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Article by DailyStocks_admin    (05-21-08 08:19 AM)

Presstek Inc. CEO Jeffrey Jacobson bought 62527 shares on 5-15-2008 at $5.65

BUSINESS OVERVIEW

General

Presstek’s address is 55 Executive Drive, Hudson, NH 03051. We also maintain executive offices at 2 Greenwich Office Park, Suite 300, Greenwich, CT 06831. The Company’s website is www.presstek.com.

Presstek is a leading manufacturer and marketer of environmentally-friendly digital offset printing solutions. These products are engineered to provide a streamlined workflow that shortens the print cycle time, reduces overall production costs, and meets the market’s increasing demand for fast turnaround high-quality short run color printing. Presstek’s subsidiary, Lasertel, Inc., manufactures semiconductor laser diodes for Presstek and external customer applications.

Our products include DI ® Presses, chemistry-free computer-to-plate systems (CTP), workflow solutions, and a complete line of prepress and press room consumables. Presstek also offers a range of technical services for its customers.

Background

Since its founding in 1987 Presstek has served the commercial print industry by offering innovative digital offset printing solutions for commercial printing applications. We:

•

invented the technology that enables DI ® presses;
•

invented chemistry-free printing plates;
•

have significantly streamlined the print production workflow;
•

have helped transition offset printing from a craft-based manual process to an automated manufacturing process and;
•

plan to continue to innovate by providing high quality fully integrated digital solutions and services that form an all-encompassing relationship with our customers

Primary Markets

Presstek serves the global print market. The two primary opportunities for Presstek’s solutions lie in the commercial and corporate segments.

Commercial markets include companies that provide printing and print-related services, such as design, prepress, and bindery, on a print-for-pay basis. Many firms in the commercial printing industry have some type of process expertise or geographic focus. This market is further segmented by employee size (i.e. < 10, 10 - 19, 20 – 49, 50 – 99, 100 +) and by equipment capability (e.g. format size 2-page, 4-page, 8-page; type of equipment - sheetfed or web press).

The corporate market includes in-plant print shops and data center printing departments that provide copying and printing services to support the primary business of a company or organization. These are companies whose primary business includes anything other than printing (i.e. insurance, manufacturing, financial services, education, or government).

Historically, Presstek has primarily served smaller commercial printers with less than 20 employees as well as the in-plant printing market.


Market Trends

The commercial printing market is shifting to increasingly faster production of smaller order quantities (shorter runs) with an increasing use of color. Key trends include the following:

•

80% of four-color jobs are now produced in runs of less than 5,000
•

10% of digital color work is versioned or personalized
•

A 27% growth in production digital color page volume is expected to occur by 2009
•

By 2010, 33% of all print jobs are expected to require a 24-hour turnaround

Providing Solutions for New Market Requirements

Presstek offers a range of products to meet these changing market demands including DI ® presses and chemistry-free CTP systems. Presstek DI ® presses incorporate Presstek’s ProFire Excel laser imaging technology, unique press design, and thermal plates to create an optimized offset printing system for runs from 250 to 20,000 sheets. With this automated print system, digital files are sent to the printing press where all four printing plates are imaged on press in precise register, resulting in a highly streamlined digital workflow that is designed to allow the fastest way to achieve finished offset press sheets. With our CTP solutions, digital files are sent directly from the prepress workflow to the plate-imaging device; the plates are imaged off line, and then mounted on a conventional offset press. Presstek introduced the concept of chemistry-free printing to the market and continues to lead the market in pursuit of this more environmentally friendly and efficient manner of producing offset printing plates.

Organizational Structure

To better address the worldwide print market, Presstek has aligned its resources into three strategic business units. The structure allows the Company to continue to focus on its traditional base of small commercial and in-plant customers, while expanding the range of products it can bring to market around the world. The structure is also designed to better position the Company to more effectively address the needs of larger commercial printers. New strategic business units are:

•

Digital Printing Business Unit, which includes digital presses, consumables and workflow
•

CTP Business Unit, responsible for digital platemaking systems, consumables and workflow
•

Traditional Business Unit, consists of polyester CTP platemaking and pressroom supplies

Geographic Structure

Presstek supplies equipment to support the growing print market; currently 67% of Presstek’s revenues come from North America, 27% from Europe; 4% from Asia Pacific and 2% from other various regions. To facilitate growth Presstek has established three sales regions that work closely with the business units to bring integrated solutions to local markets. The three sales regions are:
•

Europe (Europe, Middle East, Africa)
•

Americas (North America and Latin America)
•

Asia Pacific


Our Business Segments

We operate in two reportable segments: the Presstek segment, and the Lasertel segment. The Presstek segment is primarily engaged in the development, manufacture, sales, distribution, and servicing of digital offset printing solutions for the graphic arts industries. The Lasertel segment is primarily engaged in the manufacture and development of high-powered laser diodes for a variety of industry segments.

For an analysis of our revenue from sales to external customers, operating profit and assets by business segment as well as revenue from sales to external customer and long-lived assets by geographic area, see Note 16 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

The Presstek Segment

The Presstek segment provides research, new product development and manufacturing. It also serves as the center for marketing, sales and service for our digital offset printing solutions as well as the distribution of our third-party products. In addition, the Presstek segment serves as the central organization under which our subsidiary functions.

Our products are sold to end-user customers through either our direct sales force, our dealer channel, or through OEM partners. We also have an established catalog of pressroom supplies and consumables.

Presstek branded equipment is serviced either by our direct service organization or by our dealer channel. Our direct service organization primarily serves customers located in the United States, Canada, and the U.K.

Manufacturing

At our 165,000-square-foot facility in Hudson, New Hampshire, we manufacture ProFire ® Digital Media, PearlDry ® Plus, and PearlDry ® printing plates. The ProFire Excel imaging kits that are incorporated into DI® presses are also assembled in Hudson. All CTP systems are manufactured in Hudson, including the Dimension® Excel series, Vector TX52 and the ABDick ® -branded Digital PlateMaster ® system. At our South Hadley, Massachusetts, manufacturing facility, we manufacture aluminum-based printing plates, including chemistry-free Presstek-branded Anthem ® Pro, Freedom ® and Aurora digital printing plates.

Plate manufacturing at our Hudson facility uses vacuum deposition technology to create ultra-thin imaging layers. We have a state-of-the-art solution coater capable of handling aqueous or solvent-based fluids with best available environmental controls throughout the process. PET substrates are laminated to aluminum webs (spools) using electron beam curing technology. This eliminates the need for environmental emissions from a drying process. We utilize full converting capability, which provides high-speed slitting, spooling, formatting and final packaging.

