PRINTWARE, INC.
1270 Eagan Industrial Road
St. Paul, MN 55121
May 3, 2001
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of
1934, we are transmitting herewith the attached Form 10-QSB.
Sincerely,
PRINTWARE, INC.
/s/ CORDELL E. LOMEN
____________________________
Cordell E. Lomen, Controller
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001
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)
(651) 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--3,302,137 shares as of
May 3, 2001.
PART I--FINANCIAL INFORMATION
ITEM 1.--FINANCIAL STATEMENTS
PRINTWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
QUARTER ENDED MARCH 31, 2001 AND APRIL 1, 2000
DOLLARS IN THOUSANDS EXCEPT PER SHARE INFORMATION
(UNAUDITED)
Quarter ended
March 31 April 1
_______ _______
2001 2000
_______ _______
TOTAL REVENUES $1,530 $1,250
COST OF REVENUES 1,015 737
______ ______
GROSS MARGIN 515 513
PERIOD COSTS:
Research and development 165 154
Selling, general and administrative 430 356
______ ______
Total 595 510
______ ______
(LOSS) INCOME FROM OPERATIONS (80) 3
OTHER INCOME:
Interest and other income 135 165
______ ______
INCOME BEFORE INCOME TAXES 55 168
INCOME TAXES 21 64
______ ______
NET INCOME $ 34 $ 104
====== ======
NET INCOME PER COMMON--
BASIC AND DILUTED $ .01 $ .03
====== ======
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING--BASIC 3,298,402 3,275,583
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING--DILUTED 3,303,316 3,322,963
========= =========
OTHER COMPREHENSIVE INCOME (LOSS),
BEFORE TAX:
Unrealized holding losses on
securities:
Unrealized holding losses
arising during period $ 63 $ (22)
_________ _________
OTHER COMPREHENSIVE GAINS (LOSSES),
BEFORE TAX 63 (22)
INCOME TAX BENEFIT RELATED TO
ITEMS OF OTHER COMPREHENSIVE
GAINS (LOSSES) (39) 8
_________ _________
OTHER COMPREHENSIVE INCOME (LOSSES),
NET OF TAX $ 34 $ (14)
========= =========
COMPREHENSIVE INCOME $ 68 $ 90
========= =========
See notes to condensed financial statements.
PRINTWARE, INC.
CONDENSED BALANCE SHEETS
DOLLARS IN THOUSANDS EXCEPT SHARE INFORMATION
(UNAUDITED)
ASSETS
March 31,
2001
____________
CURRENT ASSETS:
Cash and cash equivalents $ 2,398
Marketable securities available-for-sale 4,546
Other investments 2,025
Receivables 961
Lease receivables--current 92
Inventories 2,023
Deferred income taxes--current 705
Prepaid expenses 73
_______
Total Current Assets 12,823
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 126
INTANGIBLE ASSETS, net of accumulated
amortization 17
LEASE RECEIVABLES--long term 194
DEFERRED INCOME TAXES--long term 2,296
_______
$15,456
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 883
Accrued expenses 330
Deferred revenues 19
_______
Total Current Liabilities 1,232
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
3,302,137 shares at March 31, 2001;
respectively 19,136
Accumulated deficit (4,946)
Accumulated other comprehensive losses 34
_______
Total shareholders' equity 14,224
_______
$15,456
=======
See notes to condensed financial statements.
PRINTWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
QUARTER ENDED MARCH 31, 2001 AND APRIL 1, 2000
DOLLARS IN THOUSANDS
(UNAUDITED)
March 31, April 1,
2001 2000
____________ ____________
OPERATING ACTIVITIES:
Net income $ 34 $ 104
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 17 15
Provision for bad debts 3 -
Provision for inventory write-downs 30 27
Deferred income taxes 45 (10)
Changes in operating assets and liabilities:
Receivables 2,248 (41)
Inventories 19 (58)
Prepaid expenses 72 (12)
Accounts payable 183 115
Accrued expenses (583) 8
Deferred revenues 3 (8)
______ ______
Net cash provided by
operating activities 2,071 140
INVESTING ACTIVITIES:
Purchases of other investments (2,000) -
Maturities and sales of available-for-sale
securities 1,869 297
Decrease in lease receivables 22 (297)
Purchase of property and equipment (5) -
Disposal of property and equipment - 3
______ ______
Net cash (used in) provided by
investing activities (114) 3
FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 19 24
______ ______
NET INCREASE IN CASH
AND CASH EQUIVALENTS 1,976 167
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 422 56
______ ______
CASH AND CASH EQUIVALENTS,
END OF PERIOD $2,398 $ 223
====== ======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid during the period for:
Income taxes $ - $ -
====== ======
See notes to condensed financial statements.
PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 2001
1. INTERIM FINANCIAL INFORMATION
The accompanying condensed balance sheet as of March 31, 2001 and the
condensed statements of operations and comprehensive income for the three
months ended March 31, 2001 and April 1, 2000, and the condensed statements
of cash flows for the three months ended March 31, 2001 and April 1, 2000 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.
