<PAGE>
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 March 31, 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 May 13, 1996.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Page 1 of 13 pages in this document
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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.
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PART I
______
FINANCIAL INFORMATION
_____________________
WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS March 31, 1996
______________
Current Assets:
Cash.......................... $ 1
Accounts receivable, less
allowance for doubtful
accounts of $12............. 1,741
Inventories................... 3,033
Deferred tax assets........... 128
Prepaid expenses.............. 38
______
Total Current Assets............ 4,941
Machinery and Leasehold
Improvements, at cost:
Machinery and equipment....... 2,954
Leasehold improvements........ 195
______
3,149
Less accumulated depreciation
and amortization.............. (2,484)
______
Machinery and Leasehold
Improvements (Net)............ 665
______
Total Assets.................... $5,606
______
______
The above figures are unaudited. The accompanying notes are an
integral part of the balance sheet.
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WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, 1996
______________
Current Liabilities:
Note payable to bank..................... $ 835
Accounts payable......................... 373
Customer deposits........................ 9
Accrued expenses......................... 400
Current portion of long-term debt........ 1,098
______
Total Current Liabilities................... 2,715
Long-Term Debt, less current portion........ 125
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........................ 2,090
______
2,469
Treasury stock, 331,100 shares at cost... (97)
______
Total Stockholders' Equity.................. 2,399
______
Total Liabilities and
Stockholders' Equity....................... $5,606
______
______
The above figures are unaudited. The accompanying notes are an
integral part of the balance sheet.
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WEB PRESS CORPORATION
Consolidated Statements of Operations
For the three months ending March 31,
(Dollars in Thousands Except Earnings Per Share)
1996 1995
____ ____
Sales......................... $1,372 $1,097
Cost of sales................. 1,173 927
______ ______
199 170
Selling, general and
administrative expenses..... 301 332
______ ______
(102) (162)
Interest expense.............. 47 68
______ ______
Loss before taxes............. (149) (230)
Tax benefit from loss......... 51 73
______ ______
Net loss...................... $ (98) $ (157)
______ ______
Net loss per share............ $(.03) $(.05)
_____ _____
_____ _____
The above figures are unaudited. The accompanying notes are an
integral part of these statements of earnings.
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WEB PRESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ending March 31,
(Dollars in Thousands)
1996 1995
____ ____
Cash flows from operating activities:
Net loss.............................. $(98) $(157)
Adjustments to reconcile net
earnings (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization....... 54 62
Provision for losses on accounts
receivable........................ 3 3
Deferred taxes on income............ (51) (73)
Increase (Decrease) in cash from
changes in operating accounts:
Accounts receivable.............. 226 357
Inventory......................... (39) (156)
Prepaid expenses.................. 31 34
Accounts payable.................. (31) 59
Customer deposits................. (4) 87
Accrued expenses.................. (257) (345)
____ _____
Total adjustments................... (68) 28
____ _____
Net cash provided (used) by
operating activities.............. (166) (129)
Cash flows from investing activities:
Capital expenditures.................. (25) (4)
____ _____
Cash Flows from financing activities:
Proceeds from issuance of
long-term debt...................... 36
Payments on long-term debt............ (102) (76)
Net borrowings under line of credit... 168 146
____ _____
Net cash provided (used) by
financing activities................ 66 70
____ _____
Net decrease in cash.................... (125) (63)
Cash at beginning of period............. 126 91
____ _____
Cash at end of period................... $ 1 $ 28
____ _____
____ _____
Supplemental disclosures of cash
flow information:
Cash was paid during the year for:
Interest............................. $61 $73
The above figures are unaudited. The accompanying notes are an
integral part of these statements of cash flows.
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WEB PRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING MARCH 31, 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)
March 31, 1996
______________
Raw materials and parts
(including subassemblies)..... $1,172
Work-in-progress.............. 288
Finished goods................ 1,059
Used equipment................ 514
______
$3,033
______
______
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 ten 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. When
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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 $488 thousand on March 31, 1996. Accounts receivable,
firm orders in production, inventories, and values in excess of
the long-term financing on equipment are pledged as collateral.
During the quarter, the Company secured an additoinal line of
credit with another commercial bank for borrowing up to $600
thousand to finance the manufacture of certain equipment for
export. The interest rate charged is 1.75 percent above the
bank's prime rate. Borrowings against this line were $350
thousand on March 31, 1996. The loan is secured by a letter of
credit and by a guaranty from the Small Business Administration.
The loan was paid on April 25, 1996.
