UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 28, 1996
Commission file Number 2-0729
PRINTWARE, INC.
(Exact name of registrant as specified in its charter.)
Minnesota 41-1522267
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1270 Eagan Industrial Road, St. Paul, MN 55121
(Address of principal executive offices) (Zip Code)
(612) 456-1400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant(1) has 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 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Common Stock, no Par Value - 4,849,963 shares as of
November 5, 1996.
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
PRINTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
3 AND 9 MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
DOLLARS IN THOUSANDS EXCEPT PER SHARE
(UNAUDITED)
<CAPTION>
Three months ended Nine months ended
Sept 28 Sept 30 Sept 28 Sept 30
_______ _______ _______ _______
1996 1995 1996 1995
______ ______ ______ ______
<S> <C> <C> <C> <C>
REVENUES FROM NON AFFILIATES $ 421 $1,331 $2,466 $3,496
REVENUES FROM AFFILIATES 1,255 937 2,939 3,027
______ ______ ______ ______
TOTAL REVENUES 1,676 2,268 5,405 6,523
COST OF REVENUES 966 1,278 3,078 3,674
______ ______ ______ ______
GROSS MARGIN 710 990 2,327 2,849
PERIOD COSTS:
Research and development 220 181 573 557
Selling, general and administrative 228 134 746 757
______ ______ ______ ______
Total 448 315 1,319 1,314
______ ______ ______ ______
INCOME FROM OPERATIONS 262 675 1,008 1,535
OTHER INCOME (EXPENSE):
Interest expense -- (1) -- (3)
Interest and other income 158 197 237 215
______ ______ ______ ______
INCOME BEFORE INCOME TAXES 420 871 1,245 1,747
INCOME TAXES 15 7 45 34
______ ______ ______ ______
NET INCOME $ 405 $ 864 $1,200 $1,713
====== ====== ====== ======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE: $ .08 $ .23 $ .29 $ .46
====== ====== ====== ======
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 4,848,908 3,699,874 4,071,601 3,699,587
========= ========= ========= =========
<FN>
See notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
PRINTWARE, INC.
CONDENSED BALANCE SHEETS
DOLLARS IN THOUSANDS EXCEPT PER SHARE
(UNAUDITED)
ASSETS
<CAPTION>
September 28, December 31,
1996 1995
____________ ____________
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 316 $ 2,569
Marketable securities available-for-sale 10,300 --
Receivables from non affiliates 164 511
Receivables from affiliates 470 263
Inventories 1,847 1,727
Prepaid expenses 45 17
_______ _______
Total Current Assets 13,142 5,087
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 120 131
INTANGIBLE ASSETS, net of accumulated
amortization 32 34
_______ _______
$13,294 $ 5,252
======= =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 443 $ 437
Accrued expenses 394 469
Deferred revenues 394 29
_______ _______
Total Current Liabilities 1,231 935
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock, no specified par value;
1,000,000 shares authorized;
none issued and outstanding -- --
Common Stock, no par value, authorized
15,000,000 shares: issued and outstanding
4,849,533 shares at September 28, 1996;
3,627,013 at December 31, 1995,
respectively 21,932 15,514
Unrealized holding gain on securities
available-for-sale 83 --
Unearned compensation on stock options 45 --
Accumulated deficit ( 9,997) (11,197)
_______ _______
Total shareholders' equity 12,063 4,317
_______ _______
$13,294 $ 5,252
======= =======
<FN>
See notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
PRINTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
9 MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
DOLLARS IN THOUSANDS
(UNAUDITED)
<CAPTION>
September 28, September 30,
1996 1995
____________ ____________
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,200 $1,713
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 47 52
Common Stock issued for services 8 8
Unearned compensation on stock options 45 --
Changes in operating assets and liabilities:
Receivables from non affiliates 347 (408)
Receivables from affiliates (207) 32
Inventories (120) (68)
Prepaid expenses (28) (7)
Accounts payable 6 81
Accrued expenses (75) (11)
Deferred revenues 365 (155)
______ ______
Net cash provided by
operating activities 1,588 1,237
INVESTING ACTIVITIES -
Purchases of marketable securities
available-for-sale (10,217) --
Purchases of property and equipment (34) (7)
Increase in intangible assets -- 2
______ ______
Net cash used in
investing activities (10,251) (5)
FINANCING ACTIVITIES -
Proceeds from issuance of Common Stock 6,410 1
______ ______
NET INCREASE IN CASH
AND CASH EQUIVALENTS (2,253) 1,233
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,569 861
______ ______
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 316 $2,094
====== ======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid during the period for:
Interest $ -- $ 3
====== ======
Income taxes $ 45 $ 34
====== ======
<FN>
See notes to condensed financial statements.
