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 June 30th, 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 August 9,
1996.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Page 1 of 15 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 June 30, 1996
_____________
Current Assets:
Cash.......................... $ 24
Accounts receivable, less
allowance for doubtful
accounts of $9.............. 1,634
Inventories................... 3,551
Deferred tax assets........... 63
Prepaid expenses.............. 90
______
Total Current Assets............ 5,362
Machinery and Leasehold
Improvements, at cost:
Machinery and equipment....... 2,975
Leasehold improvements........ 195
______
3,170
Less accumulated depreciation
and amortization.............. (2,535)
______
Machinery and Leasehold
Improvements (Net)............ 635
______
Total Assets.................... $5,997
______
______
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 June 30, 1996
_____________
Current Liabilities:
Notes payable............................ $ 880
Accounts payable......................... 626
Customer deposits........................ 66
Accrued expenses......................... 399
Current portion of long-term debt........ 1,047
______
Total Current Liabilities................... 3,018
Long-Term Debt, less current portion........ 89
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........................ 2,214
______
2,620
Treasury stock, 331,100 shares at cost... (97)
______
Total Stockholders' Equity.................. 2,523
Total Liabilities and
Stockholders' Equity....................... $5,997
______
______
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 six months ending June 30,
(Dollars in Thousands Except Earnings Per Share)
THREE MONTHS SIX MONTHS
____________ __________
1996 1995 1996 1995
____ ____ ____ ____
Sales....................... $1,582 $3,875 $2,954 $4,972
Cost of sales............... 995 2,726 2,168 3,653
______ ______ ______ ______
587 1,149 786 1,319
Selling, general and
administrative expenses... 346 439 647 771
______ ______ ______ ______
241 710 139 548
Interest expense............ 52 68 99 136
______ ______ ______ ______
Earnings before taxes....... 189 642 40 412
Taxes on income............. 65 213 14 140
______ ______ ______ ______
Net earnings................ $ 124 $ 429 $ 26 $ 272
______ ______ ______ ______
______ ______ ______ ______
Earnings per share.......... $.04 $.14 $.01 $.09
____ ____ ____ ____
____ ____ ____ ____
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 six months ending June 30th,
(Dollars in Thousands)
1996 1995
____ ____
Cash flows from operating activities:
Net earnings........................... $ 26 $ 272
Adjustments to reconcile net
earnings to net cash provided
(used)by operating activities:
Depreciation and amortization........ 108 122
Provision for losses on accounts
receivable.......................... 6 6
Deferred taxes on income............. 14 140
Inventory valuation reserve.......... 14 (38)
Retirement of plant assets........... 1
Increase (Decrease) in cash from
changes in operating accounts:
Accounts receivable............... 330 (1,655)
Inventory.......................... (571) 1,195
Prepaid expenses................... (21) (24)
Accounts payable................... 222 (73)
Customer deposits.................. 53 295
Accrued expenses................... (258) (89)
______ ______
Total adjustments.................. (102) (121)
______ ______
Net cash provided (used) by
operating activities............... (76) 151
Cash flows from investing activities:
Capital expenditures................... (50) (7)
______ ______
Cash Flows from financing activities:
Payments on long-term debt............. (189) (178)
Net borrowings under line of credit.... 153 (28)
Promissory note........................ 60
______ ______
Net cash provided (used) by
financing activities.................. 24 (206)
______ ______
Net decrease in cash..................... (102) (62)
Cash at beginning of period.............. 126 91
______ ______
Cash at end of period.................... $ 24 $ 29
______ ______
______ ______
Supplemental disclosures of cash
flow information:
Cash was paid during the year for:
Interest............................... $111 $143
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 SIX MONTHS ENDING JUNE 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)
June 30, 1996
_____________
Raw materials and parts
(including subassemblies)..... $1,152
Work-in-progress.............. 1,270
Finished goods................ 606
Used equipment................ 523
______
$3,551
______
______
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. When
<PAGE>
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 operations.
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 $820 thousand on June 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 an unsecured promissory note for $60
thousand in June, 1996, payable on demand.
