<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, 2000
[ ] 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 10, 2000.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Page 1 of 14 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)
<TABLE>
<CAPTION>
ASSETS March 31, 2000
______________
<S> <C>
Current Assets:
Cash............................ $ 2
Accounts receivable, less
allowance for doubtful
accounts of $118.............. 1,816
Inventories..................... 5,186
Deferred tax assets............. 265
Refundable income taxes......... 65
Deposits........................ 190
Prepaid expenses................ 24
------
Total Current Assets............ 7,548
Machinery and Leasehold Improvements,
at cost:
Machinery and equipment.......... 3,563
Leasehold improvements........... 215
------
3,778
Less accumulated depreciation
and amortization............... 2,848
------
Machinery and Leasehold
Improvements (Net)............... 930
------
Total Assets....................... $8,478
======
</TABLE>
The above figures are unaudited. The accompanying notes are an
integral part of the Consolidated Financial Statements.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, 2000
--------------
<S> <C>
Current Liabilities:
Accounts payable....................... $ 611
Customer deposits...................... 589
Accrued expenses....................... 1,388
Current portion of long-term debt...... 41
======
Total Current Liabilities.................. 2,629
Long-Term Debt, less current portion....... 2,278
Deferred Tax Liabilities................... 602
Commitments
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......................... 2,660
------
3,066
Treasury stock, 331,100 shares at cost.... (97)
------
Total Stockholders' Equity.................. 2,969
------
Total Liabilities and
Stockholders' Equity....................... $8,478
======
</TABLE>
The above figures are unaudited. The accompanying notes are an
integral part of the Consolidated Financial Statements.
<PAGE>
WEB PRESS CORPORATION
Consolidated Statements of Operations
For the three months ending March 31,
(Dollars in Thousands Except Earnings Per Share)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Sales......................... $2,241 $1,405
Cost of sales................. 1,725 1,114
------ ------
516 291
Selling, general and
administrative expenses..... 400 347
------ ------
116 (56)
Interest expense.............. 52 50
------ ------
Earnings (loss) before taxes
(benefit)................... 64 (106)
Taxes (benefit) on earnings
(loss) ..................... 22 (36)
------ ------
Net basic and diluted
earnings (loss)............. $ 42 $ (70)
====== ======
Basic and diluted earnings
(loss) per share............. $.01 $(.02)
==== =====
</TABLE>
The above figures are unaudited. The accompanying notes are an
integral part of the Consolidated Financial Statements.
<PAGE>
WEB PRESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ending March 31,
(Dollars in Thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................... $ 42 $ (70)
Adjustments to reconcile net
earnings (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization....... 38 47
Inventory valuation reserve......... 26 26
Provision for losses on accounts
receivable........................ 2 2
Deferred taxes...................... 16 (36)
Increase (Decrease) in cash from
changes in operating accounts:
Accounts receivable.............. 932 918
Inventory......................... (949) (977)
Deposits.......................... (55) (7)
Income taxes refundable........... (14)
Prepaid expenses.................. 20 20
Accounts payable.................. (64) (317)
Customer deposits................. 389 391
Accrued expenses.................. (666) (245)
Income taxes payable.............. (135)
----- -----
Total adjustments................. (446) (192)
----- -----
Net cash provided (used) by
Operating activities.............. (404) (262)
Cash flows from investing activities:
Capital expenditures.................. (44) (27)
----- -----
Net cash used by investing activities... (44) (27)
</TABLE>
(Continued on following page)
<PAGE>
(Continued from previous page)
<TABLE>
<CAPTION>
<S> <C> <C>
Cash Flows from financing activities:
Proceeds from issuance of
long-term debt...................... 160
Payments on long-term debt............ (7) (77)
Net borrowings (payments) under
short-term line of credit........... (172) 503
Net borrowings under long-term
line of credit ..................... 469
----- -----
Net cash provided by financing
activities.......................... 450 426
----- -----
Net increase in cash.................... 2 137
Cash at beginning of period............. 0 6
----- -----
Cash at end of period................... $ 2 $ 143
===== =====
Supplemental disclosures of cash
flow information:
Cash was paid during the year for:
Interest.............................. $ 87 $44
Taxes................................. 140 15
</TABLE>
The above figures are unaudited. The accompanying notes are an
integral part of the Consolidated Financial Statements.
