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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 March 29, 2003
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
PRESSTEK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 02-0415170
------------------------------ ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
55 EXECUTIVE DRIVE, HUDSON, NEW HAMPSHIRE 03051-4903
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(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (603) 595-7000
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(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 9, 2003, there were 34,155,005 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
PAGE
Item 1. Financial Statements
Balance Sheets as of March 29, 2003 (unaudited) and
December 28, 2002 3
Statements of Operations for the three months
ended March 29, 2003 and March 30, 2002 (unaudited) 4
Statements of Cash Flows for the three months
ended March 29, 2003 and March 30, 2002 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 19
Item 4. Controls and Procedures 19
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
2
PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
PRESSTEK, INC.
MAR 29 DEC 28
BALANCE SHEETS 2003 2002
(In thousands, except share data) (UNAUDITED)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 20,627 $ 17,563
Accounts receivable, net of allowance for losses
of $2,406 and $2,170 in fiscal 2003 and 2002, respectively 16,758 15,108
Inventories 10,483 11,715
Other current assets 648 554
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Total current assets 48,516 44,940
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PROPERTY, PLANT AND EQUIPMENT, NET 50,682 52,291
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OTHER ASSETS:
Patent application costs and license rights, net 3,755 4,409
Other 647 156
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Total other assets 4,402 4,565
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TOTAL $ 103,600 $ 101,796
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt 3,205 3,045
Accounts payable 2,841 3,331
Accrued expenses 11,205 9,992
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Total current liabilities 17,251 16,368
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LONG-TERM DEBT, NET OF CURRENT PORTION 12,747 13,662
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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 34,142,624 shares at
March 29, 2003; 34,125,481 shares at December 28, 2002 341 341
Additional paid-in capital 97,449 97,403
Accumulated deficit (24,188) (25,978)
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Total stockholders' equity 73,602 71,766
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TOTAL $ 103,600 $ 101,796
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See accompanying notes to financial statements
3
PRESSTEK, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
MAR 29 MAR 30
FOR THE THREE MONTHS ENDED 2003 2002
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REVENUE:
Product sales $ 21,289 $ 19,758
Royalties and fees from licensees 1,153 1,039
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Total revenue 22,442 20,797
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COSTS AND EXPENSES:
Cost of products sold 12,952 12,756
Research and product development 1,950 2,891
Sales, marketing and customer support 2,854 2,520
General and administrative 2,744 2,246
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Total costs and expenses 20,500 20,413
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INCOME FROM OPERATIONS 1,942 384
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OTHER INCOME (EXPENSE), NET:
Interest, net (153) (231)
Other, net 1 30
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Total other income (expense), net (152) (201)
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INCOME BEFORE INCOME TAXES 1,790 183
PROVISION FOR INCOME TAXES -- --
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NET INCOME $ 1,790 $ 183
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EARNINGS PER SHARE - BASIC $ 0.05 $ 0.01
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EARNINGS PER SHARE - DILUTED $ 0.05 $ 0.01
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC 34,142 34,122
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - DILUTED 34,186 34,164
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See accompanying notes to financial statements
4
PRESSTEK, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
MAR 29 MAR 30
FOR THE THREE MONTHS ENDED 2003 2002
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CASH FLOWS - OPERATING ACTIVITIES:
Net Income $ 1,790 $ 183
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,202 2,447
Provision for warranty and other costs 856 39
Provision for losses on accounts receivable 455 --
Other, net (2) 109
Changes in operating assets and liabilities:
Accounts receivable (2,105) 1,989
Inventories 1,232 288
Other current assets (94) 23
Accounts payable (490) 1,763
Accrued expenses 357 59
Other non-current assets (55) (139)
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Net cash provided by operating activities 4,146 6,761
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CASH FLOWS - INVESTING ACTIVITIES:
Property, plant and equipment purchases (374) (100)
Proceeds from sale of equipment 1 169
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Net cash provided by (used in) investing activities (373) 69
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CASH FLOWS - FINANCING ACTIVITIES:
Net proceeds from the issuance of common stock 46 53
Repayments of mortgage term loan (283) (262)
Repayments of lease line of credit (472) (311)
Repayments of revolving line of credit -- (967)
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Net cash used in financing activities (709) (1,487)
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INCREASE IN CASH AND CASH EQUIVALENTS 3,064 5,343
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 17,563 2,492
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CASH AND CASH EQUIVALENTS END OF PERIOD $ 20,627 $ 7,835
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 224 $ 245
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Income taxes $ -- $ --
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See accompanying notes to financial statements
5
PRESSTEK, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 29, 2003
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
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NATURE OF BUSINESS - Presstek, Inc. ("Presstek", or "the Company") is a
manufacturer, developer and marketer of digital laser imaging and chemistry-free
plate technologies for the printing and graphic arts industries. Presstek's
products and applications incorporate its patented direct imaging ("DI(R)"),
technologies and consumables for computer-to-plate, ("CTP") and direct-to-press
applications. The Company's subsidiary, Lasertel, Inc. ("Lasertel") is engaged
in the manufacture and development of high-powered laser diodes for the Company
and external customers.
The Company operates in two reportable segments, the Digital Imaging Products
segment and the Lasertel segment. The Digital Imaging Products segment is
primarily engaged in the development, manufacture and sale of patented digital
imaging systems and printing plate technologies for CTP and direct-to-press
applications. The Lasertel segment is primarily engaged in the manufacture and
development of high-powered laser diodes for Presstek and other customers.
