U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the three months ending September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE EXCHANGE ACT
For the transition period from ______________ to ______________
Commission file number 0-7267
______
WEB PRESS CORPORATION
_____________________
(Exact name of registrant as specified in its charter)
Washington 91-0851298
_______________________________ ____________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22023 68th Avenue S., Kent, Washington 98032
____________________________________________
(Address of principal executive offices)
Registrant's telephone number, including area code (206) 395-3343
______________
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past ninety
(90) days Yes X No
___ ___
All reports during the preceding 12 months have been filed.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date
(applicable only to corporate issuers): Common Stock, $.025 par
value per share; 3,105,413 shares outstanding as of November 8,
1996
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Page 1 of 13 pages in this document
<PAGE>
INTRODUCTORY REMARKS
The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the
information presented not misleading.
The information furnished reflects all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results for the interim period.
It is suggested that these condensed financial statements be read
in conjunction with the financial statements and the notes
therein included in the Company's latest annual report on Form 10-
KSB.
<PAGE>
PART I
FINANCIAL INFORMATION
WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS September 30, 1996
__________________
Current Assets:
Cash......................... $ 2
Accounts receivable, less
allowance for doubtful
accounts of $14............ 1,749
Inventories.................. 3,399
Deferred tax assets.......... 8
Prepaid expenses............. 78
______
Total Current Assets........... 5,236
Machinery and Leasehold
Improvements, at cost:
Machinery and equipment...... 2,995
Leasehold improvements....... 195
______
3,190
Less accumulated depreciation
and amortization............. (2,590)
______
Machinery and Leasehold
Improvements (Net)........... 600
______
Total Assets................... $5,836
______
______
The above figures are unaudited. The accompanying notes are an
integral part of the balance sheet.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, 1996
__________________
Current Liabilities:
Notes payable............................ $ 675
Accounts payable......................... 629
Customer deposits........................ 25
Accrued expenses......................... 460
Current portion of long-term debt........ 995
______
Total Current Liabilities.................. 2,784
Long-Term Debt, less current portion....... 53
Deferred taxes on income................... 367
Stockholders' Equity:
Common stock, par value $.025 per share:
Authorized, 4,000,000 shares
Issued, 3,436,513 shares................ 86
Paid-in capital.......................... 320
Retained earnings........................ 2,323
______
2,729
Treasury stock, 331,100 shares at cost... (97)
______
Total Stockholders' Equity................. 2,632
______
Total Liabilities and
Stockholders' Equity...................... $5,836
______
______
The above figures are unaudited. The accompanying notes are an
integral part of the balance sheet.
<PAGE>
WEB PRESS CORPORATION
Consolidated Statements of Operations
For the three and nine months ending September 30,
(Dollars in Thousands Except Earnings Per Share)
THREE MONTHS NINE MONTHS
____________ ___________
1996 1995 1996 1995
____ ____ ____ ____
Sales.................... $2,054 $1,796 $5,008 $6,768
Cost of sales............ 1,472 1,581 3,640 5,234
______ ______ ______ ______
582 215 1,368 1,534
Selling, general and
administrative
expenses............... 366 302 1,013 1,073
______ ______ ______ ______
216 (87) 355 461
Interest expense......... 51 59 150 195
______ ______ ______ ______
Earnings (loss) before
taxes.................. 165 (146) 205 266
Taxes (benefit) on
income (loss).......... 56 (49) 70 91
______ ______ ______ ______
Net earnings (loss)...... $ 109 $ (97) $ 135 $ 175
______ ______ ______ ______
______ ______ ______ ______
Earnings (loss) per
share.................. $ .03 $ (.01) $ .04 $ .06
______ ______ ______ ______
______ ______ ______ ______
The above figures are unaudited. The accompanying notes are an
integral part of these statements of earnings.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ending September 30,
(Dollars in Thousands)
1996 1995
____ ____
Cash flows from operating activities:
Net earnings.......................... $ 135 $ 175
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization....... 163 179
Provision for losses on accounts
receivable........................ 9 9
Deferred taxes on income............ 69 90
Inventory valuation reserve......... 21 (36)
Retirement of plant assets.......... 1
Increase (Decrease) in cash from
changes in operating accounts:
Accounts receivable............... 212 (1,155)
Inventory......................... (426) 1,112
Prepaid expenses.................. (9) (4)
Accounts payable.................. 225 (187)
Customer deposits................. 12 192
Accrued expenses.................. (197) (86)
_____ ______
Total adjustments 80 114
_____ ______
Net cash provided by operating
activities........................ 215 289
Cash flows from investing activities:
Capital expenditures.................. (70) (13)
_____ ______
Cash Flows from financing activities:
Payments on long-term debt............ (277) (268)
Net borrowings under line of credit... (292) 128
Promissory notes...................... 300
_____ ______
Net cash provided (used) by
financing activities................ (269) (140)
_____ ______
Net increase (decrease) in cash......... (124) 136
Cash at beginning of period............. 126 91
_____ ______
Cash at end of period................... $ 2 $ 227
______ ______
______ ______
<PAGE>
Supplemental disclosures of cash
flow information:
Cash was paid during the year for:
Interest............................. $172 $201
The above figures are unaudited. The accompanying notes are an
integral part of these statements of cash flows.
