SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
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 number 0-17541
PRESSTEK, INC.
(Exact name of registrant as specified in its charter)
Delaware 02-0415170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8-9 Commercial Street, Hudson, New Hampshire 03051-3907
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603)595-7000
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: As of May 7, 1997, there
were 15,456,271 shares outstanding of the Registrant's common stock, $.01 par
value per share.
<PAGE>
PRESSTEK, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets as of
March 29, 1997 (unaudited)
and December 28, 1996 3
Statements of Income for the
three month periods ended
March 29, 1997 and March 30, 1996
(unaudited) 4
Statements of Cash Flows for the
three month periods ended
March 29, 1997 and March 30, 1996
(unaudited) 5
Notes to Financial Statements
(unaudited) 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II OTHER INFORMATION 17
Item 1 Legal Proceedings
Item 6 Exhibits and Reports on Form 8-K
Signatures 18
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PRESSTEK, INC.
BALANCE SHEETS
March 29, December 28,
1997 1996
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,946,213 $ 3,530,866
Marketable securities 3,033,899 6,602,854
Accounts receivable, net of allowance
for doubtful accounts of $220,606
in 1997 and $183,851 in 1996 18,422,079 17,306,020
Inventory 12,092,631 10,639,657
Costs and estimated earnings in excess
of billings on uncompleted contracts 1,699,585 1,625,137
Other current assets 450,894 855,287
------------ ------------
Total current assets 38,645,301 40,559,821
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land 2,426,827 2,426,827
Buildings under construction 7,577,600 3,716,174
Machinery and equipment 18,494,199 14,574,637
Furniture and fixtures 698,903 681,648
Leasehold improvements 2,603,360 2,514,102
Other 34,498 34,498
------------ ------------
Total 31,835,387 23,947,886
Less accumulated depreciation and amortization (4,660,235) (4,230,674)
------------ ------------
Property, plant and equipment, net 27,175,152 19,717,212
------------ ------------
OTHER ASSETS:
Goodwill, net 6,063,614 6,144,819
Patent applications costs and
license rights, net 1,714,410 1,704,406
Software developments costs, net 404,937 546,838
Other 139,189 150,000
------------ ------------
Total other assets 8,322,150 8,546,063
------------ ------------
TOTAL $ 74,142,603 $ 68,823,096
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable $ 1,800,000 $ --
Accounts payable 8,082,876 8,332,558
Accrued expenses 1,360,159 802,692
Accrued salaries and employee benefits 607,144 686,090
Billings in excess of costs and estimated
earnings on uncompleted contracts -- 1,355,130
------------ ------------
Total current liabilities 11,850,179 11,176,470
------------ ------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 264,953 204,104
------------ ------------
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
15,398,746 shares at March 29, 1997;
15,392,276 shares at December 28, 1996 153,987 153,923
Additional paid-in capital 50,858,384 49,188,118
Unrealized loss on marketable securities, net (30,393) (42,911)
Retained earnings 11,045,493 8,143,392
------------ ------------
Stockholders' equity 62,027,471 57,442,522
------------ ------------
TOTAL $ 74,142,603 $ 68,823,096
============ ============
See notes to financial statements
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PRESSTEK, INC.
