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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 September 29, 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
-------------------------------- ------------------------------------
(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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of November 7, 2001, there were 34,110,906 shares of the registrant's common
stock, $.01 par value per share, outstanding.
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PRESSTEK, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets as of September 29, 2001 (unaudited) and
December 30, 2000 3
Statements of Operations for the three and nine months ended
September 29, 2001 and September 30, 2000 (unaudited) 4
Statements of Cash Flows for the nine months ended
September 29, 2001 and September 30, 2000 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17
PART II OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
PRESSTEK, INC.
SEPTEMBER 29 December 30
BALANCE SHEETS 2001 2000
(In thousands, except share data) (UNAUDITED)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,672 $ 11,972
Accounts receivable, net of allowance for losses
of $2,840 and $2,842 in fiscal 2001 and 2000,
respectively 20,693 16,946
Inventories 18,763 12,045
Advances to suppliers 3,599 6,455
Other current assets 985 1,147
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Total current assets 46,712 48,565
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PROPERTY, PLANT AND EQUIPMENT, NET 63,005 60,248
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OTHER ASSETS:
Patent application costs and license rights, net 4,619 4,885
Other 1,834 2,204
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Total other assets 6,453 7,089
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TOTAL $116,170 $115,902
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 2,533 $ -
Current portion of long-term debt 2,307 1,989
Accounts payable and accrued expenses 9,710 8,476
Accrued salaries and employee benefits 2,060 1,686
Deferred revenues 1,453 2,559
Net current liabilities of discontinued operations 1,433 1,568
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Total current liabilities 19,496 16,278
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LONG-TERM DEBT, NET OF CURRENT PORTION 14,655 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
34,110,906 shares at September 29, 2001;
34,027,981 shares at December 30, 2000 341 340
Additional paid-in capital 97,298 96,685
Accumulated deficit (15,620) (13,882)
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Total stockholders' equity 82,019 83,143
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TOTAL $116,170 $115,902
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See notes to financial statements
3
PRESSTEK, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three and Nine Months Ended
(In thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
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SEPTEMBER 29 September 30 SEPTEMBER 29 September 30
2001 2000 2001 2000
---------------------------------------------------------------------------------------------------
REVENUES:
Product sales $ 24,283 $ 19,609 $ 72,832 $ 55,106
Royalties and fees from licensees 2,041 2,429 6,388 7,183
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Total revenues 26,324 22,038 79,220 62,289
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COSTS AND EXPENSES:
Cost of products sold 18,551 12,031 49,984 33,778
Research and product development 2,778 3,379 9,143 12,083
Sales, marketing and customer support 3,653 2,347 10,228 7,062
General and administrative 3,806 2,552 10,697 6,777
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Total costs and expenses 28,788 20,309 80,052 59,700
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INCOME (LOSS) FROM OPERATIONS (2,464) 1,729 (832) 2,589
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OTHER INCOME (EXPENSE), NET:
Interest income (expense), net (327) (48) (857) 60
Other, net (25) 60 (49) 116
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Total other income (expense), net (352) 12 (906) 176
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INCOME (LOSS) BEFORE INCOME TAXES (2,816) 1,741 (1,738) 2,765
PROVISION FOR INCOME TAXES - 85 - 150
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NET INCOME (LOSS) $ (2,816) $ 1,656 $ (1,738) $ 2,615
===================================================================================================
EARNINGS (LOSS) PER SHARE - BASIC $ (0.08) $ 0.05 $ (0.05) $ 0.08
===================================================================================================
EARNINGS (LOSS) PER SHARE - DILUTED $ (0.08) $ 0.05 $ (0.05) $ 0.08
===================================================================================================
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING - BASIC 34,109 32,659 34,091 32,607
===================================================================================================
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING - DILUTED 34,109 33,800 34,091 34,066
===================================================================================================
See notes to financial statements
4
PRESSTEK, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
SEPTEMBER 29 September 30
FOR THE NINE MONTHS ENDED 2001 2000
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Net income (loss) $ (1,738) $ 2,615
Adjustments to reconcile income from continuing operations to net cash
provided by (used in) operating activities of continuing operations:
Depreciation and amortization 6,623 4,900
Provision for warranty and other costs 3,053 784
Provision for losses on accounts receivable 900 870
Other, net 94 84
Changes in operating assets and liabilities, net of effects from acquisitions:
Increase in accounts receivable (4,647) (4,853)
Increase in inventories (6,718) (2,831)
Decrease (increase) in advances to suppliers and other current assets 3,018 (4,101)
Decrease in accounts payable and accrued expenses (1,815) (2,207)
Increase in accrued salaries and employee benefits 374 560
Increase (decrease) in deferred revenue (1,106) 69
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Net cash used in operating activities of continuing operations (1,962) (4,110)
Net cash used in operating activities of discontinued operations (135) (141)
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Net cash used in operating activities (2,097) (4,251)
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CASH FLOWS - INVESTING ACTIVITIES:
Purchases of property, plant and equipment (8,855) (9,553)
Decrease (increase) in other assets 13 (440)
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Net cash used in investing activities (8,842) (9,993)
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CASH FLOWS - FINANCING ACTIVITIES:
Net proceeds from sale of common stock 614 1918
Proceeds under line of credit 2,533 -
Proceeds under lease line of credit - 5,959
Repayments of mortgage term loan (630) (412)
Repayments of lease line of credit (878) (506)
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Net cash provided by financing activities 1,639 6,959
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DECREASE IN CASH AND CASH EQUIVALENTS (9,300) (7,285)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 11,972 18,653
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CASH AND CASH EQUIVALENTS END OF PERIOD $ 2,672 $ 11,368
==========================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,051 $ 673
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Income taxes $ 121 $ 55
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NON-CASH INVESTING AND FINANCING ACTIVITIES:
Warrants issued in exchange for consulting services rendered $ - $ 2,488
==========================================================================================================================
See notes to financial statements
5
PRESSTEK, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 29, 2001
1. BASIS OF PRESENTATION
---------------------
Presstek, Inc. ("Presstek", or "the Company") is a manufacturer, developer, and
marketer of non-photographic, digital imaging and printing plate technologies
for the printing and graphic arts industries. Presstek's products and
applications incorporate PEARL(R) and DI(R) digital imaging technologies and
utilize PEARL consumables for computer-to-plate ("CTP") and direct-to-press
applications. The Company's patented DI and PEARL thermal laser diode product
family enables its customers to produce high quality, full-color lithographic
printed materials more quickly and cost efficiently than conventional processes.