BASIS OF PRESENTATION - The financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Certain prior fiscal years' accounts have
been reclassified for comparative purposes. The unaudited financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and in accordance with Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The financial information included in this quarterly
report should be read in conjunction with the Company's audited financial
statements and related notes thereto for the fiscal year ended December 28,
2002. The December 28, 2002 information has been derived directly from the
annual financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included and all such
adjustments were normal and recurring. Operating results for the three months
ended March 29, 2003 are not necessarily indicative of the results that may be
expected for the fiscal year ending January 3, 2004.
FISCAL YEAR - The Company operates and reports on a 52 or 53 week fiscal year
ending on the Saturday closest to December 31. Accordingly, the financial
statements include the thirteen-week periods ended March 29, 2003 ("the first
quarter of fiscal 2003") and March 30, 2002 ("the first quarter of fiscal
2002").
USE OF ESTIMATES - The Company prepares its financial statements in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities and
related disclosure of contingent assets and liabilities at the date of the
financial statements, and the
6
reported amounts of revenue and expenses during the reporting period. The
Company evaluates its estimates, including those related to product returns,
inventories, income taxes, warranty obligations, and litigation on an on-going
basis. The Company bases its estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.
REVENUE RECOGNITION - The Company recognizes revenue in accordance with Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
No. 101"). Under SAB No. 101, revenue is recognized when persuasive evidence of
an agreement exists, delivery has occurred or services have been rendered, the
price to the customer is fixed or determinable, and collection is reasonably
assured.
The Company records revenue for product sales net of estimated returns, which
are adjusted periodically, based upon historical rates of return. Revenue and
related royalties for products sold where installation is not required is
recorded at the time of shipment. Revenue for products that require
installation, for which the installation is not deemed inconsequential, is
recognized upon completion of installation and customer acceptance. Revenue
related to service maintenance agreements is recognized ratably over the
duration of the particular contract. Certain fees and other reimbursements are
recognized as revenue when the related services have been performed or the
revenue otherwise earned. Deferred revenue includes certain customer advances
received as a result of the Company's distribution agreements. This revenue is
recognized as product is shipped or services are performed.
STOCK-BASED COMPENSATION - The Company accounts for stock options and other
equity instruments granted to employees under the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), as permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). APB 25 provides for
compensation cost to be recognized over the vesting period of the options based
on the difference, if any, between the fair market value of the Company's stock
and the option price on the grant date. As the Company has only issued fixed
term stock option grants at or above the quoted market price on the date of the
grant, there is no compensation expense recognized in the accompanying financial
statements. The Company adopted the disclosure provisions of SFAS 123, which
requires the Company to provide pro forma disclosure of net income and earnings
per share as if the optional fair value method had been applied to determine
compensation costs for the Company's stock-based compensation plans.
Accordingly, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated in the following table:
MAR 29 MAR 30
(In thousands except per share data) 2003 2002
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Net income, as reported $ 1,790 $ 183
Less:
Total stock-based employee compensation expense (669) (741)
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Pro forma net income (loss) $ 1,121 $ (558)
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Net income per common share, as reported:
Basic $ 0.05 $ 0.01
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Diluted $ 0.05 $ 0.01
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Pro forma net income (loss) per common share:
Basic $ 0.03 $ (0.02)
============================================================================
Diluted $ 0.03 $ (0.02)
============================================================================
The above pro forma net income (loss) and net income (loss) per share do not
consider any related tax benefit from option exercises in the first quarters of
fiscal 2003 and 2002.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS - In January 2003, the Financial
Accounting Standards Board issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of Accounting Research Bulletin
No. 51," ("FIN No. 46"), which requires all variable interest entities ("VIEs")
to be consolidated by the primary beneficiary. The primary beneficiary is the
entity that holds the majority of the beneficial interests in the VIE. In
addition, the interpretation expands disclosure requirements for both variable
interest entities that are consolidated, as well as VIEs from which the entity
is the holder of a significant amount of the beneficial interests, but not the
majority. The disclosure requirements of this interpretation are effective for
all financial statements issued after January 31, 2003. The consolidation
requirements of this interpretation are effective for all periods beginning
after June 15, 2003. The Company does not have any disclosure related to FIN No.
46, and does not anticipate that the adoption of the consolidation requirement
of this interpretation will have a material effect on its results of operations
or financial condition.
7
The Company used the Black-Scholes option-pricing model to estimate the fair
value of $3.22 and $4.27 for each stock option issued in first quarters of
fiscal 2003 and 2002, respectively, using the following weighted average
assumptions:
MAR 29 Mar 30
2003 2002
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Dividend yield NONE NONE
Expected volatility 73.62% 71.76%
Risk free interest rate 3.15% 4.95%
Expected option life 6.59 6.29
2. INVENTORIES
-----------
Inventories consisted of the following at March 29, 2003 and December 28, 2002:
MAR 29 Dec 28
(In thousands) 2003 2002
---------------------------------------------------------------------------
Raw materials $ 1,802 $ 2,162
Work in process 6,088 4,179
Finished goods 2,593 5,374
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Total inventories $ 10,483 $ 11,715
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3. PROPERTY, PLANT AND EQUIPMENT, NET
----------------------------------
Property, plant and equipment, net consisted of the following at March 29, 2003
and December 28, 2002:
MAR 29 Dec 28
(In thousands) 2003 2002
---------------------------------------------------------------------------
At cost:
Land and improvements $ 2,038 $ 2,038
Buildings and leasehold improvements 24,517 24,456
Production equipment and other 46,234 46,023
Office furniture and equipment 4,605 4,545
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77,394 77,062
Less accumulated depreciation (26,712) (24,771)
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Total, property, plant and equipment, net $ 50,682 $ 52,291
===========================================================================
Certain property and equipment with a cost and net book value of $18.4 million
and $12.2 million, respectively, is pledged as security for long-term debt.
