Strategy

Europe Woes Mount for Presstek

An extensive internal probe of inventory and other issues in Europe takes a slice out of income, delays the filing of financials, and could cause N...
Stephen TaubDecember 20, 2007

Presstek Inc. said it has widened an internal review of inventory issues and other business practices.

The printing company already was looking into excess and obsolete inventory, receivables from distributors in Europe, and European revenue recognition practices. This caused the company to delay the filing of its third-quarter report with the Securities and Exchange Commission.

On Thursday Presstek announced that it additionally will review worldwide receivables, investigate European business practices, perform a comprehensive internal audit of European operations, and assess internal controls related to these areas.

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These reviews will reduce third-quarter operating income by $6 million to $9 million, the company estimated. This includes increased reserves for excess and obsolete inventory and accounts receivable, adjustments from a physical inventory taken in late August, and one-time costs related to the reviews such as external accounting resources and legal/investigatory support.

Presstek warned that the reviews and diversion of management time have significantly impacted revenue growth in Europe during the latter part of the year, and that U.S. sales also will come in below expectations.

The company’s stock plunged about 15 percent Thursday to below $5.

“I am obviously disappointed that these issues and business practices that current management inherited have resulted in a temporary disruption to the business, and have also consumed an inordinate percentage of our resources and attention,” said president and CEO Jeff Jacobson.

Meanwhile, a hearing before a Nasdaq committee has been scheduled for January 10 to review a previously announced decision to delist the company’s stock as a result of its failure to file its September quarterly report.

And, the company said, the SEC is informally inquiring about its results for the third quarter of 2006.

Presstek is no stranger to controversy. In the late 1990s it was a favorite among Wall Street short sellers who were skeptical of a new printing-press technology it was developing.

The stock is currently down 90 percent from its all-time high of more than $50 (split-adjusted) in 1997.