, the Company agreed to issue 60,582 shares of common stock
and has agreed to certain therapeutic improvements to its internal policies,
some of which have already been instituted. The Company issued 60,582 of such
shares in the third quarter of fiscal 2000. As a result of these issuances, all
required shares of common stock to be issued under both the class action
settlement and the memorandum of understanding in the derivative litigation have
been issued. The Company recorded a charge of $23.2 million in the fourth
quarter of fiscal 1999 related to the settlements.
10. RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"), which requires companies to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 (as amended
by SFAS No. 137) is effective for fiscal years beginning after June 15, 2000 and
therefore became effective for the Company in the first quarter of fiscal 2001.
The Company does not presently enter into any transactions involving derivative
financial instruments and accordingly, does not anticipate the new standard will
have any effect on its financial statements for the foreseeable future.
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141),
which supersedes APB Opinion No. 16, "Business Combinations". SFAS No. 141
eliminates the pooling-of-interests method of accounting for business
combinations and modifies the application of the purchase accounting method. The
elimination of the pooling-of-interests method is effective for transactions
initiated after June 30, 2001. The remaining provisions of SFAS No. 141 will be
effective for transactions accounted for using the purchase method that are
completed after June 30, 2001. The Company is currently reviewing the statement,
but does not anticipate the new standard will have any effect on its financial
statements.
In July 2001, the FASB also issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Intangible Assets" (SFAS No. 142), which supersedes APB
Opinion No. 17, "Intangible Assets". SFAS No. 142 eliminates the current
requirement to amortize goodwill and indefinite-lived intangible assets,
addresses the amortization of intangible assets with a defined life and
addresses the impairment testing and recognition for
9
goodwill and intangible assets. SFAS 142 will apply to goodwill and intangible
assets arising from transactions completed before and after the Statement's
effective date. SFAS No. 142 is effective for fiscal 2002. The Company is
currently reviewing the statement and has not yet determined the impact adoption
of SFAS No. 142 will have on its financial statements.
11. SUBSEQUENT EVENT
----------------
In July 2001, the Company settled its outstanding arbitration proceedings with
Heidelberg. Pursuant to the terms of the settlement, the Company and Heidelberg
agreed that the licensing arrangements for the Heidelberg Quickmaster 46DI shall
be non-exclusive. As a result of the recognition of the non-exclusivity of the
license, the Company agreed to reduce the royalties payable by Heidelberg for
imaging kits delivered in connection with the Heidelberg Quickmaster 46DI by
approximately $9,000 per kit. This reduced royalty rate will become effective
for kits delivered after May 1, 2002.
In addition, in consideration for the resolution of several issues that formed
part of the arbitration proceedings between the Company and Heidelberg,
Heidelberg agreed to make a one-time payment of $750,000 to the Company in the
fourth quarter of 2001.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: Certain statements contained in this Form 10-Q constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding the Company's expectations for its
financial and operating performance in 2001, the need for additional capital to
support operations and growth at the Company's Lasertel subsidiary, the adequacy
of internal cash for the Company's operations, the strength of the Company's
various strategic partnerships (both on manufacturing and distribution),
availability of component materials, management's plans and goals with respect
to the Company's Lasertel subsidiary and any other forward looking statements.
Such forward-looking statements involve a number of known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, but are not limited to, the
risks of uncertainty and delays associated with launching new market channels
with new distribution partners (including Xerox), the Company's dependency on
its strategic partners (both on manufacturing and distribution), the impact of
third-party suppliers and potential shortages of critical or sole-source
component supplies, cash flow adequacy, manufacturing constraints or
difficulties (as well as manufacturing difficulties experienced by our
sub-manufacturing partners and their capacity constraints), the ability of the
Company's Lasertel subsidiary to supply high quality laser diodes to the
Company, the ability of the Company's Lasertel subsidiary to align costs with
its current activity levels, the anticipated capital requirements of the
Company's Lasertel subsidiary, the risks of uncertainty of patent protection and
the outcome of patent proceedings (including the Company's current patent
litigation), the impact of general market factors in the printing industry
generally and the economy as a whole, market acceptance of and demand for the
Company's products and resulting revenues, the impact of competitive products
and pricing, the Company's ability to meet production challenges due to
increased sales, the ability of the Company to respond to changes in technology,
litigation and other risks detailed in the Company's filings with the Securities
and Exchange Commission including, without limitation, the Company's Annual
Report on Form 10-K for the fiscal year ending December 30, 2000 and filed with
the Commission on March 30, 2001. The words "looking forward," "looking ahead",
"believe(s)," "should," "plan," "may," "expect(s)," "project(s),"
"anticipate(s)," "likely," "potential," "opportunity," and similar expressions,
among others, identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date the statement was made. Presstek undertakes no obligation to update any
forward-looking statements contained in this Form 10-Q.
BACKGROUND
Presstek, Inc. (the "Company" or "Presstek"), incorporated in Delaware in 1987,
is a manufacturer, developer, and marketer of non-photographic, digital imaging
and printing plate technologies for the printing and graphic arts industries.
Presstek's products and applications incorporate its patented, proprietary
PEARL(R) and DI(R) digital imaging technologies and utilize PEARL consumables
for computer-to-plate ("CTP") and direct-to-press applications. The Company's
patented DI and PEARL thermal laser diode product family enables its customers
to produce high quality, full-color lithographic printed materials more quickly
and cost effectively. In the late 1980's, the Company developed a direct imaging
system that would allow digitally formatted file data to be used to image a
plate directly on the printing press. Presstek's technology and products use
thermal energy generated by lasers to reproduce digital files directly onto
printing plates. This eliminates the daylight sensitive, photomechanical and
chemical processes associated with other imaging methods.
The Company is also engaged in the development of additional PEARL and DI
products that incorporate its patented, proprietary, digital imaging system and
process-free thermal ablation printing plate technologies for CTP and
direct-to-press applications.
In fiscal 2000, Presstek and Ryobi Limited ("Ryobi") of Japan completed the
development of an A3 format size four-color sheet-fed press, which was
introduced in May 2000, and is marketed by Ryobi as the 3404DI. During fiscal
2000 the Company entered into an agreement with Xerox Corporation ("Xerox") to
supply Xerox with a series of three Presstek enabled DI presses and related
consumables, which will be marketed, distributed and serviced worldwide on a
co-branded basis. This agreement was amended in May 2001. The products included
in the Xerox relationship are four and five color versions of a B3 size
sheet-fed press, which is
11
marketed as the DocuColor 400 DI and an A3 size four-color sheet-fed press,
which is marketed as the DocuColor 233 DI.
In April 2001, the Company entered into a new agreement with Adamovske Strojirny
a.s. ("Adast") pursuant to which Adast agreed to manufacture both the four color
and five color B3 size sheet-fed presses.
In April 2000 the Company incorporated an Arizona subsidiary, Lasertel, Inc.
("Lasertel") for the purpose of securing its supply of laser diodes. Lasertel is
located in the former Delta V Technologies, Inc. ("Delta V") facility in Tucson,
Arizona, and is primarily engaged in the manufacture and development of the
Company's high-powered laser diodes.
In June 2001, the Company announced a repositioning of its Lasertel subsidiary
in order to reduce its costs and to focus its efforts on supplying high quality
diodes to the Company. The repositioning occurred, in part, due to the
unanticipated slowdown in the segment of the telecommunications market targeted
by Lasertel. As a result, Lasertel has delayed its plans to market its laser
products to the telecommunications industry but has continued its plans to
develop laser prototypes for qualification in the defense and medical
industries. There can be no assurance that any of these prototypes will be
commercially successful or produce significant revenues for the Company or
Lasertel.