The facility located in South Hadley, Massachusetts, consists of 50,000 square feet in a single building, and performs aluminum plate manufacturing including in-line graining, anodizing, silicating, and multiple layer coatings. Raw aluminum is processed into lithographic printing plates for digital markets.

Distribution

Our sales strategy is designed to emphasize the distribution of Presstek DI presses and CTP solutions and related consumables, as well as a full catalog of conventional products. These products are offered to customers through our direct sales force, independent graphic arts dealers and strategic OEM partnerships.

We have an established distribution network in North America, and in Europe we are currently strengthening our position by growing our dealer network. We are in the process of developing distribution in other parts of the world to strengthen our global position.

Service and Support

Presstek also has an established service organization throughout the United States, Canada and the UK to service its equipment. In other regions, Presstek authorized dealers are the primary source of service, with Presstek providing training and advanced technical support.

The Lasertel Segment

Our Lasertel segment is a developer and manufacturer of high-powered laser diodes. These diodes are used in Presstek DI® presses and the Dimension Series of CTP systems. Lasertel also provides diodes to external customers in a range of industries (i.e. defense, industrial, medical, and telecommunications).

Lasertel operates a 75,000-square-foot facility located in Tucson, Arizona. The facility includes 10,000 square feet of clean room space and complete process equipment for semiconductor laser manufacturing. Lasertel’s manufacturing process begins with molecular beam epitaxy reactors to grow semiconductor laser wafers, and extends through the final polishing techniques for the optical fiber.

In December of 2005, Lasertel received ISO 9001:2000 certification. An ISO 9001:2000 certification recognizes the quality of a company’s management system. ISO is a non-governmental federation of the national standard boards of countries from all regions of the world that set the standards and requirements for state-of-the-art products, services, processes, materials and systems, as well as for good conformity assessment, managerial and organizational practice.

The 2005 purchase of a high capacity molecular beam epitaxy (“MBE”) reactor enabled Lasertel to improve yields and increase revenue substantially during 2006 and 2007. During 2006 the performance and reliability of Lasertel products was demonstrated by the first use of a Lasertel diode laser on the space shuttle. The laser manufactured by Lasertel is used in a system enabling the crew of the space shuttle and engineers on the ground to determine the health of Discovery’s heat shield. The success of the system led to its use on shuttle missions. In July of 2007 Lasertel received a purchase contract for more than $3 million from SELEX Sensors and Airborne Systems to supply laser diode arrays for use in military aerospace targeting systems. This order was one in a series of contracts awarded to Lasertel as part of a strategic supply agreement in place between SELEX S&AS and Lasertel. The agreement demonstrates that defense is an important segment for Lasertel.

Strategy

Our vision is to provide high quality, fully integrated digital solutions and services in order to form an all-encompassing relationship with our customers. Our business strategy is to offer innovative digital imaging and plate technologies that address the opportunities of today and tomorrow in the graphic arts and commercial printing market.

This strategy includes several imperatives:

1. Focus on the growth of our consumables product line

Presstek provides digital offset solutions that aid printers in meeting the changing needs of today’s market – shorter run lengths, faster turn-around times, and more color. Our DI press and CTP solutions use our chemistry-free printing plates. With our direct sales force and network of distribution partners, we feel we are well positioned to expand our installation base of these solutions. Another step in growing our consumables business is to develop plates (consumables) that can be imaged on non-Presstek manufactured devices, an open systems approach. The first step in executing this strategy is the launch of Aurora Pro, our open-platform, chemistry-free printing plate, which is designed to be used on thermal CTP systems marketed by other manufacturers, planned for commercialization during 2008. The Company also believes that it can stem the erosion of its traditional consumables (ink, pressroom and proofing supplies, etc.) and has dedicated a strategic business unit to this effort.

2. Emphasize attractive market segments

Large print providers were the first to adopt digital technology, and they have driven the digital transformation of the commercial printing market. Today the benefits of a digital workflow are well understood and all segments of the commercial print market are adopting digital technologies. With our range of digital solutions and the strength of our direct sales and service force, we have experienced most of our success in these segments:

a.

Commercial printers (generally those with less than 20 employees) that need to increase their production capacity, level of productivity and output quality while improving profitability have demonstrated success with our digital offset products. These printers are often acquiring their first four-color press when they acquire a Presstek product.

b.

Digital printers and copy shops, facilities that primarily operate toner-based digital printing equipment, are acquiring DI presses as complementary devices. They are using DI presses for jobs that require run lengths greater than 250 copies, a higher level of quality, or a substrate (coated stock, thick stock, plastics, etc.) that can not be effectively produced on a toner based device.

c.

In-plant print shops that operate within corporations, colleges and universities and government agencies are attracted to the ease-of-use, compact footprint and environmentally responsible nature of our solutions.

3. Focus on key growth areas

a.

Growth within the existing segments that Presstek serves today. Historically Presstek has served print shops with less than 20 employees, this segment makes up approximately 75% of the industry (i.e..number of printers), and many have not yet fully embraced digital printing technologies. In addition, owners of existing DI presses and CTP systems will be looking to add capacity or to upgrade their capabilities (i.e. upgrade a 34DI press to a 52DI or a semi-automated CTP system to a fully automated solution).

b.

Growth up-market to larger print shops. As print buyers request shorter runs with faster turnaround times, larger shops often need to outsource these jobs or run them inefficiently on their larger offset presses or toner presses. A Presstek DI press is a good solution for these shops, because it is an offset printing solution that allows color to be matched to the output of their larger presses. The DI press may also open up new applications for the larger print shop.


c.

Growth of computer-to-plate (CTP) consumables. It is estimated that the worldwide thermal printing plate market in 2006 was $2.22 billion. This market is expected to grow by as much as 53% to $3.41 billion based on research from PIRA International and PRIMIR Research. Presstek plans to further penetrate this large consumables market by expanding its range of CTP plates. These plates will work on both imaging systems sold by Presstek and on third party imaging devices. Aurora Pro is an example of a product that fits into this area of growth

d.

Growth in geographic regions. The largest portion of Presstek’s sales has historically come from the United States and Canada. However, the largest portion of the worldwide print market is outside North America Presstek has established three sales regions, the Americas, Europe, and Asia Pacific, to establish proper distribution by region and to help develop solutions that fit that markets specific geographic requirements.


4. Enable customers to better compete by offering diverse range of products

Because our goal is to provide high quality, fully integrated digital solutions and services that form an all-encompassing relationship with our customers, we deliver solutions that allow the printers to differentiate their print businesses in a competitive marketplace. Presstek’s products can be divided into two primary categories: DI ® presses and CTP systems, along with the supplies and services that they require. Ease of use, environmentally friendly chemistry-free imaging, and a small footprint are common benefits of the two product lines.

