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, 1997
[ ] 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 (253) 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, 1997.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
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 March 31, 1997
______________
Current Assets:
Cash.......................... $ 27
Accounts receivable, less
allowance for doubtful
accounts of $15............. 1,948
Inventories................... 3,903
Deferred tax assets........... 233
Prepaid expenses.............. 68
______
Total Current Assets............ 6,179
Machinery and Leasehold
Improvements, at cost:
Machinery and equipment....... 3,025
Leasehold improvements........ 195
______
3,220
Less accumulated depreciation
and amortization.............. (2,695)
______
Machinery and Leasehold
Improvements (Net)............ 525
______
Total Assets.................... $6,704
______
______
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 March 31, 1997
______________
Current Liabilities:
Note payable to bank..................... $ 645
Accounts payable......................... 712
Customer deposits........................ 558
Accrued expenses......................... 930
Current portion of long-term debt........ 298
______
Total Current Liabilities................... 3,143
Long-Term Debt, less current portion........ 782
Deferred taxes on income.................... 415
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........................ 2,055
______
2,461
Treasury stock, 331,100 shares at cost... (97)
______
Total Stockholders' Equity.................. 2,364
______
Total Liabilities and
Stockholders' Equity....................... $6,704
______
______
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 months ending March 31,
(Dollars in Thousands Except Earnings Per Share)
1997 1996
____ ____
Sales......................... $1,460 $1,372
Cost of sales................. 1,119 1,173
______ ______
341 199
Selling, general and
administrative expenses..... 285 301
______ ______
56 (102)
Interest expense.............. 39 47
______ ______
Earnings (loss) before taxes
(benefit)................... 17 (149)
Taxes (benefit) on earnings
(loss)...................... 6 (51)
______ ______
Net earnings(loss)............ $ 11 $ (98)
______ ______
______ ______
Net earnings(loss) per share.. $.004 $(.03)
_____ _____
_____ _____
The above figures are unaudited. The accompanying notes are an
integral part of these statements of operations.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ending March 31,
(Dollars in Thousands)
1997 1996
____ ____
Cash flows from operating activities:
Net earnings (loss)................... $ 11 $ (98)
Adjustments to reconcile net
earnings (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization....... 52 54
Provision for losses on accounts
receivable........................ 3 3
Deferred taxes on income............ 6 (51)
Increase (Decrease) in cash from
changes in operating accounts:
Accounts receivable.............. (511) 226
Inventory......................... (446) (39)
Prepaid expenses.................. (6) 31
Accounts payable.................. 171 (31)
Customer deposits................. 16 (4)
Accrued expenses.................. 117 (257)
Income taxes payable.............. (38)
____ _____
Total adjustments................... (636) (68)
____ _____
Net cash used by operating
activities........................ (625) (166)
Cash flows from investing activities:
Capital expenditures.................. (10) (25)
____ _____
Cash Flows from financing activities:
Proceeds from issuance of
long-term debt...................... 975
Payments on long-term debt............ (865) (102)
Net borrowings under line of credit... 546 168
____ _____
Net cash provided by financing
activities.......................... 656 66
____ _____
Net increase (decrease) in cash......... 21 (125)
Cash at beginning of period............. 6 126
____ _____
Cash at end of period................... $ 27 $ 1
____ _____
____ _____
<PAGE>
Supplemental disclosures of cash
flow information:
Cash was paid during the year for:
Interest............................. $21 $61
Taxes................................ 38
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 THREE MONTHS ENDING MARCH 31, 1997
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, 1997
Raw materials and parts
(including subassemblies)..... $1,417
Work-in-progress.............. 514
Finished goods................ 1,565
Used equipment................ 407
$3,903
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
<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 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 $800 thousand. The interest rate charged is 2
percent above the bank's prime rate. Borrowings against this
line were $645 thousand on March 31, 1997. Accounts receivable,
firm orders in production, inventories, and values in excess of
the long-term financing on equipment are pledged as collateral.
The Company has a second line of credit with the bank for
borrowing up to an additional $1 million to manufacture
equipment for export. The loan is a revolving line of credit
based on a series of transactions backed by letter of credit
orders acceptable to the bank. The line is secured by an
"export working capital guarantee" from the Small Business
Administration. The interest rate charged is 1.5 percent above
the bank's prime rate. There were no borrowings against this
line on March 31, 1997.
<PAGE>
Long-term debt consists of the following:
(Dollars in Thousands)
March 31, 1997
______________
Term note, 2% above prime rate, due
in monthly installments of $24,837
including interest. Final payment
due February, 2000........................ $ 958
Note payable for equipment, 10.75%,
due in monthly installments of $8,903
including interest. Final payment due
in September, 1997........................ 51
Note payable for equipment and leasehold
improvements, 12%, due in monthly install-
ments of $2,262 including interest.