The Company operates and reports on a 52/53 week fiscal year ending on the
Saturday closest to December 31. Accordingly, the financial statements include
the thirteen week period ended June 30, 2001 ("the second quarter of fiscal
2001") and July 1, 2000 ("the second quarter of fiscal 2000"), and the twenty
six week period ended June 30, 2001 ("the first six months of fiscal 2001") and
July 1, 2000 ("the first six months of fiscal 2000").
The Company operates in two reportable segments, the Digital Imaging Products
segment and the Lasertel segment. The Digital Imaging Products segment is
primarily engaged in the development, manufacture and sales of proprietary
digital imaging systems and printing plate technologies for CTP and
direct-to-press applications. The Lasertel segment is primarily engaged in the
manufacture and development of Presstek's high-powered laser diodes.
RESULTS OF OPERATIONS
REVENUES
Revenues for the second quarter and first six months of fiscal 2001 of $27.1
million and $52.9 million, respectively, consisted of product sales, royalties,
license fees and product development reimbursements. Revenues for the second
quarter and first six months of fiscal 2001 increased $5.9 million or 28% and
$12.6 million or 31% as compared to $21.2 million and $40.3 million for the
second quarter and first six months of fiscal 2000. Revenues generated for the
second quarter and first six months of fiscal 2001 and fiscal 2000 relate
primarily to the Digital Imaging Products segment, as there were no material
revenues generated by the Lasertel Segment for the second quarter and first six
months of fiscal 2001 and fiscal 2000.
Product sales for the second quarter and first six months of fiscal 2001 were
$24.9 million and $48.5 million respectively, compared to $18.4 million and
$35.5 million for the second quarter and first six months of fiscal 2000, an
increase of $6.5 million or 35% and $13.0 million or 37%, respectively. These
increases were due primarily to volume increases of presses shipped to Xerox
that are marketed as the DocuColor 400DI and the DocuColor 233DI, as well as
volume increases in shipments of direct imaging systems used in the Ryobi
3404DI. The Company also experienced volume increases in sales of its Dimension
platesetter products and thermal consumable products, which were offset in part
by volume decreases of imaging kits sold to Heidelberg and used in the QM-DI.
Revenues generated from the sale of the Company's PEARLdry and other consumable
products were $11.1 million and $23.6 million for the second quarter and first
six months of fiscal 2001, respectively, an increase of $377,000 or 4% and $3.3
million or 16%, as compared to $10.7 million and $20.2 million for the second
quarter and first six months of fiscal 2000. Consumable product revenues sold
under the Company's agreements with Heidelberg and its distributors included
$5.7 million and $10.8 million for the second quarter and first six months of
fiscal 2001, respectively, as compared to $4.2 million and $7.8 million for the
comparable period in fiscal 2000.
Royalties and fees from licensees for the second quarter and first six months of
fiscal 2001 of $2.2 million and $4.3 million respectively, decreased $603,000 or
21% and $407,000 or 9%, as compared to royalties and fees from licensees of $2.8
million and $4.8 million for the second quarter and first six months of fiscal
2000. Royalties decreased $562,000 or 25% and $835,000 or 20% for the second
quarter and first six months of fiscal 2001 compared to the same periods of
fiscal 2000, as a result of decreased shipments to Heidelberg of
12
direct imaging systems used in the Quickmaster DI. The second quarter decrease
also included a $41,000 decrease in fees from licensees. The decrease for the
first six months of fiscal 2001 was offset by an increase of $428,000 in license
fees primarily due to distribution fees received from Xerox.
Revenues generated under the Company's agreements with Heidelberg and its
distributors were $12.4 million, a decrease of $600,000 or 5% for the second
quarter of fiscal 2001 as compared to $13.0 million for the comparable period in
fiscal 2000. Heidelberg revenues for the both the first six months of fiscal
2001 and fiscal 2000 were $23.8 million. Revenues from Heidelberg represented
45% and 59% of total revenues for the first six months of fiscal 2001 and fiscal
2000, respectively. The Company anticipates revenue for direct imaging kits sold
to Heidelberg for use in the Quickmaster DI to decrease by approximately 10%,
with no gross margin impact, in the third quarter of fiscal 2001, as Heidelberg
begins manufacturing certain non-strategic components of the direct imaging kit.