Our DI ® presses, the Presstek 52DI and Presstek 34DI, allow printers to offer high-quality offset printing on a wide range of substrates at run lengths starting at 250 sheets for a competitive price. DI ® presses are able to do this because of their short make-ready time, which is possible because of three Presstek technologies—laser imaging, press design, and thermal plate technology—working in unison to create an optimized printing system.

Presstek offers a full range of CTP systems, from a two-page polyester system to an eight-page aluminum system. In 2007, Presstek upgraded the Dimension250 Excel and Dimension450 Excel to include full automation.

Presstek has also recently expanded its workflow offering by partnering with third parties. This allows users to better implement Presstek’s DI ® and CTP solutions while improving the flow of jobs through production. An example of this is the recent agreement Presstek signed with Press-sense to offer a web-to-print solution that allows printers to efficiently accept work via the Internet.

5. Provide solutions that meet the growth in demand for short-run, fast turnaround high-quality color printing.

According to market research commissioned by Presstek and conducted by industry consultant Dr. Joseph Webb of Strategies for Management, “Much of the print industry’s decline in shipment volume has been in long-run printed documents. Short-run printing is actually mainstream. Short-run printing weighs on the capital base that was purchased to produce long-run printing, and until that installed base is replaced, profits are negatively affected.” Dr. Webb concludes, “Presstek has a unique opportunity and position in the reshaping of the printing industry's workflow and production methods. Presstek as a company, and print as a medium, are at a fascinating crossroads of technology, market opportunities, and competition. The company's products allow printers to compress their workflow to eliminate costly steps, leveraging the modern content creator’s capabilities to make better, richer, and more predictable printable files.”


6. Provide environmentally responsible solutions through our application of technology.

Our thermally imaged chemistry-free plate technologies are designed to provide both a streamlined workflow and an environmentally responsible solution. Besides contributing to a cleaner and safer printing operation, environmental responsibility is sound business practice in that our DI and CTP solutions reduce labor needs, reduce space requirement, eliminates plate-oriented waste disposal, and results in fewer manufacturing process errors.

CEO BACKGROUND

John W. Dreyer has been Non-Executive Chairman of the Board of Directors since June 2006. Mr. Dreyer has been a director of the Company since February 1996. Mr. Dreyer served as the Company’s Lead Director from March 2005 until his election as Chairman. He retired as Chairman and Chief Executive Officer of Pitman Company, a graphic arts and image supplier, in December 2000.

Jeffrey Jacobson has been the President and Chief Executive Officer and a director of the Company since May 2007. From April 2005 until April 2007, he was a Corporate Vice President and the Chief Operating Officer of Eastman Kodak Company’s Graphic Communications Group, a division formed by the integration of six different Kodak companies into a $3.6 billion global enterprise. From March, 2000 through March, 2005, Mr. Jacobson served as Chief Executive Officer of Kodak Polychrome Graphics, a $1.7 billion global joint venture between Sun Chemical Corporation and Eastman Kodak. In all, Mr. Jacobson has 21 years of experience in the graphics arts industry. Mr. Jacobson is a board member of the Electronic Document Systems Foundation, as well as a board member of the New York University Graphic Communications Management and Technology Advisory Board.



Daniel S. Ebenstein has been a director of the Company since November 1999. Since 1968, Mr. Ebenstein has been practicing intellectual property law at the New York law firm of Amster, Rothstein & Ebenstein LLP and has been a partner of that firm since 1972.

Dr. Lawrence Howard , a founder of the Company, has been a director of the Company since November 1987. Since March 1997, Dr. Howard has been a general partner of Hudson Ventures, L.P. (formerly known as Hudson Partners, L.P.), a limited partnership that is the general partner of Hudson Venture Partners, L.P., a limited partnership that is qualified as a small business investment company. Since March 1997, Dr. Howard has also been a managing member of Hudson Management Associates LLC, a limited liability company that provides management services to Hudson Venture Partners, L.P. Since November of 2000, Dr. Howard has been a General Partner of Hudson Venture Partners II, and a limited partner of Hudson Venture II, L.P. From 1988 to 1993 he served in various executive positions with the Company, including Chief Executive Officer. He also serves as a director and Chairman of the Board of iCad, Inc.

Steven N. Rappaport has been a director of the Company since November 2003. Since July 2002, Mr. Rappaport has been a partner of RZ Capital, LLC, a private investment firm that also provides administrative services for a limited number of clients. Mr. Rappaport is currently serving as an independent director and audit committee member with respect to a number of investment portfolios, of which Credit Suisse serves as the investment adviser under the Investment Companies Act of 1940. Twenty-one of the funds are open-end funds and Mr. Rappaport is the Chairman of these funds. Seven of the funds are closed-end funds, whose shares are currently listed on the New York Stock Exchange. Mr. Rappaport also serves as a director of iCad, Inc. and a number of for profit private businesses, and is a member of the Board of Trustees of Washington University in St. Louis.

Frank D. Steenburgh has been a director of the Company since April 2008. From January 2008 until the present, he has served as Chief Marketing Officer of ColorCentric Corporation. From January 2006 until the present, he has served as President and CEO of Steenburgh & Associates, LLC. From January 2005 until December 2005 he served as Senior Vice President, Business Growth of Xerox Corporation. From November 2001 until December 2004 he served as Senior Vice President and Worldwide General Manager, iGen3 Business of Xerox. Prior thereto he served in various capacities with Xerox.

Donald C. Waite, III has been a director of the Company since July 2002. Since February 2002, Mr. Waite has been the Director of the Executives-in-Residence Program and an Adjunct Professor at Columbia Graduate School of Business. Mr. Waite was employed as an executive with McKinsey & Company, an international management consulting firm, from 1966 until his retirement in February 2002. He remains a member of the McKinsey Investment Committee. From June 1996 to February 2002, Mr. Waite was one of the three members of McKinsey’s Office of the Managing Director, and Chairman of McKinsey’s Investment Committee and Compensation Committee. Mr. Waite is a Director Emeritus of McKinsey & Company. He sits on the Board of Overseers of the Columbia Graduate School of Business and is a member of the board of directors of Guardian Life Insurance Company of America and Information Services Group, Inc.

COMPENSATION

Components of the Compensation Program

The Company’s executive compensation program is comprised of the following components, in support of our executive compensation philosophy.