Final payment due in October, 1998........ 39
Note payable for equipment, 10%, due in
monthly installments of $1,039 including
interest. Final payment due in
November, 1998............................ 19
Note payable for equipment, 8.23%, due in
monthly installments of $277 including
interest. Final payment due in December,
2001...................................... 13
______
1,080
Less current portion...................... 298
______
$ 782
______
______
Equipment with an original cost of $694 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, 1997, 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 of 1997 were $1.460 million, an
increase of 6.4 percent from 1996 first quarter sales of $1.372
million. Sales of parts and service, which increased $88
thousand in the first quarter of 1997 from the first quarter of
1996, accounted for all of the increase. New equipment sales in
the first quarter of 1997 were the same as they were 1996.
There were no sales of used equipment in either year. The
backlog of orders believed to be firm was $1.579 million on May
13, 1997, compared to $206 thousand on May 13, 1996.
Cost of sales, expressed as a percentage of sales, improved to
76.6 percent in the first quarter of 1997 compared to 84.5
percent in the first quarter of 1996. 1996 cost of sales
included approximately $127 thousand of development expense
resulting from the Company's development of a new integrated
roll under (IRU) printing unit. Excluding the development
expenses, 1996's cost of sales were 76.2 percent. Gross profits
were $341 thousand in 1997 and $199 thousand in 1996.
Selling, general and administrative expenses decreased by $16
thousand in 1997 compared to 1996. Selling expenses increased
by 4.6 percent in 1997 compared to 1996 due primarily to higher
advertising expenditures and an increase in the cost of
participating in certain international trade shows.
Administrative expenses decreased by 13.8 percent in 1997 from
1996 due to lower payroll costs. Most other expenses were
approximately the same in 1997 as they were in 1996.
Interest expense was $39 thousand in the first quarter of 1997,
compared to $47 thousand in the first quarter of 1996. The
average interest rate on the Company's short-term borrowings
from the bank was 10.5 percent in 1997 and 10.8 percent 1996.
The average amount of short-term borrowings outstanding
decreased to $374 thousand in 1997 from $632 thousand in 1996.
The Company had net earnings of $11 thousand in the first
quarter of 1997, compared to a net loss of $98 thousand in the
first quarter of 1996. The $109 thousand increase in net
earnings was the result of lower product development and payroll
costs.
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 1997 sales to exceed those of 1996 and to operate
profitably for the year.
<PAGE>
Liquidity
_________
The current ratio on March 31, 1997, was 2:1 and net working
capital was $3.036 million. On March 31, 1996, the current
ratio was 1.8:1 and net working capital was $2.226 million. The
reason for the increase in working capital was the repayment in
February 1997 of term debt to a bank that was included in
current liabilities on March 31, 1996. Term debt to the bank
included in current liabilities was $209 thousand on March 31,
1997, and $964 thousand on March 31, 1996.
In the first quarter of 1997, cash used by operations was $625
thousand. Higher accounts receivable, increased inventories and
the payment of federal income taxes all used cash. Increases in
accounts payable, accrued expenses and customer deposits
provided additional cash. The increase in inventories was the
result of a $291 thousand increase in raw material and parts
inventories and a $273 thousand increase in finished goods
inventories.
Funds provided by operations are the Company's primary source of
liquidity. In addition, the Company uses short-term debt under
two separate revolving lines of credit with a commercial bank to
finance fluctuating working capital requirements. On March 31,
1997, the Company had additional borrowing capacity of $155
thousand from its operating line of credit.
Capital Resources
_________________
On February 3, 1997, the Company secured new long-term debt of
$975 thousand from the bank. Most of the proceeds were used to
repay term debt to another bank that matured on January 31,
1997. In March 1997, the Company received a commitment letter
from a leasing company to purchase up to $400 thousand of new
machine tools. The Company has purchased a new CNC lathe
costing $136 thousand that was installed in April 1997. The
Company intends to purchase one additional new machine tool in
the second quarter of 1997 with the remaining funds.
Long-term debt and deferred income taxes (net of deferred tax
assets), as a percentage of total capitalization was 29 percent
on March 31, 1997. The Company believes that its borrowing
capacity is sufficient to provide for orderly growth.
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, 1997.
<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, 1997 /s/ Gary B. Palmer
____________ _______________________________
Date Gary B. Palmer, General Manager
May 13, 1997 /s/ Craig L. Mathison
____________ _______________________________
Date Craig L. Mathison
Secretary/Treasurer
(Principal Accounting Officer)
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 27
<SECURITIES> 0
<RECEIVABLES> 1,963
<ALLOWANCES> 15
<INVENTORY> 3,903
<CURRENT-ASSETS> 6,179
<PP&E> 3,220
<DEPRECIATION> 2,695
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<BONDS> 0
<COMMON> 86
0
0
<OTHER-SE> 2,278
<TOTAL-LIABILITY-AND-EQUITY> 6,704
<SALES> 1,460
<TOTAL-REVENUES> 1,460
<CGS> 1,119
<TOTAL-COSTS> 1,119
<OTHER-EXPENSES> 285
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> 17
<INCOME-TAX> 6
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