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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 31, 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
PRESSTEK, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 02-0415170
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of 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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9 COMMERCIAL STREET, HUDSON, NEW HAMPSHIRE 03051-4903
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(Former address of principal executive offices including zip code)
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 May 7, 2001, there were 34,098,581 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 March 31, 2001 (unaudited) and
December 30, 2000 3
Statements of Operations for the three months ended
March 31, 2001 and April 1, 2000 (unaudited) 4
Statements of Cash Flows for the three months ended
March 31, 2001 and April 1, 2000 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
PRESSTEK, INC.
MAR 31 DEC 30
BALANCE SHEETS 2001 2000
(In thousands, except share data) (UNAUDITED)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,794 $ 11,972
Accounts receivable, net of allowance for losses
of $2,529 and $2,842 in fiscal 2001 and 2000, respectively 16,217 16,946
Inventories 14,295 12,045
Advances to suppliers 7,105 6,455
Other current assets 780 1,147
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Total current assets 46,191 48,565
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PROPERTY, PLANT AND EQUIPMENT, NET 63,860 60,248
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OTHER ASSETS:
Patent application costs and license rights, net 4,847 4,885
Other 2,094 2,204
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Total other assets 6,941 7,089
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TOTAL $ 116,992 $ 115,902
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 2,136 $ 1,989
Accounts payable and accrued expenses 9,992 8,476
Accrued salaries and employee benefits 2,135 1,686
Deferred revenues 718 2,559
Net current liabilities of discontinued operations 1,466 1,568
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Total current liabilities 16,447 16,278
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LONG-TERM DEBT, NET OF CURRENT PORTION 15,901 16,481
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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 34,098,581 shares at
March 31, 2001; 34,027,981 shares at December 30, 2000 341 340
Additional paid-in capital 97,212 96,685
Accumulated deficit (12,909) (13,882)
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Total stockholders' equity 84,644 83,143
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TOTAL $ 116,992 $ 115,902
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See notes to financial statements
3
PRESSTEK, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
MAR 31 APR 1
FOR THE THREE MONTHS ENDED 2001 2000
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REVENUES:
Product sales $ 23,641 $ 17,107
Royalties and fees from licensees 2,124 1,928
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Total revenues 25,765 19,035
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COSTS AND EXPENSES:
Cost of products sold 15,442 10,658
Research and product development 2,935 4,559
Sales, marketing and customer support 3,140 1,665
General and administrative 3,072 1,861
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Total costs and expenses 24,589 18,743
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INCOME FROM OPERATIONS 1,176 292
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OTHER INCOME (EXPENSE), NET:
Dividend and interest, net (218) 99
Other, net 15 --
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Total other income (expense), net (203) 99
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INCOME BEFORE INCOME TAXES 973 391
PROVISION FOR INCOME TAXES -- --
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NET INCOME $ 973 $ 391
============================================================================================================
EARNINGS PER SHARE - BASIC $ 0.03 $ 0.01
============================================================================================================
EARNINGS PER SHARE - DILUTED $ 0.03 $ 0.01
============================================================================================================
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING - BASIC 34,064 32,561
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WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING - DILUTED 34,621 34,195
============================================================================================================
See notes to financial statements
4
PRESSTEK, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
MAR 31 APR 1
FOR THE THREE MONTHS ENDED 2001 2000
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CASH FLOWS - OPERATING ACTIVITIES:
Net Income $ 973 $ 391
Adjustments to reconcile income from continuing operations to net cash
provided by (used in) operating activities of continuing operations:
Depreciation and amortization 2,053 1,572
Provision for warranty and other costs 442 188
Provision for losses on accounts receivable 300 300
Other, net 41 34
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease (increase) in accounts receivable 429 (2,305)
Increase in inventories (2,250) (1,527)
Increase in advances to suppliers and other current assets (283) (381)
