<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 October 4, 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 - 4,907,805 shares outstanding
as of November 4, 1997.
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PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
<TABLE>
PRINTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
3 AND 9 MONTHS ENDED OCTOBER 4, 1997 AND SEPTEMBER 28, 1996
DOLLARS IN THOUSANDS EXCEPT PER SHARE
(UNAUDITED)
<CAPTION>
Three months ended Nine months ended
Oct 4 Sep 28 Oct 4 Sep 28
_______ _______ _______ _______
1997 1996 1997 1996
______ ______ ______ ______
<S> <C> <C> <C> <C>
REVENUES FROM NON AFFILIATES $ 648 $ 421 $1,932 $2,466
REVENUES FROM AFFILIATES 975 1,255 3,463 2,939
______ ______ ______ ______
TOTAL REVENUES 1,623 1,676 5,395 5,405
COST OF REVENUES 892 966 2,987 3,078
______ ______ ______ ______
Gross margin 731 710 2,408 2,327
PERIOD COSTS:
Research and development 215 220 678 573
Selling, general and administrative 322 228 972 746
______ ______ ______ ______
Total 537 448 1,650 1,319
______ ______ ______ ______
INCOME FROM OPERATIONS 194 262 758 1,008
Interest and other income 194 158 585 237
______ ______ ______ ______
INCOME BEFORE INCOME TAXES 388 420 1,343 1,245
INCOME TAXES -- 15 -- 45
______ ______ ______ ______
NET INCOME $ 388 $ 405 $1,343 $1,200
====== ====== ====== ======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE: $ .08 $ .08 $ .27 $ .29
====== ====== ====== ======
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 4,929,840 4,848,808 4,905,218 4,071,601
========= ========= ========= =========
See notes to condensed financial statements.
</TABLE>
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<TABLE>
PRINTWARE, INC.
CONDENSED BALANCE SHEETS
DOLLARS IN THOUSANDS
(UNAUDITED)
ASSETS
October 4, December 31,
1997 1996
__________ ____________
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 453 $ 524
Marketable securities available-for-sale 11,495 10,267
Receivables from non affiliates 503 693
Receivables from affiliates 461 467
Inventories 1,961 1,763
Deferred income taxes - current 562 551
Prepaid expenses 28 40
_______ _______
Total Current Assets 15,463 14,305
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 122 109
INSTALLMENT RECEIVABLE - long term 49 --
INTANGIBLE ASSETS, net of accumulated
amortization 29 31
DEFERRED INCOME TAXES - long term 130 130
_______ _______
$15,793 $14,575
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 432 $ 522
Accrued expenses 445 453
Deferred revenues 104 350
_______ _______
Total Current Liabilities 981 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
4,907,805 shares at October 4, 1997;
4,850,694 at December 31, 1996 22,154 21,984
Unrealized holding gain (loss) on securities
available-for-sale 133 91
Unearned compensation on stock options (4) (11)
Accumulated deficit (7,471) (8,814)
_______ _______
Total shareholders' equity 14,812 13,250
_______ _______
$15,793 $14,575
======= =======
See notes to condensed financial statements.
</TABLE>
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<TABLE>
PRINTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
9 MONTHS ENDED OCTOBER 4, 1997 AND SEPTEMBER 28, 1996
DOLLARS IN THOUSANDS
(UNAUDITED)
October 4, September 28,
1997 1996
____________ ____________
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,343 $1,200
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 42 47
Common Stock issued for services 0 8
Stock option compensation earned 7 45
Deferred income taxes (11) 0
Changes in operating assets and liabilities:
Receivables from non affiliates 190 347
Receivables from affiliates 6 (207)
Inventories (198) (120)
Prepaid expenses 12 (28)
Installment receivable (49) --
Accounts payable (90) 6
Accrued expenses (8) (75)
Deferred revenues (246) 365
______ ______
Net cash provided by
operating activities 998 1,588
INVESTING ACTIVITIES -
Purchases of property and equipment (53) (34)
Purchases of available-for-sale securities (1,186) (10,217)
______ ______
Net cash used in investing activities (1,239) (10,251)
FINANCING ACTIVITIES -
Proceeds from issuance of Common Stock 170 6,410
______ ______
NET DECREASE IN CASH
AND CASH EQUIVALENTS (71) (2,253)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 524 2,569
______ ______
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 453 $ 316
====== ======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid during the period for:
Income taxes $ 2 $ 45
====== ======
See notes to condensed financial statements.