<PAGE>
Long-term debt consists of the following:
(Dollars in Thousands)
March 31, 1996
______________
Term note, 2.5% above prime rate,
due in monthly installments of $32,307
including interest. Final payment
estimated at $810,996 due January, 1977.... $ 964
Note payable for equipment, 10.75%,
due in monthly installments of
$8,903 including interest. Final
payment due in September, 1997............. 148
Note payable for equipment and
leasehold improvements, 12%, due
in monthly installments of $2,262
including interest. Final payment
due in October 1998........................ 60
Note payable for equipment, 10%,
due in monthly installments of
$1,039 including interest. Final
payment due in November, 1998.............. 29
Note payable for equipment, 7.65%,
due in monthly installments of
$714 including interest. Final
payment due February, 1999................. 22
______
1,223
Less current portion....................... 1,098
______
$ 125
______
______
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
March 31, 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 first quarter were $1.372 million in 1996, a 25
percent increase from 1995 first quarter sales of $1.097
million. The backlog of orders believed to be firm was $206
thousand on May 13, 1996, compared to $1.990 million on May 12,
1995. Gross profits were $199 thousand in 1996 and $170 thousand
in 1995.
Cost of sales expressed as a percentage of sales was
essentially the same in the two comparable periods: 85% in the
first quarter of 1996, and 84% in the first quarter of 1995.
However, 1996 cost of sales included approximately $127
thousand development expense resulting from the Company's
development of a new Integrated Roll Under (IRU) printing unit.
First quarter 1996 new product and product enhancement
development expense was approximately 6-1/3 times as large as
that for 1995.
Selling, general and administrative expenses decreased by $31
thousand in 1996 compared to 1995. Selling expenses decreased
by 24% in 1996 compared to 1995 due primarily to lower
commissions, travel and communication expenses. Administrative
expenses increased by 8% in 1996 from 1995 due to higher legal
fees and bank charges associated with the Company's bidding on
a government contract and establishing a new source of work-in-
progress financing for certain of its export orders. Most
other expenses were approximately the same.
Interest expense was $47 thousand in the first quarter of 1996,
compared to $68 thousand in the first quarter of 1995. The
average interest rate on the Company's short-term borrowings was
10.8% in 1996 and 11.3% in 1995. The average amount of short-
term borrowings outstanding decreased to $633 thousand in 1996
from $681 thousand in 1995.
The Company incurred a net loss of $98 thousand in the first
quarter of 1996, compared to a net loss of $157 thousand in the
first quarter of 1995. The low volume of sales in the first
quarter of the year is the primary reason for the loss in both
years.
The Company's operating results for the first quarter 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 exceed those of 1995. It expects to
operate profitably for the year.
Liquidity
_________
On March 31, 1996, working capital was $2.226 million as
compared with $2.657 million on March 31, 1995. The ratio of
current assets to current liabilities was 1.8:1 at the end of
the first quarter of 1996 compared to 2.2:1 in 1995. Changes in
working capital components included a $226 thousand reduction in
accounts receivable, a $257 thousand reduction in accrued
expenses, and a $735 thousand increase in the current portion of
long-term debt. The $735 thousand increase in the current portion
of long-term debt is primarily due to the reclassification of the
term note to the bank from a long-term to a current liability.
That change was the primary cause of the reduction of long-term
debt from $1.223 thousand to $125 thousand and the accompanying
lowering of the current ratio. On December 31, 1995, working capital
was $3.l32 million and the current ratio was 2.5:1.
Funds provided by operations are the Company's primary source of
liquidity. In addition, the Company uses short-term debt under
a revolving line of credit with a commercial bank to finance
fluctuating working capital requirements. On March 31, 1996,
the Company had additional borrowing capacity of $215 thousand
under this line.
Capital Resources
_________________
Long-term debt and deferred income taxes (net of deferred tax
assets) as a percentage of total capitalization was 13 percent
on March 31, 1996. The Company believes that its borrowing
capacity is sufficient to provide for orderly operations.
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 March 31, 1996.
<PAGE>
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)
May 13, 1995 \s\ Wayne R. Marcouiller, President
____________
Date
May 13, 1995 \s\ William F. Carmody
____________ Secretary/Treasurer
Date (Principal Accounting Officer)
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
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<PERIOD-END> MAR-31-1996
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 1,753
<ALLOWANCES> 12
<INVENTORY> 3,033
<CURRENT-ASSETS> 4,941
<PP&E> 3,149
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<COMMON> 86
0
0
<OTHER-SE> 2,313
<TOTAL-LIABILITY-AND-EQUITY> 5,606
<SALES> 1,372
<TOTAL-REVENUES> 1,372
<CGS> 1,173
<TOTAL-COSTS> 1,173
<OTHER-EXPENSES> 301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> (149)
<INCOME-TAX> (51)
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