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The financial
information included in the quarterly report should be read in conjunction with
the Company's audited financial statements and related notes thereto for the
fiscal year ended December 30, 2000. The December 30, 2000 information has been
derived directly from the annual financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included and all such adjustments were normal and recurring. Operating
results for the three and nine months ended September 29, 2001 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 29, 2001.
In April 2000 the Company incorporated an Arizona subsidiary, Lasertel, Inc.
("Lasertel") for the purpose of securing its supply of laser diodes. Lasertel is
located in the former Delta V Technologies, Inc. ("Delta V") facility in Tucson,
Arizona. Delta V was discontinued in fiscal 1999. Lasertel operates as a
subsidiary of Presstek, and is primarily engaged in the manufacture and
development of the Company's high-powered laser diodes.
The Company operates and reports on a 52/53 week fiscal year ending on the
Saturday closest to December 31. Accordingly, the financial statements include
the thirteen week period ended September 29, 2001 ("the third quarter of fiscal
2001") and September 30, 2000 ("the third quarter of fiscal 2000"), and the
thirty-nine week period ended September 29, 2001 ("the first nine months of
fiscal 2001") and September 30, 2000 ("the first nine months of fiscal 2000").
The Company operates in two reportable segments, the Digital Imaging Products
segment and the Lasertel segment. The Digital Imaging Products segment is
primarily engaged in the development, manufacture and sales of proprietary
digital imaging systems and printing plate technologies for CTP and
direct-to-press applications. The Lasertel segment is primarily engaged in the
manufacture and development of Presstek's high-powered laser diodes. See Note 8
of notes to the financial statements.
2. INVENTORIES
-----------
Inventories are valued at the lower of cost or market value, with cost
determined using the first-in, first-out method. At September 29, 2001 and
December 30, 2000, inventories consisted of the following:
SEPTEMBER 29 December 30
(In thousands) 2001 2000
----------------------------------------------------------------
Raw materials $ 4,362 $ 3,800
Work in process 5,391 5,082
Finished goods 9,010 3,163
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Total $ 18,763 $ 12,045
================================================================
6
3. PROPERTY, PLANT AND EQUIPMENT, NET
----------------------------------
Property, plant and equipment, at cost consisted of the following at September
29, 2001 and December 30, 2000:
SEPTEMBER 29 December 30
(In thousands) 2001 2000
---------------------------------------------------------------------
Land and improvements $ 2,038 $ 2,038
Buildings and leasehold improvements 27,424 26,711
Production equipment and other 56,456 44,610
Equipment in process 2,631 6,450
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88,549 79,809
Less accumulated depreciation (25,544) (19,561)
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$ 63,005 $ 60,248
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4. EARNINGS PER SHARE
------------------
Basic earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. Diluted
earnings per share is computed giving effect to all diluted potential common
shares that were outstanding during the period. Diluted potential common shares
consist of the incremental common shares issuable upon exercise of stock options
and warrants.
The following represents the calculation of basic and diluted earnings per share
for the three and nine months ended September 29, 2001 and September 30, 2000:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 29 September 30 SEPTEMBER 29 September 30
(In thousands, except per share data) 2001 2000 2001 2000
------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (2,816) $ 1,656 $ (1,738) $ 2,615
==================================================================================================================
Weighted average common shares
Outstanding - Basic 34,109 32,659 34,091 32,607
Effect of assumed conversion
of stock options - 1,141 - 1,459
------------------------------------------------------------------------------------------------------------------
Weighted average common shares
Outstanding - Diluted 34,109 33,800 34,091 34,066
==================================================================================================================
Earnings (loss) per share - Basic $ (0.08) $ 0.05 $ (0.05) $ 0.08
==================================================================================================================
Earnings (loss) per share - Diluted $ (0.08) $ 0.05 $ (0.05) $ 0.08
==================================================================================================================
Options and warrants to purchase 2,268,476 and 1,760,726 shares of common stock
at exercise prices ranging from $8.75 to $26.94 per share were outstanding
during a portion of the third quarter and the first nine months of fiscal 2001,
respectively, but were not included in the computation of diluted earnings per
share as the exercise prices of the options and warrants were greater than the
average market price of the common shares. These options and warrants, which
expire from February 23, 2002 through July 30, 2011, were all outstanding at
September 29, 2001.
Options and warrants to purchase 339,250 and 307,250 shares of common stock at
exercise prices ranging from $16.44 to $26.94 per share were outstanding during
a portion of the third quarter and the first nine months of fiscal 2000,
respectively, but were not included in the computation of diluted earnings per
share as the exercise prices of the options and warrants were greater than the
average market price of the common shares. These options and warrants, which
expire from May 18, 2008 through September 29, 2010, were all outstanding at
September 30, 2000.
7
5. INCOME TAXES
------------
The Company did not record a provision for or a charge in lieu of United States
federal income taxes, due to tax losses incurred for the third quarter and the
first nine months of fiscal 2001 and fiscal 2000 prior to deductions related to
stock compensation.