In July 2001, the Company settled its outstanding arbitration proceedings with
Heidelberg. Pursuant to the terms of the settlement, the Company and Heidelberg
agreed that the licensing arrangements for the Heidelberg Quickmaster 46DI shall
be non-exclusive. As a result of the recognition of the non-exclusivity of the
license, the Company agreed to reduce the royalties payable by Heidelberg for
imaging kits delivered in connection with the Heidelberg Quickmaster 46DI by
approximately $9,000 per kit. This reduced royalty rate will become effective
for kits delivered after May 1, 2002.
In addition, in consideration for the resolution of several issues that formed
part of the arbitration proceedings between the Company and Heidelberg,
Heidelberg agreed to make a one-time payment of $750,000 to the Company in the
fourth quarter of 2001.
Specifically, pursuant to the terms of the settlement, the Company and
Heidelberg agreed to license on a non-exclusive basis certain know-how and
patent rights. The Company also licensed to Heidelberg the right to use the DI
trademark in connection with its press and imaging products. Several other
technical intellectual property issues were also resolved. The settlement did
not resolve patent infringement claims between the parties with respect to the
Heidelberg Speedmaster 74-DI press but established a mechanism to do so upon
resolution of the Company's outstanding patent litigation with Creo Products,
Inc.
COST OF PRODUCTS SOLD
Cost of products sold consists of the costs of material, labor and overhead as
well as future warranty costs associated with product sales. Cost of products
sold for the Digital Imaging Products segment were $14.0 million or 52% of
revenue for the second quarter of fiscal 2001, an increase of $3.2 million or
30%, as compared to $10.8 million or 51% of revenue for the comparable period in
fiscal 2000. Cost of products sold for the first six months of fiscal 2001 were
$27.6 million or 52% of revenue, an increase of $6.1 million or 28%, as compared
to $21.5 million or 53% of revenue for the comparable period in fiscal 2000. The
gross margin on product sales for the Digital Imaging Products segment increased
to 44% and 43% for the second quarter and first six months of fiscal 2001,
respectively, compared to 40% and 39% for the second quarter and first six
months of fiscal 2000, respectively. These gross margin increases are primarily
the result of the increase in press products shipped to Xerox, as well as the
result of economies of scale related to increased manufacturing volumes of
proprietary digital media and consumable products. Cost of products sold for the
Lasertel segment for the second quarter and first six months of fiscal 2001
included $1.9 million and $3.8 million, respectively, in manufacturing costs, as
compared to $288,000 for the second quarter and first six months of fiscal 2000.
RESEARCH AND PRODUCT DEVELOPMENT
Research and product development expenses consist primarily of payroll and
related expenses for personnel, parts and supplies, and contracted services
required to conduct the Company's equipment and consumable product development
efforts. Research and product development expenses, all of which were related to
the Digital Imaging Products segment, were $3.4 million or 13% of revenue for
the second quarter of fiscal 2001, a decrease of $715,000 as compared to $4.1
million or 19% of revenue for the comparable period in fiscal 2000. Research and
product development expenses for the first six months of fiscal 2001 were $6.4
million or 12% of
13
revenue, a decrease of $2.3 million as compared to $8.7 million or 22% of
revenue for the comparable period in fiscal 2000. These decreases are primarily
the result of reduced expenditures for parts and components associated with a
reduction in the development of prototypes for the Company's products previously
introduced in fiscal 2000.
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. Sales, marketing and customer support expenses for the Digital
Imaging Products segment were $3.1 million or 11% of revenue for the second
quarter of fiscal 2001, an increase of $100,000 as compared to $3.0 million or
14% of revenue for the comparable period in fiscal 2000. Sales, marketing and
customer support expenses for the first six months of fiscal 2001 were $6.1
million, or 12% of revenue, an increase of $1.5 million as compared to $4.7
million or 12% of revenue for the comparable period in fiscal 2000. These
increases resulted primarily from increases in salaries as a result of head
count growth, and professional services related to the Company's continued
expansion of its worldwide sales, distribution and customer support network.