Increase (decrease) in accounts payable and accrued expenses 1,075 (647)
Increase in accrued salaries and employee benefits 449 435
Decrease in deferred revenue (1,841) (100)
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Net cash provided by (used in) operating activities of continuing operations 1,388 (2,040)
Net cash used in operating activities of discontinued operations (102) (362)
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Net cash provided by (used in) operating activities 1,286 (2,402)
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CASH FLOWS - INVESTING ACTIVITIES:
Purchases of property, plant and equipment (5,510) (1,626)
Increase in other assets (49) (193)
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Net cash used in investing activities (5,559) (1,819)
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CASH FLOWS - FINANCING ACTIVITIES:
Net proceeds from sale of common stock 528 804
Repayments of mortgage term loan (147) (250)
Repayments of lease line of credit (286) --
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Net cash provided by financing activities 95 554
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DECREASE IN CASH AND CASH EQUIVALENTS (4,178) (3,667)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 11,972 18,653
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CASH AND CASH EQUIVALENTS END OF PERIOD $ 7,794 $ 14,986
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 341 $ 266
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Income taxes $ 46 $ 55
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NON-CASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued in exchange for consulting services rendered $ -- $ 59
=========================================================================================================================
See notes to financial statements
5
PRESSTEK, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 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 months ended March 31, 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. 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 divestiture of Delta V was recorded in the quarter ended October 2, 1999,
and the financial statements for all periods reflect Delta V as a discontinued
operation. See Note 6 of notes to the financial statements. All of the following
notes, unless otherwise indicated, refer to the continuing operations of
Presstek.
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 periods ended March 31, 2001 ("the first quarter of fiscal
2001") and April 1, 2000 ("the first quarter 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 March 31, 2001 and December
30, 2000, inventories consisted of the following:
MAR 31 DEC 30
(In thousands) 2001 2000
----------------------- -------------------- ----------------------
Raw materials $ 5,106 $ 3,800
Work in process 5,285 5,082
Finished goods 3,904 3,163
----------------------- -------------------- ----------------------
Total $ 14,295 $ 12,045
======================= ==================== ======================
6
3. PROPERTY, PLANT AND EQUIPMENT, NET
----------------------------------
Property, plant and equipment, at cost consisted of the following at March 31,
2001 and December 30, 2000:
MAR 31 DEC 30
(In thousands) 2001 2000
--------------------------------------- ----------- -----------
Land and improvements $ 2,038 $ 2,038
Buildings and leasehold improvements 26,928 26,711
Production equipment and other 51,055 44,610
Equipment in process 5,255 6,450
--------------------------------------- ----------- -----------
85,276 79,809
Less accumulated depreciation (21,416) (19,561)
--------------------------------------- ----------- -----------
$ 63,860 $ 60,248
======================================= =========== ===========
4. EARNINGS PER SHARE
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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
at March 31, 2001 and April 1, 2000:
MAR 31 APR 1
(In thousands, except per share data) 2001 2000
-------------------------------------- ------------ ------------
-------------------------------------- ------------ ------------
Net income $ 973 $ 391
====================================== ============ ============
Weighted average common shares
outstanding - Basic 34,064 32,561
Effect of assumed conversion
of stock options 557 1,634
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Weighted average common shares
outstanding - Diluted 34,621 34,195
====================================== ============ ============
Earnings per share - Basic $ 0.03 $ 0.01
====================================== ============ ============
Earnings per share - Diluted $ 0.03 $ 0.01
====================================== ============ ============
Options and warrants to purchase 1,696,626 shares of common stock at exercise
prices ranging from $11.69 to $26.94 per share were outstanding during a portion
of the first quarter of fiscal 2001, 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 March 19, 2011, were all
outstanding at March 31, 2001.
Options to purchase 3,250 shares of common stock at an exercise price of $26.94
per share were outstanding during a portion of the first quarter of fiscal 2000,
but were not included in the computation of diluted earnings per share as the
exercise prices of the options were greater than the average market price of the
common shares. These options which expire on March 27, 2010 were all outstanding
at April 1, 2000.
