Presstek Announces Second Quarter 2009 Financial Results

GREENWICH, CT--(Marketwire - August 13, 2009) - Presstek, Inc. PRST, a leading manufacturer and marketer of digital offset printing business solutions, today reported financial and operating results for the second quarter ended July 4, 2009. The Company's second quarter 2009 results reflect the global economic recession and significant non-cash charges.

Including non-cash, non-routine charges totaling $35.9 million, the Company incurred a loss from continuing operations (after tax) for the second quarter of 2009 of $39.9 million, or $1.09 per share, compared with income from continuing operations of $1.0 million, or $0.03 per share, in the second quarter of 2008. Results from continuing operations exclude the Company's Lasertel subsidiary, which is currently being marketed for sale and is recorded in discontinued operations.

Excluding the non-cash, non-routine charges, the Company reported a pre-tax operating loss in the second quarter of 2009 of $3.6 million, a decrease of $5.6 million from the prior year. In addition to lower sales, earnings were negatively impacted by foreign currency exchange rates and a $0.7 million increase in bad debt reserves, partially offset by continued improvements in operating expenses.

Second quarter 2009 revenue totaled $33.5 million, compared to $51.6 million in the second quarter of 2008, reflecting the global economic recession and an unfavorable change in foreign currency exchange rates.

"Although non-cash charges and additions to our bad debt reserves significantly reduced our second quarter results, we were able to hold sequential quarterly revenues relatively stable despite ongoing challenges created by the state of the economy," said Presstek Chairman, President and Chief Executive Officer, Jeff Jacobson.

Cost-Reduction Initiative

The Company has begun implementing additional cost reductions that primarily will be completed by the end of 2009 and will generate approximately $10 million of annualized savings. Including savings from the Company's Business Improvement Plan, once these additional actions are fully implemented, the Company will have achieved nearly $40 million in annualized savings since 2007. Presstek expects to incur one-time costs of approximately $1.0 million related to these actions. As part of these initiatives, the Company will reduce its global workforce across all levels of the organization by approximately 60 positions, or ten percent. Additional cost actions will result in the elimination of the 401(k) company matching contribution and furloughs in certain of the Company's operating areas.

"These actions, while difficult, are necessary to help us weather the current economic conditions and properly position ourselves to capture market share and grow revenues once the industry and economy start to recover," added Jacobson. "We strongly believe in the strategy we have put in place and will continue to stay focused on building a stronger product portfolio and expanding our distribution channels while carefully managing our cost structure and cash position."

Second Quarter 2009 Financial Results

Revenue for the second quarter of 2009 fell $18.1 million, or 35 percent, to $33.5 million when compared to the same quarter in 2008. The year-over-year decline in revenue was driven primarily by the deterioration of the global economy resulting in a 64 percent reduction in equipment sales due to delays in customer purchasing decisions and continued tightening in the credit markets. Consumable sales were down 26 percent in the second quarter of 2009 to $21.1 million, when compared to the second quarter of 2008. The decline in consumables revenue was primarily attributable to lower print volume. However, sales of 52DI plates were up 14 percent from last year's second quarter performance. In addition, sales of Presstek's new chemistry-free CTP thermal plate, Aurora Pro, were up 54 percent over last year's second quarter sales. Service revenue declined approximately 16 percent to $7.2 million in the second quarter of 2009 primarily due to reduced service of traditional equipment and lower parts sales.

Gross margin in the second quarter of 2009 was 32.9 percent, compared with 33.8 percent in the second quarter of 2008. Margins in the second quarter of 2009 were negatively impacted by an unfavorable change in foreign currency exchange rates as well as lower manufacturing productivity.

Excluding the goodwill impairment charge of $19.1 million and a $0.7 million addition to bad debt reserves, second quarter operating expenses declined to $13.9 million, reflecting a year-over-year improvement of $1.5 million, or approximately 10 percent. Lower expenses resulted primarily from cost reduction activities as well as lower trade show costs and restructuring charges.

Second Quarter 2009 Non-Cash Accounting Charges

Special charges totaled $19.2 million in the second quarter of 2009, primarily due to the Company recording a non-cash, non-routine charge of $19.1 million related to goodwill. The goodwill write-off reflects the full impairment of amounts relating to the 2004 acquisitions of A.B. Dick and Precision Lithograining.

