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 June 29, 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 - 4,838,390 shares as of
August 7, 1996.
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<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
PRINTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
3 AND 6 MONTHS ENDED JUNE 29, 1996 AND JULY 1, 1995
DOLLARS IN THOUSANDS EXCEPT PER SHARE
(UNAUDITED)
<CAPTION>
Three months ended Six months ended
June 29 July 1 June 29 July 1
______ ______ ______ ______
1996 1995 1996 1995
______ ______ ______ ______
<S> <C> <C> <C> <C>
REVENUES FROM NON AFFILIATES $ 920 $1,357 $2,045 $2,364
REVENUES FROM AFFILIATES 977 1,090 1,684 1,891
______ ______ ______ ______
TOTAL REVENUES 1,897 2,447 3,729 4,255
COST OF REVENUES 1,003 1,395 2,113 2,396
______ ______ ______ ______
Gross margin 894 1,052 1,616 1,859
PERIOD COSTS:
Research and development 174 170 353 376
Selling, general and administrative 280 352 519 623
______ ______ ______ ______
Total 454 522 872 999
______ ______ ______ ______
INCOME FROM OPERATIONS 440 530 744 860
OTHER INCOME (EXPENSE):
Interest expense -- (1) -- (2)
Interest and other income 47 9 81 18
______ ______ ______ ______
INCOME BEFORE INCOME TAXES 487 538 825 876
INCOME TAXES 23 15 30 27
______ ______ ______ ______
NET INCOME $ 464 $ 523 $ 795 $ 849
______ ______ ______ ______
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE: $ .13 $ .14 $ .21 $ .23
______ ______ ______ ______
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 3,701,346 3,679,641 3,701,346 3,679,641
_________ _________ _________ _________
<FN>
See notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
PRINTWARE, INC.
CONDENSED BALANCE SHEETS
DOLLARS IN THOUSANDS EXCEPT PER SHARE
(UNAUDITED)
ASSETS
<CAPTION>
June 29, December 31,
1996 1995
____________ ____________
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,323 $ 2,569
Receivables from non affiliates 257 511
Receivables from affiliates 264 263
Inventories 1,805 1,727
Prepaid expenses 107 17
_______ _______
Total Current Assets 5,756 5,087
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 117 131
INTANGIBLE ASSETS, net of accumulated
amortization 33 34
_______ _______
$ 5,906 $ 5,252
_______ _______
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 334 $ 437
Accrued expenses 382 469
Deferred revenues 38 29
_______ _______
Total Current Liabilities 754 935
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
3,630,685 shares at June 29, 1996;
3,627,013 at December 31, 1995,
respectively 15,555 15,514
Accumulated deficit (10,403) (11,197)
_______ _______
Total shareholders' equity 5,152 4,317
_______ _______
$ 5,906 $ 5,252
_______ _______
<FN>
See notes to condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
PRINTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
6 MONTHS ENDED JUNE 29, 1996 AND JULY 1, 1995
DOLLARS IN THOUSANDS
(UNAUDITED)
<CAPTION>
June 29, December 31,
1996 1995
_______ ___________
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 795 $ 849
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 61 38
Common Stock issued for services 8 8
Changes in operating assets and liabilities:
Receivables from non affiliates 254 (328)
Receivables from affiliates (1) 138
Inventories (78) (164)
Prepaid expenses (90) 2
Accounts payable (103) 100
Accrued expenses (87) (13)
Deferred revenues 9 (154)
______ ______
Net cash provided by
operating activities 768 476
INVESTING ACTIVITIES -
Purchases of property and equipment (17) (5)
FINANCING ACTIVITIES -
Proceeds from issuance of Common Stock 3 1
______ ______
NET INCREASE IN CASH
AND CASH EQUIVALENTS 754 472
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,569 861
______ ______
CASH AND CASH EQUIVALENTS,
END OF PERIOD $3,323 $1,333
______ ______
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid during the period for:
Interest $ -- $ 3
______ ______
Income taxes $ 30 $ 27
______ ______
<FN>
See notes to condensed financial statements.