Base Salary . Base salary is based upon competitive market data derived from compensation surveys, such as those used in 2007 and described below, as well as compensation information derived from search firms in connection with the Company’s recruitment of new executives. Our objective is to pay competitive base salaries in order to attract and retain talented executives. Increases in base salary are used to reward performance and/or to address changes in the market with respect to the competitive salary for a particular position.

Annual Incentive Program . Annual cash incentive opportunities provided to executives are based upon the achievement of targeted performance levels in specific categories. These incentives are designed to reward performance, to align the interests of management with those of stockholders, and to provide market competitive compensation opportunities to executives. In 2007, as part of their employment agreements and to induce them to become employed by the Company, Messrs. Jacobson and Cook received guaranteed bonuses. Beginning in 2008 we intend to pay our executives primarily performance-based bonuses.

Long-Term Incentive Program . Time-vested equity compensation in the form of stock options and other equity based awards provided to executives are and will be designed to reward performance, to serve as a retention tool to align the interests of management with those of stockholders, and to provide market competitive compensation opportunities to executives.

Benefits/Perquisites. We provide corporate executives with generally the same benefits as those provided to all other salaried employees, such as health and dental insurance, life insurance, short- and long-term disability, 401(k) plan with company match, and an employee stock purchase plan. In addition, we also provide certain executives with a car allowance or Company-provided automobile and reimbursement of gas and parking expenses.

In addition, certain executives, including Messrs. Jacobson and Cook, are parties to employment agreements with us that that provide compensation if the executive’s employment is terminated under specified circumstances. These agreements also provide for certain severance payments if there is a change in control and the executive is terminated without cause or the executive leaves for good reason, as defined in the agreements. These agreements help us to attract talented executives, reduce the potential for employment litigation and avoid the loss of our executives to our competitors and other companies.

Compensation Committee

Our executive compensation programs are overseen and administered by the Committee, is comprised of three independent members of the Board. The current members of the Committee are Dr. Lawrence Howard (Chairman), Brian F. Mullaney and Steven N. Rappaport. The Committee’s charter charges it with various duties and responsibilities, including responsibility for establishing annual and long-term performance goals for the Company’s elected officers, including the compensation and evaluation of the performance of executive officers. The Committee’s charter is reviewed annually and can be found on our website at www.presstek.com .

Management’s Role in Compensation

The President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer, the Vice President of Human Resources and the Vice President, General Counsel and Secretary often attend Committee meetings to present matters for consideration by the Committee and to answer questions regarding those matters.

The President and Chief Executive Officer recommends to the Committee increases or changes in compensation for executive officers other than himself, based on his assessment of each individual’s performance, contribution to the Company’s results and potential for future contributions to our success. The Committee meets in executive session without any members of management present to review the performance and compensation of the President and Chief Executive Officer, to evaluate compensation proposals made by management and to make decisions with respect to these proposals. The Committee has ultimate responsibility for approving and setting compensation levels for the Company’s executive officers, other than the Chief Executive Officer, with respect to whom the Committee makes recommendations to the full Board.

Compensation Consultants

In 2007 the Committee retained Pearl Meyer & Partners as a compensation consultant to provide the Committee with independent analysis and competitive market data in connection with the Committee’s negotiation of a compensation arrangement with Mr. Jacobson, who joined the Company in May 2007 as President and Chief Executive Officer. The Committee also used compensation survey data acquired from Radford Consulting.

Setting Compensation Levels

During 2007 the Board of Directors recruited and hired a new executive management team. In determining the compensation to be paid to Mr. Jacobson as President and Chief Executive Officer, the Committee utilized competitive market information developed by Pearl Meyer & Partners. The Committee considered several factors in determining the amount and components of Mr. Jacobson’s compensation. The Committee considered, among other things:




•


the Board’s strong desire to hire Mr. Jacobson due to his reputation for successfully leading other businesses in the industry to significantly improved financial performance,




•


Mr. Jacobson’s then current compensation level, as well as the components of his compensation,




•


the competitive market information provided to the Committee by Pearl Meyer & Partners, and




•


t he desire of the Committee to provide Mr. Jacobson with a competitive total compensation and benefit package that would attract him to accept the Company’s offer of employment, and that would align strongly align his interests to those of the Company’s stockholders by providing a significant incentive to enhance stockholder wealth.

In performing a compensation analysis with respect to the Committee’s negotiations with Mr. Jacobson, Pearl Meyer & Partners examined compensation data from certain companies included in its CHiPS executive compensation survey.

The consideration of these factors, and the negotiations between the Company and Mr. Jacobson, resulted in a compensation reflected in an employment agreement consisting of the following elements:





•


a starting base salary of $600,000 per year which will increase over the four-year term of his employment agreement,




•


guaranteed annual bonus of $400,000 for 2007,




•


a target annual cash incentive opportunity of 66.7% of base salary for 2008 which will increase over the four-year period of his employment agreement ,




•


a signing bonus of 300,000 shares of the Company’s Common Stock , and




•


and a non-qualified stock option to purchase 1,000,000 shares of Common Stock with an exercise price of $6.14 per share, with an option for 200,000 shares vesting immediately and options for the remaining 800,000 shares vesting ratably over the four-year term of the employment agreement .


The employment agreement also provides for certain severance payments if Mr. Jacobson’s employment is terminated under specified circumstances, and provides for certain payments and benefits in the event that Mr. Jacobson’s employment is terminated following a change in control of the Company. The Committee believes that this compensation package achieved the Committee’s objectives of providing a competitive compensation and benefit package to Mr. Jacobson that strongly aligns his interests with those of stockholders.

The terms of Mr. Jacobson’s employment agreement are more fully described below in this proxy statement under “Discussion Concerning Summary Compensation and Grants of Plan-Based Awards Tables – Employment Agreements”.

With respect to establishing compensation levels for those executives other than the President and Chief Executive Officer, including Mr. Cook, the Committee considers competitive market survey data.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

We are a market-focused company primarily engaged in the design, manufacture, sales and service of high-technology digital imaging solutions to the graphic arts industry worldwide. We are helping to lead the industry’s transformation from analog print production methods to digital imaging technology. We are a leader in the development of advanced printing systems using digital imaging equipment and consumables-based solutions that economically benefit the user through a streamlined workflow and chemistry free, environmentally responsible operation. We are also a leading sales and service channel in the small to mid-sized commercial, quick and in-plant printing markets offering a wide range of solutions to over 20,000 customers worldwide.

Presstek’s business model is a capital equipment and consumables (razor and blade) model. In this model, approximately 62% of our revenue is recurring revenue. Our model is designed so that each placement of either a Direct Imaging Press or a Computer to Plate system results in recurring aftermarket revenue for consumables and service.