During the second quarter of 2009, the Company also recorded a non-cash valuation allowance against its deferred tax assets of $16.8 million related to its U.S. business entities. However, the benefit of the net operating losses remains available to offset the Company's future U.S. income tax liability.

The Company's second quarter 2009 debt net of cash totaled $13.1 million, an increase of $3.5 million from the first quarter of 2009. This increase was due to lower earnings, the timing of inventory purchases, and the reduction of accrued expenses. However, debt net of cash was down $9.6 million, or 42 percent, from the second quarter of 2008.

Including discontinued operations and the non-cash charges, the Company reported a net loss of $41.4 million for the second quarter of 2009, compared with net income of $0.6 million in the second quarter of 2008.

Credit Facility

As a result of the Company's financial performance during the second quarter, the Company is not in compliance with certain financial covenants under its credit agreement. The Company is in discussions with the agent bank to ensure that the Company continues to have access to its revolving credit facility. Concurrently, the Company is in discussions with potential lenders concerning a new credit facility and expects to have a new credit agreement in place on or prior to the expiration of the current credit agreement on November 4, 2009.

Print 09 Trade Show

"While we are disappointed with the impact that the economy has had on our business, we remain encouraged about our future and are making good progress toward our key strategic initiatives," commented Jacobson. "We have many exciting new products in our pipeline, some of which will be highlighted at the upcoming Print 09 trade show taking place next month in Chicago. We will officially announce our first long-run thermal plate at Print 09, which will debut as an expansion to our current digital plate offerings. Our newest offering is a non-preheat thermal technology plate which, along with our latest chemistry-free technology, can be imaged on a substantial number of new and a large installed base of existing platesetters worldwide. In addition, we will be showcasing a 52DI press with ultraviolet printing capability, which is currently available, as well as a 52DI with aqueous coating capability, which will be available for order starting in the fourth quarter of 2009."

Second Quarter 2009 Report on Form 10-Q

The Company announced it would be filing a Form 12b-25, Notification of Late Filing, with the Securities and Exchange Commission regarding its quarterly report on Form 10-Q for the second quarter of 2009. The late filing is caused by delays in documenting supporting schedules for the report. The Company expects to file its second quarter 2009 Form 10-Q within the five-day extension period permitted by the Securities and Exchange Commission.

Information Regarding Non-GAAP Measures

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the Company provides non-GAAP financial measures, including debt net of cash, which is defined as debt minus cash, and other GAAP measures adjusted for certain charges, which the Company believes are useful to help investors better understand its past financial performance and prospects for the future. A full reconciliation of GAAP to non-GAAP measures is provided in the financial tables below. Supplemental financial information has been provided with this release to provide additional details on the Company's performance.

Conference Call and Webcast

Management will discuss Presstek's second quarter 2009 results in a conference call today at 10:30 a.m. Eastern Time. Conference call information is below:

Conference Call Access: Domestic Dial In: 866-713-8564 International Dial In: 617-597-5312 Passcode: 44029027

In addition, for those unable to participate at the time of the call, a rebroadcast will be available following the call from Thursday, August 13, 2009 at 1:30 PM Eastern Time until Thursday, August 20, 2009 Eastern Time at 11:59 PM.

Rebroadcast Access: Domestic Dial In: 888-286-8010 International Dial In: 617-801-6888 Passcode: 99214445

An archived webcast of this conference call will also be available on the "Investor Events Calendar" page of the Company's web site, www.presstek.com.

About Presstek

Presstek, Inc. is a leading manufacturer and marketer of high tech digital imaging solutions to the graphic arts and laser imaging markets. Presstek's patented DI®, CTP and plate products provide a streamlined workflow in a chemistry-free environment, thereby reducing printing cycle time and lowering production costs. Presstek solutions are designed to make it easier for printers to cost effectively meet increasing customer demand for high-quality, shorter print runs and faster turnaround while providing improved profit margins. Presstek subsidiary, Lasertel, Inc., manufactures semiconductor laser diodes for Presstek's and external customers' applications. For more information visit www.presstek.com, or call 603-595-7000 or email: info@presstek.com. DI is a registered trademark of Presstek, Inc.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

