Presstek defaults in second quarter, operations holding on

Presstek is technically in default to its creditors and has no goodwill left, but that doesn’t have any immediate effect on operations of the Hudson-based provider of printing equipment, according to its quarterly filing with the Securities and Exchange Commission.

However, the company’s poor performance in the second quarter — a 35 percent drop in revenue, a 41.5 percent net loss and a stock price that has gone down by more than two-thirds in a year — has taken its toll.

On July 4, the last day of its second quarter, Presstek owed $27.8 million to three banks in a revolving line of credit administered by the banks’ agent. Last fall, the company renegotiated the loan, allowing it to lower its payments if it maintained four financial thresholds. However, last quarter it flunked two of those tests, resulting in an “event of default” which allows the banks’ agent to call in the loan. Presstek could try to renegotiate the note, but if it had to, the company could pay it back out of pocket. Presstek would have enough cash and working capital to last a year, but that could “forego certain opportunities, or possibly discontinue certain of our operations.”

Presstek is already in the midst of reducing workforce by 60 workers.

So far the banks have not called in the loan, and show no indication of doing so. Still Presstek is now seeking alterative financing.

Goodwill has also suffered this quarter. Goodwill is how much the company could be sold for on top of its assets, at least its tangible ones, like plant, equipment, receivables, and some intangibles, such as intellectual property. It’s basically what a company’s name and reputation adds to its value.

Previously Presstek estimated that it had $19.1 million in goodwill, but because of its declining stock price and its economic performance, the company took another look and discovered it had none left.

“The company has no goodwill balance remaining as of July 4, 2009,” the filing said.

That $19.1 million charge is included in the company’s quarterly $41.5 million loss, but the “impairment charge is non-cash in nature and does not affect the company’s liquidity, cash flows from operating activities or debt covenants and will not have a material impact on future operations.” — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW