<PAGE>
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 July 5, 1997
Commission file Number 000-20729
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 - 4,874,602 shares outstanding as
of July 30, 1997.
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PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
<TABLE>
PRINTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
3 AND 6 MONTHS ENDED JULY 5, 1997 AND JUNE 29, 1996
DOLLARS IN THOUSANDS EXCEPT PER SHARE
(UNAUDITED)
<CAPTION>
Three months ended Six months ended
July 5 June 29 July 5 June 29
______ ______ ______ ______
1997 1996 1997 1996
______ ______ ______ ______
<S> <C> <C> <C> <C>
REVENUES FROM NON AFFILIATES $ 807 $ 920 $1,284 $2,045
REVENUES FROM AFFILIATES 1,118 977 2,488 1,684
______ ______ ______ ______
TOTAL REVENUES 1,925 1,897 3,772 3,729
COST OF REVENUES 1,054 1,003 2,095 2,113
______ ______ ______ ______
Gross margin 871 894 1,677 1,616
PERIOD COSTS:
Research and development 250 174 463 353
Selling, general and administrative 322 280 650 519
______ ______ ______ ______
Total 572 454 1,113 872
______ ______ ______ ______
INCOME FROM OPERATIONS 299 440 564 744
Interest and other income 196 47 391 81
______ ______ ______ ______
INCOME BEFORE INCOME TAXES 495 487 955 825
INCOME TAXES -- 23 -- 30
______ ______ ______ ______
NET INCOME $ 495 $ 464 $ 955 $ 795
====== ====== ====== ======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE: $ .10 $ .13 $ .20 $ .21
====== ====== ====== ======
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 4,873,664 3,701,346 4,879,259 3,701,346
========= ========= ========= =========
See notes to condensed financial statements.
</TABLE>
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<TABLE>
PRINTWARE, INC.
CONDENSED BALANCE SHEETS
DOLLARS IN THOUSANDS EXCEPT PER SHARE
(UNAUDITED)
ASSETS
July 5, December 31,
1997 1996
____________ ____________
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 214 $ 524
Marketable securities available-for-sale 11,162 10,267
Receivables from non affiliates 602 693
Receivables from affiliates 468 467
Inventories 1,781 1,763
Deferred income taxes - current 577 551
Prepaid expenses 63 40
_______ _______
Total Current Assets 14,867 14,305
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 111 109
INTANGIBLE ASSETS, net of accumulated
amortization 30 31
DEFERRED INCOME TAXES - long-term 130 130
_______ _______
$15,138 $14,575
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 396 $ 522
Accrued expenses 357 453
Deferred revenues 158 350
_______ _______
Total Current Liabilities 911 1,325
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
4,858,497 shares at July 5, 1997;
4,850,694 at December 31, 1996 22,009 21,984
Unrealized holding gain (loss) on securities
available-for-sale 81 91
Unearned compensation on stock options (4) (11)
Accumulated deficit (7,859) (8,814)
_______ _______
Total shareholders' equity 14,227 13,250
_______ _______
$15,138 $14,575
======= =======
See notes to condensed financial statements.
</TABLE>
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<TABLE>
PRINTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
6 MONTHS ENDED JULY 5, 1997 AND JUNE 29, 1996
DOLLARS IN THOUSANDS
(UNAUDITED)
July 5, June 29,
1997 1996
_______ ______
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 955 $ 795
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 32 61
Common Stock issued for services 0 8
Stock option compensation earned 6 0
Gain (loss) on sale of investments
available-for-sale 109 0
Deferred income taxes (26) 0
Changes in operating assets and liabilities:
Receivables from non affiliates 90 254
Receivables from affiliates (1) (1)
Inventories (18) (78)
Prepaid expenses (23) (90)
Accounts payable (126) (103)
Accrued expenses (96) (87)
Deferred revenues (192) 9
______ ______
Net cash provided by
operating activities 712 768
INVESTING ACTIVITIES -
Purchases of property and equipment (34) (17)
Purchases of available-for-sale securities (1,012) --
______ ______
Net cash used in investing activities (1,046) (17)
FINANCING ACTIVITIES -
Proceeds from issuance of Common Stock 24 3
______ ______
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (310) 754
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 524 2,569
______ ______
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 214 $3,323
====== ======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid during the period for:
Income taxes $ 27 $ 30
====== ======
See notes to condensed financial statements.