<PAGE>
WEB PRESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING MARCH 31, 2000
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, 2000
<TABLE>
<CAPTION>
<S> <C>
Raw materials and parts
(including subassemblies)..... $2,500
Work-in-progress.............. 535
Finished goods................ 1,792
Used equipment................ 359
------
$5,186
======
</TABLE>
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 betterment's that do not appreciably extend the
life of the asset are charged directly to costs or expenses.
<PAGE>
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
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 ships. 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-basic and diluted were calculated based on
the weighted average number of shares outstanding. The weighted
average-basic and diluted number of shares outstanding were
3,105,413 in 2000 and 1999.
Note 2 - Financing:
The company has a revolving line of credit with a commercial
bank for borrowing up to $3 million. Borrowings against this
line were $2,016 million on March 31, 2000. Because the loan
matures on June 1, 2002, that amount is included in long-term
debt on the balance sheet. The interest rate charged is the
bank's prime rate. That rate was 9 percent on March 31, 2000.
Accounts receivable, firm orders in production, inventories, and
values in excess of the long-term financing on equipment are
pledged as collateral.
<PAGE>
The Company has a second financing facility with the bank for
borrowing, on a short-term basis, up to an additional $2 million
to manufacture equipment for export. On March 31, 2000, the
Company was not borrowing any money using this facility. The
Company intends to request additional loans using this facility
during 2000. The interest rate charges is .25 percent under the
bank's prime rate. Loans from this facility are secured by an
"export working capital guarantee" from the Export-Import Bank
of the Unites States.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
March 31, 2000
--------------
<S> <C>
Note payable, 9%, due in monthly
installments of $2,027 including
interest. Final payment
due April, 2010........................... $160
Note payable for equipment, 9.3%, due
in monthly installments of $2,198
including interest. Final payment due
in March, 2004............................ 87
Note payable for equipment, 8.97%, due in
monthly installments of $1,124 including
interest. Final payment due
in March, 2003............................ 50
Note payable for equipment, 8.23%, due in
monthly installments of $277 including
interest. Final payment due in December,
2001...................................... 6
----
303
Less current portion...................... 41
----
$262
====
</TABLE>
Equipment with an original cost of $206 thousand is pledged as
collateral under the notes payable for equipment and the
equipment purchase contracts.
<PAGE>
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, 2000, no options had been granted under this Plan.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
-----------------
Total sales were $2.241 million in the first quarter of 2000, an
increase of $836 thousand over 1999 first quarter sales of $1.405
million. New equipment sales, used equipment sales, and the sale
of replacement parts and service were all higher in 2000 than
they were in 1999. New equipment sales were $1.582 million in
2000, an increase of $537 thousand over 1999 first quarter sales
of $1.045 million. The Company sold $90 thousand worth of used
equipment in 2000. There were no used equipment sales in the
first quarter of 1999. The sale of replacement parts and service
increased $209 thousand to $569 thousand in 2000 from $360
thousand for the corresponding period in 1999. Domestic sales of
$1.193 million accounted for 53 percent of total sales, while
international sales of $1.048 million accounted for 47 percent of
total sales. The backlog of orders believed to be firm was
approximately $3.273 million on May 10, 2000, compared with
$3.172 million on May 11, 1999.
Cost of sales, expressed as a percentage of sales, decreased to
77.0 percent in the first quarter of 2000, compared with 79.3
percent in the first quarter of 1999. The primary reasons for
the decrease were an improvement in the gross profit margin on
new equipment sales, and the increase in parts sales, which have
a higher gross profit margin. Research and development costs in
2000 were $31 thousand higher than they were in 1999. The
Company charged $26 thousand to expense for inventory valuation
adjustments in both 2000 and 1999. Gross profits were $516
thousand and $291 thousand in the first quarter of 2000 and 1999,
respectively.
Selling, general and administrative expenses increased by $53
thousand in the first quarter of 2000 compared with the same
period in 1999. Selling expenses were $8 thousand higher in the
first quarter of 2000 than they were in the first quarter of
1999. The Company spent $38 thousand attending trade shows in
2000. In 1999, the Company spent $23 thousand attending trade
shows. Nominal decreases in most other selling expenses offset
<PAGE>
the higher trade show costs. General and administrative expenses
increased $45 thousand in 2000 from 1999. The largest increase
was $20 thousand for professional services. Higher legal fees
caused the increase. Administrative payroll costs were $19
thousand higher in 2000 than they were in 1999. Most other
selling, general and administrative expenses did not change
significantly.