Sales and marketing expenses for the Lasertel segment were $291,000 and $427,000
or 1% of revenues for the second quarter and first six months of fiscal 2001,
respectively, as compared to $55,000 for the second quarter and first six months
of fiscal 2000. These increases resulted primarily from increases in salaries as
a result of headcount growth, and increases in promotional and advertising
expenses.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of payroll and related
expenses for personnel, and contracted professional services. General and
administrative expenses for the Digital Imaging Products segment were $3.2
million or 12% of revenues for the second quarter of fiscal 2001, an increase of
$900,000 as compared to $2.3 million or 11% of revenues for the comparable
period in fiscal 2000. General and administrative expenses for the first six
months of fiscal 2001 were $5.5 million or 10% of revenue, an increase of $1.4
million as compared to $4.1 million or 10% of revenue for the comparable period
in fiscal 2000. These increases relate primarily to increases in legal fees as a
result of patent litigation, and other professional services necessary to
conduct the finance, information systems, and administrative functions of the
Company. The general and administrative expenses for the Lasertel segment were
$606,000 or 2% of revenue and $1.4 million or 3% of revenue for the second
quarter and first six months of fiscal 2001, as compared to $100,000 for the
second quarter and first six months of fiscal 2000. These increases resulted
primarily from increases in salaries as a result of headcount growth.
OTHER INCOME AND EXPENSE
Other expense net, was $351,000 or 1% of revenues for the second quarter of
fiscal 2001 as compared to other income net, of $65,000 or less than 1% of
revenue for the comparable period in fiscal 2000. Other expense, net was
$554,000 or 1% of revenue for the first six months of fiscal 2001 as compared to
other income, net of $164,000 or less than 1% of revenue for the comparable
period in fiscal 2000.
Interest income was $41,000 for the second quarter of fiscal 2001, a decrease of
$152,000, as compared to $193,000 for the comparable period in fiscal 2000.
Interest income for the first six months of fiscal 2001 was $164,000, a decrease
of $312,000 as compared to $476,000 for the comparable period in fiscal 2000.
These decreases are primarily attributed to the decrease in average cash
balances available for investment. Interest expense was $353,000 for the second
quarter of fiscal 2001, an increase of $165,000 as compared to $188,000 for the
comparable period in 2000. Interest expense for the first six months of fiscal
2001 was $694,000, an increase of $327,000 as compared to $367,000 for the
comparable period in fiscal 2000. These increases are primarily attributed to
the increased borrowings related to the Company's lease line of credit facility
with Keybank National Association, and its line of credit facility with Citizens
Bank.
PROVISION FOR INCOME TAXES
The Company did not record a provision for or a charge in lieu of United States
federal income taxes, due to tax losses incurred for the second quarter and
first six months of fiscal 2001 and fiscal 2000 prior to deductions related to
stock compensation.
The Company recorded a provision for state income taxes for the second quarter
and six months of fiscal 2000 in the amount of $65,000.
14
NET INCOME
As a result of the foregoing, the Company had net income of $105,000 and $1.1
million for the second quarter and first six months of fiscal 2001,
respectively, as compared to net income of $568,000 and $959,000 for the second
quarter and first six months of fiscal 2000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, the Company had cash and cash equivalents of $2.7 million and
working capital of $29.7 million as compared to cash and cash equivalents of
$12.0 million and working capital of $32.3 million at December 30, 2000. The
decrease in cash of $9.2 million for the first six months of fiscal 2001 was
primarily attributable to cash used in operating and investing activities of
$3.7 million and $7.4 million, respectively, offset by cash provided by
financing activities of $1.9 million.