4. ACCRUED EXPENSES
----------------
Accrued expenses consisted of the following at March 29, 2003 and December 28,
2002:
MAR 29 Dec 28
(In thousands) 2003 2002
---------------------------------------------------------------------------
Accrued payroll and benefits $ 2,449 $ 2,152
Accrued warranty 1,339 1,089
Accrued special charges 3,049 3,226
Other current liabilities 2,064 1,687
Deferred revenue 859 389
Net liabilities of discontinued operations 1,445 1,449
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Total accrued expenses $ 11,205 $ 9,992
===========================================================================
8
5. LONG-TERM DEBT
Long-term debt consisted of the following at March 29, 2003 and December 28,
2002:
MAR 29 Dec 28
(In thousands) 2003 2002
---------------------------------------------------------------------------
Mortgage term loans $ 7,134 $ 7,417
Lease line of credit 8,818 9,290
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15,952 16,707
Less current portion (3,205) (3,045)
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Total long-term debt, net of current portion $ 12,747 $ 13,662
===========================================================================
6. INCOME TAXES
------------
The Company did not record a provision for federal or state income taxes as a
result of the utilization of net operating loss carryforwards for the first
quarters of fiscal 2003 and fiscal 2002.
7. EARNINGS PER SHARE
------------------
The calculation of basic and diluted earnings per share at March 29, 2003 and
March 30, 2002 is as follows:
MAR 29 MAR 30
(In thousands, except per share data) 2003 2002
---------------------------------------------------------------------------
Net income $ 1,790 $ 183
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Weighted average common shares
outstanding - Basic 34,142 34,122
Weighted average common stock
equivalents 44 42
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Weighted average common shares
outstanding - Diluted 34,186 34,164
===========================================================================
Earnings per share - Basic $ 0.05 $ 0.01
===========================================================================
Earnings per share - Diluted $ 0.05 $ 0.01
===========================================================================
Options and warrants to purchase 3,576,727 and 2,662,161 shares of common stock
at exercise prices ranging from $4.93 to $26.94 per share were outstanding
during a portion of the first quarters of fiscal 2003 and fiscal 2002,
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.
8. COMPREHENSIVE INCOME
--------------------
Comprehensive income is comprised of net income and all changes in stockholder's
equity except those due to investments by owners and distributions to owners.
For the first quarters of fiscal 2003 and fiscal 2002, comprehensive income was
comprised solely of net income.
9
9. SEGMENT INFORMATION
-------------------
The following table presents a summary of the Company's operations by segment
for the first quarters ended March 29, 2003 and March 30, 2002:
DIGITAL IMAGING
(In thousands) PRODUCTS LASERTEL INTER-SEGMENT TOTAL
-------------------------------------------------------------------------------------------------
FIRST QUARTER ENDED MARCH 29, 2003
----------------------------------
NET REVENUE $ 22,167 $ 1,745 $ (1,470) $ 22,442
INCOME (LOSS) FROM OPERATIONS 3,015 (1,073) -- 1,942
TOTAL ASSETS 88,041 15,559 -- 103,600
First quarter ended March 30, 2002
----------------------------------
Net revenue $ 20,797 $ 292 $ (292) $ 20,797
Income (loss) from operations 2,011 (1,627) -- 384
Total assets 84,024 23,372 -- 107,396
10. DISCONTINUED PROGRAMS AND SPECIAL CHARGES
-----------------------------------------
In fiscal 2002, the Company initiated various repositioning actions to reduce
costs. As a result of the repositioning programs, the Company recorded a charge
of $3.7 million to cost of products sold and $6.0 million in special charges in
fiscal 2002. These charges included inventory, equipment and other asset
write-downs, severance and fringe benefit costs, and executive and other
contractual obligations.