The Company did not record a provision for or a charge in lieu of state income
taxes, due to tax losses incurred for the third quarter and the first nine
months of fiscal 2001. The Company recorded a provision for state income taxes
for the third quarter and the first nine months of fiscal 2000 in the amount of
$85,000 and $150,000, respectively.
6. DISCONTINUED OPERATIONS
-----------------------
The Company concluded the operations of Delta V at the end of fiscal 1999.
Located in Tucson, Arizona, Delta V was engaged in the development, manufacture,
and sale of vacuum deposition coating equipment for vacuum coating applications.
Delta V was reported separately as a discontinued operation in prior periods.
Net current liabilities of discontinued operations at September 29, 2001 and
December 30, 2000 were $1.4 million and $1.6 million, respectively. The
remaining net current liabilities of discontinued operations represent primarily
product warranties and other liabilities related to Delta V's equipment
installations.
7. COMPREHENSIVE INCOME
--------------------
Comprehensive income is comprised of net income and all changes in stockholder's
equity except those due to investments by owners and distributions to owners,
which for the Company includes unrealized gains on marketable securities. For
the third quarter and the first nine months of fiscal 2001 and fiscal 2000 there
were no differences between net income and comprehensive income.
8. SEGMENT INFORMATION
-------------------
The Company operates in two reportable segments, the Digital Imaging Products
segment and the Lasertel segment. The Digital Imaging Products segment is
primarily engaged in the development, manufacture and sales of its proprietary
digital imaging systems and printing plate technologies for CTP and
direct-to-press applications. The Lasertel segment is primarily engaged in the
manufacture and development of the Company's high-powered laser diodes. The
Company operated in one business segment for the first quarter of fiscal 2000.
A summary of the Company's operations by segment for the three and nine months
ended September 29, 2001 and September 30, 2000 were as follows:
DIGITAL
IMAGING
(In thousands) PRODUCTS LASERTEL TOTAL
----------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 29, 2001
Revenues $ 26,299 $ 25 $ 26,324
Inter-segment sales - 1,300 1,300
Income (loss) from operations (162) (2,302) (2,464)
THREE MONTHS ENDED SEPTEMBER 30, 2000
Revenues $ 22,038 $ - $ 22,038
Inter-segment sales - - -
Income (loss) from operations 2,752 (1,023) 1,729
NINE MONTHS ENDED SEPTEMBER 29, 2001
Revenues $ 79,192 $ 28 $ 79,220
Inter-segment sales - 2,512 2,512
Income (loss) from operations 7,115 (7,947) (832)
NINE MONTHS ENDED SEPTEMBER 30, 2000
Revenues $ 62,289 $ - $ 62,289
Inter-segment sales - - -
Income (loss) from operations 4,055 (1,466) 2,589
8
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. The
Company issued the 60,582 shares in the third quarter of fiscal 2000. As a
result of these issuances, all required shares of common stock to be issued
under both the class action settlement and the memorandum of understanding in
the derivative litigation have been issued. The Company recorded a charge of
$23.2 million in the fourth quarter of fiscal 1999 related to the settlements.
In July 2001, the Company settled its outstanding arbitration proceedings with
Heidelberg. Pursuant to the terms of the settlement, the Company and Heidelberg
agreed that the licensing arrangements for the Heidelberg Quickmaster 46DI shall
be non-exclusive. As a result of the recognition of the non-exclusivity of the
license, the Company agreed to reduce the royalties payable by Heidelberg for
imaging kits delivered in connection with the Heidelberg Quickmaster 46DI by
approximately $9,000 per kit. This reduced royalty rate will become effective
for kits delivered after May 1, 2002.
Specifically, pursuant to the terms of the settlement, the Company and
Heidelberg agreed to license on a non-exclusive basis certain know-how and
patent rights. The Company also licensed to Heidelberg the right to use the DI
trademark in connection with its press and imaging products. Several other
technical intellectual property issues were also resolved. The settlement did
not resolve patent infringement claims between the parties with respect to the
Heidelberg Speedmaster 74-DI press but established a mechanism to do so upon
resolution of the Company's outstanding patent litigation with Creo Products,
Inc.
In addition, in consideration for the resolution of several issues that formed
part of the arbitration proceedings between the Company and Heidelberg,
Heidelberg agreed to make a one-time payment of $750,000 to the Company in the
fourth quarter of 2001.
In August 1999 Creo Products, Inc., ("Creo"), filed an action in the United
States District Court for the District of Delaware against the Company asserting
that Creo has a "reasonable apprehension that it will be sued by Presstek for
infringement" of two of the Company's patents and seeking a declaration that
Creo's products "do not and will not infringe any valid and enforceable claims"
of the patents in question. In September 1999, the Company filed a counterclaim
against Creo for patent infringement. The Company claimed that Creo infringed
two direct imaging patents owned by the Company which were recently the subject
of re-examination by the U.S. Patent and Trademark Office. This action went to
trial before the court without a jury during the week of June 25, 2001. The
court issued a decision on September 11, 2001, in which it affirmed the validity
and enforceability of the Company's on-press imaging patents, but held that the
current Creo DOP System did not infringe the patents. The Company disagrees with
the Court's conclusion on infringement. Creo has appealed the Court's decision
that the patents are valid and enforceable, and the Company has cross-appealed
the finding of non-infringement by the current Creo DOP System.
9
10. RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141),
which supersedes APB Opinion No. 16, "Business Combinations". SFAS No. 141
eliminates the pooling-of-interests method of accounting for business
combinations and modifies the application of the purchase accounting method. The
elimination of the pooling-of-interests method is effective for transactions
initiated after June 30, 2001. The remaining provisions of SFAS No. 141 will be
effective for transactions accounted for using the purchase method that are
completed after June 30, 2001. The Company is currently reviewing the provisions
of SFAS 141, but does not anticipate the new standard will have any effect on
its financial statements.