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 29, March 30,
1997 1996
------------------------------
REVENUES:
Product sales $ 16,346,956 $ 7,524,957
Royalties and fees from licensees 3,660,696 3,479,797
------------ ------------
Total revenues 20,007,652 11,004,754
------------ ------------
COSTS AND EXPENSES:
Cost of products sold 10,607,114 5,400,723
Engineering and product development 2,267,335 2,228,548
Marketing 761,838 545,371
General and administrative 1,247,423 966,803
------------ ------------
Total costs and expenses 14,883,710 9,141,445
------------ ------------
INCOME FROM OPERATIONS 5,123,942 1,863,309
OTHER INCOME (EXPENSE):
Dividend and interest, net 104,676 212,255
Other, net (446,517) (16,150)
------------ ------------
Total other income - net (341,841) 196,105
------------ ------------
INCOME BEFORE INCOME TAXES 4,782,101 2,059,414
PROVISION FOR INCOME TAXES 1,880,000 770,000
------------ ------------
NET INCOME $ 2,902,101 $ 1,289,414
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES 16,495,988 16,500,536
============ ============
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .18 $ .08
============ ============
See notes to financial statements
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<PAGE>
PRESSTEK, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 29, March 30,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES:
Net income $ 2,902,101 $ 1,289,414
Adjustments to reconcile net income to net
cash provided by operating activities:
Tax benefit arising from stock option deductions 1,575,000 770,000
Depreciation 429,562 244,627
Amortization 281,239 181,581
Provision for warranty and other costs 366,765 127,500
Other, net 332,074 18,183
(Increase) decrease in:
Accounts receivable (1,300,528) 1,352,598
Inventory (1,552,974) (1,294,448)
Costs and estimated earnings in excess of
billings on uncompleted contracts (74,448) (253,998)
Other current assets 404,393 15,722
Increase (decrease) in:
Accounts payable and accrued expenses 41,020 1,084,153
Accrued salaries and employee benefits (78,946) (31,078)
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,355,130) (634,765)
------------ ------------
Net cash provided by operating activities 1,970,128 2,869,489
------------ ------------
CASH FLOWS - INVESTING ACTIVITIES:
Investment in subsidiary, net of cash acquired -- (7,456,020)
Purchases of property and equipment (7,887,501) (940,455)
Proceeds from sale of equipment 1,200 --
Increase in other assets (57,326) (174,546)
Sales and maturities of marketable securities 3,493,516 --
Purchases of marketable securities -- (7,050,122)
------------ ------------
Net cash used for investing activities (4,450,111) (15,621,143)
------------ ------------
CASH FLOWS - FINANCING ACTIVITIES:
Net proceeds from sale of common stock
and warrants 95,330 20,628,178
Proceeds from line of credit 1,800,000 --
------------ ------------
Net cash provided by financing activities 1,895,330 20,628,178
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (584,653) 7,876,524
CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD 3 530,866 3,628,021
------------ ------------
END OF PERIOD $ 2,946,213 $ 11,504,545
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for income taxes $ 90,406 $ 45,000
============ ============
</TABLE>
See notes to financial statements
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<PAGE>
PRESSTEK, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 29, 1997
1. BASIS OF PRESENTATION
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Rule 10 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
year ended December 28, 1996. The December 28, 1996 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.
Presstek, Inc. (the "Company"), which was incorporated in the State of
Delaware in September 1987, develops, manufactures, and markets proprietary,
digital imaging technologies and system architectures, and non-photographic
consumables (the "Direct Imaging" technologies) primarily to the graphic arts
and related imaging industries. The Company's current Direct Imaging
technologies, referred to as PEARL(R), permit the direct digital imaging of the
Company's printing plates and films which eliminates the need for photosensitive
materials and the hazardous waste by-products and effluents usually associated
with these processes.
Revenues generated under the Company's agreements with Heidelberger
Druckmaschinen AG ("Heidelberg") and from Heidelberg distributors represented
72% and 76% of the Company's total revenues for the quarters ended March 29,
1997, and March 30, 1996, respectively.
On February 15, 1996, the Company acquired 90% of the outstanding common
stock of Catalina Coatings, Inc., an Arizona corporation ("Catalina"). The
acquisition was accounted for as a purchase. Catalina is engaged in the
development, manufacture and sale of vacuum deposition coating equipment and the
licensing and sublicensing of patent rights with respect to a vapor deposition
process to coat moving webs of material at high speeds. The Company has
continued the business of Catalina which operates as a subsidiary of the
Company. Accordingly, the results of Catalina's operations have been included in
the Company's first quarter 1997 and 1996 financial statements. Significant
intercompany accounts and transactions have been eliminated.
Certain accounts in the 1996 financial statements have been reclassified
for comparative purposes to conform with the presentation in the March 29, 1997,
financial statements.