<PAGE>
Long-term debt consists of the following:
(Dollars in Thousands)
June 30, 1996
_____________
Term note, 2.5% above prime rate,
due in monthly installments of $26,831
including interest. Final payment
estimated at $810,996 due January, 1977.... $ 910
Note payable for equipment, 10.75%,
due in monthly installments of
$8,903 including interest. Final
payment due in September, 1997............. 124
Note payable for equipment and
leasehold improvements, 12%, due
in monthly installments of $2,262
including interest. Final payment
due in October 1998........................ 55
Note payable for equipment, 10%,
due in monthly installments of
$1,039 including interest. Final
payment due in November, 1998.............. 27
Note payable for equipment, 7.65%,
due in monthly installments of
$714 including interest. Final
payment due February, 1999................. 20
______
1,136
Less current portion....................... 1,047
______
$ 89
______
______
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
June 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 second quarter of 1996 were $1.582 million, a
decrease of $2.393 million from 1995 second quarter sales of
$3.875 million. Sales for the first six months of 1996 were
$2.954 million, compared to $4.972 million for the first six
months of 1995. The decline in sales is due to the Company not
being able to finalize certain domestic orders in the second
quarter. International sales increased approximately 28 percent
during the first six months of 1996 compared to the first six
months of 1995.
Cost of sales as a percentage of sales decreased to 63 percent in
the second quarter of 1996, compared to 70 percent in the second
quarter of 1995. For the first six months it was 73 percent in
1996 and 74 percent in 1995. 1996 cost of sales included
approximately $127 thousand in development expenses attendant to
a new Integrated Roll Under (IRU) printing unit. Development
cost for the first six months of 1996 were $173 thousand,
compared to $90 thousand in the first six months of 1995.
Selling, general and administrative expenses for the second
quarter of 1996 were 21 percent below those for the same period
of 1995. For the first six months of 1996 they were 16 percent
below 1995 expenses for the same period. Most of the decrease
resulted from lower commissions and incentive compensation in
1996 due to lower sales. Promotional and travel expenses were
slightly higher in 1996 compared to 1995. Most other selling,
general and administrative expenses did not change significantly.
Interest expense was $52 thousand in the second quarter and $99
thousand for the first six months of 1996, compared to $68
thousand and $136 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 second quarter
and 10.8 percent for the first six months, compared to 11.5
percent and 11.4 percent for the corresponding periods in 1995,
respectively. Average short-term borrowings in 1996 were $546
thousand in the second quarter and $589 thousand for the first
six months, compared to $657 thousand and $665 thousand for the
corresponding periods in 1995.
Net earnings in the second quarter were $124 thousand in 1996
compared to net earnings of $429 in the second quarter of 1995.
For the six-month period ended June 30, net earnings were $26
thousand in 1996, compared to net earnings of $272 thousand in
1995. Lower sales in the first six months of 1996 compared to
the same period in 1995 resulted in the lower net earnings.
<PAGE>
The Company's operating results for the first six 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 exceed those of 1995. It expects to
operate profitably for the year.
Liquidity
_________
On June 30, 1996, working capital was $2.244 million as compared
to $3.112 million on June 30, 1995, a decrease of $768 thousand.
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 to a current liability. Other changes in working capital
components included a $330 reduction in accounts receivable, an
increase of $571 thousand in inventories, accounts payable were
higher by $222 thousand, and accrued expenses decreased by $258
thousand. The ratio of current assets to current liabilities was
1.8:1 on June 30, 1996, compared to 2.3:1 on June 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. 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 June 30, 1996, the
Company had additional borrowing capacity of $30 thousand under
this line.
Capital Resources
_________________
Long-term debt and deferred incomes taxes (net of deferred tax
assets) as a percentage of total capitalization was 13 percent on
June 30, 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) Exhibits
(10) Material Contracts
The following exhibits are filed herewith:
(10a) being the Business Loan Modification
Agreement between Web Press Corporation and Key
Bank of Washington dated June 26, 1996.