</TABLE>
<PAGE>
PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
3 AND 6 MONTHS ENDED JUNE 29, 1996 AND JULY 1, 1995
1. INTERIM FINANCIAL INFORMATION
The accompanying condensed balance sheet as of June 29, 1996 and the
condensed statements of operations for the three and six months ended June 29,
1996 and July 1, 1995, the condensed statements of cash flows for the six
months ended June 29, 1996 and July 1, 1995 and the interim information as of
and for the six months ended June 29, 1996 appearing in the notes to condensed
financial statements 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>
June 29, December 31,
1996 1995
_________ ____________
<S> <C> <C>
2. RECEIVABLES FROM NON AFFILIATES:
Trade $ 284 $ 533
Employees 1 3
Allowance for doubtful accounts (28) (25)
______ ______
Total receivables from non affiliates $ 257 $ 511
______ ______
3. INVENTORIES:
Raw materials $ 776 $ 782
Work-in-process 295 165
Finished goods 734 780
______ ______
Total inventories $1,805 $1,727
______ ______
4. PROPERTY AND EQUIPMENT:
Office equipment $ 401 $ 396
Software 99 94
Machinery and equipment 233 226
Leasehold improvements 75 75
Tooling and spares 334 334
Motor vehicles 10 10
______ ______
Total property and equipment 1,152 1,135
Less accumulated depreciation and amortization 1,035 1,004
______ ______
Net property and equipment $ 117 $ 131
______ ______
</TABLE>
<PAGE>
PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
3 AND 6 MONTHS ENDED JUNE 29, 1996 AND JULY 1, 1995
(Continued)
<TABLE>
<CAPTION>
June 29, 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 581 580
______ ______
Net intangible assets $ 33 $ 34
______ ______
6. ACCRUED EXPENSES:
Accrued payroll and related $ 61 $ 77
Accrued vacation and benefits 148 127
Accrued professional services 117 204
Accrued warranty reserve 31 33
Accrued income taxes -- 7
Accrued other 25 21
______ ______
Total accrued expenses $ 382 $ 469
______ ______
</TABLE>
7. SHAREHOLDERS' EQUITY
During the six months ended June 29, 1996, the Company issued 1,170
shares of Common Stock due to certain employees exercising their stock options
at $3.00 per share.
8. SUBSEQUENT EVENT
On July 2, 1996, the Company issued 1,200,000 shares of Common Stock
through its initial public offering at $6.00 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 JUNE 29, 1996 AND JULY 1, 1995
Total revenues for the 1996 quarter decreased 22% compared to 1995. The
decrease was anticipated because the Company had a very strong second 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.
Cost of revenues in the 1996 quarter were 53% of revenues, compared to 57%
of revenues in the 1995 quarter. The decrease was due to a higher proportion
of 1996 sales from supplies, which have significantly lower costs as a
percentage of revenues than the 3240 product sold to Mitsubishi.
Selling, general and administrative expenses were $280,000 in the 1996
quarter, down 20% from $352,000 in 1995. These expenses were lower in 1996
primarily due to the high legal expenses incurred in 1995 due to the A.B. Dick
arbitration.
Operating income in the 1996 quarter was $440,000 or 23% of revenues,
compared to $530,000, or 22% of revenues in the 1995 quarter. The increase as
a percentage of revenues was despite reduced revenues, and was due to lower
cost of revenues from the change in product mix to a higher proportion of
supplies, and to lower expenses.
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 $464,000, or 24% of revenues, down 11%
from $523,000, or 21% of revenues, in 1995.
RESULTS OF OPERATIONS FOR THE 6 MONTHS ENDED JUNE 29, 1996 AND JULY 1, 1995
Total revenues for the first half of 1996 decreased 12% from 1995. The
decrease in 1996 revenues versus the year-ago period were because the Company
had a very strong period in 1995. Sales of the Company's Model 3240
Platesetter were very strong in the 1995 period, when the product was recently
introduced and the Company was filling a backlog of orders.
Cost of revenues in the 1996 period were 57% of revenues, essentially
unchanged from 56% of revenues in the 1995 period.
Selling, general and administrative expenses were 17% lower in 1996
compared to 1995 primarily from high legal expenses incurred in 1995 from the
A.B. Dick arbitration.