Through our various operations, we:

•

provide advanced print solutions through the development and manufacture of digital laser imaging equipment and advanced technology chemistry-free printing plates, which we call consumables, for commercial and in-plant print providers targeting the growing market for high quality, fast turnaround short-run color printing;

•

are a leading sales and services company delivering Presstek digital solutions and solutions from other manufacturing partners through our direct sales and service force and through distribution partners worldwide;

•

manufacture semiconductor solid state laser diodes for Presstek imaging applications and for use in external applications; and

•

distribute printing plates for conventional print applications, as well as related equipment and supplies for the graphic arts and printing industries.

We have developed a proprietary system by which digital images are transferred onto printing plates for Direct Imaging on-press applications and for computer-to-plate applications. We refer to Direct Imaging as DI ® and computer-to-plate as CTP. Our digital imaging systems enable customers to produce high-quality, full color lithographic printed materials more quickly and cost effectively than conventional methods that employ more complicated workflows and toxic chemical processing. This results in reduced printing cycle time and lowers the effective cost of production for commercial printers. Our solutions make it more cost effective for printers to meet the increasing demand for shorter print runs, higher quality color and faster turn-around times.

Our groundbreaking DI technology is used in our CTP systems. Our Presstek business segment designs and manufactures CTP systems that incorporate our imaging technology and image our chemistry free printing plates.

In addition to marketing, selling and servicing our proprietary digital products, we also market, sell and service traditional, or analog products for the commercial print market. This analog equipment is manufactured by third party strategic partners and analog consumables are manufactured by our various partners.

Lasertel, Inc., a subsidiary of Presstek, is primarily engaged in the manufacture and development of high-powered laser diodes for Presstek and for sale to external customers. Lasertel’s products include semiconductor lasers and active components for the graphics, defense, industrial, and medical industries. Lasertel offers high-powered laser diodes in both standard and customized configurations, including chip on sub-mount, un-mounted bars, and fiber-coupled devices, to support various applications.

Our operations are organized based on the market application of our products and related services and consist of two reportable segments: Presstek and Lasertel. The Presstek segment is primarily engaged in the development, manufacture, sale and servicing of our patented digital imaging systems and patented printing plate technologies as well as traditional, analog systems and related equipment and supplies for the graphic arts and printing industries, primarily the short-run, full-color market segment. The Lasertel segment manufactures and develops high-powered laser diodes for Presstek and for sale to external customers.

We generate revenue through four main sources: (i) the sale of our equipment, including DI ® presses and CTP devices, as well as imaging kits, which are incorporated by leading press manufacturers into direct imaging presses for the graphic arts industry; (ii) the sale of high-powered laser diodes for the graphic arts, defense, medical and industrial sectors; (iii) the sale of our proprietary and non-proprietary consumables and supplies; and (iv) the servicing of offset printing systems and analog and CTP systems and related equipment.

Our business strategy is centered on maximizing the sale of consumable products, such as printing plates, and therefore our business efforts focus on the sale of “consumable burning engines” such as our DI ® presses and CTP devices. Our strategy to grow our consumables has two parts. The first part is to increase the number of our DI ® and CTP units in the field. By increasing the number of consumable burning engines we expect to increase the demand for our consumables.

We rely on partnerships with press manufacturers such as Ryobi Limited, Heidelberger Druckmaschinen AG, or Heidelberg, and Koenig & Bower AG, or KBA, to market printing presses and press solutions that use our proprietary consumables. We also rely on distribution partners, such as Eastman Kodak, to sell related proprietary consumable products.

Another method of growing the market for consumables is to develop consumables that can be imaged by non-Presstek devices. In addition to expanding our base of our consumable burning engines, an element of our focus is to reach beyond our proprietary systems and penetrate the installed base of CTP devices in all market segments with our chemistry free and process-free offerings. The first step in executing this strategy was the launch of our non-proprietary Aurora chemistry-free printing plate designed to be used with consumable burning engines manufactured by thermal CTP market leaders Screen and Kodak. We continue to work with other CTP manufacturers to qualify our consumables on their systems. We believe this shift in strategy fundamentally enhances our ability to expand and control our business.

We operate and report on a 52- or 53-week, fiscal year ending on the Saturday closest to December 31. Accordingly, the consolidated financial statements include the financial reports for the 52-week fiscal year ended December 29, 2007, which we refer to as “fiscal 2007”, the 52-week fiscal year ended December 30, 2006, which we refer to as “fiscal 2006”, and the 52-week fiscal year ended December 31, 2005, which we refer to as “fiscal 2005”.

We intend the discussion of our financial condition and results of operations that follows to provide information that will assist in understanding our consolidated financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our consolidated financial statements.

The discussion of results of operations at the consolidated level is presented together with results of operations by business segment.

RESULTS OF OPERATIONS

Fiscal 2007 Compared to Fiscal 2006

Revenue

Consolidated revenues were $254.8 million in 2007, a decrease of $10.9 million, or 4.1%, from $265.7 million in 2006. Equipment revenues reflected a decrease of $1.6 million, or 1.6%, compared to 2006, as strong sales of 52DI presses and increases in our Lasertel business were not enough to offset significant declines in our analog and CTP product lines, particularly lower sales of DPM machines. Consumables revenues declined by $3.2 million, or 2.6%, due primarily to lower sales of QMDI plates. Revenues in our service business were lower by $6.0 million, or 13.3%, in 2007 due to lower contract service revenues resulting from the transition of our customer base from analog to digital solutions. Overall, sales of Presstek’s “growth” portfolio of products, defined as 34DI and 52DI digital offset solutions, the Presstek family of chemistry free CTP solutions, and Lasertel, increased $18.2 million, or 16.6%, from $109.9 million in 2006 to $128.1 million in 2007.