</TABLE>
<PAGE>
PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
3 AND 9 MONTHS ENDED OCTOBER 4, 1997 AND SEPTEMBER 28, 1996
(UNAUDITED)
1. INTERIM FINANCIAL INFORMATION
The accompanying condensed balance sheet as of October 4, 1997 and
December 31, 1996, the condensed statements of operations for the three
and nine months ended October 4, 1997 and September 28, 1996, the condensed
statements of cash flows for the nine months ended October 4, 1997 and
September 28, 1996 and the interim information as of and for the nine
months ended October 4, 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>
October 4, December 31,
1997 1996
__________ ____________
<S> <C> <C>
2. RECEIVABLES FROM NON AFFILIATES:
Trade $ 534 $ 719
Employees 1 1
Allowance for doubtful accounts (32) (27)
______ ______
Total receivables from non affiliates $ 503 $ 693
====== ======
3. INVENTORIES:
Raw materials $1,040 $ 847
Work-in-process 197 196
Finished goods 724 720
______ ______
Total inventories $1,961 $1,763
====== ======
4. PROPERTY AND EQUIPMENT:
Office equipment $ 430 $ 407
Software 106 103
Machinery and equipment 270 244
Leasehold improvements 76 75
Tooling and spares 335 335
Motor vehicles 10 10
______ ______
Total property and equipment 1,227 1,174
Less accumulated depreciation and amortization 1,105 1,065
______ ______
Net property and equipment $ 122 $ 109
====== ======
</TABLE>
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PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
3 and 9 MONTHS ENDED OCTOBER 4, 1997 AND SEPTEMBER 28, 1996
(Continued)
<TABLE>
<CAPTION>
October 4, 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 585 583
______ ______
Net intangible assets $ 29 $ 31
====== ======
6. ACCRUED EXPENSES:
Accrued payroll and related $ 77 $ 89
Accrued vacation and benefits 171 147
Accrued professional services 130 158
Accrued warranty reserve 39 36
Accrued income taxes -- --
Accrued other 28 23
______ ______
Total accrued expenses $ 445 $ 453
====== ======
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7. MARKETABLE SECURITIES
The Company classifies its marketable securities as available-for-sale.
At October 4, 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 nine months ended October 4, 1997, the Company issued
40,178 shares of Common Stock to certain employees exercising their stock
options at $3.00 per share. An additional 5,391 shares and 6,542 shares
were issued to employees as part of the Company's Employee Stock Purchase
Plan at $2.66 and $2.76 per share; respectively. In August 1997 a customer
and affiliate was issued 5,000 shares of Common Stock upon the exercise
of warrants at $3.00 per share.
9. NEW ACCOUNTING STANDARDS
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 revised 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
nine months ended and the third quarter ended October 4, 1997 under SFAS 128
under the basic and diluted earnings methods is not materially different
than the calculations of EPS under APB 15.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
which will be effective for the Company beginning January 1, 1998. SFAS No.
131 redefines how operating segments are determined and requires disclosure
of certain financial and descriptive information about a company's operating
segments. The Company believes that this statement will not have a material
impact on results reported in its financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income," which will be effective for the
Company beginning January 1, 1998. SFAS No. 130 requires the disclosure of
comprehensive income and its components in the Company's financial statements.
The Company anticipates the effect of SFAS No. 130 will result in disclosure
of the net unrealized gain on available-for-sale securities and unearned
compensation on stock options on the face of the comprehensive income
statement.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED
OCTOBER 4, 1997 AND SEPTEMBER 28, 1996
Total revenues for the 1997 quarter were $1.62 million, a decrease of
3% from $1.68 million from the third quarter 1996. The decrease was due
to a decline of supplies sales which were partially offset by an increase
in Model 3240 Platesetter sales in the 1997 quarter compared to 1996.
Model 3240 Platesetter sales included PlateStream sales to the
Company's dealers and end-user customers. The decline in supplies sales
was due primarily to consolidation in the check-printing industry.
The Company's gross margin was $731,000 in the 1997 quarter versus
$710,000 in the comparable quarter in 1996. Gross margin as a
percentage of revenue increased to 45% in the third quarter 1997 from 42%
in third quarter 1996. The increased margin in 1997 was due primarily
to a change in product mix from supplies to the higher margin PlateStream
and model 1440 Platesetter hardware sales.
Research and development expenses decreased slightly to $215,000 in
the third quarter 1997 from $220,000 in the third quarter in 1996. The
decrease was primarily due to decreased expenses caused by completion
of the development of the new PlateStream product.
Selling, general and administrative expenses increased to $322,000
in the third quarter of 1997, up from $228,000 in the third quarter of
1996. Marketing and sales expenses increased by approximately $112,000
in the third quarter 1997 primarily due increased advertising and
exhibition participation. General and administrative expenses were
down slightly in the 1997 quarter due primarily to lower professional
services costs in 1997.
Operating income in the 1997 period was $194,000 or 12% of revenues,
compared to $262,000 or 16% of revenues in the 1996 period. The
decrease was due primarily to higher period costs from investment
spending on the new PlateStream programs.