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142, "Goodwill and Intangible Assets" (SFAS No. 142), which supersedes APB
Opinion No. 17, "Intangible Assets". SFAS No. 142 eliminates the current
requirement to amortize goodwill and indefinite-lived intangible assets,
addresses the amortization of intangible assets with a defined life and
addresses the impairment testing and recognition for goodwill and intangible
assets. SFAS 142 will apply to goodwill and intangible assets arising from
transactions completed before and after the Statement's effective date. SFAS No.
142 is effective for fiscal 2002. The Company is currently reviewing the
provisions of SFAS 142, but does not anticipate the new standard will have any
effect on its financial statements.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: Certain statements contained in this Form 10-Q constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding the Company's expectations for its
financial and operating performance in 2001, the adequacy of cash for the
Company's operations, the strength of the Company's various strategic
partnerships (both on manufacturing and distribution), availability of component
materials, management's plans and goals with respect to the Company's Lasertel
subsidiary and any other forward looking statements. Such forward-looking
statements involve a number of known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, but are not limited to, the risks of uncertainty and delays
associated with launching new market channels with new distribution partners
(including Xerox), the Company's dependency on its strategic partners (both on
manufacturing and distribution), the impact of third-party suppliers and
potential shortages of critical or sole-source component supplies, cash flow
adequacy, manufacturing constraints or difficulties (as well as manufacturing
difficulties experienced by our sub-manufacturing partners and their capacity
constraints), risks associated with new product introductions, including the
risk of increased warranty expenditures, the ability of the Company's Lasertel
subsidiary to supply high quality laser diodes to the Company, the ability of
the Company's Lasertel subsidiary to align costs with its current activity
levels, the anticipated capital requirements of the Company's Lasertel
subsidiary, the risks of uncertainty of patent protection and the outcome of
patent proceedings (including the Company's current patent litigation), the
impact of general market factors in the printing industry generally and the
economy as a whole, market acceptance of and demand for the Company's products
and resulting revenues, the impact of competitive products and pricing, the
Company's ability to meet production challenges due to increased sales, the
ability of the Company to respond to changes in technology, litigation and other
risks detailed in the Company's filings with the Securities and Exchange
Commission including, without limitation, the Company's Annual Report on Form
10-K for the fiscal year ending December 30, 2000 and filed with the Commission
on March 30, 2001. The words "looking forward," "looking ahead", "believe(s),"
"should," "plan," "may," "expect(s)," "project(s)," "anticipate(s)," "likely,"
"potential," "opportunity," and similar expressions, among others, identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date the statement
was made. Presstek undertakes no obligation to update any forward-looking
statements contained in this Form 10-Q.
BACKGROUND
Presstek, Inc. (the "Company" or "Presstek"), incorporated in Delaware in 1987,
is a manufacturer, developer, and marketer of non-photographic, digital imaging
and printing plate technologies for the printing and graphic arts industries.
Presstek's products and applications incorporate its patented, proprietary
PEARL(R) and DI(R) digital imaging technologies and utilize PEARL consumables
for computer-to-plate ("CTP") and direct-to-press applications. The Company's
patented DI and PEARL thermal laser diode product family enables its customers
to produce high quality, full-color lithographic printed materials more quickly
and cost effectively. In the late 1980's, the Company developed a direct imaging
system that would allow digitally formatted file data to be used to image a
plate directly on the printing press. Presstek's technology and products use
thermal energy generated by lasers to reproduce digital files directly onto
printing plates. This eliminates the daylight sensitive, photomechanical and
chemical processes associated with other imaging methods.
The Company is also engaged in the development of additional PEARL and DI
products that incorporate its patented, proprietary, digital imaging system and
process-free thermal ablation printing plate technologies for CTP and
direct-to-press applications.
In fiscal 2000, Presstek and Ryobi Limited ("Ryobi") of Japan completed the
development of an A3 format size four-color sheet-fed press, which was
introduced in May 2000, and is marketed by Ryobi as the 3404DI.
During fiscal 2000 the Company entered into an agreement with Xerox Corporation
("Xerox") to supply Xerox with a series of three Presstek enabled DI presses and
related consumables, which will be marketed, distributed and serviced on a
co-branded basis, as amended in May and September 2001. 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.
11
In April 2001, the Company entered into a new agreement with Adamovske Strojirny
a.s. ("Adast") pursuant to which Adast agreed to manufacture both the four color
and five color B3 size sheet-fed presses.
In October 2001, the Company signed a memorandum of understanding with Koenig &
Bauer, AG ("KBA"), an international supplier of printing presses, of Wurzburg,
Germany. Under the terms of the memorandum, KBA is expected to market and sell
the 46 Karat press, an A3 format size four-color sheet-fed press, in certain
geographic markets. In addition, KBA is expected to distribute and sell the
Dimension400 computer-to-plate system, and the Company's Anthem plate in Europe.
In April 2000, the Company incorporated an Arizona subsidiary, Lasertel, Inc.
("Lasertel") for the purpose of manufacturing and supplying its supply of laser
diodes. Lasertel is located in the former Delta V Technologies, Inc. ("Delta V")
facility in Tucson, Arizona, and is primarily engaged in the manufacture and
development of the Company's high-powered laser diodes. In June 2001, the
Company announced a repositioning of its Lasertel subsidiary in order to reduce
its costs and to focus its efforts on supplying high quality diodes to the
Company. In recent months, the Company has intensified this focus. As a result,
Lasertel has delayed its plans to market its laser products to the
telecommunications industry but has continued its plans to develop laser
prototypes for qualification in the defense, medical and graphics industries.
There can be no assurance that any of these prototypes, if and when marketed,
will be commercially successful or produce significant revenues for the Company
or Lasertel.