Net cash used in operating activities of $3.7 million for the six months ended
June 30, 2001 resulted from net income of $1.1 million, non-cash items of
depreciation and amortization of $4.3 million, and provisions for warranty and
losses on accounts receivable of $983,000 and $600,000, respectively, offset by
an aggregate increase of $10.8 million in accounts receivable and inventory as a
result of greater production requirements. Advances to suppliers, which
decreased $1.1 million reflecting receipt of product in connection with certain
supply agreements, was offset by an increase in other current assets of
$261,000. Deferred revenue increased by $170,000 as a result of prepayments for
product shipments in connection with certain customer agreements.
Net cash used in investing activities of $7.4 million for the six months ended
June 30, 2001 consisted primarily of additions to property, plant and equipment
used in the Company's business. These additions included $5.4 million in
equipment purchases related to the manufacture of laser diodes for the Lasertel
segment.
Net cash provided by financing activities for the six months ended June 30, 2001
totaled $1.9 million, and consisted primarily of proceeds of $2.3 million from
the Company's line of credit facility with Citizens Bank, as well as proceeds of
$571,000 from the sale of common stock upon the exercise of options, offset by
payments on the mortgage term loans and the lease line of credit of $954,000.
In June 2000, the Company borrowed the remaining $6.0 million under a $10.0
million lease line of credit facility from Keybank National Association. The
$10.0 million in borrowings is secured by equipment valued at $13.4 million. The
loan bears a variable rate of interest based upon the prime rate, currently 8.5%
with a fixed rate conversion provision. Principal and interest under the lease
line are payable in 84 monthly installments beginning on July 31, 2000 for the
$6.0 million in borrowings. Payments on the initial $4.0 million borrowed in
September 1999 commenced in October 1999. The Company has a commitment for a
$5.0 million lease line of credit from Keybank, which expires on April 30, 2002.
On October 30, 2000 the Company renewed its credit facilities with Citizens Bank
New Hampshire ("Citizens"). These credit facilities, which expire in September
2002, included renewal of a ten-year mortgage term loan in the amount of $6.9
million, securing an additional ten-year mortgage term loan in the amount of
$4.0 million, and securing a revolving line of credit loan in the amount of
$16.0 million.
The ten-year mortgage term loan in the amount of $6.9 million bears a fixed rate
of interest of 7.12% per year during the first five years, a variable rate of
interest at the LIBOR rate plus 2%, (5.86% at June 30, 2001) for the remaining
five years. Principal and interest payments during the first five years of the
loan will be made in 60 monthly installments of $80,500. During the remaining
five years, principal and interest payments will be made on a monthly basis in
the amount of one-sixtieth of the outstanding principal amount as of the first
day of the second five year period, plus accrued interest through the monthly
payment date. All outstanding principal and accrued interest is due and payable
on February 6, 2008.
The ten-year mortgage term loan in the amount of $4.0 million bears a fixed rate
of interest equal to 7.95% per year during the first five years, a fixed rate of
interest equal to United States Treasury Notes or Bills with a maturity date
closest to the end of the second five years plus 225 basis points, for the
remaining five years. During the first five years, principal and interest shall
be paid in 60 monthly installments of $48,425. During the remaining five years,
principal and interest payments will be made on a monthly basis in the amount of
15
one-sixtieth of the outstanding principal amount as of the first day of the
second five year period, plus accrued interest through the monthly payment date.
All outstanding principal and accrued and unpaid interest is due and payable on
October 30, 2010.
Both ten-year mortgage term loans are secured by land and buildings with a cost
of approximately $22.0 million.
The revolving line of credit loan, under which the Company may borrow $16.0
million, is subject to certain restrictions based on applicable percentages of
accounts receivable and inventory, as defined by the loan agreement, and reduced
by the amount of all letters of credit outstanding. The revolving line of credit
loan is secured by substantially all of the Company's assets, with interest
payable at the LIBOR rate plus 1.50% (5.36% at June 30, 2001). As of June 30,
2001, the Company had $7.8 million outstanding under standby letters of credit,
and $5.7 million available under the revolving line of credit loan.
Under the terms of the mortgage term loans, the lease line of credit and the
revolving line of credit agreements, the Company is required to meet certain
covenants on a quarterly and annual basis. At June 30, 2001 the Company was in
compliance with all financial covenants.