The following table summarizes the accrued balances related to the discontinued
programs and special charges at March 29, 2003 and December 28, 2002:
UTILIZATION
BALANCE AT THROUGH BALANCE AT
DEC 28 MAR 29 MAR 29
(In thousands) 2002 2003 2003
-----------------------------------------------------------------------------------
Equipment and other asset write downs $ 39 $ -- $ 39
Discontinued programs 1,501 -- 1,501
Executive contractual obligations 1,257 (102) 1,155
Severance and fringe benefits 262 -- 262
Lease termination and other
miscellaneous costs 167 (75) 92
-----------------------------------------------------------------------------------
Total accrued special charges and
discontinued programs $ 3,226 $ (177) $ 3,049
===================================================================================
Deferred revenue associated with
discontinued programs $ 120 $ (20) $ 100
===================================================================================
The cumulative cash paid by the Company at March 29, 2003 as a result of the
forgoing repositioning actions totaled $1.9 million. The Company anticipates the
remaining payments related to the discontinued programs and special charges will
be completed by May 2005.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995:
Certain statements contained in this Quarterly Report on Form 10-Q constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, including statements regarding our expectations
for our financial and operating performance in 2003 and beyond; the adequacy of
internal cash and working capital for our operations; the strength of our
various strategic partnerships both on manufacturing and distribution; our
ability to secure other strategic alliances and relationships; our expectations
regarding Presstek's strategy for growth; our expectations and plans regarding
market penetration, including the strength and scope of our distribution
channels and our expectations regarding sales of DI presses in Europe; our
expectations regarding the sale of our products and use of our technology; our
expectations regarding performance of existing, planned and recently introduced
products; the effects, market acceptance, or pricing of competitive products,
including the possibility of a competitive plate product being introduced by a
strategic partner; the placement of orders for direct imaging kits; our
expectations regarding reductions in warranty costs; and the expected effect of
adopting recently issued accounting standards, among others. Such
forward-looking statements involve a number of known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors that could cause or contribute to such differences include our
dependency on our strategic partners (both on manufacturing and distribution);
shortages of critical or sole-source component supplies; the availability and
quality of Lasertel's laser diodes; manufacturing constraints or difficulties
(as well as manufacturing difficulties experienced by our sub-manufacturing
partners and their capacity constraints); the impact of general market factors
in the print industry generally and the economy as a whole; market acceptance of
and demand for our products and resulting revenues; the introduction and market
acceptance of competitive products; and other risks detailed in the Company's
reports on file with the Securities and Exchange Commission, including its
Annual Report on Form 10-K for the fiscal year ended December 28, 2002, as well
as those discussed elsewhere in this report. The words "looking forward,"
"looking ahead," "believe(s)," "should," "plan," "expect(s)," "project(s),"
"anticipate(s)," "may," "likely," "potential," "opportunity" and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date the statements were made and readers are advised to consider such
forward-looking statements in light of the risks set forth below. Presstek
undertakes no obligation to update any forward-looking statements contained in
this Quarterly Report on Form 10-Q.
BACKGROUND
Presstek, Inc. ("Presstek (R)", "we" or "us"), incorporated in Delaware in 1987,
is a manufacturer, developer and marketer of digital laser imaging and
chemistry-free plate technologies for the printing and graphic arts industries.
Presstek's products and applications incorporate its patented Direct Imaging
("DI(R)") technologies and consumables for computer-to-plate ("CTP") and
direct-to-press applications. Presstek's DI technology enables "direct to press"
imaging, whereby the printing plates are imaged on the press directly from
digital files, bypassing numerous prepress procedures and chemical processes in
preparing jobs for presswork. Our CTP or off-press imaging allows operators of
conventional printing presses the ability to image plates directly from digital
files to the CTP device. The printer then uses these plates as they would a
traditional plate, but without the chemical processes required for conventional
plates.
Our patented DI thermal laser diode product family enables customers to produce
high quality, full-color lithographic printed materials more quickly and cost
effectively than conventional methods. Our DI technology eliminates photographic
darkrooms, film, and chemical processing, which results in reduced turn-around
time and lowers the effective cost of production for commercial printers. We
lead our industry with an environmentally friendly process that avoids the
chemicals associated with plate development. Our DI technologies, which use
digital information and high-powered semiconductor laser diodes to create images
on our patented printing plate materials, are marketed to leading press
manufacturers and are used in our Dimension(R) series of CTP systems. Presstek's
Dimension CTP systems incorporate our patented ProFire(R) laser imaging
technology and use our chemistry free printing plate, Anthem(R).
Presstek's CTP workflow and automated DI printing technology not only complement
digital publishing technology, they also are designed to help printers meet the
short-run, quick turn-around, color demands
11
of the marketplace. By significantly increasing the efficiency with which jobs
are prepared for print, Presstek's technology is designed to make shorter
printing runs more feasible at lower costs. Presstek's technology utilizes the
offset lithographic method of applying ink to paper that is universally accepted
by printers and consumers, and produces the versatile, high-quality
characteristics they require.
Lasertel, Inc. ("Lasertel"), a subsidiary of Presstek, is primarily engaged in
the manufacture and development of high-powered laser diodes. Lasertel's
products include semiconductor lasers and active components for the graphics,
industrial and defense industries. Lasertel offers high-powered laser diodes in
both standard and customized configurations, including chip on sub-mount,
un-mounted bars, and fiber-coupled devices, to support various applications.
We operate and report on a 52 or 53 week fiscal year, ending on the Saturday
closest to December 31. Accordingly, the financial statements include the
thirteen week periods ended March 29, 2003 ("the first quarter of fiscal 2003"),
and March 30, 2002 ("the first quarter of fiscal 2002").
We operate in two reportable segments, the Digital Imaging Products segment and
the Lasertel segment. The Digital Imaging Products segment is primarily engaged
in the development, manufacture and sale of Presstek's patented digital imaging
systems and printing plate technologies for CTP and direct-to-press
applications. The Lasertel segment is primarily engaged in the manufacture and
development of high-powered laser diodes for Presstek and other customers.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
GENERAL
Presstek's Management's Discussion and Analysis of Financial Condition and
Results of Operations are based upon our consolidated financial statements,
which have been prepared in accordance with generally accepted accounting
principles as adopted in the United States. The preparation of these financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, and related disclosure of contingent
assets and liabilities, and the reported amounts of revenue and expenses during
the reporting period. On an on-going basis, Presstek evaluates its estimates,
including those related to product returns, allowances for doubtful accounts,
inventories, long-lived assets, warranty obligations, and litigation. Presstek
bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements. Presstek's significant accounting policies are presented
in Note 1 of our financial statements in our Annual Report on Form 10-K for the
fiscal year ended December 28, 2002, filed with the Securities Exchange
Commission on March 28, 2003.