The Company operates and reports on a 52/53 week fiscal year ending on the
Saturday closest to December 31. Accordingly, the financial statements include
the thirteen week period ended September 29, 2001 ("the third quarter of fiscal
2001") and September 30, 2000 ("the third quarter of fiscal 2000"), and the
thirty-nine week period ended September 29, 2001 ("the first nine months of
fiscal 2001") and September 30, 2000 ("the first nine months of fiscal 2000").
The Company operates in two reportable segments, the Digital Imaging Products
segment and the Lasertel segment. The Digital Imaging Products segment is
primarily engaged in the development, manufacture and sales of proprietary
digital imaging systems and printing plate technologies for CTP and
direct-to-press applications. The Lasertel segment is primarily engaged in the
manufacture and development of Presstek's high-powered laser diodes.
RESULTS OF OPERATIONS
REVENUES
Revenues for the third quarter and the first nine months of fiscal 2001 of $26.3
million and $79.2 million, respectively, consisted of product sales, royalties,
license fees and product development reimbursements. Revenues for the third
quarter and the first nine months of fiscal 2001 increased $4.3 million or 19%
and $16.9 million or 27% as compared to $22.0 million and $62.3 million for the
third quarter and the first nine months of fiscal 2000. Revenues generated for
the third quarter and the first nine months of fiscal 2001 and fiscal 2000
relate primarily to the Digital Imaging Products segment, as there were no
material revenues generated by the Lasertel segment for the third quarter and
the first nine months of fiscal 2001 and fiscal 2000.
Product sales for the third quarter and the first nine months of fiscal 2001
were $24.3 million and $72.8 million, an increase of $4.7 million or 24% and
$17.7 million or 32%, as compared to $19.6 million and $55.1 million for the
third quarter and the first nine months of fiscal 2000, respectively. These
increases were due primarily to volume increases of presses shipped to Xerox
that are marketed as the DocuColor 400DI and the DocuColor 233DI, volume
increases in shipments of direct imaging systems used in the Ryobi 3404DI, as
well as volume increases in sales of the Company's Dimension platesetter
products. These increases were offset in part by volume and price decreases of
imaging kits sold to Heidelberg and used in the Quickmaster DI. Prices of kits
sold to Heidelberg decreased by approximately 10%, with no gross margin impact,
in the third quarter of fiscal 2001, as Heidelberg began manufacturing certain
non-strategic components of the direct imaging kit.
12
Revenues generated from the sale of the Company's PEARLdry and other consumable
products were $10.9 million for the third quarter of fiscal 2001, a decrease of
$813,000 or 7% as compared to $11.6 million for the third quarter of fiscal
2000. The decrease reflects a reduction in print demand as a result of the
general economic slowdown. Consumable revenues were $34.5 million for the nine
months ended September 29, 2001, an increase of $2.5 million or 8%, as compared
to the same period in fiscal 2000. This increase is as a result of the increase
in the installed base of equipment using the Company's proprietary consumable
products. Consumable product revenues sold under the Company's agreements with
Heidelberg and its distributors included $4.7 million and $15.5 million for the
third quarter and the first nine months of fiscal 2001, respectively, as
compared to $5.1 million and $12.9 million for the comparable period in fiscal
2000.
Royalties and fees from licensees for the third quarter and the first nine
months of fiscal 2001 of $2.0 million and $6.4 million respectively, decreased
$389,000 or 16% and $796,000 or 11%, as compared to royalties and fees from
licensees of $2.4 million and $7.2 million for the third quarter and the first
nine months of fiscal 2000. Royalties decreased $655,000 or 31% and $1.5 million
or 24% for the third quarter and the first nine months of fiscal 2001 compared
to the same periods of fiscal 2000, as a result of decreased shipments to
Heidelberg of direct imaging systems used in the Quickmaster DI. These decreases
were offset by increases of $266,000 and $695,000 in fees from licensees for the
third quarter and the first nine months of fiscal 2001, respectively, primarily
due to distribution fees received from Xerox.
Revenues generated under the Company's agreements with Heidelberg and its
distributors were $9.3 million, a decrease of $4.2 million or 31% for the third
quarter of fiscal 2001 as compared to $13.5 million for the comparable period in
fiscal 2000. Heidelberg revenues for the first nine months of fiscal 2001 were
$33.0 million compared to $37.2 million for the comparable period in fiscal
2000. Revenues from Heidelberg represented 42% and 60% of total revenues for the
first nine months of fiscal 2001 and fiscal 2000, respectively.
In July 2001, the Company settled its outstanding arbitration proceedings with
Heidelberg. Pursuant to the terms of the settlement, the Company and Heidelberg
agreed that the licensing arrangements for the Heidelberg Quickmaster 46DI shall
be non-exclusive. As a result of the recognition of the non-exclusivity of the
license, the Company agreed to reduce the royalty payable by Heidelberg for
imaging kits delivered in connection with the Heidelberg Quickmaster 46DI by
approximately $9,000 per kit. This reduced royalty rate will become effective
for kits delivered after May 1, 2002.
In addition, in consideration for the resolution of several issues that formed
part of the arbitration proceedings between the Company and Heidelberg,
Heidelberg agreed to make a one-time payment of $750,000 to the Company in the
fourth quarter of 2001.
Specifically, pursuant to the terms of the settlement, the Company and
Heidelberg agreed to license on a non-exclusive basis certain know-how and
patent rights. The Company also licensed to Heidelberg the right to use the DI
trademark in connection with its press and imaging products. Several other
technical intellectual property issues were also resolved. The settlement did
not resolve patent infringement claims between the parties with respect to the
Heidelberg Speedmaster 74-DI press but established a mechanism to do so upon
resolution of the Company's outstanding patent litigation with Creo Products,
Inc.