(b) Reports on Form 8-K - There are no reports on Form 8-K filed
for the three months ending June 30, 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)
August 12, 1996 /s/ Wayne R. Marcouiller
_______________ _______________________________
Date Wayne R. Marcouiller, President
August 12, 1996 /s/ William F. Carmody
_______________ _______________________________
Date William F. Carmody
Secretary/Treasurer
(Principal Accounting Officer)
<PAGE>
Exhibit (10a)
LOAN MODIFICATION AND/OR EXTENSION AGREEMENT
DATE: June 26, 1996
BORROWER: Web Press Corporation
LENDER: Key Bank of Washington
NOTE: $750,000.00 dated December 15, 1994
LOAN NUMBER: 93826 - 11009901
FOR VALUE RECEIVED, Borrower and Lender hereby agree to
modify the above referenced Loan and promissory note as
follows:
1. MODIFICATION AND/OR EXTENSION PROVISIONS
________________________________________
a. The maturity date of the loan is hereby extended to January
31, 1997, at which time the entire balance due under the Loan
must be paid in full. No further extensions are contemplated at
this time.
b. Interest rate and pyament provisions are not being modified,
and Borrower shall continue to make regular installments as
provided in the Note. Provisions for adjustment of the interest
rate and/or payment amounts (if any) shall continue to apply.
c. The Maximum loan amount that Borrower may borrow under the
Loan shall be reduced to $700,000.00.
d. Borrower shall pay lender in cash an extension fee of
$5,250.00.
2. CONDITIONS
__________
The modifications and/or extensions described above are subject
to and conditioned upon Borrower's full satisfaction of all of
the following conditions on or before June 28, 1996, time being
of the essence:
a. There shall be no uncured event of default under the Loan,
nor any event or condition which with notice of the passage of
time would be an event of default thereunder.
b. Borrower shall deliver to Lender a fully executed original
of this Loan Modification and/or Extension Agreement.
<PAGE>
c. All expenses incurred by Lender in connectin with this
Agreement (including without limitation, attorney fees, recording
charges, charges for title policy update(s), escrow charges,
costs of obtaining updated or additional appraisal(s), or
collateral valuations, if required by Lender) shall be paid by
Borrower.
3. GENERAL PROVISION: Except as modified above, all other
__________________
provisions of the Note and any other documents securing or
relating to the Loan (the "Loan Documents") remain in full force
and effect. All security given for the Loan and all guarantees
of the Loan (as applicable) shall continue in full force.
Borrower warrants and represents to Lender that it has full
right, power, and authority to enter into this Agreement and to
perform all it's obligations hereunder, and that all information
and materials submitted to Lender in connection with this
modification are accurate and complete. Borrower warrants that
no default exists under the Loan Documents. Borrower reaffirms
it's obligation to pay the Loan in full and reaffirms the
validity and enforceability of the Loan Documents, without set-
off, counterclaim or defense. Borrow acknowledges that:
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT
OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
KEY BANK OF WASHINGTON Web Press Corporation
/s/ A. Leon Frank /s/ Wayne Marcouiller
________________________ _____________________
A. Leon Frank, Wayne Marcouiller,
Assistant Vice President President
The undersigned guarantors hereby agree and consent to this
Loan Modification Agreement.
Web Leader International, Inc.
/s/ Wayne Marcouiller
______________________________
Wayne Marcouiller, Chairman
/s/ Wayne Marcouiller
______________________________
Wayne Marcouiller,
Individual Guarantor
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 126
<SECURITIES> 0
<RECEIVABLES> 2,002
<ALLOWANCES> 32
<INVENTORY> 2,994
<CURRENT-ASSETS> 5,236
<PP&E> 3,146
<DEPRECIATION> 2,452
<TOTAL-ASSETS> 5,930
<CURRENT-LIABILITIES> 2,104
<BONDS> 0
<COMMON> 86
0
0
<OTHER-SE> 2,411
<TOTAL-LIABILITY-AND-EQUITY> 5,930
<SALES> 8,951
<TOTAL-REVENUES> 8,961
<CGS> 6,794
<TOTAL-COSTS> 6,794
<OTHER-EXPENSES> 1,473
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 243
<INCOME-PRETAX> 451
<INCOME-TAX> 151
<INCOME-CONTINUING> 300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 300
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
