<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 April 4, 1998
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--4,921,566 shares as of
April 29, 1998.
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PART I--FINANCIAL INFORMATION
ITEM 1.--FINANCIAL STATEMENTS
<TABLE>
PRINTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS
QUARTER ENDED APRIL 4, 1998 AND APRIL 5, 1997
DOLLARS IN THOUSANDS EXCEPT PER SHARE
(UNAUDITED)
<CAPTION>
Quarter ended
April 4 April 5
_______ _______
1998 1997
______ ______
<S> <C> <C>
REVENUES FROM NONAFFILIATES $ 974 $ 477
REVENUES FROM AFFILIATES 701 1,370
______ ______
TOTAL REVENUES 1,675 1,847
COST OF REVENUES 925 1,041
______ ______
GROSS MARGIN 750 806
PERIOD COSTS:
Research and development 179 213
Selling, general and administrative 405 328
______ ______
Total 584 541
______ ______
INCOME FROM OPERATIONS 166 265
OTHER INCOME (EXPENSE):
Interest expense -- --
Interest and other income 200 195
______ ______
INCOME BEFORE INCOME TAXES 366 460
INCOME TAXES -- --
______ ______
NET INCOME $ 366 $ 460
====== ======
NET INCOME PER COMMON:
BASIC $ .07 $ .09
====== ======
DILUTED $ .07 $ .09
====== ======
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING--BASIC 4,915,218 4,852,297
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING--DILUTED 4,932,031 4,871,205
========= =========
See notes to condensed financial statements.
</TABLE>
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<TABLE>
PRINTWARE, INC.
CONDENSED BALANCE SHEETS
DOLLARS IN THOUSANDS EXCEPT SHARE INFORMATION
(UNAUDITED)
ASSETS
April 4, December 31,
1998 1997
____________ ____________
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 214 $ 348
Marketable securities available-for-sale 11,947 11,868
Receivables from nonaffiliates 727 564
Receivables from affiliates 230 359
Inventories 2,194 1,942
Deferred income taxes--current 273 264
Prepaid expenses 39 15
_______ _______
Total Current Assets 15,624 15,360
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 140 135
INTANGIBLE ASSETS, net of accumulated
amortization 27 28
LEASE RECEIVABLES--long term 345 174
DEFERRED INCOME TAXES--long term 850 850
_______ _______
$16,986 $16,547
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 526 $ 457
Accrued expenses 429 412
Deferred revenues 5 40
_______ _______
Total Current Liabilities 960 909
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
4,921,566 shares at April 4, 1998;
4,914,939 at December 31, 1997,
respectively 22,193 22,175
Unrealized holding gain (loss) on securities
available-for-sale 125 122
Unearned compensation on stock options (3) (4)
Accumulated deficit (6,289) (6,655)
_______ _______
Total shareholders' equity 16,026 15,638
_______ _______
$16,986 $16,547
======= =======
See notes to condensed financial statements.
</TABLE>
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<TABLE>
PRINTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
QUARTER ENDED APRIL 4, 1998 AND APRIL 5, 1997
DOLLARS IN THOUSANDS
(UNAUDITED)
April 4, April 5,
1998 1997
____________ ____________
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 366 $ 460
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16 15
Unearned compensation on stock options 1 5
Deferred income taxes (9) (49)
Changes in operating assets and liabilities:
Receivables from nonaffiliates (163) 385
Receivables from affiliates 129 (49)
Lease receivables (171) --
Inventories (252) (127)
Prepaid expenses (24) (13)
Accounts payable 69 (60)
Accrued expenses 17 (73)
Deferred revenues (35) (119)
______ ______
Net cash (used) provided by
operating activities (56) 375
INVESTING ACTIVITIES:
Purchases of marketable securities
available-for-sale (76) (467)
Purchases of property and equipment (21) (27)
Decrease in intangible assets 1 --
______ ______
Net cash used in
investing activities (96) (494)
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 18 10
______ ______
NET DECREASE IN CASH
AND CASH EQUIVALENTS (134) (109)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 348 524
______ ______
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 214 $ 415
====== ======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid during the period for:
Income taxes $ 2 $ --
====== ======
See notes to condensed financial statements.