Certain statements contained in this News Release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding expected revenue, gross margins, operating income (loss), EBITDA, asset impairments, expectations concerning the reductions of costs, the level of customer demand, the results of the Company's Business Improvement Plan, the ability of the Company to achieve its stated objectives, and the Company's expectations concerning its ability to access its current revolving credit facility and to obtain a new credit facility. 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 severity and length of the current economic downturn, the impact of the economic downturn on the availability of credit for the Company's customers, the ability of the Company to continue to have access to its revolving credit facility, the ability of the Company to obtain an adequate credit facility to replace its current credit facility, the Company's ability to successfully market its Lasertel subsidiary for sale, market acceptance of and demand for the Company's products and resulting revenue, the ability of the Company to successfully expand into new territories, the ability of the Company to meet its stated financial and operational objectives, the Company's dependence on its partners (both manufacturing and distribution), the results of the pending formal investigation by the Securities and Exchange Commission and the impact of any civil penalty on the Company, the ability of the Company's insurer to fund the settlement of the class action lawsuit and certain costs associated with the lawsuit and the SEC investigation, and other risks and uncertainties detailed in the Company's 2008 Annual Report on Form 10-K and the Company's other reports on file with the Securities and Exchange Commission. The words "looking forward," "looking ahead," "believe(s)," "should," "may," "expect(s)," "anticipate(s)," "project(s)," "likely," "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. The Company undertakes no obligation to update any forward-looking statements contained in this news release.

