HUDSON, N.H., July 27 -- Presstek, Inc., a leading manufacturer and marketer of high tech digital imaging solutions for the graphic arts and laser imaging markets, today reported record consolidated revenue of $74.2 million for the second quarter of 2006, and net income of $2.7 million, or $0.08 per diluted share. President and Chief Executive Officer Edward J. Marino said, "We are very pleased to report solid business results for the second quarter of 2006. Growth of the company's consolidated revenue was driven by strong digital sales, which now comprise 69% of our total revenue. DI press products again led digital sales, increasing 38% over the previous quarter. These achievements were reached with very little contribution from OEM equipment sales." Marino continued, "We believe that the strong growth trends developing in our digital product lines clearly demonstrate growing market acceptance of Presstek's digital technology and that our strategy of moving more toward a direct sales model and taking more control of our channels to market is working." Financial Results The company reported the following financial highlights in the second quarter of 2006: * Record consolidated revenue of $74.2 million, up 5% from the prior quarter, and 6% from the corresponding quarter last year; * Record consolidated digital revenue, up 10% from the prior quarter, and 24% from the corresponding quarter last year; * Record consolidated equipment revenue of $27.4 million, up 16% from the prior quarter, and 29% from the corresponding quarter last year; * Record DI equipment revenue, up 38% from the prior quarter, and 117% from the corresponding quarter last year; * Record DI consumable revenue, up 10% from the prior quarter, and 12% from the corresponding quarter last year; * Record revenue at Presstek Europe, up 28% from the prior quarter, and 135% from the corresponding quarter last year; * Record external revenue of $1.9 million at the company's Lasertel subsidiary, up 58% from the prior quarter, and 159% from the corresponding quarter last year. Executive Vice President and Chief Financial Officer Moosa E. Moosa said, "Presstek's strong financial and operating performance in the second quarter was offset by a decrease in analog consumable and service revenue. During the quarter we shifted some of the less profitable analog service contracts to a time and materials model, which in the short term will impact the steady annuity-type revenue of the normal service contract. We believe this is in the best interest of the company as it frees up valuable customer service resources for digital service requirements and results in a more profitable model for the long run. Service costs were higher by approximately $0.6 million as a result of higher infrastructure costs to equip technicians with the latest technology tools." Moosa continued, "The decrease in analog service and consumable revenues had a direct impact on our gross margins, which decreased to 28% in the second quarter from 29% in the prior quarter. Margins were also impacted by the increase of equipment in our product mix. We expect margins to improve in the coming quarters as analog service contracts are replaced by service contracts on newly installed digital products, and as analog consumable revenue levels off." "Operating expenses in the second quarter were $17.0 million, down from $17.8 million in the corresponding quarter last year, even with an additional $0.6 million in IPEX trade show related expenses in the second quarter which did not occur last quarter," said Moosa. "Net income for the quarter was $2.7 million, up 17% from $2.3 million in the corresponding quarter last year in spite of the additional IPEX related expenses this quarter." Moosa continued, "Our balance sheet continues to be very strong. We continued to see the results of our inventory reduction program in the second quarter, with inventories down by $4.8 million, or 11%, from the previous quarter. "Receivables were up $6.6 million in the second quarter," said Moosa. "This is mainly the result of increased revenue and the continuing shift from an OEM sales model to a direct sales model." "We paid down $1.8 million of long-term debt during the quarter," said Moosa. "Total debt at the end of the quarter was $33.5 million, down from $34.8 million at the end of Q1. Debt-net-of-cash at the end of the quarter was $24.9 million, down from $28.8 million at the end of the first quarter." Looking ahead "The penetration of Presstek's digital technology continues to be the driving force behind our growth plans," said Marino. "Increased penetration of our international markets, beginning in Europe, and the expansion of our digital product lines are the primary sources for near term growth. The latest addition to our digital product line is the new Presstek 52DI press, which was introduced at IPEX in April. The first customer shipments of the new 52DI will begin in the third quarter. To help us execute our growth plans we plan to continue to add staff in our sales, marketing and service organizations." Marino continued, "We have known all along that our DI press product line could experience the kind of growth we are now seeing. The value proposition of the DI press to the customer is very strong. Customers tell us and survey results show that DI press users are growing their businesses and seeing more profits as a result of our technology. The market is there and we are focusing our resources on meeting customer demand." "We are pleased that the business strategies we have set in place are proving successful," said Marino. "Looking ahead, we expect third quarter revenue to be roughly equal to the second quarter due to the normal seasonality of our business. For the year, we believe we are on track to achieve our annual revenue growth target of 10% in 2006."