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, 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 (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 11,
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 June 30, 1997
_____________
Current Assets:
Cash.......................... $ 16
Accounts receivable, less
allowance for doubtful
accounts of $17............. 1,276
Inventories................... 3,759
Deferred tax assets........... 222
Prepaid expenses.............. 103
______
Total Current Assets............ 5,376
Machinery and Leasehold
Improvements, at cost:
Machinery and equipment....... 3,134
Leasehold improvements........ 195
______
3,329
Less accumulated depreciation
and amortization.............. 2,726
______
Machinery and Leasehold
Improvements (Net)............ 603
______
Total Assets.................... $5,979
______
______
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, 1997
_____________
Current Liabilities:
Notes payable............................ $ 898
Accounts payable......................... 415
Customer deposits........................ 262
Accrued expenses......................... 475
Current portion of long-term debt........ 291
______
Total Current Liabilities................... 2,341
Long-Term Debt, less current portion........ 836
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........................ 2,078
______
2,484
Treasury stock, 331,100 shares at cost... (97)
______
Total Stockholders' Equity.................. 2,387
______
Total Liabilities and
Stockholders' Equity....................... $5,979
______
______
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
____________ __________
1997 1996 1997 1996
____ ____ ____ ____
Sales....................... $1,940 $1,582 $3,400 $2,954
Cost of sales............... 1,466 995 2,585 2,168
______ ______ ______ ______
474 587 815 786
Selling, general and
administrative expenses... 375 346 660 647
______ ______ ______ ______
99 241 155 139
Interest expense............ 65 52 104 99
______ ______ ______ ______
Earnings before taxes....... 34 189 51 40
Taxes on earnings........... 11 65 17 14
______ ______ ______ ______
Net earnings................ $ 23 $ 124 $ 34 $ 26
______ ______ ______ ______
______ ______ ______ ______
Earnings per share.......... $.006 $.04 $.01 $.01
_____ ____ ____ ____
_____ ____ ____ ____
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)
1997 1996
____ ____
Cash flows from operating activities:
Net earnings........................... $ 34 $ 26
Adjustments to reconcile net
earnings to net cash provided
(used)by operating activities:
Depreciation and amortization........ 106 108
Provision for losses on accounts
receivable.......................... 6 6
Deferred taxes on income............. 17 14
Inventory valuation reserve.......... 28 14
Retirement of plant assets........... 21 1
Increase (Decrease) in cash from
changes in operating accounts:
Accounts receivable................ 158 330
Inventories........................ (330) (571)
Prepaid expenses................... (41) (21)
Accounts payable................... (126) 222
Customer deposits.................. (280) 53
Accrued expenses................... (338) (258)
Imcome taxes payable............... (38)
______ ______
Total adjustments.................. (817) (102)
______ ______
Net cash provided (used) by
operating activities............... (738) (76)
Cash flows from investing activities:
Capital expenditures................... (163) (50)
______ ______
Cash Flows from financing activities:
Proceeds from issuance of long-term
debt................................. 1,111
Payments on long-term debt............. (954) (189)
Net borrowings under line of credit.... 799 153
Promissory note........................ 60
______ ______
Net cash provided by financing
activities........................... 956 24
______ ______
Net increase (decrease) in cash.......... 10 (102)
Cash at beginning of period.............. 6 126
______ ______
Cash at end of period.................... $ 16 $ 24
______ ______
______ ______
<PAGE>
Supplemental disclosures of cash
flow information:
Cash was paid during the year for:
Interest............................... $89 $111
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 SIX MONTHS ENDING JUNE 30, 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)
June 30, 1997
_____________
Raw materials and parts
(including subassemblies)..... $1,441
Work-in-progress.............. 303
Finished goods................ 1,618
Used equipment................ 397
______
$3,759
______
______
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 $800 thousand. The interest rate charged is 2
percent above the bank's prime rate. Borrowings against this
line were $549 thousand on June 30, 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 transactins 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. Borrowings against this line were $349
thousand on June 30, 1997.