COST OF PRODUCTS SOLD
Cost of products sold consists of the costs of material, labor and overhead as
well as future warranty costs associated with product sales. Cost of products
sold for the Digital Imaging Products segment were $16.3 million or 62% of
revenue for the third quarter of fiscal 2001, an increase of $5.0 million or
44%, as compared to $11.3 million or 51% of revenue for the comparable period in
fiscal 2000. Cost of products sold for the first nine months of fiscal 2001 were
$43.9 million or 55% of revenue, an increase of $11.1 million or 34%, as
compared to $32.8 million or 53% of revenue for the comparable period in fiscal
2000. The gross margin on product sales for the Digital Imaging Products segment
decreased to 33% for the third quarter of fiscal 2001, as compared to 39% for
the third quarter of fiscal 2000. The gross margin decrease is primarily the
result of reduced manufacturing volumes of proprietary digital media and
consumable products, as well as increased warranty expenditures for customer
service related to product performance issues of the Company's Dimension
platesetter products. The gross margin on product sales for the Digital Imaging
Products segment increased to 40% for the first nine months of fiscal 2001 as
compared to 39% for the first nine months of fiscal 2000 primarily as a result
of the increase in press products shipped to Xerox. Cost of products sold for
the Lasertel segment for the third quarter and the first nine
13
months of fiscal 2001 included $2.2 million and $6.1 million, respectively, in
manufacturing costs, as compared to $697,000 and $985,000 for the third quarter
and the first nine months of fiscal 2000, respectively. These increases reflect
increases in salaries as a result of headcount additions, depreciation, and
other costs associated with the manufacture of laser diodes for the Company.
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 $2.8 million or 11% of revenue for
the third quarter of fiscal 2001, a decrease of $601,000 as compared to $3.4
million or 15% of revenue for the comparable period in fiscal 2000. Research and
product development expenses for the first nine months of fiscal 2001 were $9.1
million or 12% of revenue, a decrease of $3.0 million as compared to $12.1
million or 19% of revenue for the comparable period in fiscal 2000. These
decreases are primarily the result of reduced expenditures for parts and
components associated with a reduction in the development of prototypes for the
Company's products previously introduced in fiscal 2000.
SALES, MARKETING AND CUSTOMER SUPPORT
Sales, marketing and customer support expenses consist primarily of payroll and
related expenses for personnel, advertising, trade shows, promotional expenses,
and travel costs. Sales, marketing and customer support expenses for the Digital
Imaging Products segment were $3.4 million or 13% of revenue for the third
quarter of fiscal 2001, an increase of $1.4 million as compared to $2.0 million
or 9% of revenue for the comparable period in fiscal 2000. Sales, marketing and
customer support expenses for the first nine months of fiscal 2001 were $9.6
million, or 12% of revenue, an increase of $2.5 million as compared to $7.1
million or 11% of revenue for the comparable period in fiscal 2000. The
increases resulted primarily from increases in salaries as a result of head
count growth, and promotional and travel expenditures incurred as a result of
the Company's attendance at the Print 2001 trade show, held in Chicago during
the month of September. Sales and marketing expenses for the Lasertel segment
were $237,000 and $664,000 or 1% of revenues for the third quarter and the first
nine months of fiscal 2001, respectively, as compared to $388,000 for the third
quarter and the first nine months of fiscal 2000. These increases resulted
primarily from increases in salaries as a result of headcount growth, and
increases in promotional and advertising expenses.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of payroll and related
expenses for personnel, and contracted professional services. General and
administrative expenses for the Digital Imaging Products segment were $3.2
million or 12% of revenues for the third quarter of fiscal 2001, an increase of
$1.1 million as compared to $2.2 million or 10% of revenues for the comparable
period in fiscal 2000. General and administrative expenses for the first nine
months of fiscal 2001 were $8.8 million or 11% of revenue, an increase of $2.5
million as compared to $6.3 million or 10% of revenue for the comparable period
in fiscal 2000. These increases relate primarily to increases in legal fees as a
result of conducting the trial phase of the Company's patent litigation with
Creo Products, Inc., and other professional services necessary to conduct the
finance, information systems, and administrative functions of the Company. The
general and administrative expenses for the Lasertel segment were $561,000 and
$1.9 million or 2% of revenue for the third quarter and the first nine months of
fiscal 2001, respectively, as compared to $381,000 and $481,000 for the third
quarter and the first nine months of fiscal 2000, respectively. These increases
resulted primarily from increases in salaries as a result of headcount growth.
OTHER INCOME AND EXPENSE
Other expense net, was $352,000 or 1% of revenues for the third quarter of
fiscal 2001 as compared to other income net, of $12,000 or less than 1% of
revenue for the comparable period in fiscal 2000. Other expense, net was
$906,000 or 1% of revenue for the first nine months of fiscal 2001 as compared
to other income, net of $176,000 or less than 1% of revenue for the comparable
period in fiscal 2000.
Interest income was $26,000 for the third quarter of fiscal 2001, a decrease of
$232,000, as compared to $258,000 for the comparable period in fiscal 2000.
Interest income for the first nine months of fiscal 2001 was
14
$190,000, a decrease of $543,000 as compared to $733,000 for the comparable
period in fiscal 2000. These decreases are primarily the result of the decrease
in average cash balances available for investment. Interest expense was $357,000
for the third quarter of fiscal 2001, an increase of $51,000 as compared to
$306,000 for the comparable period in 2000. Interest expense for the first nine
months of fiscal 2001 was $1.1 million, an increase of $378,000 as compared to
$673,000 for the comparable period in fiscal 2000. These increases are primarily
attributed to the increased borrowings related to the Company's lease line of
credit facility with Keybank National Association, and its mortgage loan and
line of credit facility with Citizens Bank.
PROVISION FOR INCOME TAXES
The Company did not record a provision for or a charge in lieu of United States
federal income taxes, due to tax losses incurred for the third quarter and the
first nine months of fiscal 2001 and fiscal 2000 prior to deductions related to
stock compensation.