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<PAGE>
2. INVENTORY
Inventory is valued at the lower of cost or market, with cost determined on
the first-in, first-out method. At March 29, 1997, and December 28, 1996,
inventory consisted of the following:
1997 1996
---- ----
Raw materials $ 9,751,317 $ 6,155,277
Work in process 1,552,238 3,532,724
Finished goods 789,076 951,656
----------- -----------
Total $12,092,631 $10,639,657
=========== ===========
3. NET INCOME PER COMMON SHARE
Net income per common share is computed by dividing net income by the
weighted average number of Common Stock and Common Stock equivalent shares
outstanding. Common Stock equivalents represent the dilutive effect of the
assumed exercise of outstanding stock options and warrants.
A summary of the calculations for the three month periods ended March 29,
1997, and March 30, 1996, follows:
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
(In Thousands, Except Per Share)
<S> <C> <C> <C> <C>
Net income $ 2,902 $ 2,902 $ 1,289 $ 1,289
======== ======== ======== ========
Weighted average common shares
outstanding 15,402 15,402 14,972 14,972
Common equivalent shares from assumed
conversion of outstanding options
and warrants whose effect are not
antidilutive on earnings per share 1,485 1,486 1,850 1,857
Less shares assumed repurchased using
the treasury method for calculation of
net shares outstanding (391) (392) (321) (289)
-------- -------- -------- --------
Weighted average common and common
equivalent shares outstanding 16,496 16,496 16,501 16,540
======== ======== ======== --------
Net income per common and common
equivalent shares $ .18 $ .18 $ .08 $ .08
======== ======== ======== ========
</TABLE>
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<PAGE>
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which
is effective for both interim and annual periods ending after December 15, 1997.
Earlier application is not permitted. The Company accordingly plans to adopt
SFAS No. 128 in its January 3, 1998 annual financial statements. The Company
does not anticipate that SFAS No. 128 would have had a material effect on the
earnings per share presented, if it had been adopted in the first quarter 1997.
4. INCOME TAXES
The components of the provision for income taxes for the quarters ended
March 29, 1997, and March 30, 1996, based upon the estimated effective income
tax rate for the full fiscal year, were as follows:
1997 1996
---- ----
Current tax expense - State $ 305,000 $ --
Charge in lieu of income taxes:
Federal 1,575,000 640,000
State -- 130,000
---------- ----------
Total provision $1,880,000 $ 770,000
========== ==========
The charge in lieu of income taxes included in the first quarter 1997
relates to the tax benefit of stock option deductions principally from prior
years. The charge in lieu of income taxes included in the first quarter 1996
related to the tax benefit of stock option deductions in the first quarter 1996.
The tax benefit of such stock option deductions has been credited to
stockholders' equity.
5. LINE OF CREDIT
On December 18, 1996, the Company entered into an agreement with Citizens
Bank New Hampshire for a revolving line of credit loan under which the Company
may borrow a maximum of $10,000,000 for working capital requirements and general
corporate purposes. Borrowings are secured by substantially all of the Company's
assets and are guaranteed by the Company's subsidiary, Catalina, and secured by
its assets. Under the terms of the revolving credit agreement, the Company is
required to meet certain financial covenants on a quarterly and annual basis.
Interest on the line of credit is payable at the LIBOR rate plus 1.75% (7.47% at
March 29, 1997). The loan agreement terminates on July 31, 1997, at which date,
the entire principal and accrued interest is due and payable. As of March 29,
1997, the Company had $1,800,000 outstanding and $8,200,000 available under the
line of credit.
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<PAGE>
6. OTHER INFORMATION
The Company is currently constructing two new facilities, a 70,000 square
foot manufacturing facility in Tucson, Arizona for Catalina, and a 100,000
square foot manufacturing facility in Hudson, New Hampshire. The Hudson
manufacturing facility is expected to accommodate the Company's new plate
manufacturing operations, which will utilize a new vacuum deposition coating
system currently being developed and built for the Company by Catalina, along
with the necessary plate finishing and packaging equipment. The Company
estimates that the total capital cost of these projects, including land
purchases, to be approximately $30,000,000.