<PAGE>
WEB PRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1996
Note 1 - Summary of Significant Accounting Policies:
Principles of consolidation
___________________________
The accompanying consolidated financial statements include the
accounts of Web Press Corporation and Web Leader International,
Inc., its wholly owned Domestic International Sales Corporation
(DISC). All significant inter-company accounts and transactions
have been eliminated in consolidation.
Inventories
___________
Raw materials, work-in-progress and finished goods inventories
are stated at the lower of average cost or market. Used presses
and other related press equipment are stated at the lower of
cost (specific identification basis) or market. Inventory costs
include material, labor, and manufacturing overhead.
Inventories were classified as follows:
(Dollars in Thousands)
September 30, 1996
__________________
Raw materials and parts
(including subassemblies)..... $1,088
Work-in-progress.............. 261
Finished goods................ 1,536
Used equipment................ 514
______
$3,399
______
______
Machinery and leasehold improvements
____________________________________
Machinery and equipment are depreciated on the straight-line
method, for financial statement purposes, based upon useful
lives of three to twelve years. Leasehold improvements are
amortized over their useful lives or the term of the lease,
whichever is shorter. For income tax purposes, accelerated
methods are used for all eligible assets.
Maintenance and repairs are charged directly to costs or
expenses as incurred. Equipment of only nominal value and
renewals and betterments that do not appreciably extend the life
of the asset are charged directly to costs or expenses.
Fully depreciated or fully amortized assets which are no longer
in use or are not identifiable are written off by charges to the
allowance for accumulated depreciation and amortization.
<PAGE>
When assets are retired or disposed of, the costs and
accumulated depreciation of such assets are removed from the
accounts and the difference between the net depreciated cost and
the amount received is recorded in the statements of operatinos.
Revenue recognition
___________________
Revenue from sales of manufactured products under firm contracts
is recognized generally at the time equipment is available for
shipment. All freight and installation costs are accrued at the
time revenue is recognized. Estimated costs related to product
warranties are provided at the time of sale. Proceeds received
on contracts prior to recognition as a sale are recorded as
deposits.
Income taxes
____________
Income taxes are provided on income for financial reporting
purposes without regard to the period in which such taxes are
payable. Deferred taxes are provided for all significant items
which are reported for tax purposes in different periods than
the consolidated statements of earnings. Investment tax credits
are recorded as a reduction of Federal income taxes in the year
available.
Earnings per share
__________________
Earnings per share calculations are based on the weighted
average number of shares outstanding.
Note 2 - Financing:
The Company has a line of credit with a commercial bank for
borrowing up to $700 thousand. The interest rate charged is 2.5
percent above the bank's prime rate. Borrowings against this
line were $376 thousand on September 30, 1996. Accounts
receivable, firm orders in production, inventories, and values
in excess of the long-term financing on equipment are pledged as
collateral. The Company executed unsecured promissory notes for
$300 thousand during the third quarter, payable on demand. They
were paid off on October 1, 1996.
<PAGE>
Long-term debt consists of the following:
(Dollars in Thousands)
September 30, 1996
__________________
Term note, 2.5% above prime rate,
due in monthly installments of $26,831
including interest. Final payment
estimated at $801,996 due January, 1977.... $ 854
Note payable for equipment, 10.75%,
due in monthly installments of
$8,903 including interest. Final
payment due in September, 1997............. 101
Note payable for equipment and
leasehold improvements, 12%, due
in monthly installments of $2,262
including interest. Final payment
due in October, 1998....................... 50
Note payable for equipment, 10%,
due in monthly installments of
$1,039 including interest. Final
payment due in November, 1998.............. 24
Note payable for equipment, 7.65%,
due in monthly installments of
$714 including interest. Final
payment due February, 1999................. 19
______
1,048
Less current portion....................... 995
______
$ 53
______
______
Equipment with original cost of $680 thousand is pledged as
collateral under the notes payable for equipment and the
equipment purchase contracts.