</TABLE>
<PAGE>
PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
3 AND 9 MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
1. INTERIM FINANCIAL INFORMATION
The accompanying condensed balance sheet as of September 28, 1996 and the
condensed statements of operations for the three and nine months ended
September 28, 1996 and September 30, 1995, and the condensed statements of
cash flows for the nine months ended September 28, 1996 and September 30, 1995
are unaudited. In the opinion of management, such unaudited financial
statements include all adjustments, consisting of only normal, recurring
accruals, necessary for a fair presentation thereof. The results of operations
for any interim period are not necessarily indicative of the results for the
year.
<TABLE>
<CAPTION>
September 28, December 31,
1996 1995
____________ ____________
<S> <C> <C>
2. RECEIVABLES FROM NON AFFILIATES:
Trade $ 194 $ 533
Employees 1 3
Allowance for doubtful accounts (31) (25)
______ ______
Total receivables from non affiliates $ 164 $ 511
====== ======
3. INVENTORIES:
Raw materials $ 754 $ 782
Work-in-process 364 165
Finished goods 729 780
______ ______
Total inventories $1,847 $1,727
====== ======
4. PROPERTY AND EQUIPMENT:
Office equipment $ 406 $ 396
Software 103 94
Machinery and equipment 241 226
Leasehold improvements 75 75
Tooling and spares 334 334
Motor vehicles 10 10
______ ______
Total property and equipment 1,169 1,135
Less accumulated depreciation and amortization 1,049 1,004
______ ______
Net property and equipment $ 120 $ 131
====== ======
</TABLE>
<PAGE>
PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
9 MONTHS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
(Continued)
<TABLE>
<CAPTION>
September 28, December 31,
1996 1995
____________ ____________
5. INTANGIBLE ASSETS:
<S> <C> <C>
License rights $ 560 $ 560
Patents 54 54
______ ______
Total intangible assets 614 614
Less accumulated amortization 582 580
______ ______
Net intangible assets $ 32 $ 34
====== ======
6. ACCRUED EXPENSES:
Accrued payroll and related $ 49 $ 77
Accrued vacation and benefits 150 127
Accrued professional services 138 204
Accrued warranty reserve 34 33
Accrued income taxes -- 7
Accrued other 23 21
______ ______
Total accrued expenses $ 394 $ 469
====== ======
</TABLE>
7. MARKETABLE SECURITIES
The Company classifies its marketable securities as available-for-sale.
At September 28, 1996, securities available-for-sale are carried at fair value
with the unrealized holding gain or loss included in shareholders' equity. At
December 31, 1995, the Company had no such securities.
8. SHAREHOLDERS' EQUITY
On July 2, 1996, the Company issued 1,200,000 shares of Common Stock
through its initial public offering at $6.00 per share and subsequently
received net proceeds of $6,400,000. As part of the initial public stock
offering, selling shareholders sold another 400,000 shares of Common Stock at
$6.00 per share.