March 31,
2000
____________
2. RECEIVABLES:
Trade $ 884
Interest 86
Employees 1
Allowance for doubtful accounts (10)
______
Total receivables $ 961
======
3. INVENTORIES:
Raw materials $ 761
Work-in-process 373
Finished goods 889
______
Total inventories $2,023
======
4. PROPERTY AND EQUIPMENT:
Office equipment $ 521
Software 108
Machinery and equipment 326
Leasehold improvements 126
Tooling and spares 338
Motor vehicles 13
______
Total property and equipment 1,432
Less: accumulated depreciation and amortization (1,306)
______
Net property and equipment $ 126
======
PRINTWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
QUARTER ENDED MARCH 31, 2001
(Continued)
March 31,
2000
____________
5. INTANGIBLE ASSETS:
License rights $ 560
Patents 54
______
Total intangible assets 614
Less: accumulated amortization (597)
______
Net intangible assets $ 17
======
6. ACCRUED EXPENSES:
Accrued payroll and related $ 88
Accrued vacation and benefits 109
Accrued professional services 41
Accrued warranty reserve 46
Accrued taxes 3
Accrued other 43
______
Total accrued expenses $ 330
======
7. MARKETABLE SECURITIES
The Company classifies its marketable securities as available-for-sale.
At March 31, 2001, 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 March 31, 2001, the Company issued 5,301
shares at $2.02 and 3,658 shares at $1.97 per share of Common Stock in connection with the Employee Stock Purchase Plan.
9. NEW ACCOUNTING PRONOUNCEMENT
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued by the Financial Accounting Standards Board in
June 1998. The Standard requires the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are
not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in
fair value of the hedged assets, liabilities, or firm commitments through
earnings, or recognized in other comprehensive income until the hedged item
is recognized in earnings. The change in a derivative's fair value related
to the ineffective portion of a hedge, if any, will be immediately recognized
in earnings. The Company adopted this Standard as of January 1, 2001 and there
was no effect on the Company's financial position or results in operations.
10. Related Party Transactions
Included in other investments is the Company's investment of $2,000,000 in
the Whitebox Statistical Arbitrage Fund, LLC. A director of the Company is
Chief Executive Officer of Whitebox Advisors, LLC, which is a general partner
of Whitebox Statistical Arbitrage Fund, LLC. The investment was carried at
estimated fair value on March 31, 2001 was $2,025,000. The Company recognized
investment income during the period of $25,000 relating to this investment.
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED
MARCH 31, 2000 AND APRIL 1, 2000
Total revenues for the first quarter in 2001 were $1,530,000, an increase
of 22% from revenues of $1,250,000 for first quarter 2000. The increase was due
primarily to an increase in Platesetter equipment sales and increased
SilverStream supply sales.
The Company's gross margin was $515,000 in the first quarter 2001 versus
$513,000 in the comparable quarter in 2000. Gross margin as a percentage of
revenue decreased from 41% in the first quarter 2000 to 34% in first quarter
2001. The decreased margin percentage in 2001 was due primarily to the first
quarter margin impact from favorable manufacturing variances of $67,000, which
impacted last year's margin percentage by 5%, and due to increased equipment
sales in 2001 at lower margins.
Research and development expenses increased to $165,000 in the first
quarter of 2001 from $154,000 in the first quarter of 2000. The increase was
largely due to development costs associated with efforts taken to identify
approaches for reducing the costs of the Company's manufactured equipment.
Selling, general and administrative expenses increased to $430,000 in the
first quarter of 2001 from $356,000 in the first quarter of 2000. Selling
expenses increased by approximately $44,000 in the first quarter 2001 versus
the first quarter of 2000 due to having a larger sales force which increased
throughout 2000. General and administrative expenses increased by
approximately $30,000 over the same periods primarily due to costs related to
consultants and senior management changes.
Interest and other income in the first quarter of 2001 was $135,000
compared to $165,000 in the same period of the prior year. The decrease in
interest income is due primarily to the sale of the Company's lease portfolio
effective December of 2000.
The Company's income tax expense is calculated based on the estimated
annual rate for the entire year.
Net income for the first quarter of 2001 was $34,000, or $.01 per common
share, down from income of $104,000 or $.03 per share in 2000.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $11.6 million on March 31, 2001, which is consistent
with December 31, 2000. Cash, cash equivalents and investments increased by
approximately $2.76 million at March 31, 2001 compared to December 31, 2000
primarily due to collection of proceeds from the sale of the Company's lease
portfolio.
The Company had no long-term debt and management believes its working
capital is adequate to meet its current needs.
PART II--OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 11. Statement re: computation of per share earnings
b. Reports on Form 8-K
No reports have been filed on Form 8-K during this
quarter.
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: May 3, 2001 /s/ MARK G. EISENSCHENK
________________________
Mark G. Eisenschenk
CHIEF FINANCIAL OFFICER
(Principal Financial Officer)
Date: May 3, 2001 /s/ STANLEY GOLDBERG
________________________
Stanley Goldberg
PRESIDENT
& CHIEF EXECUTIVE OFFICER
(Principal Executive Officer)
Exhibit 11 Statement re: Computation per share earnings (loss)
PRINTWARE, INC.
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Quarter ended
March 31, April 1,
2001 2000
__________ __________
BASIC EPS:
Weighted average number of
common shares outstanding 3,298,402 3,275,583
__________ __________
Total shares 3,298,402 3,275,583
========== ==========
Net income (000's) $ 34 $ 104
========== ==========
Earnings per share $ .01 $ .03
========== ==========
DILUTED:
Weighted average number of
common shares outstanding 3,298,402 3,275,583
Common share equivalents
from assumed exercise of
options and warrants 4,914 47,380
__________ __________
Total shares 3,303,316 3,322,963
========== ==========
Net income (000's) $ 34 $ 104
========== ==========
Earnings per share $ .01 $ .03
========== ==========