Although the Company believes that existing funds, cash flows from operations,
and cash available under its revolving line of credit and lease line of credit
should be sufficient to satisfy working capital requirements and capital
expenditures for the next twelve months, there can be no assurance that the
Company will not require additional financing, or that such additional funding,
if needed, will be available on acceptable terms.
EFFECT OF INFLATION
Inflation has not had, and is not expected to have, a material impact upon the
Company's operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"), which requires companies to recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 (as amended
by SFAS No. 137) is effective for fiscal years beginning after June 15, 2000 and
therefore became effective for the Company in the first quarter of fiscal 2001.
The Company does not presently enter into any transactions involving derivative
financial instruments and, accordingly, does not anticipate the new standard
will have any effect on its financial statements for the foreseeable future.
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141),
which supersedes APB Opinion No. 16, "Business Combinations". SFAS No. 141
eliminates the pooling-of-interests method of accounting for business
combinations and modifies the application of the purchase accounting method. The
elimination of the pooling-of-interests method is effective for transactions
initiated after June 30, 2001. The remaining provisions of SFAS No. 141 will be
effective for transactions accounted for using the purchase method that are
completed after June 30, 2001. The Company is currently reviewing the statement,
but does not anticipate the new standard will have any effect on its financial
statements.
In July 2001, the FASB also issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Intangible Assets" (SFAS No. 142), which supersedes APB
Opinion No. 17, "Intangible Assets". SFAS No. 142 eliminates the current
requirement to amortize goodwill and indefinite-lived intangible assets,
addresses the amortization of intangible assets with a defined life and
addresses the impairment testing and recognition for goodwill and intangible
assets. SFAS 142 will apply to goodwill and intangible assets arising from
transactions completed before and after the Statement's effective date. SFAS No.
142 is effective for fiscal 2002. The Company is currently reviewing the
statement and has not yet determined the impact adoption of SFAS No. 142 will
have on its financial statements.
16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------
The Company is exposed to market risk from changes in interest rates primarily
as a result of its borrowing activities, and to a lesser extent, its investing
activities. The majority of the Company's long-term borrowings are in fixed rate
instruments, or variable rate instruments with fixed rate conversion provisions.
The Company does not enter into interest rate swap agreements or other
speculative or leveraged transactions. The Company currently has no material
exposure to interest rate fluctuations on its short-term investments.
The Company has limited exposure to foreign currency exchange rate risk, as
substantially all of its transactions are denominated in U.S. dollars. Some of
the Company's customers and strategic partners are not located in the United
States, however. As a result, these customers and strategic partners are
themselves subject to fluctuations in foreign exchange rates. If their home
country currency were to decrease in value relative to the United States dollar,
their ability to purchase and market the Company's products could be adversely
affected and the Company's products may become less competitive to them. This
may have an adverse impact on the Company's business. Likewise, some of the
Company's suppliers are not located in the United States and thus, such
suppliers are subject to foreign exchange rate risks in transactions with the
Company. Decreases in the value of their home country currency versus that of
the United States dollar could cause fluctuations in supply pricing which could
have an adverse effect on the Company's business.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In August 1999 Creo Products, Inc., ("Creo"), filed an action in the United
States District Court for the District of Delaware against the Company asserting
that Creo has a "reasonable apprehension that it will be sued by Presstek for
infringement" of two of the Company's patents and seeking a declaration that
Creo's products "do not and will not infringe any valid and enforceable claims"
of the patents in question. In September 1999, the Company filed a counterclaim
against Creo for patent infringement. The Company claims that Creo has infringed
two direct imaging patents owned by the Company which were recently the subject
of re-examination by the U. S. Patent and Trademark Office. This action went to
trial before the court without a jury during the week of June 25, 2001, and the
parties have submitted to the court proposed findings, briefs, and other related
documents. The Company is currently awaiting a decision in this case.