Presstek segment equipment revenues were $87.7 million in 2007 vs. $90.7 million in 2006, a decrease of $3.1 million, or 3.4%. Gross sales of Presstek’s growth portfolio of equipment increased to $77.1 million in 2007 from $69.3 million in 2006. Revenues from the sale of DI ® equipment in 2007 of $64.0 million reflects an increase of $10.0 million, or 18.4%, vs. 2006 due to strong marketplace demand for the 52DI press, which was first introduced in the third quarter of 2006. Total unit sales of the 52DI press reached 59 in 2007, and 52DI revenues as a percentage of total DI ® press revenue increased from 10.0% in 2006 to 44.1% in 2007. Sales of our remaining growth portfolio of equipment, Presstek CTP platesetters and Vector TX52 machines, declined from $15.3 million in 2006 to $13.1 million in 2007, a decrease of 14.2%, due in part to the company’s continued emphasis on marketing higher margin DI ® presses, as well as a large decline in the sale of DPM machines consistent with industry trends. In addition, unit sales of the Vector TX52 were negatively impacted early in 2007 from the carry-over impact of quality issues experienced during the second half of 2006. These issues have since been successfully resolved. Equipment sales of our “traditional” line of products, defined as QMDI presses, polyester CTP platesetters, and conventional equipment, were all lower in 2007 compared to 2006 due to the ongoing transition of our customer base from analog to digital technologies. Gross revenues from our traditional equipment products decreased from $25.8 million in 2006 to $16.2 million in 2007, a decline of 37.2%. As a percentage of total equipment revenue within the Presstek segment, net sales of growth portfolio products increased from 73.0% of revenue in 2006 to 82.6% of revenue in 2007.

Revenue for the Lasertel segment, including intercompany revenue, was $12.5 million in 2007, and reflects an increase of $1.0 million, or 8.9%, compared to 2006. The favorable increase in 2007 is principally the result of additional sales of laser diode array products to external customers, which more than offset lower sales to the Presstek segment.

Consumables product revenues decreased from $123.1 million in 2006 to $119.9 million in 2007, a reduction of $3.2 million, or 2.6%. The decline in revenues resulted from the anticipated slowdown of certain products in Presstek’s traditional line, including QMDI plates and conventional consumables, and was consistent with industry trends. QMDI plates declined from $24.6 million in 2006 to $19.5 million in 2007, a decrease of 20.5%. Sales of conventional consumables declined from $40.6 million in fiscal 2006 to $35.1 million in the comparable 2007 period. Partially offsetting this decline were sales of Presstek’s “growth portfolio” of consumables, defined as 52DI, 34DI, and chemistry-free CTP plates, which grew from $30.4 million in 2006 to $37.5 million in 2007, an increase of $7.1 million, or 23.5%.

Service and parts revenues declined from $45.0 million in 2006 to $39.0 million in 2007, a decrease of 13.3%. Lower revenues resulted primarily from the anticipated shift away from our less profitable legacy service contract base which, in the short term, is declining faster than our digital service business is accelerating.

Cost of Revenue

Consolidated cost of revenue was $184.2 million in fiscal 2007, a decrease of $2.5 million, or 1.4%, compared to fiscal 2006. Product cost of revenue in 2007 includes $5.4 million of charges related to excess and obsolete inventory, warranty, and accrued purchase commitments related to product portfolio changes, planned changes for the Vector TX52 product line, physical inventory results, and other adjustments. Service and parts cost of revenue in fiscal 2007 includes a charge of $1.1 million related to write-downs of field service parts inventory.

Cost of product, consisting of costs of material, labor and overhead, shipping and handling costs and warranty expenses, was $152.5 million in fiscal 2007 compared to $154.3 million in fiscal 2006.

Cost of product in the Presstek segment was $145.7 million in fiscal 2007 compared to $149.3 million in the same prior year period. In 2007, the Company recorded inventory-related charges of $4.9 million, consisting of $2.3 million for the write-off of excess and obsolete inventory, $2.5 million of inventory write-downs related to the Vector TX52, $0.6 million of warranty-related expenses, and other adjustments. Offsetting these costs were lower costs related to favorable equipment product mix, production efficiencies in our plate manufacturing processes, and lower freight costs.

Cost of revenue in the Lasertel segment, including intercompany, was $11.5 million in fiscal 2007 compared to $10.1 million in the comparable prior year period. In fiscal 2007, the company recorded excess and obsolete inventory charges of $0.2 million, and $0.3 million related to physical inventory losses.

Cost of service in 2007, including the previously discussed $1.1 million write down of field service parts inventory, was $31.6 million compared to $32.5 million same prior year period. These amounts represent the costs of spare parts, labor and overhead associated with the ongoing service of products. Service costs were favorably impacted by the improved utilization of the field service organization in North America, the result of a restructuring plan intended to realign our service organization with a declining analog revenue base.

Gross Profit

Consolidated gross profit as a percentage of total revenue was 27.7% in 2007 compared to 29.7% in 2006. Gross margins were negatively impacted in 2007 by excess and obsolete inventory and warranty charges related to product portfolio changes and field service parts inventory changes.

Gross profit as a percentage of product revenue was 29.3% in fiscal 2007 compared to 30.1% in fiscal 2006. Gross margins were negatively impacted in 2007 by excess and obsolete inventory and warranty charges related principally to product portfolio changes and field service parts inventory changes. Offsetting this somewhat was the favorable impact of a higher mix of DI ® revenues, which are predominately higher margin products than our CTP and traditional lines of business, as well as improved production efficiencies in our plate manufacturing.

Gross profit as a percentage of service revenue was 18.9% in 2007 compared to 27.8% in 2006. Service margins in 2007 were negatively impacted by charges for losses on field service parts inventory of $1.1 million. Lower service margins also reflect the declining analog contract revenue base, which more than offset cost savings resulting from reductions in field service personnel.

Research and Development

Research and development expenses consist primarily of payroll and related expenses for personnel, parts and supplies, and contracted services required to conduct our equipment, consumables and laser diode development efforts.

Consolidated research and development expenses of $6.2 million in fiscal 2007 were essentially unchanged from $6.4 million in the comparable prior year period.


Research and development expenses for the Presstek segment were $5.0 million in 2007 compared to $5.3 million in 2006. The decrease was due to lower payroll related expenses resulting from turnover of personnel.

Research and development expenses for the Lasertel segment were $1.2 million in 2007 compared to $1.1 million in the same prior year period. The increased expense in 2007 relates primarily to incremental parts and supplies consumed in the product development process.

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 associated with sales, marketing and customer support activities.

Consolidated sales, marketing and customer support expenses of $39.9 million in 2007 were flat compared to expenses of $40.0 million in 2006.

Sales, marketing and customer support expenses for the Presstek segment of $39.2 million in fiscal 2007 decreased $0.3 million from the comparable prior year expense of $39.5 million due primarily to lower payroll, commission, and travel and entertainment expenses, offset somewhat by increased marketing costs in Europe necessary to support planned growth.

Sales, marketing and customer support expenses for the Lasertel segment increased from $0.5 million in 2006 to $0.7 million in 2007. Higher expenses in 2007 were due primarily to additional contract labor and advertising expense to continue expanding external sales.