<PAGE>
Long-term debt consists of the following:
(Dollars in Thousands)
June 30, 1997
_____________
Term note, 2% above prime rate,
due in monthly installments of $24,948
including interest. Final payment
due in February, 2000...................... $ 908
Note payable for equipment, 9.3%, due
in monthly installments of $2,198
including interest. Final payment due
in March, 2004............................. 132
Note payable for equipment, 10.75%,
due in monthly installments of
$8,903 including interest. Final
payment due in September, 1997............. 26
Note payable for equipment and
leasehold improvements, 12%, due
in monthly installments of $2,262
including interest. Final payment
due in October 1998........................ 33
Note payable for equipment, 10%,
due in monthly installments of
$1,039 including interest. Final
payment due in November, 1998.............. 16
Note payable for equipment, 8.23%,
due in monthly installments of
$277 including interest. Final
payment due in December, 2001.............. 12
______
1,127
Less current portion....................... 291
______
$ 836
______
______
Equipment with original cost of $790 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, 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 second quarter of 1997 were $1.940 million, an
increase of $359 thousand from 1996 second quarter sales of
$1.582. Sales for the first six months of 1997 were $3.400
million, an increase of $446 thousand from 1996 six-month sales
of $2.954 million. New equipment sales in 1997 were $1.594 in
the second quarter and $2.728 for the first six months, compared
with 1996 sales of $1.246 in the second quarter and $2.481 for
the first six months. Parts sales in 1997 increased 29 percent
in the second quarter and 33 percent for the first six months,
compared with the same periods in 1996. For the first six months
international sales, as a percentage of total sales, were 75
percent in 1997 and 88 percent in 1996.
Cost of sales, as a percentage of sales, increased to 76 percent
in the second quarter of 1997, compared with 63 percent in the
second quarter of 1996. For the first six months it was 76
percent in 1997 and 73 percent in 1996. The increase was
primarily the result of the Company accepting new equipment sales
in the second quarter of 1997 which had a lower than normal
profit margin.
Selling, general and administrative expenses for the second
quarter of 1997 were 8 percent higher than they were for the same
period in 1996. For the first six months of 1997 they were 2
percent above 1996 expenses for the same period. Most of the
increase resulted from higher advertising expenditures and the
cost of attending certain trade shows. Professional service
costs also increased. Lower administrative payroll costs in 1997
offset some of the increase. Most other selling, general and
administrative expenses did not change significantly.
Interest expense was $65 thousand in the second quarter and $104
thousand for the first six months of 1997, compared with $52
thousand and $99 thousand for the respective periods in 1996.
The average interest rate on the Company's short-term borrowings
from the bank in 1997 were 10.5 percent for both the second
quarter and the first six months, compared with 10.75 and 10.8
percent for the corresponding periods in 1996, respectively.
Average short-term borrowings from the bank in 1997 were $862
thousand in the second quarter and $618 thousand for the first
six months, compared with $546 thousand and $589 thousand for the
corresponding periods in 1996.
Net earnings in the second quarter were $23 thousand in 1997,
compared to net earnings of $124 thousand in the second quarter
of 1996. For the six-month period, net earnings were $34
thousand in 1997, compared with net earnings of $26 thousand in
1996.
<PAGE>
The company's operating results for the first six months of 1997
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.
Liquidity
_________
On June 30, 1997, working capital was $3.035 million compared
with $2.244 million on June 30, 1996, an increase of $791
thousand. The current ratio was 2.3:1 on June 30, 1997, compared
with 1.8:1 on June 30, 1996. 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 June 30,
1996. Term debt to the bank included in current liabilities was
$214 thousand on June 30, 1997, and $910 thousand on June 30,
1996.
For the first six months of 1997, cash used by operations was
$738 thousand. Increased inventories, higher prepaid expenses,
lower accounts payable and accrued expense, and the payment of
taxes all used cash. Lower accounts receivable provided
additional cash.
The increase in inventories was the result of higher raw
materials and parts inventories of $315 thousand and finished
goods inventories of $325 thousand, offset by lower work-in-
progress inventories of $319 thousand and used equipment
inventories of $20 thousand.
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 June 30,
1997, the Company had additional borrowing capacity of $251
thousand from its operating line of credit and $651 thousand from
its export working capital line of credit.
Capital Resources
_________________
In April 1997, the Company secured new long-term debt of $136
thousand from a leasing company. The proceeds were used to
purchase a new CNC lathe. The Company intends to purchase two
additional new machine tools in 1997 using additional long-term
financing from the leasing company.
Long-term debt and deferred income taxes (net of deferred tax
assets), as a percentage of total capitalization was 30 percent
on June 30, 1997. The Company believes that its borrowing
capacity is sufficient to provide for orderly growth.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
_________________________________________
(b) Reports on Form 8-K - There are no reports on Form 8-K
filed for the three months ending June 30, 1997.
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, 1997 /s/ Gary B. Palmer
_______________ _______________________________
Date Gary B. Palmer, General Manager
August 12, 1997 /s/ Craig L. Mathison
_______________ _______________________________
Date Craig L. Mathison
Secretary/Treasurer
(Principal Accounting Officer)
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<S> <C>
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<PERIOD-END> JUN-30-1997
<CASH> 16
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<ALLOWANCES> 17
<INVENTORY> 3,759
<CURRENT-ASSETS> 5,376
<PP&E> 3,329
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0
0
<OTHER-SE> 2,301
<TOTAL-LIABILITY-AND-EQUITY> 5,979
<SALES> 3,400
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