<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 September 30, 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 October 31,
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 September 30, 1997
__________________
Current Assets:
Cash......................... $ 6
Accounts receivable, less
allowance for doubtful
accounts of $4............ 1,448
Inventories.................. 3,581
Deferred tax assets.......... 192
Prepaid expenses............. 83
______
Total Current Assets........... 5,310
Machinery and Leasehold
Improvements, at cost:
Machinery and equipment...... 3,161
Leasehold improvements....... 195
______
3,356
Less accumulated depreciation
and amortization............. 2,761
______
Machinery and Leasehold
Improvements (Net)........... 595
______
Total Assets................... $5,905
______
______
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, 1997
__________________
Current Liabilities:
Notes payable............................. $ 851
Accounts payable......................... 515
Customer deposits........................ 95
Accrued expenses......................... 513
Current portion of long-term debt........ 272
______
Total Current Liabilities.................. 2,246
Long-Term Debt, less current portion....... 765
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........................ 2,170
______
2,576
Treasury stock, 331,100 shares at cost... (97)
______
Total Stockholders' Equity................. 2,479
Total Liabilities and
Stockholders' Equity...................... $5,905
______
______
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
____________ ___________
1997 1996 1997 1996
____ ____ ____ ____
Sales.................... $1,960 $2,054 $5,360 $5,008
Cost of sales............ 1,460 1,472 4,045 3,640
______ ______ ______ ______
500 582 1,315 1,368
Selling, general and
administrative
expenses............... 282 366 942 1,013
______ ______ ______ ______
218 216 373 355
Interest expense......... 78 51 182 150
______ ______ ______ ______
Earnings before taxes.... 140 165 191 205
Taxes on income.......... 48 56 65 70
______ ______ ______ ______
Net earnings ............ $ 92 $ 109 $ 126 $ 135
______ ______ ______ ______
______ ______ ______ ______
Earnings per share....... $ .03 $ .03 $ .04 $ .04
______ ______ ______ ______
______ ______ ______ ______
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)
1997 1996
____ ____
Cash flows from operating activities:
Net earnings.......................... $ 126 $ 135
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization....... 158 163
Provision for losses on accounts
receivable........................ (7) 9
Deferred taxes on income............ 65 69
Inventory valuation reserve......... 42 21
Retirement of plant assets.......... 1 1
Increase (Decrease) in cash from
changes in operating accounts:
Accounts receivable............... (1) 212
Inventory......................... (166) (426)
Prepaid expenses.................. (21) (9)
Accounts payable.................. (26) 225
Customer deposits................. (447) 12
Accrued expenses.................. (300) (197)
Income taxes payable.............. (38)
_____ _____
Total adjustments (740) 80
_____ _____
Net cash provided(Used)by operating
activities........................ (614) 215
Cash flows from investing activities:
Capital expenditures.................. (205) (70)
_____ _____
Cash Flows from financing activities
Proceeds from issuance of long-term
debt................................ 1,111
Payments on long-term debt............ (1,044) (277)
Net borrowings under line of credit... 752 (292)
Promissory notes...................... 300
______ _____
Net cash provided (used) by
financing activities................ 819 (269)
______ _____
Net increase (decrease) in cash......... 0 (124)
Cash at beginning of period............. 6 126
______ ______
Cash at end of period................... $ 6 $ 2
______ ______
______ ______
<PAGE>
Supplemental disclosures of cash
flow information:
Cash was paid during the year for:
Interest............................. $164 $172
Taxes................................ 57
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, 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)
September 30, 1997
__________________
Raw materials and parts
(including subassemblies)..... $1,121
Work-in-progress.............. 899
Finished goods................ 1,284
Used equipment................ 277
______
$3,581
______
______
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
percent above the bank's prime rate. Borrowings against this
line were $326 thousand on September 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 transactions backed by letter of credit
orders acceptable to the bank. The interest rate charged is 1.5
percent above the bank's prime rate. Borrowings against this
line were $525 thousand on September 30, 1997. The line is
secured by an "export working capital guarantee" from the Small
Business Administration.
<PAGE>
Long-term debt consists of the following:
(Dollars in Thousands)
September 30, 1997
__________________
Term note, 2% above prime rate,
due in monthly installments of $24,948
including interest. Final payment
due in February, 2000...................... $ 857
Note payable for equipment, 9.3%,
due in monthly installments of
$2,198 including interest. Final
payment due in March, 2004................. 128
Note payable for equipment and
leasehold improvements, 12%, due
in monthly installments of $2,262
including interest. Final payment
due in October, 1998....................... 27
Note payable for equipment, 10%,
due in monthly installments of
$1,039 including interest. Final
payment due in November, 1998.............. 13
Note payable for equipment, 8.23%,
due in monthly installments of
$277 including interest. Final
payment due in December, 2001.............. 12
______
1,037
Less current portion....................... 272
______
$ 765
______
______
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, 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 third quarter of 1997 were $1.960 million, a
decrease of $94 thousand from 1996 third quarter sales of $2.054
million. Sales for the first nine months of 1997 were $5.360
million, an increase of $352 thousand from 1996 third quarter
sales of $5.008 million. New equipment sales in 1997 were
$1.424 million in the third quarter and $4.152 million for the
first nine months, compared with 1996 sales of $1.622 million in
the third quarter and $4.103 million for the first nine months.