Through March 29, 1997, the Company has expended approximately $10,005,000
for land, land improvements, and construction of the two new facilities.
Approximately $3,862,000 of this total was expended during the first quarter of
1997, and as of March 29, 1997, the Company had outstanding purchase commitments
of approximately $4,400,000 with respect to the new facilities. Additionally,
through March 29, 1997, the Company expended $10,742,000 for new plate
manufacturing and packaging equipment. Approximately $2,933,000 of this total
was expended during the first quarter of 1997, and as of March 29, 1997, the
Company had outstanding purchase commitments of approximately $4,800,000 with
respect to the plate manufacturing and packaging equipment.
Since June 28, 1996, several class action lawsuits were filed against the
Company and certain other defendants, including, but not limited to the
Company's officers and directors. These actions have been consolidated in the
United States District Court, District of New Hampshire, and a single
consolidated amended complaint has been filed by lead counsel for the
plaintiffs. In addition, two actions have been filed derivatively, 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.
The lawsuits each contain a variety of allegations including, among other
things, that the defendants violated Section 10(b) of the Securities Exchange
Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder,
violations of Section 20(a) of the Exchange Act, common law fraud and deceit,
negligent misrepresentation and waste of corporate assets. The allegations
include claims that the Company issued false and misleading financial
statements, and failed to properly disclose (a) adverse information concerning
the Company's patents; (b) the nature and extent of the investigation by the
Securities and Exchange Commission with respect to activities by certain unnamed
persons and entities in connection with the securities of the Company (c) the
backlog of orders from, supply contracts with, and orders received by its
principal customer. The Company's officers and directors are alleged to have
sold the Company's common stock while in possession of material non-public
information. The plaintiffs generally are seeking to recover unspecified damages
and reimbursement of their costs and expenses incurred in connection with the
action. Moreover, the plaintiff in the derivative action in Delaware is also
seeking a return to the Company of all salaries and the value of other
remuneration paid to the defendants by the
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<PAGE>
Company during the time they were in breach of their fiduciary duties and an
accounting of and/or constructive trust on the proceeds of defendants trading
activities in the common stock.
The Company intends to vigorously defend all actions. However, the outcome
of any litigation is subject to uncertainty and a successful claim against the
Company, in any of the foregoing actions, could have a material adverse effect
on the financial position and results of operations of the Company. At the
present time, the Company cannot reasonably estimate the ultimate liability, if
any, resulting from these lawsuits. Accordingly, no provision for any liability
that may result has been recorded in the accompanying financial statements.
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<PAGE>
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:
The statements which are not historical facts contained in this Item 2 and
elsewhere in this Form 10-Q are forward looking statements that involve a number
of risks and uncertainties, including, but not limited to, the risks of
uncertainty of patent protection, the impact of supply and manufacturing
constraints or difficulties, possible technological obsolescence, increased
competition, litigation, and other risks detailed in the Securities and Exchange
Commission filings of Presstek, Inc. (the "Company").
Results of Operations
The Company, which was incorporated in the State of Delaware in September
1987, continues to further develop and market its proprietary, digital imaging
technologies and system architectures, and non-photographic consumables (the
"Direct Imaging" technologies) primarily to the graphic arts and related imaging
industries. The Company's current Direct Imaging technologies, referred to as
PEARL(R), permit the direct digital imaging of the Company's printing plates and
films which eliminates the need for photosensitive materials and the hazardous
waste by-products and effluents usually associated with these processes.