5. INCOME TAXES
------------
The Company did not record a provision for or a charge in lieu of United States
federal income taxes or state income taxes due to tax losses incurred for the
first quarter of fiscal 2001 and the first quarter of fiscal 2000, prior to the
deductions related to stock compensation.
7
6. DISCONTINUED OPERATIONS
-----------------------
During fiscal 1999 the Company discontinued the operations of Delta V to allow
the Company to further focus its efforts on the core business of digital imaging
and plate manufacturing. Located in Tucson, Arizona, Delta V was engaged in the
development, manufacture, and sale of vacuum deposition coating equipment for
vacuum coating applications. The Company concluded the operations of Delta V at
the end of fiscal 1999.
Delta V was reported separately as a discontinued operation in prior periods.
Net current liabilities of discontinued operations at March 31, 2001 and
December 30, 2000 were $1.5 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 first quarter of fiscal 2001 and the first quarter of 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 first quarter of fiscal
2001 were as follows:
DIGITAL IMAGING
(In thousands) PRODUCTS LASERTEL TOTAL
------------------------------- ---------------- ------------ --------
Revenues $ 25,765 $ - $ 25,765
Inter-segment sales - 588 588
Income (loss) from operations 3,965 (2,789) 1,176
Total assets 97,534 19,458 116,992
Depreciation and amortization 1,842 211 2,053
Capital expenditures 1,270 4,240 5,510
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
shares of common stock required 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, $22.9 million of which was
recorded as a long-term liability.
8
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 current fiscal quarter. 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.
9
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) 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 meet production demands and develop
other markets for its laser prototypes, 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 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. The products included in the Xerox relationship are four and
five color versions of a B3 size sheet-fed press, which is 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 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. While the Company established LaserTel
primarily to gain some control over the
10
source of laser diodes, the nature of LaserTel's technology and the Company's
available capacity have enabled LaserTel to find additional market applications
for its laser technology. As a result, LaserTel is also currently developing
laser prototypes for qualification to the telecommunications, defense, and
medical industries. LaserTel has particular experience in the design and
fabrication of multi-mode high power laser diodes. This experience spans ten
years of development activity at Presstek and is expected to support
applications in telecommunications as well as graphic arts. There can be no
assurance, however that these products will be commercially successful or
produce significant revenues for the Company or LaserTel.
In fiscal 1999 the Company discontinued the operations of its Delta V subsidiary
to allow the Company to further focus its efforts on the core business of
digital imaging and plate manufacturing. Located in Tucson, Arizona, Delta V was
engaged in the development, manufacture, and sale of vacuum deposition coating
equipment for vacuum coating applications. The Company concluded the operations
of Delta V as of the end of the fiscal 1999.
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 periods ended March 31, 2001 ("the first quarter of fiscal
2001) and April 1, 2000 ("the first quarter 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 first quarter of fiscal 2001 of $25.8 million consisted of
product sales, royalties, license fees and product development reimbursements.
Revenues for the first quarter of fiscal 2001 increased $6.8 million or 36% as
compared to $19.0 million for the first quarter of fiscal 2000. Revenues
generated for the first quarter of fiscal 2001 and the first quarter of fiscal
2000 relate solely to the Digital Imaging Products segment.
Product sales for the first quarter of fiscal 2001 were $23.7 million as
compared to $17.1 million for the first quarter of fiscal 2000, an increase of
$6.6 million or 39%. The increase was due primarily to volume increases of
presses shipped to Xerox, which are marketed by Xerox 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 CTP Dimension platesetter products, and volume increases of the
Company's thermal consumable products. The revenues generated from the sale of
the Company's PEARLdry and other consumable products were $12.5 million for the
first quarter of fiscal 2001, an increase of $2.9 million or 30%, as compared to
$9.6 million for the first quarter of fiscal 2000. These consumable product
revenues included $5.1 million and $3.6 million for the first quarter of fiscal
2001 and fiscal 2000, respectively, sold under the Company's agreements with
Heidelberg and its distributors.