The Company did not record a provision for or a charge in lieu of state income
taxes, due to tax losses incurred for the third quarter and the first nine
months of fiscal 2001. The Company recorded a provision for state income taxes
for the third quarter and the first nine months of fiscal 2000 in the amount of
$85,000 and $150,000, respectively.
NET INCOME (LOSS)
As a result of the foregoing, the Company had net loss of $2.8 million and $1.7
million for the third quarter and the first nine months of fiscal 2001,
respectively, as compared to net income of $1.7 million and $2.6 million for the
third quarter and the first nine months of fiscal 2000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
At September 29, 2001, the Company had cash and cash equivalents of $2.7 million
and working capital of $27.2 million as compared to cash and cash equivalents of
$12.0 million and working capital of $32.3 million at December 30, 2000. The
decrease in cash of $9.3 million for the first nine months of fiscal 2001 was
primarily attributable to cash used in operating and investing activities of
$2.1 million and $8.9 million, respectively, offset by cash provided by
financing activities of $1.6 million.
Net cash used in operating activities of $2.1 million for the nine months ended
September 29, 2001 resulted from net losses of $1.7 million, increases in
accounts receivable of $4.6 million related to increased sales, and increases in
inventories of $6.7 million, as a result of increased production requirements,
offset by non-cash items of depreciation and amortization of $6.6 million, and
provisions for warranty and losses on accounts receivable of $3.1 million and
$900,000, respectively. Advances to suppliers decreased $2.9 million reflecting
receipt of product in connection with certain supply agreements. Deferred
revenue decreased $1.1 million as a result of product shipments in connection
with certain prepayments related to customer agreements.
Net cash used in investing activities of $8.9 million for the nine months ended
September 29, 2001 consisted primarily of additions to property, plant and
equipment used in the Company's business. These additions included $6.7 million
in equipment purchases used in the manufacture of laser diodes for the Lasertel
segment.
Net cash provided by financing activities for the nine months ended September
29, 2001 totaled $1.6 million, and consisted primarily of proceeds of $2.5
million from the Company's line of credit facility with Citizens Bank, as well
as proceeds of $614,000 from the sale of common stock upon the exercise of
options, offset by payments on the mortgage term loans and the lease line of
credit of $1.5 million.
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,
("Keybank"). 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 5.0% with a fixed rate conversion provision. Principal and
interest under the lease line are payable in 84 monthly installments beginning
on July 31, 2000 for the $6.0 million in borrowings. Payments on the initial
$4.0 million borrowed in September 1999 commenced in October 1999. The Company
has a commitment for a $5.0 million lease line of credit from Keybank, which
expires on April 30, 2002.
15
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%, (4.63% at September 29, 2001) for the
remaining five years. Principal and interest payments during the first five
years of the loan will be made in 60 monthly installments of $80,500. During the
remaining five years, principal and interest payments will be made on a monthly
basis in the amount of one-sixtieth of the outstanding principal amount as of
the first day of the second five year period, plus accrued interest through the
monthly payment date. All outstanding principal and accrued interest is due and
payable on February 6, 2008.
The ten-year mortgage term loan in the amount of $4.0 million bears a fixed rate
of interest equal to 7.95% per year during the first five years, a fixed rate of
interest equal to United States Treasury Notes or Bills with a maturity date
closest to the end of the second five years plus 225 basis points, for the
remaining five years. During the first five years, principal and interest shall
be paid in 60 monthly installments of $48,425. During the remaining five years,
principal and interest payments will be made on a monthly basis in the amount of
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% (4.13% at September 29, 2001). As of
September 29, 2001, the Company had $7.8 million outstanding under standby
letters of credit, and $5.7 million available under the revolving line of credit
loan.
Under the terms of the mortgage term loans, the lease line of credit and the
revolving line of credit agreements, the Company is required to meet certain
financial covenants. These financial covenants, which were recently amended,
contain, among other restrictions, certain liquidity and cash flows coverage
covenants. After giving effect to the amendments, the Company is in compliance
with all financial covenants.
Although the Company believes that existing funds, cash flows from operations,
and cash available under its revolving line of credit and lease line of credit
should be sufficient to satisfy working capital requirements and capital
expenditures for the next twelve months, there can be no assurance that the
Company will not require additional financing, or that such additional funding,
if needed, will be available on acceptable terms.
EFFECT OF INFLATION
Inflation has not had, and is not expected to have, a material impact upon the
Company's operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141),
which supersedes APB Opinion No. 16, "Business Combinations". SFAS No. 141
eliminates the pooling-of-interests method of accounting for business
combinations and modifies the application of the purchase accounting method. The
elimination of the pooling-of-interests method is effective for transactions
initiated after we reported June 30, 2001. The remaining provisions of SFAS No.
141 will be effective for transactions accounted for using the purchase method
that are completed after we reported June 30, 2001. The Company is currently
reviewing the provisions of SFAS 141, but does not anticipate the new standard
will have any effect on its financial statements.
16
In July 2001, the FASB also issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Intangible Assets" (SFAS No. 142), which supersedes APB
Opinion No. 17, "Intangible Assets". SFAS No. 142 eliminates the current
requirement to amortize goodwill and indefinite-lived intangible assets,
addresses the amortization of intangible assets with a defined life and
addresses the impairment testing and recognition for goodwill and intangible
assets. SFAS 142 will apply to goodwill and intangible assets arising from
transactions completed before and after the Statement's effective date. SFAS No.
142 is effective for fiscal 2002. The Company is currently reviewing the
provisions of SFAS 142, but does not anticipate the new standard will have any
effect on its financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------
The Company is exposed to market risk from changes in interest rates primarily
as a result of its borrowing activities, and to a lesser extent, its investing
activities. The majority of the Company's long-term borrowings are in fixed rate
instruments, or variable rate instruments with fixed rate conversion provisions.