The Company continues to pursue a strategy based on alliances and
relationships with major corporations in the graphic arts and other industries
encompassing licensing, product development and commercialization,
manufacturing, marketing, distribution, sales and services. The Company and
Heidelberger Druckmaschinen AG ("Heidelberg"), the world's largest manufacturer
of printing presses and printing equipment, based in Germany, jointly developed
the first Heidelberg Direct Imaging Printing Press (the "GTO-DI") and its
successor, the four color, fully automated lithographic press, the Quickmaster
DI 46-4 ("Quickmaster DI") to take full advantage of the Company's improved
implementation of its Direct Imaging technologies. The Quickmaster DI press,
which was introduced by Heidelberg in May 1995 to replace the GTO-DI, which is
no longer being produced, employs the Company's automatic plate changing
cylinder which eliminates the need for manually changing plates between jobs.
The Company also has an agreement with the Adast-Adamov Company, a manufacturer
of offset lithographic presses. This agreement has resulted in the use of the
Company's Direct Imaging technologies on a larger format (19" x 26") multicolor
press. Shipments of the Omni Adast Direct Imaging systems began in December
1996. In addition, Nilpeter A/S of Denmark has announced the introduction of an
offset label press that utilizes the Company's technology.
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<PAGE>
During 1996, the Company began shipments of the PEARLsetter(TM), a
computer-to-plate imaging device that images both the Company's wet and dry
offset printing plates. Other systems are under development, which will use the
Company's imaging and plate technology in a broader range of printing
applications.
On February 15, 1996, the Company acquired 90% of the outstanding common
stock of Catalina Coatings, Inc., an Arizona corporation ("Catalina"). The
acquisition was accounted for as a purchase. Catalina is engaged in the
development, manufacture and sale of vacuum deposition coating equipment and the
licensing and sublicensing of patent rights with respect to a vapor deposition
process to coat moving webs of material at high speeds. The Company has
continued the business of Catalina which operates as a subsidiary of the
Company. Accordingly, the results of Catalina's operations have been included in
the Company's first quarter 1997 and 1996 financial statements.
The Company operates and reports on a 52/53 week fiscal year ending on the
Saturday closest to December 31. Accordingly, the first quarters of 1997 and
1996 ended on March 29, 1997, and March 30, 1996, respectively.
Revenues
Revenues for the quarters ended March 29, 1997, and March 30, 1996, of
$20,008,000 and $11,005,000 respectively, (of which $1,584,000 and $891,000,
respectively, related to Catalina) consisted of product sales, royalties, fees
and other reimbursements. Product sales for the first quarter of 1997 increased
$8,822,000 (117%) over the first quarter of 1996 primarily as a result of volume
increases in sales by the Company of Direct Imaging systems used in the
Quickmaster DI, as well as volume increases in consumable sales. Royalties and
fees from licensees increased $181,000 in the first quarter of 1997 as a result
of increases in royalties of $1,823,000, of which $1,679,000 was attributable to
increases in product sales to Heidelberg, and a decrease of $1,642,000 in
engineering and other fees. Engineering and other fees are based primarily on
amounts annually agreed upon between the Company and Heidelberg. No such fees
have been negotiated for 1997, and there can be no assurance that the Company
will receive such fees from Heidelberg in the current fiscal year. Revenues
generated under the Company's agreements with Heidelberg and from Heidelberg
distributors represented 72% and 76% of the Company's total revenues for the
quarters ended March 29, 1997, and March 30, 1996, respectively.
Cost of Products Sold
Costs of products sold for the quarters ended March 29, 1997, and March 30,
1996, of $10,607,000 and $5,401,000 respectively (of which $1,205,000 and
$638,000, respectively, related to Catalina), consisted of the material, labor
and overhead costs associated with product sales, as well as anticipated future
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<PAGE>
warranty costs. The increases in such costs, comparing the first quarter of 1997
with the first quarter of 1996, related primarily to corresponding volume
increases in product sales. The improvement in the gross margin on product sales
to 35% from 28%, comparing the first quarter of 1997 with the same period in
1996, results primarily from a change in product mix and certain manufacturing
efficiencies.
Engineering and Product Development
Engineering and product development expenses were $2,267,000 for the first
quarter of 1997, as compared to $2,229,000 for the first quarter of 1996. These
expenses include parts, supplies, labor, and contracted services related to the
Company's continued development of products incorporating its PEARL technology,
as well as other product development efforts including the Company's
PEARLwet(TM) and PEARLdry(TM) plates.