REVENUE RECOGNITION
Presstek recognizes revenue in accordance with Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements" ("SAB No. 101"). Under SAB
No. 101, revenue is recognized when persuasive evidence of an agreement exists,
delivery has occurred or services have been rendered, the price to the customer
is fixed or determinable, and collection is reasonably assured.
We record revenue for product sales net of estimated returns, which are adjusted
periodically, based upon historical rates of return. Revenue and related
royalties for products sold where installation is not required is recorded at
the time of shipment. Revenue for products that require installation, for which
the installation is not deemed inconsequential, is recognized upon completion of
installation and customer acceptance. Revenue related to service maintenance
agreements is recognized ratably over the duration of the
12
particular contract. Certain fees and other reimbursements are recognized as
revenue when the related services have been performed or the revenue otherwise
earned. Deferred revenue includes certain customer advances received as a result
of our distribution agreements. This revenue is recognized as product is shipped
or services are performed.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Presstek evaluates its accounts receivable on an ongoing basis and establishes
an allowance for doubtful accounts based on specific customer circumstances and
on its historical rate of write-offs. We include any accounts receivable
balances that are determined to be uncollectible, along with a general reserve,
in an overall allowance for doubtful accounts. After all attempts to collect a
receivable have failed, the receivable is written off against the allowance.
While we believe the allowance for doubtful accounts as of March 29, 2003 is
adequate, actual write-offs might exceed the recorded allowance.
PRODUCT WARRANTIES
Presstek warrants its products against defects in material and workmanship for
various periods, determined by the product, generally from a period of ninety
days to a period of one year from the date of installation. We provide for the
estimated cost of product warranties at the time revenue is recognized. While we
engage in product quality programs and processes, our warranty obligation is
affected by product failure rates, material usage and service costs incurred in
correcting a product failure. Should actual product failure rates, material
usage or service costs differ from our estimates, revisions to the estimated
warranty liability would be required.
INVENTORY VALUATION
Inventories are valued at the lower of cost or net realizable value, with cost
determined using the first-in, first-out method. We assess the recoverability of
inventory to determine whether adjustments for impairment are required.
Inventory that is in excess of future requirements is written down to its
estimated value based upon forecasted demand for its products. If actual demand
is less favorable than what has been forecasted by management, additional
inventory write-downs may be required.
LONG-LIVED ASSETS
Long-lived assets, such as intangible assets and property and equipment, are
evaluated for impairment when events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When any such
impairment exists, the related assets will be written down to fair value.
13
RESULTS OF OPERATIONS
REVENUE
Revenue for the first quarter of fiscal 2003 of $22.4 million consisted of
product sales, customer support revenue, royalties and license fees. Revenue for
the first quarter of fiscal 2003 increased $1.6 million or 8%, compared to $20.8
million for the first quarter of fiscal 2002.
Product sales for the Digital Imaging Products segment including the sale of
equipment and consumables, were $21.3 million for the first quarter of fiscal
2003, an increase of $1.5 million or 8%, as compared to $19.8 million for the
first quarter of fiscal 2002. The increase in product sales was due primarily to
volume increases in sales of our CTP Dimension platesetter products, and volume
increases of the 46 Karat press sold to Koenig & Bauer, AG ("KBA"). This revenue
increase was partially offset set by decreased press shipments of the DocuColor
233DI.
The revenue generated from the sale of consumable products was $13.6 million for
the first quarter of fiscal 2003, a decrease of $100,000 or 1%, as compared to
$13.7 million in the first quarter of fiscal 2002. Consumable product revenue
includes sales under our agreements with Heidelberger Druckmaschinen AG
("Heidelberg") and its distributors of $5.6 million for the first quarter of
fiscal 2003, a decrease of $200,000 or 3%, as compared to $5.8 million in the
first quarter of fiscal 2002.
In March 2003, we expanded the product offerings to select dealers in our
European distribution channel to include the sale of Quickmaster DI consumables.
In connection with this offering, we reduced pricing on our full line of spooled
consumables distributed through this dealer channel up to 20%. This new pricing
may reduce the revenue generated by Presstek from its spooled consumable
products by up to $3.0 million in fiscal 2003. While the expected lost revenue
resulting from the price reduction may be offset by increased revenue from
spooled consumable sales derived from additional presses installed and increased
usage of spooled consumables, there can be no assurance that this expected lost
revenue will be offset. In addition, market conditions may require us to expand
the regions in which we offer reduced prices, or to further reduce our spooled
consumable prices, which could further reduce our revenues in 2003 and beyond.
This could have a material adverse effect on our relationship with Heidelberg,
as well as our business, results of operations and financial condition.
Revenue generated from services related to customer support, including
installation and service contract revenue, was $470,000 for the first quarter of
fiscal 2003, an increase of $59,000 or 14%, as compared to $411,000 for the
first quarter of fiscal 2002. This increase relates primarily to the sale of
service maintenance agreements related to our CTP Dimension products.
Royalties and fees from licensees for the first quarter of fiscal 2003 were $1.1
million, an increase of $100,000, or 10%, as compared to $1.0 million for the
first quarter of fiscal 2002. This increase relates primarily to royalties
generated from increased shipments to Heidelberg for direct imaging kits used in
the Quickmaster DI. Heidelberg has indicated, however, as a result of the global
economic slowdown, that it has an inventory of direct imaging kits on hand to
support its production requirements for at least six months. We currently
believe that orders for direct imaging kits may not resume until sometime in the
first half of 2004, however, there can be no assurance that any orders will be
received.