PRESSTEK, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per-share data) (Unaudited) Three months ended Six months ended July 4, June 28, July 4, June 28, 2009 2008 2009 2008 --------- --------- --------- --------- Revenue Product $ 26,324 $ 43,086 $ 53,220 $ 84,476 Service and parts 7,186 8,520 14,750 17,924 --------- --------- --------- --------- Total revenue 33,510 51,606 67,970 102,400 --------- --------- --------- --------- Cost of revenue Product 17,107 27,602 33,484 53,070 Service and parts 5,367 6,539 11,356 13,465 --------- --------- --------- --------- Total cost of revenue 22,474 34,141 44,840 66,535 --------- --------- --------- --------- Gross profit 11,036 17,465 23,130 35,865 --------- --------- --------- --------- Operating expenses Research and development 1,164 1,275 2,424 2,638 Sales, marketing and customer support 6,884 7,903 13,249 15,323 General and administrative 6,321 5,416 12,293 12,389 Amortization of intangible assets 233 274 487 565 Restructuring and other charges 38 560 122 1,195 Goodwill impairment 19,114 - 19,114 - --------- --------- --------- --------- Total operating expenses 33,754 15,428 47,689 32,110 --------- --------- --------- --------- Income (loss) from operations (22,718) 2,037 (24,559) 3,755 Interest and other income (expense), net (246) 185 214 (287) --------- --------- --------- --------- Income (loss) from continuing operations before income taxes (22,964) 2,222 (24,345) 3,468 Provision for income taxes 16,905 1,219 16,630 1,578 --------- --------- --------- --------- Income (loss) from continuing operations (39,869) 1,003 (40,975) 1,890 Loss from discontinued operations, net of income taxes $ (1,580) $ (436) $ (1,665) $ (1,105) --------- --------- --------- --------- Net income (loss) $ (41,449) $ 567 $ (42,640) $ 785 ========= ========= ========= ========= Earnings (loss) per share - basic Income (loss) from continuing operations $ (1.09) $ 0.03 $ (1.12) $ 0.05 Loss from discontinued operations (0.04) (0.01) (0.04) (0.03) --------- --------- --------- --------- $ (1.13) $ 0.02 $ (1.16) $ 0.02 ========= ========= ========= ========= Earnings (loss) per share - diluted Income (loss) from continuing operations $ (1.09) $ 0.03 $ (1.12) $ 0.05 Loss from discontinued operations (0.04) (0.01) (0.04) (0.03) --------- --------- --------- --------- $ (1.13) $ 0.02 $ (1.16) $ 0.02 ========= ========= ========= ========= Weighted average shares outstanding Weighted average shares outstanding - basic 36,665 36,584 36,652 36,578 Dilutive effect of stock options - 16 - 12 --------- --------- --------- --------- Weighed average shares outstanding - diluted 36,665 36,600 36,652 36,590 ========= ========= ========= ========= PRESSTEK, INC. CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) July 4, January 3, 2009 2009 ---------- ---------- ASSETS Current assets Cash and cash equivalents $ 4,453 $ 4,738 Accounts receivable, net 26,570 30,759 Inventories 38,864 37,607 Assets of discontinued operations 13,607 13,330 Deferred income taxes 243 7,066 Other current assets 3,864 4,095 ---------- ---------- Total current assets 87,601 97,595 Property, plant and equipment, net 25,024 25,530 Goodwill - 19,114 Intangible assets, net 4,399 4,174 Deferred income taxes 700 10,494 Other noncurrent assets 500 606 ---------- ---------- Total assets $ 118,224 $ 157,513 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt and capital lease obligation $ 1,644 $ 4,074 Line of credit 15,948 12,415 Accounts payable 14,996 12,060 Accrued expenses 9,824 13,261 Deferred revenue 6,525 7,300 Liabilities of discontinued operations 5,950 5,702 ---------- ---------- Total current liabilities 54,887 54,812 Other long-term liabilities 159 170 ---------- ---------- Total liabilities 55,046 54,982 ---------- ---------- Stockholders' equity Preferred stock - - Common stock 368 366 Additional paid-in capital 119,178 117,985 Accumulated other comprehensive loss (3,855) (5,954) Accumulated deficit (52,513) (9,866) ---------- ---------- Total stockholders' equity 63,178 102,531 ---------- ---------- Total liabilities and stockholders' equity $ 118,224 $ 157,513 ========== ========== PRESSTEK, INC. CONTINUING OPERATIONS SUPPLEMENTAL FINANCIAL INFORMATION $000's (Unaudited) Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 -------- -------- -------- -------- -------- Key Units DI Presses (Excludes QMDI) 35 37 25 13 11 CtP Platesetters (Excludes DPM) 31 36 35 24 21 Revenue - Growth Portfolio DI Presses (Excludes QMDI) 11,863 12,867 7,528 3,521 3,732 Presstek Branded DI Plates 4,796 4,653 4,661 4,025 4,301 -------- -------- -------- -------- -------- Total DI Revenue 16,659 17,520 12,189 7,546 8,033 Presstek CtP Platesetters (Excludes DPM) 2,183 2,228 2,039 1,109 1,505 Chemistry Free CtP Plates 5,136 4,064 4,402 3,426 3,678 -------- -------- -------- -------- -------- Total CtP Revenue 7,319 6,292 6,441 4,535 5,183 Service Transfer (1,334) (976) (1,176) (601) (603) Service Revenue 3,110 2,804 3,002 2,723 2,588 -------- -------- -------- -------- -------- Total Revenue - Growth Portfolio 25,754 25,640 20,456 14,203 15,201 -------- -------- -------- -------- -------- Revenue - Traditional Portfolio QMDI Platform 4,357 3,456 3,417 2,962 2,987 Polyester CtP Platform 4,524 4,077 3,601 3,575 3,178 Other DI Plates 2,249 2,059 1,693 1,295 1,128 Conventional/Other 9,427 7,943 7,916 7,775 6,608 -------- -------- -------- -------- -------- Total Product Revenue - Traditional 20,557 17,535 16,627 15,607 13,901 Service Transfer (116) (85) (102) (190) (190) Service Revenue - Traditional 5,411 5,444 5,336 4,840 4,598 -------- -------- -------- -------- -------- Total Revenue - Traditional Portfolio 