General and Administrative

Consolidated general and administrative expenses consist primarily of payroll and related expenses for personnel and contracted professional services necessary to conduct our finance, information systems, legal, human resources and administrative activities. General and Administrative costs also include stock based compensation expenses, as well as bad debt reserves.

Consolidated general and administrative expenses were $34.2 million compared to $19.9 million in the comparable prior year period. General and administrative expense increases were primarily the result of higher patent defense and litigation activities of $4.6 million; increased bad debt expense of $2.0 million and increased professional fees of $3.4 million related primarily to various detailed financial reviews conducted during the year. General and administrative expenses in 2007 also include an increase of $2.1 million in stock compensation related to stock option grants to officers, directors and employees compared to the same period in fiscal 2006, as well as a $1.5 million increase in expense related to restricted stock compensation granted to our CEO.


General and administrative expenses for the Presstek segment were $33.2 million in 2007 compared to $18.9 million in 2006. The increased expense was due primarily to the increased professional fees, litigation, stock compensation, and bad debt expenses noted above.

General and administrative expenses for the Lasertel segment of $1.04 million in fiscal 2007 were essentially flat compared to $1.06 million in fiscal 2006.

Amortization of Intangible Assets

Amortization expense of $2.4 million in fiscal 2007 declined from $3.0 million in the comparable prior year period. These expenses relate to intangible assets recorded in connection with the Company’s 2004 acquisition of the business of the A.B. Dick Company, patents and other purchased intangible assets.

Restructuring and Other Charges

Consolidated restructuring and other charges of $2.7 million in 2007 decreased from $5.5 million in 2006. 2007 restructuring expenses represent the cost of severance and separation expenses for employment contracts of former executives, as well as costs related to implementation of our Business Improvement Plan (BIP). The BIP costs include the consolidation of the Canadian back-office operations and certain Des Plaines, Illinois activities into the Hudson, New Hampshire operations, and include restructuring costs relating to severance, operating lease run-out and inventory consolidation.

In fiscal 2006, the Company recognized restructuring and other charges of $5.5 million. These charges included $2.3 million related to impairment of intangible assets associated with patent defense costs on the Creo/Kodak litigation matter, $2.8 million related to impairment of goodwill resulting from SFAS 144 valuation adjustments of long lived assets at Precision as a result of the decision to discontinue its newspaper analog business, $0.5 million for merger-related costs primarily related to additional professional fees, and $0.3 million related to the impairment of other assets. In addition, approximately $0.4 million of previously established accruals at the Presstek segment were recognized in income in fiscal 2006 due principally to changes in the scope of previously announced severance programs.

Interest and Other Income (Expense), Net

Consolidated net interest and other expense in 2007 was $2.4 million compared to $1.8 million in the comparable prior year period. Increased expense in 2007 was due primarily to higher interest expense resulting from higher balances on our revolving credit facility, as well as higher interest rates. Offsetting this somewhat were gains on foreign currency translation.

Provision (Benefit) for Income Taxes

Our effective tax rate was (29.2%) in fiscal 2007 and (448.3%) in fiscal 2006. In fiscal 2006, in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” , (“FAS 109”), the Company recognized through its tax provision a $11.2 million deferred tax benefit from the reversal of the previously recorded valuation allowance established on its U.S. federal, state and local deferred tax assets, except for that portion where the evidence does not yet support a reversal. To support the determination that is more likely than not that the Company’s deferred tax assets will be realized in the future, FAS 109 requires that the Company consider all available positive and negative evidence. Based on a detailed analysis, the Company concluded that evidence exists to support the U.S. valuation allowance reversal as of December 30, 2006.

MANAGEMENT DISCUSSION FOR LATEST QUARTER


Three months ended March 29, 2008 compared to three months ended March 31, 2007

Revenue

Consolidated Revenue

Consolidated revenues were $52.4 million in the first quarter of 2008, a decline of $12.7 million, or 19.5%, compared to $65.2 million in the first quarter of 2007. The decline in sales was primarily driven by reduced sales in Europe due to a disruption in operations resulting from a comprehensive business review, economic weakness in the United States, and customer anticipation of the DRUPA trade show which will take place in Germany in Q2. Overall, sales of Presstek’s “growth” portfolio of products, defined as 34DI and 52DI digital offset solutions, the Presstek family of chemistry free CtP solutions, and Lasertel, decreased $5.2 million, or 16.6%, from $31.2 million in the first quarter of 2007 to $26.0 million in 2008.

Presstek segment equipment revenues were $13.2 million in the first quarter of 2008, a decrease of $10.3 million, or 43.8%, from the comparable prior year period. Sales of growth portfolio DI presses declined from $15.2 million in Q1 of 2007 to $9.7 million in Q1 of 2008, a reduction of 36.1%, due to lower press sales in Europe. In addition, sales of DI kits declined from $0.9 million in the first quarter of 2007 to zero in the first quarter of 2008. Sales of our remaining growth portfolio of equipment, Dimension and Vector TX52 platesetters, declined from $3.4 million in the first quarter of 2007 to $2.8 million in 2008, a decrease of 18.2%, due in part to the company’s continued emphasis on marketing higher margin DI presses. Equipment sales of our “traditional” line of products, defined as QMDI presses, polyester CtP platesetters, and conventional equipment, were all lower in the first quarter of 2008 compared to 2007 due to the ongoing transition of our customer base from analog to digital technologies. Revenues from our traditional line of equipment products declined from $5.1 million in 2007 to $1.6 million in 2008, a decrease of 69.1%. As a percentage of total equipment revenue within the Presstek segment, net sales of growth portfolio equipment products increased from 83.3% of revenue in Q1 2007 to 95.2% in 2008.

Revenue for the Lasertel segment was $2.3 million in the first quarter of 2008, a decrease of $0.7 million, or 23.2%, from the comparable prior year period. The decrease was the result of delayed orders from external customers, as well as a decline in sales to the Presstek segment.

Consumables product revenues declined from $30.1 million in the first quarter of 2007 to $28.2 million in the first quarter of 2008, a decrease of 6.3%. The decline was due primarily to lower sales of our traditional products resulting from the continuing migration of our customer base from analog to digital solutions. Total sales of Presstek’s “traditional” portfolio of consumable products declined from $21.2 million in the first quarter of 2007 to $18.2 million in the first quarter of 2008, a decrease of 14.1%, driven primarily from lower sales of QMDI plates and conventional consumables. Partially offsetting this decline were sales of Presstek’s “growth” portfolio of consumables, defined as 52DI, 34DI, and chemistry-free CtP plates, which grew from $8.9 million in 2007 to $10.0 million in 2008, an increase of 12.0%. Sales of 52DI and 34DI plates increased by $1.5 million, or 37.6%, from $4.0 million in the first quarter of 2007 to $5.5 million in 2008.