In connection with the settlement of our arbitration proceedings with Heidelberg
in a prior year, we reduced the royalty payable by Heidelberg for imaging kits
delivered in connection with the Heidelberg Quickmaster 46 DI by approximately
$9,000 per kit. This reduced royalty rate became effective for imaging kits
ordered and delivered after May 1, 2002.
Revenue generated under our agreements with Heidelberg and its distributors was
$7.8 million for the first quarter of fiscal 2003, a decrease of $100,000 or 1%,
as compared to $7.9 million in the first quarter of fiscal 2002. Revenue from
Heidelberg represented 35% and 38% of total revenue for the first quarters of
fiscal 2003 and fiscal 2002, respectively.
14
Heidelberg recently announced that it plans to introduce a competitive plate
product, as an alternative to Presstek's PEARLdry for the Quickmaster DI,
beginning in the second quarter of fiscal 2003. While it is too early to
estimate the impact this plate may have on our business or our relationship with
Heidelberg, the introduction of a competitive plate could reduce the revenue
generated by Presstek under its agreements with Heidelberg. This could also lead
to downward pricing pressure for our full line of spooled consumable products,
which could have a material adverse effect on our business, results of
operations or financial condition.
In March 2003, we negotiated the termination of our supply and distribution
agreement with Xerox for DocuColor DI presses. Xerox will no longer sell the
DocuColor 233 DI-4, the DocuColor 400 DI-4 and the DocuColor 400 DI-5 presses
and related consumables. The revenue generated from the sale of these presses
was not material in fiscal 2002, and as a result, the termination of this
agreement is not expected to have a material adverse effect on our business,
results of operations or financial condition.
Revenue for the Lasertel segment for the first quarter of fiscal 2003 was
$275,000, and primarily related to the sale of products for defense industry
applications. Product sales to external customers for the first quarter of
fiscal 2002 were not material.
COST OF PRODUCTS SOLD
Cost of products sold consists of the cost of material, labor and overhead,
shipping and handling costs and warranty expenses. Cost of products sold for the
Digital Imaging Products segment was $12.2 million or 54% of revenue for the
first quarter of fiscal 2003, an increase of $600,000 or 5%, as compared to
$11.6 million or 56% of revenue for the first quarter of fiscal 2002. This
increase relates primarily to increased production costs driven by increased
sales volume. Gross margin as a percentage of total revenue for the Digital
Imaging Products segment was 46% for the first quarter of fiscal 2003, as
compared to 44% for the first quarter of fiscal 2002. The gross margin
improvement for the first quarter of fiscal 2003 was primarily the result of
lower warranty costs.
Cost of products sold for the Lasertel segment was $700,000 for the first
quarter of fiscal 2003, a decrease of $500,000 or 42% as compared to $1.2
million for the first quarter of fiscal 2002. The decrease in manufacturing
costs relates primarily to decreased salaries and benefits due to yield
improvements, as well as head count reductions undertaken in the first six
months of fiscal 2002.
RESEARCH AND PRODUCT DEVELOPMENT
Research and product development expenses consist primarily of payroll and
related expenses for personnel, parts and supplies, and contracted services
required to conduct our equipment, consumables and high-powered laser diode
product development efforts.
Research and product development expenses for the Digital Imaging Products
segment were $1.7 million or 8% of revenue, a decrease of $1.1 million, as
compared to $2.8 million or 13% of revenue for the first quarter of fiscal 2002.
The decrease relates primarily to a reduction in the number of development
programs which resulted in reduced expenditures in salaries and benefits, parts
and supplies, and professional and contractor services. Presstek's product
development cycle centers around major industry trade shows, and as a result,
our research and product development expenses vary in accordance with our
product development cycle.
Research and product development expenses for the Lasertel segment were
$270,000, an increase of $235,000, as compared to $35,000 for the first quarter
of fiscal 2002. The increase relates primarily to increased salaries and
benefits and parts and supplies to support Lasertel's additional research and
product development activities.
15
SALES, MARKETING AND CUSTOMER SUPPORT
Sales, marketing and customer support expenses consist primarily of payroll and
related expenses for personnel, advertising, trade shows, promotional expenses,
and travel costs related to our sales, marketing and customer support
activities.
Sales, marketing and customer support expenses for the Digital Imaging Products
segment were $2.8 million or 13% of revenue for the first quarter of fiscal
2003, an increase of $400,000, as compared to $2.4 million, or 12% of revenue
for the first quarter of fiscal 2002. The increase relates primarily to
increased salaries and benefits, as a result of head count increases in the
first quarter of fiscal 2003, as well as increased professional and contracted
services to support increased promotional activities directed at product
distribution.
Sales and marketing expenses for our Lasertel segment were $68,000 for the first
quarter of fiscal 2003, a decrease of $15,000, as compared to $83,000 for the
first quarter of fiscal 2002. The decrease was primarily related to reduced
promotional activities.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of payroll and related
expenses for personnel, and contracted professional services necessary to
conduct our finance, information systems, human resources and administrative
activities.