Marketing
Marketing expenses were $762,000 for the first quarter of 1997, as compared
to $545,000 for the same period in 1996, an increase of $217,000 (40%). The
increase related principally to increased expenditures for additional personnel
and related costs as well as various promotional activities.
General and Administrative
General and Administrative expenses for the quarters ended March 29, 1997,
and March 30, 1996, of $1,247,000 and $966,803 (of which $239,000 and $167,000,
respectively, related to Catalina) related primarily to increases in
expenditures for salaries and other costs required to conduct various general
and administrative functions of the Company.
Other Income and Expense
Dividend and interest income, net of interest expense, earned on the
Company's cash and investments decreased $107,000 comparing the first quarter of
1997 with the same period in 1996, principally as a result of the decreased
funds available for investment.
The increase in other expenses of $430,000 comparing the first quarter of
1997 to the first quarter of 1996 related primarily to the foreign exchange
losses incurred on certain receivables from Heidelberg.
Income Taxes
The provision for income taxes for the quarter ended March 29, 1997,
represents a $1,575,000 charge in lieu of federal income taxes relating to the
tax benefit of stock option deductions
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<PAGE>
principally from prior years and a state provision of $305,000 based upon the
estimated effective income tax rate for the full fiscal year.
The provision for income taxes in 1996 represented the charge in lieu of
income taxes arising from stock option deductions in the first quarter 1996,
based upon the estimated effective income tax rate for the full fiscal year. The
tax benefits related to such stock option deductions have been credited to
stockholders' equity in the first quarters of 1997 and 1996.
Net Income
As a result of the foregoing, the Company had net income of $2,902,000 for
the first quarter of 1997 compared to net income of $1,289,000 for the first
quarter of 1996. The operations of Catalina did not have a material effect on
net income for the quarters ended March 29, 1997, and March 30, 1996.
Liquidity and Capital Resources
At March 29, 1997, the Company had working capital of $26,795,000, a
decrease of $2,588,000 as compared to working capital of $29,383,000 at December
28, 1996. This decrease was primarily attributed to the Company's additions to
property, plant and equipment of $7,888,000, offset in part by net income from
operations $2,902,000, plus non-cash items including the tax benefit arising
from stock option deductions of $1,575,000, and depreciation and amortization of
$711,000.
Net cash provided by operating activities of $1,970,000 for the quarter
ended March 29, 1997, resulted primarily from net income from operations of
$2,902,000 plus noncash items of totaling $2,985,000 ($1,575,000 of which
relates to the tax benefit arising from stock option deductions), offset by
increases in accounts receivable and inventory of $1,301,000 and $1,553,000, and
a decrease in billings in excess of costs on uncompleted contracts of
$1,355,000.
Net cash used for investing activities of $4,450,000 for the quarter ended
March 29, 1997, resulted primarily from the proceeds of sales of marketable
securities of $3,494,000, offset by additions to property, plant and equipment
used in the Company's business of $7,888,000.
Net cash provided by financing activities during the quarter ended March
29, 1997, totaled $1,895,000, and consisted of the proceeds from the line of
credit of $1,800,000 and the sale of Common Stock incident to the exercise of
various stock options.
The Company is currently constructing two new facilities; a 70,000 square
foot facility in Tucson, Arizona for Catalina, and a 100,000 square foot
manufacturing facility in Hudson, New
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<PAGE>
Hampshire. The Hudson manufacturing facility is expected to accommodate the
Company's new plate manufacturing operations, which will utilize a new vacuum
deposition coating system currently being developed and built for the Company by
Catalina, along with the necessary plate finishing and packaging equipment. The
Company estimates that the total capital cost of these projects, including land
purchases, to be approximately $30,000,000.
Through March 29, 1997, the Company has expended approximately $10,005,000
for land, land improvements, and construction of the two new facilities.