The Company does not enter into interest rate swap agreements or other
speculative or leveraged transactions. The Company currently has no material
exposure to interest rate fluctuations on its short-term investments.
The Company has limited exposure to foreign currency exchange rate risk, as
substantially all of its transactions are denominated in U.S. dollars. Some of
the Company's customers and strategic partners are not located in the United
States, however. As a result, these customers and strategic partners are
themselves subject to fluctuations in foreign exchange rates. If their home
country currency were to decrease in value relative to the United States dollar,
their ability to purchase and market the Company's products could be adversely
affected and the Company's products may become less competitive to them. This
may have an adverse impact on the Company's business. Likewise, some of the
Company's suppliers are not located in the United States and thus, such
suppliers are subject to foreign exchange rate risks in transactions with the
Company. Decreases in the value of their home country currency versus that of
the United States dollar could cause fluctuations in supply pricing which could
have an adverse effect on the Company's business.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 1999 Creo Products, Inc., ("Creo"), filed an action in the United
States District Court for the District of Delaware against the Company asserting
that Creo has a "reasonable apprehension that it will be sued by Presstek for
infringement" of two of the Company's patents and seeking a declaration that
Creo's products "do not and will not infringe any valid and enforceable claims"
of the patents in question. In September 1999, the Company filed a counterclaim
against Creo for patent infringement. The Company claimed that Creo infringed
two direct imaging patents owned by the Company which were recently the subject
of re-examination by the U.S. Patent and Trademark Office. This action went to
trial before the court without a jury during the week of June 25, 2001. The
court issued a decision on September 11, 2001, in which it affirmed the validity
and enforceability of the Company's on-press imaging patents, but held that the
current Creo DOP System did not infringe the patents. The Company disagrees with
the Court's conclusion on infringement. Creo has appealed the Court's decision
that the patents are valid and enforceable, and the Company has cross-appealed
the finding of non-infringement by the current Creo DOP System.
In December of 1999 a complaint was filed by PPG, Inc. ("PPG") against Delta V
in the United States District Court for the Western District of Pennsylvania
alleging that Delta V sold to PPG certain vacuum coating equipment that did not
meet certain product specifications. An amended complaint was filed in April of
2000. In the suit, PPG seeks damages in excess of $7.0 million. In addition to
naming Delta V as a defendant in the complaint, PPG also named Presstek as a
defendant, seeking damages from Presstek and attempting to hold Presstek liable
for the alleged breach of contract by its subsidiary, Delta V, on a theory of
indirect liability. Motions to dismiss for improper venue were denied, but venue
was transferred to the United States District Court for the Middle District of
Pennsylvania. Presstek (and Delta V) have answered the complaint and Delta V has
asserted a counterclaim against PPG and a cross-claim against Circonix, a Delta
V subcontractor for the vacuum coater project. A motion by Circonix to dismiss
PPG's complaint was denied and Circonix has subsequently filed an interlocutory
appeal. In addition, on October 29, 2001, Circonix filed cross-claims against
Presstek and Delta V. The Company intends to continue to vigorously defend this
action.
17
See also Part I - Item 3 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 30, 2000 filed with the Commission on March 30, 2001,
Part II - Item 1 of the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001 filed with the Commission on May 14, 2001, Part II - Item 1
of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2001 filed with the Commission on August 14, 2001, and Note 9 of Notes to the
Financial Statements of this Form 10Q. All of such information is hereby
incorporated by reference in response to this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amendment No. 4 to the Master Security Agreement by and between
Presstek, Inc. and Key Equipment Finance, a Division of Key
Corporate Capital, Inc. dated September 26, 2001 (filed
herewith).
10.2 Amendment to Loan Agreement and Related Documents by and between
Presstek, Inc. and Citizens' Bank New Hampshire dated as of
October 19, 2001 (filed herewith).
10.3 Settlement Agreement made as of July 13, 2001 by and between
Heidelberger Druckmaschinen Aktiengesellschaft and Presstek,
Inc. (filed herewith). *
10.4 Letter Agreement dated September 19, 2001 between Xerox
Corporation and Presstek, Inc. amending the Amended Master
Supply and Distribution Agreement by and among Presstek, Inc.
and Xerox Corporation dated May 11, 2001 (filed herewith). *
* Confidential treatment requested as to omitted portions pursuant
to Rule 24b-2 promulgated under the Securities Exchange Act of
1934, as amended.
(b) Reports on Form 8-K
None.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRESSTEK, INC.
(Registrant)
Date: November 13, 2001 /s/ Robert W. Hallman
---------------------------------
By: Robert W. Hallman
President and
Chief Executive Officer
(Principal Executive and
Duly Authorized Officer)
Date: November 13, 2001 /s/ Neil Rossen
---------------------------------
By: Neil Rossen
Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
19
EXHIBIT INDEX
No. Description
--- -----------
10.1 Amendment No. 4 to the Master Security Agreement by and between
Presstek, Inc. and Key Equipment Finance, a Division of Key
Corporate Capital, Inc. dated September 26, 2001 (filed
herewith).
10.2 Amendment to Loan Agreement and Related Documents by and between
Presstek, Inc. and Citizens' Bank New Hampshire dated as of
October 19, 2001 (filed herewith).
10.3 Settlement Agreement made as of July 13, 2001 by and between
Heidelberger Druckmaschinen Aktiengesellschaft and Presstek,
Inc. (filed herewith). *
10.4 Letter Agreement dated September 19, 2001 between Xerox
Corporation and Presstek, Inc. amending the Amended Master
Supply and Distribution Agreement by and among Presstek, Inc.
and Xerox Corporation dated May 11, 2001 (filed herewith). *
* Confidential treatment requested as to omitted portions pursuant
to Rule 24b-2 promulgated under the Securities Exchange Act of
1934, as amended.
20