General and administrative expenses for the Digital Imaging Products segment
were $2.5 million or 11% of revenue for the first quarter of fiscal 2003, an
increase of $600,000, as compared to $1.9 million or 9% of revenue for the first
quarter of fiscal 2002. The increase relates primarily to increased salaries and
benefits as a result of increased head count in the first quarter of fiscal
2003.
General and administrative expenses for the Lasertel segment were $278,000 in
the first quarter of fiscal 2003, a decrease of $60,000, as compared to $338,000
for the first quarter of fiscal 2002. This decrease relates primarily to reduced
professional services.
OTHER INCOME (EXPENSE), NET
Other income (expense), net consists primarily of net interest expense, and
other miscellaneous expenses.
Interest expense, net was $153,000 for the first quarter of fiscal 2003, a
decrease of $78,000 as compared to $231,000 for the first quarter of fiscal
2002. Interest income was $71,000 for the first quarter of fiscal 2003, an
increase of $57,000, as compared to $14,000 for the first quarter of fiscal
2002, primarily as a result of increased cash balances available for investment.
Interest expense was $224,000 for the first quarter of fiscal 2003, a decrease
of $21,000, as compared to $245,000 for the first quarter of fiscal 2002,
primarily as a result of lower average debt balances and lower interest rates on
borrowings.
PROVISION FOR INCOME TAXES
We did not record a provision for federal or state income taxes as a result of
the utilization of net operating loss carryforwards for the first quarters of
fiscal 2003 and fiscal 2002.
NET INCOME
As a result of the foregoing, we had net income of $1.8 million for the first
quarter of fiscal 2003, as compared to net income of $183,000 for the first
quarter of fiscal 2002.
16
LIQUIDITY AND CAPITAL RESOURCES
We finance our operating and capital investment requirements primarily through
cash flows from operations and borrowings. At March 29, 2003, we had cash and
cash equivalents of $20.6 million and working capital of $31.3 million as
compared to cash and cash equivalents of $17.6 million and working capital of
$28.6 million at December 28, 2002. The increase in cash and cash equivalents of
$3.0 million for the first quarter of fiscal 2003 was primarily due to net cash
provided by operating activities of $4.1 million, offset by cash of $1.1 million
used in investing and financing activities.
Net cash provided by operating activities was $4.1 million for the first quarter
of fiscal 2003, due primarily to net income of $1.8 million, non-cash charges of
depreciation, amortization, and other charges of $3.5 million, a decrease in net
inventories of $1.2 million, offset by increases in accounts receivable of $2.1
million. The increase in accounts receivable is attributable to the timing of
sales later in the quarter. The decrease in inventories is primarily the result
of inventory management programs initiated in fiscal 2002.
Net cash used in investing activities was $373,000 for the first quarter of
fiscal 2003, and consisted primarily of additions to property, plant and
equipment, net of proceeds from the sale of equipment used in the business.
Net cash used in financing activities was $709,000 for the first quarter of
fiscal 2003, and consisted primarily of payments on the mortgage term loans and
the equipment lease line of credit facility.
Our long-term debt consists of two mortgage term loans from Citizens Bank New
Hampshire ("Citizens"), and a lease line of credit from Keybank National
Association ("Keybank").
The first mortgage term loan is a 1998 ten-year mortgage term loan from Citizens
in the amount of $6.9 million and bears a fixed rate of interest of 7.12% per
year during the first five years, and a variable rate of interest at the LIBOR
rate plus 2%, (3.3% at March 29, 2003) 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 second mortgage term loan is a 2000 ten-year mortgage term loan in the
amount of $4.0 million and bears a fixed rate of interest equal to 7.95% per
year during the first five years, and 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 payments will be made in 60 monthly
installments of $34,993 plus interest. 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 and unpaid interest is due and payable on
October 30, 2010.
The two mortgage term loans are secured by land and buildings with a cost and
net book value of approximately $25.7 million and $22.1 million, respectively.
We also borrowed $13.0 million against a $15.0 million lease line of credit
facility, which expired in April 2002, from Keybank pursuant to a 1999 loan
agreement. The $13.0 million in borrowings is secured by equipment with a cost
and net book value at March 29, 2003 of $18.4 million and $12.2 million,
respectively. The loan bears a variable rate of interest based upon the LIBOR
rate plus 4.25% (5.55% at March 29, 2003) or the prime rate (4.25% at March 29,
2003), with a future fixed rate conversion provision. Principal and interest
under the Keybank lease line of credit are payable in 84 monthly installments.
17
In addition to the Citizens' mortgage term loans and the borrowings under the
Keybank lease line of credit, we also have a revolving line of credit loan with
Citizens, under which we may borrow a maximum of $16.0 million. This revolving
line of credit, which expires in October 2003, is subject to a borrowing base
formula based on eligible accounts receivable and inventories, as defined by the
revolving line of credit 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 our assets, with interest payable at the LIBOR rate plus
1.50% (2.8% at March 29, 2003). As of March 29, 2003, we had $14.2 million
available under the revolving line of credit loan, reduced by $6.3 million
outstanding under standby letters of credit.
Under the terms of the Citizens' mortgage term loans, the Keybank lease line of
credit and the Citizens' revolving line of credit, we are required to meet
various restrictive covenants on a quarterly and annual basis, including maximum
funded debt to EBITDA and minimum fixed charge coverage covenants. As of March
29, 2003, we were in compliance with all financial covenants.