Note 3 - Common Stock:
The Company's Stock Option Plan permits issuance of stock
options to key employees at prices not less than 100% of market
price at the date of grant. An aggregate of 600,000 shares of
common stock is reserved in connection with this Plan. As of
September 30, 1996, no options had been granted under this Plan.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Operating Results
_________________
Sales for the third quarter of 1996 were $2.054 million compared
to $1.769 million for the third quarter of 1995. Sales for the
first nine months of 1996 were $5.008 million, compared to $6.768
million for the first nine months of 1995. During the first nine
months of 1996 international sales continued their growth
pattern. They totaled $3.024 million in 1996 compared to $2.550
for the same period of 1995, a 19% increase. The backlog of
orders believe to be firm on November 8, 1996, was $1.299
million. The backlog was $2.744 million on November 10, 1995.
Cost of sales as a percentage of sales improved to 72 percent in
the third quarter of 1996, compared to 88 percent in the third
quarter of 1995. 1995 costs were high due to the sale of a large
volume of reconditioned, used presses which were sold at a low
gross margin. For the first nine months of 1996 the percentage
improved to 72 percent, compared to 77 percent for the first nine
months of 1995.
Development costs were $219 in the first nine months of 1996,
compared to $162 thousand in the first nine months of 1995. The
increase was primarily due to the development of the Company's
new Integral Roll Unit, which is now in operation and performing
well.
Selling, general and administrative expenses for the third
quarter of 1996 increased 21 percent from the same period in
1995. Promotional expenses accounted for most of the increase in
the third quarter. Selling, general and administrative expenses
for the first nine months of 1996 were 6% less than those for the
same period of 1995 due to lower commissions and incentive pay
more than offsetting increased promotional expenses. Most other
selling, general and administrative expenses did not change
significantly.
Interest expense was $51 thousand in the third quarter and $150
thousand for the first nine months of 1996, compared to $59
thousand and $195 thousand for the respective periods in 1995.
The average interest rate on the Company's short-term borrowings
from the bank in 1996 were 10.75 percent for the third quarter
and 10.8 percent for the first nine months, compared to 11.3
percent and 11.4 percent for the corresponding periods in 1995,
respectively. Average short-term borrowings from the bank in
1996 were $621 thousand in the third quarter and $566 thousand
for the first nine months, compared to $649 thousand and $693
thousand for the corresponding periods in 1995.
Net earnings in the third quarter were $109 thousand in 1996
compared to a net loss of $97 thousand in the third quarter of
1995. For the nine-month period ended September 30, net earnings
<PAGE>
were $135 thousand in 1996, compared to net earnings of $175
thousand in 1995. Lower sales in the first half of 1996 resulted
in the lower nine-month net earnings as compared to 1995.
The Company's operating results for the first nine months are not
necessarily indicative of results to be expected for the full
year, particularly because of the high value of each order for
the Company's equipment and their irregular timing. The Company
expects 1996 sales to equal or exceed those of 1995.
Liquidity
_________
One September 30, 1996, working capital was $2.452 million as
compared to $2.972 million on September 30, 1995. The primary
reason for the decrease in working capital was a $684 thousand
increase in the current portion of long-term debt due to the
reclassification of the term note to the bank from a long-term
liability to a current liability. Other changes in working
capital components are itemized in the Consolidated Statement of
Cash Flows. The ratio of current assets to current liabilities
was 1.9:1 on September 30, 1996, compared to 2.3:1 on September
30, 1995. On December 31, 1995, working capital was $3.132
million and the current ratio was 2.5:1.
Funds provided by operations are the Company's primary source of
liquidity. The Company uses short-term debt under a revolving
line of credit with a commercial bank to finance fluctuating
working capital requirements. On September 30, 1996, the Company
had additional borrowing capacity of $324 thousand under this
line. In addition, during the third quarter the company issued
unsecured notes totaling $300 thousand. These notes were repaid
on October 1, 1996.
Capital Resources
_________________
Long-term debt and deferred incomes taxes (net of deferred tax
assets) as a percentage of total capitalization was 14 percent on
September 30, 1996. The Company believes that its borrowing
capacity is sufficient to provide for orderly operations.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
_________________________________________
(a) Reports on Form 8-K -- There are no reports on Form 8-K
filed for the three months ending September 30, 1996.
SIGNATURE
_________
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
WEB PRESS CORPORATION
_____________________
(Registrant)
November 8, 1996 /s/ Wayne R. Marcouiller
________________ _______________________________
Date Wayne R. Marcouiller, President
November 8, 1996 /s/ William F. Carmody
________________ _______________________________
Date William F. Carmody
Secretary/Treasurer
(Principal Accounting Officer)
<PAGE>
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<S> <C>
<PERIOD-TYPE> 9-MOS
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<PERIOD-END> SEP-30-1996
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<PP&E> 3,190
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0
0
<COMMON> 86
<OTHER-SE> 2,546
<TOTAL-LIABILITY-AND-EQUITY> 5,836
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<CGS> 3,640
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