Interest expense was $52 thousand in the first quarter of 2000,
compared with $50 thousand in the first quarter of 1999. The
average interest rate on the Company's revolving lines of credit
with the bank was 8.6 percent in 2000 and 9.5 percent in 1999.
The average borrowings from the bank were $1.651 million in 2000
and $363 thousand in 1999. The higher average borrowings in 2000
resulted from the conversion of most of the Company's long-term
debt into a long-term revolving line of credit in the second
quarter of 1999, allowing the Company to pay interest only on the
money it needs to borrow. The lower average interest rate on
those borrowings in 2000 is because the interest rate on the new
revolving line of credit is 2 percent lower than the rate for the
retired short-term revolving line of credit used by the Company
in 1999.
Net earnings of $42 thousand in 2000 resulted from higher sales
and the improvement in the gross profit margin on new equipment
sales and parts sales. Pre-tax earnings were $64 thousand. In
1999, the Company had a pre-tax loss of $106 thousand, and a net
loss of $70 thousand.
LIQUIDITY
---------
Net working capital was $4.919 million and the current ratio was
2.9:1 on March 31, 2000. Net cash used by operating activities
was $404 thousand in the first quarter of 2000. Changes in
working capital components from December 31, 1999, include a
decrease in accounts receivable of $932 thousand, an increase in
inventory of $949 thousand, a decrease in accrued expenses of
$666 thousand, an increase in customer deposits of $389 thousand,
and payment of $135 thousand in federal income taxes.
The Company is manufacturing equipment in larger lots to meet
demand for both the Quad-Stack and the Quadracolor, and to
achieve other manufacturing efficiencies. This has caused
inventories to increase. On March 31, 2000, raw materials and
parts had increased $368 thousand; work-in-progress had increased
$65 thousand; finished goods had increased $447 thousand; and
used equipment had increased $43 thousand, from December 31,
1999.
<PAGE>
Funds provided by operations are the Company's primary source of
liquidity. In addition, the Company uses short-term debt from
two separate revolving lines of credit with a commercial bank to
finance fluctuating working capital requirements. On March 31,
2000, the Company had additional borrowing capacity of $984
thousand from its $3 million line of credit. There were no
borrowings from the $2 million "export working capital" financing
facility the Company has with the bank.
CAPITAL RESOURCES
-----------------
Total assets were $8.478 million on March 31, 2000.
Stockholders' equity was $2.969 million, an increase of $42
thousand from December 31, 1999. Long-term debt (excluding the
long-term revolving line of credit) increased $160 thousand in
the first quarter of 2000. The new term debt is part of a
product liability settlement that is discussed in the Company's
Form 10-KSB for the year ended December 31, 1999. The settlement
requires the Company to make 120 monthly payments of $2,027
commencing May 1, 2000. The Company accrued the expense for the
settlement in 1999, and the $160 thousand was included in accrued
expenses in the balance sheet on December 31, 1999.
<PAGE>
PART II
-------
OTHER INFORMATION
-----------------
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K -- There are no reports on Form 8-K
filed for the three months ending March 31, 2000.
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 11, 2000 /s/Gary B. Palmer
------------ -------------------------
Date Gary B. Palmer, President
May 11, 2000 /s/Craig L. Mathison
------------ --------------------------
Date Craig L. Mathison
Vice President of Finance
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 1934
<ALLOWANCES> 118
<INVENTORY> 5186
<CURRENT-ASSETS> 7548
<PP&E> 3778
<DEPRECIATION> 2848
<TOTAL-ASSETS> 8478
<CURRENT-LIABILITIES> 2629
<BONDS> 0
0
0
<COMMON> 86
<OTHER-SE> 2980
<TOTAL-LIABILITY-AND-EQUITY> 8478
<SALES> 2241
<TOTAL-REVENUES> 2241
<CGS> 1725
<TOTAL-COSTS> 1725
<OTHER-EXPENSES> 400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52
<INCOME-PRETAX> 64
<INCOME-TAX> 22
<INCOME-CONTINUING> 42
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