</TABLE>
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PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 4, 1998 AND APRIL 5, 1997
1. INTERIM FINANCIAL INFORMATION
The accompanying condensed balance sheet as of April 4, 1998 and the
condensed statements of operations for the three months ended April 4, 1998
and April 5, 1997, and the condensed statements of cash flows for the three
months ended April 4, 1998 and April 5, 1997 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>
April 4, December 31,
1998 1997
____________ ____________
<S> <C> <C>
2. RECEIVABLES FROM NONAFFILIATES:
Trade $ 662 $ 556
Leases--current 104 37
Employees 2 4
Allowance for doubtful accounts (41) (33)
______ ______
Total receivables from nonaffiliates $ 727 $ 564
====== ======
3. INVENTORIES:
Raw materials $1,132 $ 995
Work-in-process 294 260
Finished goods 768 687
______ ______
Total inventories $2,194 $1,942
====== ======
4. PROPERTY AND EQUIPMENT:
Office equipment $ 434 $ 430
Software 108 108
Machinery and equipment 298 281
Leasehold improvements 75 75
Tooling and spares 335 335
Motor vehicles 24 24
______ ______
Total property and equipment 1,274 1,253
Less: accumulated depreciation and amortization 1,134 1,118
______ ______
Net property and equipment $ 140 $ 135
====== ======
</TABLE>
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PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
QUARTER ENDED APRIL 4, 1998 AND APRIL 5, 1997
(Continued)
<TABLE>
<CAPTION>
April 4, December 31,
1998 1997
____________ ____________
<S> <C> <C>
5. INTANGIBLE ASSETS:
License rights $ 560 $ 560
Patents 54 54
______ ______
Total intangible assets 614 614
Less: accumulated amortization 587 586
______ ______
Net intangible assets $ 27 $ 28
====== ======
6. ACCRUED EXPENSES:
Accrued payroll and related $ 86 $ 44
Accrued vacation and benefits 169 158
Accrued professional services 97 143
Accrued warranty reserve 41 37
Accrued income taxes 24 15
Accrued other 12 15
______ ______
Total accrued expenses $ 429 $ 412
====== ======
</TABLE>
7. MARKETABLE SECURITIES
The Company classifies its marketable securities as available-for-sale.
At April 4, 1998 and December 31, 1997, 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 three months ended April 4, 1998, the Company issued 6,627
shares of Common Stock in connection with the Employee Stock Purchase Plan at
$2.7625 per share.
9. COMPREHENSIVE NET INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS
No. 130 requires the disclosure of comprehensive income and its components in
the Company's financial statements. The Company had comprehensive income of
$370,000 and $347,000 for the quarters ended April 4, 1998 and April 5, 1997,
respectively, which consists of net income in addition to the net unrealized
gain on available-for-sale securities and unearned compensation on stock
options.
10. NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information." SFAS No. 131
redefines how operating segments are determined and requires disclosure of
certain financial and descriptive information about a company's operating
segments. This statement does not have a material impact on results reported
in the financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED
APRIL 4, 1998 AND APRIL 5, 1997
Total revenues for the 1998 quarter were $1.68 million, a decrease of 9%
from those of first quarter 1997 which were $1.85 million. The decrease was
due to a reduction in affiliate supplies sales largely offset by an increase
in PlateStream Platesetter sales in the 1998 quarter compared to 1997.
The decrease in revenues from the Company's affiliate in the 1998 quarter
was due primarily to reduced purchases of digital plate material used in the
Company's older Platesetter models. The Company believes this will continue
for the remainder of 1998.
The Company's gross margin was $750,000 in the first quarter 1998 versus
$806,000 in the comparable quarter in 1997. Gross margin as a percentage of
revenue increased from 44% in the first quarter 1997 to 45% in first quarter
1998. The increased percentage margin in 1997 was due primarily to a change
in product mix from lower margin supplies to higher margin Platesetters.