Service and parts revenues were $9.4 million in the first quarter of fiscal 2008, reflecting a decrease of $0.5 million, or 5.2%, from the comparable prior year period. The decrease is due primarily to lower billable service and parts revenue resulting from the transition of our customer base from analog to digital solutions which, in the short term, is having a negative impact on sales. Contract service revenues, which had been declining for some time due to the shift away from our less profitable legacy service contract base, were essentially flat compared to Q1 of 2007.

Cost of Revenue

Consolidated cost of product, consisting of costs of material, labor and overhead, shipping and handling costs and warranty expenses, was $27.4 million in the first quarter of fiscal year 2008, compared to $38.9 million in the first quarter of fiscal year 2007, a decrease of 29.7%. The decrease was due primarily to lower revenues, lower costs resulting from the positive impact of our business improvement plan, “BIP”, and lower freight costs due in part to $0.4 million of expense incurred in the first quarter of 2007 resulting from a refinement in freight cost estimates. Favorable results from the BIP include improved efficiencies and yields in our South Hadley plate manufacturing operation, lower overall freight costs, and procurement initiatives which have resulted in lower product costs.

Consolidated cost of service and parts was $6.9 million in the first quarter of fiscal year 2008, compared to $7.7 million in the same prior year period. These amounts represent the costs of spare parts, labor and overhead associated with the ongoing service of products. The reduction in overall cost is principally due to the termination of service personnel in North America, an element of our BIP intended to realign our service costs with a declining analog revenue base.

Gross Profit

Consolidated gross profit as a percentage of total revenue was 34.5% in the first quarter of fiscal year 2008, compared to 28.4% in the first quarter of fiscal year 2007.

Gross profit as a percentage of product revenues was 36.3% in the first quarter of 2008 compared to 29.5% in the comparable prior year period. The increase in gross profit in the first quarter of 2008 reflects the favorable impact of the company’s higher profit consumables business representing a greater proportion of total product sales, in addition to the company’s BIP actions, price increase on consumable products in response to higher costs and lower costs resulting from the $0.4 million freight charge taken in Q1 2007.

Gross profit on service revenues increased from 22.4% in the first quarter of 2007 to 26.3% in the first quarter of 2008. The increase in profit is due primarily to the positive impact of the company’s BIP plan that has resulted in a cost structure more appropriately aligned with the current revenue base.

Research and Development

Research and development expenses primarily consist of payroll and related expenses for personnel, parts and supplies, and contracted services required to conduct our equipment, consumables and laser diode development efforts.

Consolidated research and development expenses were $1.5 million in the first quarter of fiscal year 2008 compared to $1.6 million in the first quarter of fiscal year 2007.

Research and development expenses for the Presstek segment were $1.3 million in both the first quarter of fiscal year 2008 and fiscal 2007.

Research and development expenses for the Lasertel segment were $0.2 million in the first quarter of fiscal 2008 compared to $0.3 million the same prior year period.


Sales, Marketing and Customer Support

Sales, marketing and customer support expenses primarily consist of payroll and related expenses for personnel, advertising, trade shows, promotional expenses, and travel costs associated with sales, marketing and customer support activities.

Consolidated sales, marketing and customer support expenses decreased from $9.9 million in the first quarter of fiscal year 2007 to $7.6 million in the first quarter of 2007, a decrease of 2.3 million, or 23.0%.

Sales, marketing and customer support expenses for the Presstek segment decreased from $9.7 million in the first quarter of fiscal year 2007 to $7.4 million in 2007. The decrease in expense is due primarily to lower payroll, facilities, and travel related expenses resulting from the favorable impact of our BIP program, as well as lower commission expense resulting from lower sales.

Sales, marketing and customer support expenses for the Lasertel segment were $0.2 million in the first quarter of fiscal year 2008, unchanged from the same prior year period.


General and Administrative

Consolidated general and administrative expenses, are primarily comprised of payroll and related expenses, including stock compensation, for personnel and contracted professional services necessary to conduct our general management, finance, information systems, human resources and administrative activities.

Consolidated general and administrative G&A expenses were $7.2 million in the first quarter of fiscal year 2008 compared to $6.3 million in 2007, an increase of $0.9 million, or 14.2%.

General and administrative expenses for the Presstek segment were $7.0 million in the first quarter of 2008 compared to $6.1 million in 2007. The increased expense was due primarily to costs associated with increased incentive plan accruals as well as the rebuilding of our finance organization necessary to remediate previously disclosed material weaknesses.

General and administrative expenses for the Lasertel segment were $0.2 million in both the first quarter of 2007 and the first quarter of 2008.

Amortization of Intangible Assets

Amortization expense of $0.4 million in the first quarter of fiscal 2008 declined $0.3 million from the prior year period. These expenses relates to intangible assets recorded in connection with the Company’s 2004 ABDick acquisition, patents and other purchased intangible assets.


Restructuring and Other Charges

In the first quarter of 2008, we recognized $0.6 million of restructuring and other related costs associated with our business improvement plan.

Interest and Other Expense, Net

Consolidated net interest and other expense decreased from $0.9 million in the first quarter of 2007 to $0.7 million in the first quarter of 2008. Net interest expense of $0.6 million in the first quarter of 2008 reflected a decrease of $0.2 million over the comparable prior year period due to lower interest rates as well as a lower balance on our revolving credit facility. Other expense in Q1 2008 of $0.1 million, comprised primarily of loss on currency translation, was unchanged from the same prior year period.

Provision for Income Taxes

Our tax benefit was $0.08 million and $0.3 million for the three months ended March 29, 2008 and March 31, 2007, respectively, on pre-tax income (loss) from continuing operations of $0.1 million and ($1.2) million for the respective periods. The estimated annual effective tax rate excluding discrete items is expected to be approximately 43%.


Discontinued Operations

The Company accounts for its discontinued operations under the provisions of SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets (SFAS 144). Accordingly, results of operations and the related expenses associated with discontinued operations have been classified as “Loss from discontinued operations, net of tax” in the accompanying Consolidated Statements of Income. Assets and liabilities of discontinued operations have been reclassified and reflected on the accompanying Consolidated Balance Sheets as “Assets of discontinued operations” and “Liabilities of discontinued operations.” For comparative purposes, all prior periods presented have been reclassified on a consistent basis.

Precision Lithograining Corp. - Analog Newspaper Business
During December 2006, the Company terminated production in South Hadley, Massachusetts of Precision-branded analog plates used in newspaper applications.

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