Operating income in the 1996 period was $744,000 or 20% of revenues,
compared to $860,000 or 20% of revenues in the 1995 period. Lower expenses in
1996 partially offset the reduction in gross profits from lower revenues.
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 $795,000, or 21% of revenues, down 6%
from $849,000, or 20% of revenues in 1995.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The current ratio was over 7 to 1 on June 29, 1996 compared to over 5 to 1
on December 31, 1995. Working capital was $5.00 million on June 29, 1996
compared to $4.15 million on December 31, 1995. Cash and cash equivalents
increased by approximately $750,000 at June 29, 1996, compared to December 31,
1995. These measures increased due to the Company's profitability over the 6
month period.
Net cash generated in operating activities was $768,000 due to the
profitable 6 month period of operation, compared to $468,000 in the 1995
period. Cash used in investing activities was $17,000, primarily for
purchases of equipment and software, and compares to $5,000 in 1995. Cash
from investing activities was $3,000 from issuance of common stock due to
exercise of incentive stock options, compared to $1,000 in the 1995 period.
As of June 29, 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 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.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-
BASED COMPENSATION (SFAS 123). SFAS 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but does
not require) application of the fair value recognition provisions of SFAS 123
to such arrangements. SFAS 123 is required to be adopted for reporting
purposes by the Company in 1996. Companies are permitted, however, to continue
to apply APB opinion No. 25, which recognizes compensation cost based on the
intrinsic value of the equity instrument awarded. The Company will continue to
apply APB opinion No. 25 to its stock based compensation awards to employees
and will disclose the required pro forma effect on net income and earnings per
share in its annual 1996 financial statements.
<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: August 7, 1996 /s/ THOMAS W. PETSCHAUER
________________________
Thomas W. Petschauer
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
(Principal Financial Officer)
Date: August 7, 1996 /s/ DANIEL A. BAKER
___________________
Daniel A. Baker, Ph.D.,
PRESIDENT
AND CHIEF EXECUTIVE OFFICER
(Principal Executive Officer)
<PAGE>
<TABLE>
PRINTWARE, INC.
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Three months ended Six months ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
_________ _________ _________ _________
<S> <C> <C> <C> <C>
PRIMARY EPS:
Weighted average number of
common shares outstanding 3,630,683 3,626,613 3,630,683 3,626,613
Common share equivalents
from assumed exercise of
options and warrants 70,663 53,028 70,663 53,028
_________ _________ _________ _________
Total shares 3,701,346 3,679,641 3,701,346 3,679,641
_________ _________ _________ _________
Net income (000's) $ 464 $ 523 $ 795 $ 849
_________ _________ _________ _________
Earnings per share $ .13 $ .14 $ .21 $ .23
_________ _________ _________ _________
FULLY DILUTED:
Weighted average number of
common shares outstanding 3,630,683 3,626,613 3,630,683 3,626,613
Common share equivalents
from assumed exercise of
options and warrants 70,663 53,028 70,663 53,028
_________ _________ _________ _________
Total shares 3,701,346 3,679,641 3,701,346 3,679,641
_________ _________ _________ _________
Net income (000's) $ 464 $ 523 $ 795 $ 849
_________ _________ _________ _________
Earnings per share $ .13 $ .14 $ .21 $ .23
_________ _________ _________ _________
<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> 6-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Jun-29-1996
<CASH> 3323
<SECURITIES> 0
<RECEIVABLES> 521
<ALLOWANCES> (28)
<INVENTORY> 1805
<CURRENT-ASSETS> 5756
<PP&E> 1152
<DEPRECIATION> 1035
<TOTAL-ASSETS> 5906
<CURRENT-LIABILITIES> 754
<BONDS> 0
<COMMON> 15555
0
0
<OTHER-SE> (10403)
<TOTAL-LIABILITY-AND-EQUITY> 5906
<SALES> 3729
<TOTAL-REVENUES> 3729
<CGS> 2113
<TOTAL-COSTS> 2113
<OTHER-EXPENSES> 872
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (81)
<INCOME-PRETAX> 825
<INCOME-TAX> 30
<INCOME-CONTINUING> 795
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 795
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