25,852 22,894 21,861 20,257 18,309 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total Revenue 51,606 48,534 42,318 34,460 33,510 -------- -------- -------- -------- -------- Product Revenue Components % Growth 49.9% 52.8% 48.3% 41.2% 45.4% Traditional 50.1% 47.2% 51.7% 58.8% 54.6% Geographic Revenues (Origination) North America 35,918 35,244 32,374 26,715 26,076 Europe 15,688 13,290 9,944 7,745 7,434 -------- -------- -------- -------- -------- Consolidated 51,606 48,534 42,318 34,460 33,510 ======== ======== ======== ======== ======== Gross Margin Presstek Equipment 10.1% 15.1% 11.7% 5.9% 0.9% Consumables 49.1% 49.5% 51.2% 46.7% 43.5% Service 23.3% 26.1% 29.7% 20.8% 25.3% -------- -------- -------- -------- -------- Consolidated 33.8% 34.7% 37.9% 35.1% 32.9% ======== ======== ======== ======== ======== Operating Expense (Excluding Special Charges) (A) $ 14,868 $ 14,337 $ 16,409 $ 13,851 $ 14,602 Profitability Net income (loss) $ 567 $ 195 $ (456) $ (1,191) $(41,449) Add back: Loss from discontinued operations 436 431 1,070 85 1,580 -------- -------- -------- -------- -------- Net income (loss) from continuing operations 1,003 626 614 (1,106) (39,869) Add back: Interest 195 147 121 56 110 Other (income) expense (380) 212 (1,705) (516) 136 Tax charge (benefit) 1,219 1,153 49 (275) 16,905 Impairment - - - - 19,114 Other charges (credits) 560 374 539 84 38 -------- -------- -------- -------- -------- Operating income (loss) from continuing operations 2,597 2,512 (382) (1,757) (3,566) Add back: Depreciation and amortization 1,440 1,379 1,172 1,191 1,150 Other income (expense) 380 (212) 1,705 516 (136) -------- -------- -------- -------- -------- EBITDA From Continuing Operations (A) $ 4,417 $ 3,679 $ 2,495 $ (50) $ (2,552) ======== ======== ======== ======== ======== Cash Earnings From Continuing Operations Income (loss) from continuing operations 1,003 626 614 (1,106) (39,869) Add back: Other charges (credits) 560 374 539 84 38 Impairment - - - - 19,114 Depreciation and amortization 1,440 1,379 1,172 1,191 1,150 Non cash portion of equity compensation (2006 forward 123R related) 381 498 482 457 505 Non cash portion of taxes 371 749 36 (454) 17,071 -------- -------- -------- -------- -------- Cash Earnings From Continuing Operations (A) 3,755 3,626 2,843 172 (1,991) ======== ======== ======== ======== ======== Working Capital Current assets (excluding net assets of discontinued operations) $103,619 $ 93,152 $ 84,263 $ 83,850 $ 73,994 -------- -------- -------- -------- -------- Current liabilities Short-term debt 25,356 15,130 16,489 14,941 17,592 All other current liabilities 45,250 37,163 32,575 33,847 31,345 -------- -------- -------- -------- -------- Current liabilities 70,606 52,293 49,064 48,788 48,937 -------- -------- -------- -------- -------- Working capital 33,013 40,859 35,199 35,062 25,057 Add back short-term debt 25,356 15,130 16,489 14,941 17,592 -------- -------- -------- -------- -------- Working capital, excluding short-term debt (A) $ 58,369 $ 55,989 $ 51,688 $ 50,003 $ 42,649 ======== ======== ======== ======== ======== Debt net of cash (A) Calculation of total debt: Current portion of long-term debt $ 10,356 $ 3,240 $ 4,074 $ 2,454 $ 1,644 Line of credit 15,000 11,890 12,415 12,487 15,948 Long-term debt, net of current portion 1,644 834 - - - -------- -------- -------- -------- -------- Total debt 27,000 15,964 16,489 14,941 17,592 Cash 4,268 2,634 4,738 5,262 4,453 -------- -------- -------- -------- -------- Debt net of cash $ 22,732 $ 13,330 $ 11,751 $ 9,679 $ 13,139 ======== ======== ======== ======== ======== Days Sales Outstanding 64 60 69 74 69 Days Inventory Outstanding 86 87 87 100 105 Capital Expenditures $ 417 $ 437 $ 831 $ 180 $ 238 Employees 628 622 608 612 608 A. Operating expenses, excluding special charges and EBITDA from continuing operations [earnings before interest, taxes, depreciation, amortization and restructuring and merger-related charges (credits)]; Working capital, excludingshort-term debt; Debt net of cash; and Cash earning from continuing operations are not measures of performance under accounting principles generally accepted in the United States of America ("GAAP") and should not be considered alternatives for, or in isolation from, the financial information preparedand presented in accordance with GAAP. Presstek's management believes that EBITDA provides meaningful supplemental information regarding Presstek's current financial performance and prospects for the future. Presstek's management believes that Cash earnings from continuing operations provide meaningful supplemental information regarding Presstek's current financial performance and prospects for the future. Presstek's management believes that Working capital, excluding short-term debt, provides meaningful supplemental information regarding Presstek's ability to meet its current liability obligations. Presstek's management believes that Debt net of cash provides meaningful information on Presstek's debt relative to its cash position. Presstek believes that both management and investors benefit from referring to these non-GAAP measures in assessing the performance of Presstek's ongoing operations and liquidity, and when planning and forecasting future periods. These non-GAAP measures also facilitate management's internal comparisons to Presstek's historical operating results and liquidity. Our presentations of these measures, however, may not be comparable to similarly titled measures used by other companies. Reconciliations of these measures to GAAP are included in the tables above. ** Certain amounts may be subject to reclassification to conform to current presentation