</TABLE>
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PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
3 AND 6 MONTHS ENDED JULY 5, 1997 AND JUNE 29, 1996
1. INTERIM FINANCIAL INFORMATION
The accompanying condensed balance sheets as of July 5, 1997 and
December 31, 1996, the condensed statements of operations for the three and
six months ended July 5, 1997 and June 29, 1996, the condensed statements of
cash flows for the six months ended July 5, 1997 and June 29, 1996 and the
interim information as of and for the six months ended July 5, 1997
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>
July 5, December 31,
1997 1996
_________ ____________
<S> <C> <C>
2. RECEIVABLES FROM NON AFFILIATES:
Trade $ 633 $ 719
Employees -- 1
Allowance for doubtful accounts (31) (27)
______ ______
Total receivables from non affiliates $ 602 $ 693
====== ======
3. INVENTORIES:
Raw materials $ 882 $ 847
Work-in-process 304 196
Finished goods 595 720
______ ______
Total inventories $1,781 $1,763
====== ======
4. PROPERTY AND EQUIPMENT:
Office equipment $ 425 $ 407
Software 103 103
Machinery and equipment 256 244
Leasehold improvements 76 75
Tooling and spares 334 335
Motor vehicles 10 10
______ ______
Total property and equipment 1,204 1,174
Less accumulated depreciation and amortization 1,093 1,065
______ ______
Net property and equipment $ 111 $ 109
====== ======
</TABLE>
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PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
3 AND 6 MONTHS ENDED JULY 5, 1997 AND JUNE 29, 1996
(Continued)
<TABLE>
<CAPTION>
July 5, December 31,
1997 1996
______ ___________
<S> <C> <C>
5. INTANGIBLE ASSETS:
License rights $ 560 $ 560
Patents 54 54
______ ______
Total intangible assets 614 614
Less accumulated amortization 584 583
______ ______
Net intangible assets $ 30 $ 31
====== ======
6. ACCRUED EXPENSES:
Accrued payroll and related $ 44 $ 89
Accrued vacation and benefits 144 147
Accrued professional services 116 158
Accrued warranty reserve 37 36
Accrued income taxes -- --
Accrued other 16 23
______ ______
Total accrued expenses $ 357 $ 453
====== ======
</TABLE>
7. MARKETABLE SECURITIES
The Company classifies its marketable securities as available-for-sale.
At July 5, 1997 and December 31, 1996, securities available-for-sale are
carried at fair value with the net unrealized holding gain or loss included
in shareholders' equity.
8. SHAREHOLDERS' EQUITY
During the six months ended July 5, 1997, the Company issued 2,412
shares of Common Stock to certain employees exercising their stock options
at $3.00 per share and an additional 5,391 shares to employees as part of
the Company's Stock Purchase Plan at $2.66 per share.
9. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128) "Earnings
per Share," which is effective for periods ending after December 15, 1997.
SFAS 128 revises the standards for computing and presenting earnings per
share (EPS). The Company will continue to apply APB Opinion No. 15 to
compute the EPS through the effective date. The calculation EPS for the
six months ended and the second quarter ended July 5, 1997 under SFAS 128
under the basic and diluted earnings methods is not materially different
than the calculations of EPS under APB 15.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED
JULY 5, 1997 AND JUNE 29, 1996
Total revenues for the 1997 quarter were $1.93 million, an increase of
1% over those of second quarter 1996 which were $1.90 million. The increase
was due to an increase in Model 3240 Platesetter sales which was essentially
offset by a decline of supplies sales in the 1997 quarter compared to 1996.
Model 3240 Platesetter sales included sales to the Company's OEM
customer and sales of the new PlateStream model. The decline in supplies
sales was due to consolidation in the check printing industry.
The Company's gross margin was $871,000 in the second quarter 1997
versus $894,000 in the comparable quarter in 1996. Gross margin as a
percentage of revenue decreased from 47% in the second quarter 1996 to 45%
in second quarter 1997. The decreased margin in 1997 was due primarily to
a change in product mix from supplies to the lower margin Model 3240
Platesetter.
Research and development expenses increased to $250,000 in the second
quarter 1997 from $174,000 in the second quarter in 1996. The increase
was primarily due to increased expenses associated with the development of
the new PlateStream product.
Selling, general and administrative expenses were $322,000 in the
second quarter of 1997 up from $280,000 in the second quarter of 1996.
Marketing and sales expenses increased by approximately $57,000 in the
second quarter 1997 primarily due to the hiring of a new sales manager for
the PlateStream product, and to increased advertising and exhibition
participation. General and administrative expenses were down slightly in
the 1997 quarter due primarily to costs associated with preparation of
going public in 1996.
Operating income in the 1997 period was $299,000 or 16% of revenues,
compared to $440,000 or 23% of revenues in the 1996 period. The decrease
was due to higher period costs from investment spending on the new
PlateStream program in 1997, more than offsetting the slightly higher
revenues.
Interest and other income were $196,000 in the 1997 quarter compared
to $23,000 in the 1996 quarter. The increase in 1997 was due primarily
to the 1997 quarter's increase in cash and investments of over $8.1 million
compared to the 1996 quarter. This was largely due to the $6.4 million from
the Company's initial public offering, with the remainder from the Company's
positive cash flow from operations.
The Company's income tax expense primarily consists of minimum taxes
due, offset by net operating loss carryforwards.