Interest and other income were $194,000 in the 1997 quarter compared
to $158,000 in the 1996 quarter. The increase in 1997 was due primarily
to the increase in cash and investments of over $1.3 million compared
to the 1996 quarter. This increase was due to the Company's positive
cash flow from operations.
The Company's income tax expense consists of minimum taxes due, as
the majority of the Company's taxable income is offset by net operating
loss carryforwards.
Net income for the third quarter of 1997 was $388,000, or $.08 per
common and common equivalent share, down from $405,000 or $.08 per share
in 1996 as higher margins and investment income partially offset increased
expenses. The income per share remained the same as shares outstanding
remained about the same.
<PAGE>
RESULTS OF OPERATIONS FOR THE 9 MONTHS ENDED OCTOBER 4, 1997 and
SEPTEMBER 28, 1996
Total revenues for the three quarters of 1997 were $5.40 million or
slightly less than period in 1996. The Company had stronger sales of
the Company's Model 3240 Platesetter and PlateStream model, which were
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 45%, slightly above the 43% in the 1996 period. The increase
was due to higher margins on the new PlateStream sales than the reduced
supplies sales.
Research and development expenses for the 1997 period increased 18%
over the same period in 1996 due primarily to costs incurred to develop
the new PlateStream, the PunchStream, the PlateStream 46 and new raster
image processors.
Selling, general and administrative expenses were 30% higher in 1997
compared to 1996 primarily due to higher marketing and sales investment
spending associated with the new PlateStream products.
Operating income in the 1997 period was $758,000 or 14% of revenues,
compared to $1,008,000 or 19% 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 programs in
1997.
Interest and other income were $585,000 in the 1997 period compared
to $237,000 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 continued profitable operations.
The Company's income tax expense consists of minimum taxes due, as
the majority of the Company's taxable income is offset by the net
operating loss carryforwards.
Net income for the 1997 period was $1,343,000 or 25% of revenues,
up 12% from $1,200,000 or 22% of revenues in 1996. Earnings per share
were $.27 in the 1997 period versus $.29 per share for the 1996 period.
The slight earnings per share 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 October 4, 1997 compared to
over 10 to 1 on December 31, 1996. Working capital was $14.0 million on
October 4, 1997 compared to $13.0 at December 31, 1996. Cash, cash
equivalents and investments increased by approximately $1.16 million at
October 4, 1997 compared to December 31, 1996, due to the past nine
months of profitable operations.
As of October 4, 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: November 4, 1997 /s/ THOMAS W. PETSCHAUER
________________________
Thomas W. Petschauer
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
(Principal Financial Officer)
Date: November 4, 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 Nine months ended
Oct 4, Sep 28, Oct 4, Sep 28,
1997 1996 1997 1996
_________ _________ _________ _________
<S> <C> <C> <C> <C>
PRIMARY EPS:
Weighted average number of
common shares outstanding 4,888,651 4,800,924 4,864,600 4,023,617
Common share equivalents
from assumed exercise of
options and warrants 41,189 47,984 40,618 47,984
_________ _________ _________ _________
Total shares 4,929,840 4,848,908 4,905,218 4,071,601
========= ========= ========= =========
Net income (000's) $ 388 $ 405 $ 1,343 $ 1,200
========= ========= ========= =========
Earnings per share $ .08 $ .08 $ .27 $ .29
========= ========= ========= =========
FULLY DILUTED:
Weighted average number of
common shares outstanding 4,888,651 4,800,924 4,864,600 4,023,617
Common share equivalents
from assumed exercise of
options and warrants 37,898 52,134 37,898 52,133
_________ _________ _________ _________
Total shares 4,926,549 4,853,058 4,902,498 4,075,750
========= ========= ========= =========
Net income (000's) $ 388 $ 405 $ 1,343 $ 1,200
========= ========= ========= =========
Earnings per share $ .08 $ .08 $ .27 $ .29
========= ========= ========= =========
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> Jul-06-1997
<PERIOD-END> Oct-04-1997
<CASH> 453
<SECURITIES> 11495
<RECEIVABLES> 535
<ALLOWANCES> (32)
<INVENTORY> 1961
<CURRENT-ASSETS> 15463
<PP&E> 1227
<DEPRECIATION> 1105
<TOTAL-ASSETS> 15793
<CURRENT-LIABILITIES> 987
<BONDS> 0
<COMMON> 22154
0
0
<OTHER-SE> (7471)
<TOTAL-LIABILITY-AND-EQUITY> 15793
<SALES> 1623
<TOTAL-REVENUES> 1623
<CGS> 892
<TOTAL-COSTS> 872
<OTHER-EXPENSES> 537
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (194)
<INCOME-PRETAX> 388
<INCOME-TAX> 0
<INCOME-CONTINUING> 388
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 388
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