During the nine months ended September 28, 1996, the Company issued
41,295 shares of Common Stock due to certain employees exercising their stock
options at $3.00 per share.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE 3 MONTHS ENDED
SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
Total revenues for the 1996 quarter decreased 26% compared to 1995. The
decrease was anticipated because the Company had a very strong third quarter
in 1995. Sales of the Company's Model 3240 Platesetter, which is sold under
the Mitsubishi Imaging (MC), Inc. ("Mitsubishi") brand name, were extremely
strong in the 1995 quarter, when the product was recently introduced and the
Company was filling a backlog of orders. Also contributing to lower revenues
was the loss of the supplies business of a large customer which discontinued
its production in the quarter.
Revenues in the 1996 quarter from the Company's affiliate were $1.3
million, or 75% of revenues, compared to $937,000, or 41% of the 1995
revenues. The increase in 1996 was primarily due to increased supplies sales
caused by variations in order timing as compared to 1995.
Research and development expenses were $220,000, or 22% higher in 1996
than the $181,000 in 1995, primarily due to increased labor expenses for
expanded product development activities.
Selling, general and administrative expenses were $228,000 in the 1996
quarter, up 70% from $134,000 in 1995. Expenses in 1995 were reduced by
$142,000 due to the award of a $334,000 arbitration settlement from A. B. Dick
Company.
Interest and other income was $158,000 in 1996 compared to $197,000 in
1995. The 1996 amount was primarily due to interest earned from the
investment of the initial public offering proceeds and additional funds.
The 1995 amount was primarily due to the $192,000 remainder of the A. B. Dick
settlement.
The Company's effective income tax rate consists primarily of minimum
taxes due to the Company's net operating loss carryforwards which have been
fully offset by a valuation allowance.
Net income for the 1996 quarter was $405,000, down 53% from $864,000 in
1995. The A. B. Dick settlement contributed net income of $334,000 in 1995.
RESULTS OF OPERATIONS FOR THE 9 MONTHS ENDED
SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
Total revenues for 9 months of 1996 decreased 17% from the 1995 period.
The decrease in 1996 revenues versus the year-ago period was primarily because
the Company had a very strong period in 1995. Sales of the Company's Model
3240 Platesetter, which is sold under the Mitsubishi Imaging (MC), Inc.
("Mitsubishi") brand name, were extremely strong in 1995, when the product was
recently introduced and the Company was filling a backlog of orders.
Management believes revenues to non affiliates, as a percentage of total
revenues, will be trending higher in the near future.
Revenues from the affiliate were $2.94 million, or 54% of revenues,
compared to $3.03 million, or 46% of 1995 revenues. The revenue decrease in
1996 was due to a variation in orders for goods other than supplies.
Interest and other income was $237,000 in 1996 compared to $212,000 in
1995. The 1996 amount was primarily due to interest earned from the
investment of the initial public offering proceeds and available funds.
The 1995 amount was primarily due to the $192,000 portion of the A. B. Dick
settlement.
<PAGE>
The Company's effective income tax rate consists primarily of minimum
taxes due to the Company's net operating loss carryforwards which have been
fully offset by a valuation allowance.
Net income for the 1996 period was $1.20 million, down 30% from $1.71
million in 1995. The A. B. Dick settlement contributed $334,000 to the 1995
net income.
LIQUIDITY AND CAPITAL RESOURCES
The current ratio was over 10 to 1 on September 28, 1996 compared to over
5 to 1 on December 31, 1995. Working capital was $11.91 million on September
28, 1996 compared to $4.15 million on December 31, 1995. Cash, cash
equivalents and marketable securities increased by approximately $8 million at
September 28, 1996, compared to December 31, 1995. These measures increased
due to the Company's profitability over the 9 month period and due to the $6.4
million net proceeds from the July 2, 1996 initial public offering.
Net cash generated in operating activities was $1.54 million due to the
profitable 9 month period of operation, compared to $1.24 million in the 1995
period. Cash used in investing activities was $10.25 million, primarily for
purchases of marketable securities, and compares to $5,000 in 1995. Cash from
financing activities was $6.41 million, primarily from the initial public
offering, compared to $1,000 in the 1995 period. As of September 28, 1996,
the Company had no material commitments which would result in significant cash
outflows other than for purchase of inventory in the normal course of
business.