We have future contractual payment obligations through 2010 that primarily
relate to debt, royalty obligations, executive contractual obligations and
operating leases. The following table represents our future commitments at March
29, 2003 and December 28, 2002:
MAR 29 Dec 28
(In thousands) 2003 2002
---------------------------------------------------------------------------
Credit facilities $ 15,952 $ 16,707
Royalty obligation 11,707 11,900
Executive contractual obligations 1,155 1,257
Lease agreements 54 121
---------------------------------------------------------------------------
Total contractual obligations $ 28,868 $ 29,985
===========================================================================
Our anticipated capital expenditures for fiscal 2003 are approximately $2.0
million, and primarily relate to the purchase of capital equipment to be used in
the production of our DI and CTP equipment and consumable products.
Heidelberg recently announced that it plans to introduce a competitive plate
product as an alternative to Presstek's PEARLdry for the Quickmaster DI,
beginning in the second quarter of fiscal 2003. While it is too early to
estimate the impact this plate may have on our business or our relationship with
Heidelberg, the introduction of a competitive plate could reduce the revenue
generated by Presstek under its relationship with Heidelberg. This could also
lead to downward pricing pressure for our full line of spooled consumable
products, which could have a material adverse effect on our liquidity.
We believe that existing funds, cash flows from operations, and cash available
under our Citizens' revolving line of credit should be sufficient to satisfy
working capital requirements and capital expenditures through the term of the
Citizens' revolving line of credit loan agreement, which expires in October
2003. There can be no assurance, however, that we will be able to renew this
loan agreement, will not require additional financing, or that such additional
financing, if needed, will be available on acceptable terms.
EFFECT OF INFLATION
Inflation has not had, and is not expected to have, a material impact upon our
operations.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------
We are exposed to market risk from changes in interest rates primarily as a
result of our borrowing activities, and to a lesser extent, our investing
activities. The majority of our long-term borrowings are in fixed rate
instruments, or variable rate instruments with fixed rate conversion provisions.
We do not enter into interest rate swap agreements or other speculative or
leveraged transactions. We currently have no material exposure to interest rate
fluctuations on our short-term investments.
We have limited exposure to foreign currency exchange rate risk. While
substantially all of our transactions are currently denominated in U.S. dollars,
a limited number of sales transactions are denominated in our customers'
currency. To date, the currency exposure related to these transactions has not
been material. Furthermore, some of our customers and strategic partners are not
located in the United States, and are themselves subject to fluctuations in
foreign exchange rates. If the home country currency of these customers and
strategic partners were to decrease in value relative to the United States
dollar, their ability to purchase and/or market our products could be adversely
affected and our products may become less competitive to them. This may have an
adverse impact on our business. Likewise, some of our suppliers are not located
in the United States and thus, such suppliers are subject to foreign exchange
rate risks in transactions with us. Decreases in the value of their home country
currency versus that of the United States dollar could cause fluctuations in
supply pricing which could have an adverse effect on our business.
ITEM 4. CONTROLS AND PROCEDURES.
------------------------
(a) Evaluation of Disclosure Controls and Procedures
As of a date (the "Evaluation Date") within ninety days prior to the filing date
of this Quarterly Report on Form 10-Q, we have, under the supervision and with
the participation of the Presstek's management, including its Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of the design
and operation of Presstek's disclosure controls and procedures pursuant to Rule
13a-15 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Based upon that evaluation, Presstek's Chief Executive Officer
and Chief Financial Officer concluded that, as of the Evaluation Date,
Presstek's disclosure controls and procedures are effective in ensuring that
material information relating to Presstek (including its consolidated
subsidiaries) required to be disclosed by Presstek in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, including ensuring that such material information
is accumulated and communicated to Presstek's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
(b) Changes in Internal Controls
There were no significant changes in Presstek's internal controls or in other
factors that could significantly affect Presstek's internal controls subsequent
to the Evaluation Date.
19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Part I - Item 3 of the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 2002 filed with the Commission on March 28, 2003 for a
description of certain legal proceedings pending against the Company. All of
such information is hereby incorporated by reference in response to this item.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1* Distribution Agreement by and between Presstek Inc. and Kodak
Polychrome Graphics LLC dated March 18, 2003 (filed herewith).
10.2* Restated Amended Master Supply and Distribution Agreement by and
between Presstek, Inc. and Xerox Corporation dated March 18, 2003 (filed
herewith).
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
* 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
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRESSTEK, INC.
(Registrant)
Date: May 13, 2003 /s/ Edward J. Marino
------------------------------------------------
By: Edward J. Marino
President and Chief Executive Officer
(Principal Executive and Duly Authorized Officer)
Date: May 13, 2003 /s/ Moosa E. Moosa
------------------------------------------------
By: Moosa E. Moosa
Vice President - Finance,
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
21
CERTIFICATIONS
I, Edward J. Marino, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Presstek, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003 /s/ Edward J. Marino
------------------------------
Edward J. Marino
President and Chief Executive Officer
(Principal Executive Officer)
22
I, Moosa E. Moosa, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Presstek, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003 /s/ Moosa E. Moosa
-------------------------------
Moosa E. Moosa
Vice President - Finance, Chief
Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
23
EXHIBIT INDEX
No. Description
10.1* Distribution Agreement by and between Presstek Inc. and Kodak
Polychrome Graphics LLC dated March 18, 2003 (filed herewith).
10.2* Restated Amended Master Supply and Distribution Agreement by and
between Presstek, Inc. and Xerox Corporation dated March 18, 2003
(filed herewith).
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
* Confidential treatment requested as to omitted portions pursuant to Rule 24b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
24