In December of 1999 a complaint was filed by PPG, Inc. ("PPG") against Delta V
in the United States District Court for the Western District of Pennsylvania
alleging that Delta V sold to PPG certain vacuum coating equipment that did not
meet certain product specifications. An amended complaint was filed in April of
2000. In the suit, PPG seeks damages in excess of $7.0 million. In addition to
naming Delta V as a defendant in the complaint, PPG also named Presstek as a
defendant, seeking damages from Presstek and attempting to hold Presstek liable
for the alleged breach of contract by its subsidiary, Delta V, on a theory of
indirect liability. Motions to dismiss for improper venue were denied, but venue
was transferred to the United States District Court for the Middle District of
Pennsylvania. Presstek (and Delta V) have answered the complaint and Delta V has
asserted a counterclaim against PPG and a cross-claim against Circonix, a Delta
V subcontractor for the vacuum coater project. The Company intends to continue
to vigorously defend this action.
See also Part I - Item 3 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 30, 2000 filed with the Commission on March 30, 2001,
Part II - Item 1 of the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001 filed with the Commission on May 14, 2001 and Note 9 of
Notes to the Financial Statements of this Form 10Q. All of such information is
hereby incorporated by reference in response to this item.
Item 4. Submission of Matters to a Vote of Security Holders
(a) On June 5, 2001, the Company held its Annual Meeting of Stockholders.
17
(b) Not Applicable.
(c) At such meeting, the stockholders of the Company voted:
(1) To elect eight (8) Directors to serve for the ensuing year. The votes
cast were as follows:
Votes Votes Broker Non
Nominees Votes For Against Withheld Abstained Votes
------------------- ---------- ------- -------- --------- ----------
Richard A. Williams 28,860,193 N/A 419,900 NA N/A
Robert W. Hallman 28,866,294 N/A 413,799 N/A N/A
Dr. Lawrence Howard 29,001,233 N/A 278,860 N/A N/A
John W. Dreyer 29,134,846 N/A 145,247 N/A N/A
Daniel S. Ebenstein 29,124,797 N/A 155,296 N/A N/A
John B. Evans 29,138,445 N/A 141,648 N/A N/A
Edward J. Marino 29,137,327 N/A 142,766 N/A N/A
Michael D. Moffitt 29,021,304 N/A 258,789 N/A N/A
(2) To ratify the selection of BDO Seidman, LLP, as the Company's
independent auditors for the fiscal year ending December 29, 2001. The votes
cast were as follows:
Votes Votes Broker Non
Votes For Against Withheld Abstained Votes
--------------- ------- -------- --------- ----------
29,148,539 49,263 N/A 82,291 N/A
(d) Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amended Master Supply and Distribution Agreement by and between
Presstek, Inc. and Xerox Corporation dated May 11, 2001 (filed
herewith).*
10.2 Agreement between Presstek, Inc. and Adamovski Strojirny a.s.
("Adast") dated as of April 24, 2001 (filed herewith).*
* Confidential treatment requested as to omitted portions pursuant to
Rule 24b-2 promulgated under the Securities and Exchange Act of 1934, as
amended.
(b) Reports on Form 8-K
None.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRESSTEK, INC.
(Registrant)
Date: August 14, 2001 /s/ Robert W. Hallman
---------------------------
By: Robert W. Hallman
President and
Chief Executive Officer
(Principal Executive and
Duly Authorized Officer)
Date: August 14, 2001 /s/ Neil Rossen
---------------------------
By: Neil Rossen
Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
19
EXHIBIT INDEX
No. Description
------ -----------
10.1 Amended Master Supply and Distribution Agreement by and between
Presstek, Inc. and Xerox Corporation dated May 11, 2001
(filed herewith).*
10.2 Agreement between Presstek, Inc. and Adamovski Strojirny a.s.
("Adast") dated as of April 24, 2001 (filed herewith).*
* Confidential Treatment requested as to omitted portions pursuant to Rule
24b-2 promulgated under the Securities and Exchange Act of 1934, as amended.
20