Royalties and fees from licensees for the first quarter of fiscal 2001 of $2.1
million increased $200,000 or 11% as compared to royalties and fees of $1.9
million for the first quarter of fiscal 2000. Royalties decreased $273,000 or
14% comparing the first quarter of fiscal 2001 to the first quarter of fiscal
2000, as a result of decreased shipments to Heidelberg of direct imaging systems
used in the Quickmaster DI. This decrease was offset by an increase of $469,000
in license fees primarily due to distribution fees received from Xerox in the
first quarter of fiscal 2001.
Revenues generated under the Company's agreements with Heidelberg and its
distributors were $11.3 million in the first quarter of fiscal 2001, an increase
of $500,000 or 5% from the first quarter of fiscal 2000 revenues of $10.8
million. Revenues from Heidelberg represented 44% and 57% of total revenues for
the first quarter 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.
11
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 for the first quarter of fiscal
2001 was $13.5 million, an increase of $2.8 million or 26% as compared to $10.7
million for the first quarter of fiscal 2000 as a result of increased product
shipments. The gross margin on product sales for the Digital Imaging Products
segment increased to 43% for the first quarter of fiscal 2001, from 37% for the
first quarter of fiscal 2000. This increase is 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
first quarter of fiscal 2001 included $1.9 million in manufacturing costs.
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 $2.9 million or 11% of revenues for
the first quarter of fiscal 2001 as compared to $4.6 million or 24% of revenues
for the first quarter of fiscal 2000. The decrease of $1.7 million is primarily
the result of reduced expenditures for parts and components associated with
developing prototypes of the Company's products 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 $3.0 million, or 12% of revenues for the first
quarter of fiscal 2001 as compared to $1.7 million or 9% of revenues for the
first quarter of fiscal 2000. The increase of $1.3 million resulted primarily
from increases in salaries as a result of head count growth and increases in
professional services related to the Company's continued expansion of its
worldwide sales, distribution and customer support network. Sales, marketing and
customer support expenses for the LaserTel segment were $136,000 or 1% of
revenues for the first quarter of fiscal 2001 and primarily include salaries and
advertising expenses related to establishing the Lasertel segment.
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 $2.3
million or 9% of revenues for the first quarter of fiscal 2001, as compared to
$1.9 million or 10% of revenues for the first quarter of fiscal 2000. The
increase of $458,000 related primarily to increases in legal fees as a result of
patent litigation, and increases in other professional services necessary to
conduct the finance, information systems, and administrative functions. The
general and administrative expenses for the LaserTel segment were $753,000 or 3%
of revenues for the first quarter of fiscal 2001, and relate primarily to
salaries and other professional services necessary to conduct the finance,
information systems and administrative functions.
OTHER INCOME AND EXPENSE
Other expense net, was $203,000 or 1% of revenues for the first quarter of
fiscal 2001 as compared to other income net, of $99,000 or 1% of revenues for
the first quarter of fiscal 2000. Dividend and interest income was $123,000 for
the first quarter of fiscal 2001 as compared to $283,000 for the first quarter
of fiscal 2000. The decrease of $160,000 is primarily attributed to the decrease
in average cash balances available for investments. Interest expense was
$341,000 for the first quarter of fiscal 2001 as compared to $184,000 for the
first quarter of fiscal 2000. The increase of $157,000 is primarily attributed
to the increased borrowings related to the Company's lease line of credit
facility with Keybank National Association.
12
PROVISION FOR INCOME TAXES
The Company did not record a provision for or a charge in lieu of United States
federal income taxes or state income taxes due to tax losses incurred for the
three months ended March 31, 2001 and April 1, 2000, prior to the deductions
related to stock compensation.