Research and development expenses decreased to $179,000 in the first
quarter 1998 from $213,000 in the first quarter in 1997. The decrease was
largely due to the completion of the development of the new PlateStream
product in 1997.
Selling, general and administrative expenses increased to $405,000 in the
first quarter of 1998 from $328,000 in the first quarter of 1997. Selling
expenses increased by approximately $60,000 in the first quarter 1998 due to
investment spending on the new PlateStream model and higher commissions due
to increased equipment sales. General and administrative expenses were up
approximately $20,000 in the 1998 quarter due primarily to increased
management compensation, annual report expenses, and Nasdaq expenses.
Interest, other income and income taxes were $200,000 in the 1998 quarter
compared to $195,000 in the 1997 quarter. This increase in interest income in
1998 is due primarily to an increase in cash and investments of over $1.1
million from the 1997 quarter compared to the 1998 quarter. This is largely
due to the Company's profit from operations.
The Company's income tax expense primarily consists of minimum taxes due,
offset by the net operation loss carryforwards.
Net income for the first quarter of 1998 was $366,000, or $.07 per common
share, down from $460,000 or $.09 per share in 1997 due to increased expenses
partially offset by higher margins and investment income.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $14.7 million on April 4, 1998 compared to $14.5 at
December 31, 1997. Cash, cash equivalents and investments decreased by
approximately $55,000 at April 4, 1998 compared to December 31, 1997. The
decrease was primarily due to an increase in sales-type leases financed
by the Company partially offset by net income from operating activities.
As of April 4, 1998 the Company has no material commitments which would
result in a significant cash outflow other than purchases of inventory in the
normal course of business, and the financing of additional Platesetter leases.
MILLENNIUM CHANGE
The Company has conducted a review of its computer systems to identify
those areas that could be affected by the "Year 2000" issue. The Company
presently believes, with modification to existing software, the Year 2000
problem will not pose significant operational problems, and the costs are not
anticipated to be material to its financial position or results of operations
in any given year.
<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: April 29, 1998 /s/ THOMAS W. PETSCHAUER
________________________
Thomas W. Petschauer
EXECUTIVE VICE PRESIDENT
& CHIEF FINANCIAL OFFICER
(Principal Financial Officer)
Date: April 29, 1998 /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>
Quarter ended
April 4, April 5,
1998 1997
__________ __________
<S> <C> <C>
BASIC EPS:
Weighted average number of
common shares outstanding 4,915,218 4,852,297
__________ __________
Total shares 4,915,218 4,852,297
========== ==========
Net income (000's) $ 366 $ 460
__________ __________
Earnings per share $ .07 $ .09
========== ==========
DILUTED:
Weighted average number of
common shares outstanding 4,915,218 4,852,297
Common share equivalents
from assumed exercise of
options and warrants 16,813 18,908
__________ __________
Total shares 4,932,031 4,871,205
========== ==========
Net income (000's) $ 366 $ 460
__________ __________
Earnings per share $ .07 $ .09
========== ==========
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Apr-04-1998
<CASH> 214
<SECURITIES> 11947
<RECEIVABLES> 998
<ALLOWANCES> (41)
<INVENTORY> 2194
<CURRENT-ASSETS> 15626
<PP&E> 1274
<DEPRECIATION> 1134
<TOTAL-ASSETS> 16986
<CURRENT-LIABILITIES> 960
<BONDS> 0
<COMMON> 22315
0
0
<OTHER-SE> (6289)
<TOTAL-LIABILITY-AND-EQUITY> 16986
<SALES> 1675
<TOTAL-REVENUES> 1675
<CGS> 925
<TOTAL-COSTS> 925
<OTHER-EXPENSES> 584
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (200)
<INCOME-PRETAX> 366
<INCOME-TAX> 0
<INCOME-CONTINUING> 366
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 366
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