As the result of the Company completing its initial public offering on
July 2, 1996, it received net proceeds of approximately $6.40 million. The
Company plans to use the proceeds primarily for product development and
distribution expansion. The Company expects that it will remain profitable at
least through its fiscal year ending December 31, 1997. In addition, the
Company expects its existing cash, cash equivalents, and available-for-sale
marketable securities balances (including the net proceeds from the initial
public offering) together with cash generated from operations to be sufficient
to finance its operations through at least December 31, 1998. However, the
information set forth in the preceding three sentences is forward-looking
information, and actual results may differ materially from such information.
Factors that may affect the Company's revenues, use of capital, expenses
and/or operating profits include, but are not limited to, the introduction of
competing products with performance equivalent to or exceeding that of the
Company's products, a claim (whether or not successfully made) that the
Company's products infringe a patent held by another company or individual,
any performance problems involving the Company's products, changes in
technology that could cause the Company's products to become obsolete, the
departure of key members of management and/or key employees, and general
economic conditions.
<PAGE>
PART II - OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 11. Statement re computation of per share earnings
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
No reports have been filed on Form 8-K during this
quarter.
<PAGE>
PRINTWARE, INC.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRINTWARE, INC.
Registrant
Date: November 7, 1996 /s/ THOMAS W. PETSCHAUER
________________________
Thomas W. Petschauer
EXECUTIVE VICE PRESIDENT
& CHIEF FINANCIAL OFFICER
(Principal Financial Officer)
Date: November 7, 1996 /s/ DANIEL A. BAKER
________________________
Daniel A. Baker, Ph.D.,
PRESIDENT
& CHIEF EXECUTIVE OFFICER
(Principal Executive Officer)
<PAGE>
<TABLE>
PRINTWARE, INC.
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Three months ended Nine months ended
Sept 28, Sept 30, Sept 28, Sept 30,
1996 1995 1996 1995
_________ _________ _________ _________
<S> <C> <C> <C> <C>
PRIMARY EPS:
Weighted average number of
common shares outstanding 4,800,924 3,626,613 4,023,617 3,626,326
Common share equivalents
from assumed exercise of
options and warrants 47,984 73,261 47,984 73,261
_________ _________ _________ _________
Total shares 4,848,908 3,699,874 4,071,601 3,699,587
========= ========= ========= =========
Net income (000's) $ 405 $ 864 $ 1,200 $ 1,713
_________ _________ _________ _________
Earnings per share $ .08 $ .23 $ .29 $ .46
========= ========= ========= =========
FULLY DILUTED:
Weighted average number of
common shares outstanding 4,800,924 3,626,613 4,023,617 3,626,326
Common share equivalents
from assumed exercise of
options and warrants 52,134 73,261 52,133 73,261
_________ _________ _________ _________
Total shares 4,853,058 3,699,874 4,075,750 3,699,587
========= ========= ========= =========
Net income (000's) $ 405 $ 864 $ 1,200 $ 1,713
_________ _________ _________ _________
Earnings per share $ .08 $ .23 $ .29 $ .46
========= ========= ========= =========
<FN>
Note: Fully diluted net income per share is not reported
separately because it is substantially the same as
primary net income per share.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-28-1996
<CASH> 316
<SECURITIES> 10300
<RECEIVABLES> 634
<ALLOWANCES> (31)
<INVENTORY> 1847
<CURRENT-ASSETS> 13142
<PP&E> 1169
<DEPRECIATION> 1049
<TOTAL-ASSETS> 13294
<CURRENT-LIABILITIES> 1231
<BONDS> 0
<COMMON> 21932
0
0
<OTHER-SE> (9997)
<TOTAL-LIABILITY-AND-EQUITY> 13294
<SALES> 5405
<TOTAL-REVENUES> 5405
<CGS> 3078
<TOTAL-COSTS> 3078
<OTHER-EXPENSES> 1319
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (237)
<INCOME-PRETAX> 1245
<INCOME-TAX> 45
<INCOME-CONTINUING> 1200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1200
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