Net income for the second quarter of 1997 was $495,000, or $.10 per
common and common equivalent share, up from $464,000 or $.13 per share in
1996 as higher margins and investment income offset increased expenses.
The income per share decreased due to the increased shares outstanding due
to the initial public offering of 1.2 million shares on July 2, 1996.
<PAGE>
RESULTS OF OPERATIONS FOR THE 6 MONTHS ENDED JULY 5, 1997 and JUNE 29, 1996
Total revenues for the first half of 1997 were $3.77 million or an
increase of 1% from 1996. The increase in 1997 revenues versus the year-ago
period was because the Company had stronger sales of the Company's Model
3240 Platesetter and PlateStream model, which were essentially offset by
decreased supplies sales due to consolidation in the check-printing industry.
The Company's gross margin as a percentage of revenue in the 1997
period was 44%, essentially unchanged from 43% in the 1996 period.
Research and development expenses for the 1997 period increased 31%
over the same period in 1996 due primarily to costs incurred to develop the
new PlateStream product.
Selling, general and administrative expenses were 25% higher in 1997
compared to 1996 primarily due to higher marketing and sales costs
associated with the new PlateStream product.
Operating income in the 1997 period was $564,000 or 15% of revenues,
compared to $744,000 or 20% of revenues in the 1996 period. The decrease
was due primarily to investment spending on research and development and
in marketing and sales on the PlateStream program in 1997.
Interest and other income were $391,000 in the 1997 period compared
to $81,000 in the 1996 period. The increase in 1997 is due primarily to
an increase in cash and investments from the initial public offering in
July, 1996 and to profitable operations.
The Company's income tax expense consists of minimum taxes due,
offset by the net operating loss carryforwards.
Net income for the 1997 period was $955,000 or 25% of revenues, up 4%
from $795,000 or 21% of revenues in 1996. Earnings per share were $.20 in
the 1997 period versus $.21 per share for the 1996 period. The slight
decrease is due to the increased outstanding shares from the initial
public offering in July, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The current ratio was over 16 to 1 on July 5, 1997 compared to over
10 to 1 on December 31, 1996. Working capital was $14.0 million on
July 5, 1997 compared to $13.0 at December 31, 1996. Cash, cash equivalents
and investments increased by approximately $600,000 at July 5, 1997 compared
to December 31, 1996, due to the past six months of profitable operations.
As of July 5, 1997 the Company has no material commitments which would
result in a significant cash outflows other than purchases of inventory in
the normal course of business.
<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 caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PRINTWARE, INC.
Registrant
Date: July 30, 1997 /s/ THOMAS W. PETSCHAUER
________________________
Thomas W. Petschauer
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
(Principal Financial Officer)
Date: July 30, 1997 /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
July 5, June 29, July 5, June 29,
1997 1996 1997 1996
_________ _________ _________ _________
<S> <C> <C> <C> <C>
PRIMARY EPS:
Weighted average number of
common shares outstanding 4,853,393 3,630,683 4,852,984 3,630,683
Common share equivalents
from assumed exercise of
options and warrants 20,271 70,663 26,275 70,663
_________ _________ _________ _________
Total shares 4,873,664 3,701,346 4,879,259 3,701,346
_________ _________ _________ _________
Net income (000's) $ 495 $ 464 $ 955 $ 795
========= ========= ========= =========
Earnings per share $ .10 $ .13 $ .20 $ .21
========= ========= ========= =========
FULLY DILUTED:
Weighted average number of
common shares outstanding 4,853,393 3,630,683 4,852,984 3,630,683
Common share equivalents
from assumed exercise of
options and warrants 13,856 70,663 13,856 70,663
_________ _________ _________ _________
Total shares 4,867,249 3,701,346 4,866,840 3,701,346
_________ _________ _________ _________
Net income (000's) $ 495 $ 464 $ 955 $ 795
========= ========= ========= =========
Earnings per share $ .10 $ .13 $ .20 $ .21
========= ========= ========= =========
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> Apr-06-1997
<PERIOD-END> Jul-05-1997
<CASH> 214
<SECURITIES> 11162
<RECEIVABLES> 633
<ALLOWANCES> (31)
<INVENTORY> 1781
<CURRENT-ASSETS> 14867
<PP&E> 1204
<DEPRECIATION> 1093
<TOTAL-ASSETS> 15138
<CURRENT-LIABILITIES> 911
<BONDS> 0
<COMMON> 22009
0
0
<OTHER-SE> (7858)
<TOTAL-LIABILITY-AND-EQUITY> 15138
<SALES> 1925
<TOTAL-REVENUES> 1925
<CGS> 1054
<TOTAL-COSTS> 1054
<OTHER-EXPENSES> 572
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (196)
<INCOME-PRETAX> 495
<INCOME-TAX> 0
<INCOME-CONTINUING> 495
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 495
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