NET INCOME
As a result of the foregoing, the Company had net income of $973,000 for the
first quarter of fiscal 2001, as compared to net income of $391,000 for the
first quarter of fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001, the Company had cash and cash equivalents of $7.8 million and
working capital of $29.8 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 $4.2 million for the first quarter of fiscal 2001 was
primarily attributable to cash used in investing activities of $5.6 million,
offset by cash provided by operating activities of $1.4 million.
Net cash generated from operating activities was $1.4 million for the first
quarter ended March 31, 2001, as a result of net income $973,000, adjusted for
non-cash items of depreciation and amortization of $2.1 million and a decrease
in accounts receivable of $429,000, offset by increases in inventories of $2.3
million as a result of greater production requirements, and increases in
accounts payable and accrued expenses of $1.6 million. Advances to suppliers and
other current assets increased by $283,000, primarily reflecting advanced
payments made in connection with certain supply agreements. Deferred revenue
decreased by $1.8 million as a result of product shipments in the first quarter
of fiscal 2001, for which payment had been received in fiscal 2000.
Net cash used for investing activities was $5.6 million for the first quarter
ended March 31, 2001, and consisted primarily of additions to property, plant
and equipment used in the Company's business of $5.5 million. These additions
included $4.2 million in equipment purchases related to the manufacture of laser
diodes for the LaserTel segment.
Net cash provided by financing activities for the first quarter ended March 31,
2001 totaled $95,000, and consisted primarily of proceeds from the issuance of
common stock upon the exercise of options of $528,000, offset by payments on the
mortgage term loans and the lease line of credit of $433,000.
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 received an extension
on 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%, (7.08% at March 31, 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.
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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
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% (6.58% at March 31, 2001). As of March 31,
2001, the Company had $8.0 million outstanding under standby letters of credit,
and $8.0 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 March 31, 2001 the Company was in
compliance with all financial covenants.
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.
The Company is currently exploring various financing alternatives with respect
to LaserTel's capital requirements, however there can be no assurance that the
Company will obtain additional financing.
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 current fiscal quarter. 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.
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
14
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
See 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 and
Note 9 of Notes to the Financial Statements of this Form 10Q for a description
of certain legal proceedings pending against the Company and certain of its
officers and directors. All of such information is hereby incorporated by
reference in response to this item.
Item 2. Changes in Securities and Use of Proceeds
(a) None
(b) None
(c) Pursuant to the terms of the settlement agreement related to the
consolidated class action settlement, and in consideration for the
execution of such settlement, the Company agreed to issue an
aggregate of 1,245,246 shares of its common stock to the various
class action plaintiffs and their lawyers. The number of shares was
determined by calculating the aggregate number of shares of common
stock of the Company obtained by dividing $11.0 million by the
volume weighted average price of the Company's common stock for all
trading days in April 2000 and the aggregate number of shares of
common stock of the Company obtained by dividing $11.0 million by
the volume weighted average price of the Company's common stock for
all trading days in October 2000. In addition, in connection with
the settlement of the derivative lawsuit initiated against the
Company, the Company agreed to issue 60,582 shares of common stock.
Thus between both the class action settlement and the derivative
suit settlement, the Company agreed to issue, in the aggregate,
1,305,828 shares of common stock. On August 2, 2000 the Company
issued 60,582 shares of common stock. On November 15, 2000 the
Company issued 437,196 of these shares of common stock. On March
30, 2001 the Company issued the remaining 808,050 shares of common
stock. All such shares were issued pursuant to an exemption from
registration provided by Section 3(a)(10) of the Securities Act of
1933, as the issuance of such shares was approved at a fairness
hearing before the United States District Court of New Hampshire in
June 2000.
(d) None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
NA
(b) Reports on Form 8-K
None
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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 14, 2001 /s/ Robert W. Hallman
------------------------------------
By: Robert W. Hallman
President and
Chief Executive Officer
(Principal Executive and
Duly Authorized Officer)
Date: May 14, 2001 /s/ Neil Rossen
------------------------------------
By: Neil Rossen
Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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