Approximately $3,862,000 of this total was expended during the first quarter of
1997, and as of March 29, 1997, the Company had outstanding purchase commitments
of approximately $4,400,000 with respect to the new facilities. Additionally,
through March 29, 1997, the Company expended $10,742,000 for new plate
manufacturing and packaging equipment. Approximately $2,933,000 of this total
was expended during the first quarter of 1997, and as of March 29, 1997, the
Company had outstanding purchase commitments of approximately $4,800,000 with
respect to the plate manufacturing and packaging equipment.
On December 18, 1996, the Company entered into an agreement with Citizens
Bank New Hampshire ("Citizens") for a revolving line of credit loan under which
the Company may borrow a maximum of $10,000,000 for working capital requirements
and general corporate purposes. Borrowings are secured by substantially all of
the Company's assets and are guaranteed by the Company's subsidiary, Catalina
Coatings, Inc. and secured by its assets. Under the terms of the revolving
credit agreement, the Company is required to meet certain financial covenants on
a quarterly and annual basis. Interest on the line of credit is payable at the
LIBOR rate plus 1.75% (7.47% at March 29, 1997). The loan agreement terminates
on July 31, 1997, at which date, the entire principal and accrued interest is
due and payable. As of March 29, 1997, the Company had $1,800,000 outstanding
and $8,200,000 available under the line of credit.
The Company continues to explore various long term funding options with
respect to financing the cost of its new facilities and plate manufacturing
equipment. Moreover, in order to fund increased production of the Company's
Direct Imaging system for the Quickmaster DI during the balance of 1997, the
Company will require additional working capital if its current line of credit
with Citizens is not renewed or replaced upon its expiration in July 1997, or if
the Company is unable to obtain any long-term financing for its new facilities.
There can be no assurance that the Company can obtain any necessary financing,
or that the current line of credit with Citizens will be renewed.
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 February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which
is effective for both interim and annual periods ending after December 15, 1997.
Earlier application is not permitted. The Company accordingly plans to adopt
SFAS No.128 in its January 3, 1998 annual financial statements. The Company does
not anticipate that SFAS No. 128 would have had a material effect on the
earnings per share presented, if it had been adopted in the first quarter 1997.
- 15 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Item 3 of the Company's Form 10-K for the fiscal year ended December
28, 1996, for a description of certain legal proceedings pending against the
Company, its officers, and certain of its directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 Financial Data Schedule (for SEC use only)
(b) No reports on Form 8-K were filed for the quarter for which this
report is filed.
- 16 -
<PAGE>
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.
Dated: May 12, 1997
PRESSTEK, INC.
(Registrant)
By: /s/ Richard A. Williams
---------------------------
Richard A. Williams
Chief Executive Officer
(Duly Authorized Officer)
By: /s/ Glenn J. DiBenedetto
---------------------------
Glenn J. DiBenedetto
Chief Financial Officer
(Principal Financial and
Accounting Officer)
- 17 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AT
MARCH 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-3-1998
<PERIOD-END> MAR-29-1997
<CASH> 2,946,213
<SECURITIES> 3,033,899
<RECEIVABLES> 18,642,685
<ALLOWANCES> 220,606
<INVENTORY> 13,792,216<F1>
<CURRENT-ASSETS> 38,645,301
<PP&E> 31,835,387
<DEPRECIATION> 4,660,235
<TOTAL-ASSETS> 74,142,603
<CURRENT-LIABILITIES> 11,850,179
<BONDS> 0
0
0
<COMMON> 153,987
<OTHER-SE> 61,873,484
<TOTAL-LIABILITY-AND-EQUITY> 74,142,603
<SALES> 16,346,956
<TOTAL-REVENUES> 20,007,652
<CGS> 10,607,114
<TOTAL-COSTS> 10,607,114
<OTHER-EXPENSES> 2,267,335
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,782,101
<INCOME-TAX> 1,880,000
<INCOME-CONTINUING> 2,902,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,902,101
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
<FN>
(1) Includes $1,699,585 costs and estimated earnings in excess of billings on
uncompleted contracts.
</FN>
</TABLE>