Service and parts sales in 1997 increased 77 percent in the
third quarter and 49 percent for the first nine months, compared
with the same periods in 1996. For the first nine months
international sales, as a percentage of total sales, were 74
percent in 1997 and 60 percent in 1996.
Cost of sales, as a percentage of sales, increased to 75 percent
in the third quarter of 1997, compared with 72 percent in the
third quarter of 1996. For the first nine months it was 75
percent in 1997 and 72 percent in 1996. The increase was the
result of the company selling a used press for a $48 thousand
loss in the third quarter of 1997; writing down the book value
of certain other used presses by $44 thousand; and accepting a
new equipment sale in the second quarter of 1997 which had a
lower than normal profit margin.
Selling, general and administrative expenses for the third
quarter of 1997 were 23 percent lower than they were for the
same period in 1996. For the first nine months of 1997 they
were 7 percent below 1996 expenses for the same period. The
decrease was the result of lower promotional expenses, insurance
fees, sales commissions, and payroll costs. Expenses in 1996
included a performance bonus accrual of $29 thousand for the
general manager. Professional service fees and bank charges
were slightly higher in 1997. Most other selling, general and
administrative expenses did not change significantly.
Interest expense was $78 thousand in the third quarter and $182
thousand for the first nine months of 1997, compared with $51
thousand and $150 thousand for the respective periods in 1996.
The average interest rate on the Company's short-term borrowings
from the bank in 1997 were 10.3 percent for both the third
quarter and the first nine months, compared with 10.8 percent
for the respective periods in 1996. Average short-term
borrowings from the bank in 1997 were $928 thousand in the third
quarter and $712 thousand for the first nine months, compared
with $622 thousand and $566 thousand for the corresponding
periods in 1996.
<PAGE>
Net earnings in the third quarter were $92 thousand in 1997,
compared with net earnings of $109 thousand in the third quarter
of 1996. For the nine-month period, net earnings were $126
thousand in 1997 and $135 thousand in 1996.
The Company's operating results for the first nine 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 and earnings to exceed
those of 1996.
Liquidity
_________
On September 30, 1997, working capital was $3.064 million, an
increase of $612 thousand from September 30, 1996 working
capital of $2.452 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 September
30, 1996. Term debt to the bank included in current liabilities
was $220 thousand on September 30, 1997, compared with $854
thousand on September 30, 1996.
For the first nine months of 1997, cash used by operations was
$614 thousand. Increased inventories, lower customer deposits
and accrued expenses, and the payment of taxes all used cash.
The higher inventories was the result of a $277 thousand
increase in work-in-progress. Partially offsetting the increase
in work-in-progress were lower used equipment inventories, which
have declined by $140 thousand. Part of that decline is the
result of the Company writing down the book value of certain
used presses. Raw materials and finished goods inventories did
not change significantly.
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 September
30, 1997, the Company had additional borrowing capacity of $374
thousand from its operating line of credit and $475 thousand
from its export working capital line of credit.
Capital Resources
_________________
Long-term debt and deferred income taxes (net of deferred tax
assets), as a percentage of total capitalization was 29 percent
on September 30, 1997. The Company believes that its borrowing
capacity is sufficient to provide for orderly growth.
<PAGE>
New Directors
_____________
In August 1997, the Company's board of directors was increased
from three members to seven. The new board members are Rollie
Mercer, Alan White, Roy Thompson and Edwin Beierlorzer. They
are all shareholders of the Corporation and employees of the
Company.
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, 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)
November 3, 1997 /s/ Gary B. Palmer
________________ _______________________________
Date Gary B. Palmer, President
November 3, 1997 /s/ Craig L. Mathison
________________ _______________________________
Date Craig L. Mathison
Secretary/Treasurer
(Principal Accounting Officer)
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 1,452
<ALLOWANCES> 4
<INVENTORY> 3,581
<CURRENT-ASSETS> 5,310
<PP&E> 3,356
<DEPRECIATION> 2,761
<TOTAL-ASSETS> 5,905
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<BONDS> 0
<COMMON> 86
0
0
<OTHER-SE> 2,490
<TOTAL-LIABILITY-AND-EQUITY> 5,905
<SALES> 5,360
<TOTAL-REVENUES> 5,360
<CGS> 4,045
<TOTAL-COSTS> 4,045
<OTHER-EXPENSES> 942
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