UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from to
Commission file number 0-14870
Quipp, Inc.
(Exact name of registrant as specified in its charter)
Florida 59-2306191
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
4800 N.W. 157th Street, Miami, Florida 33014
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (305) 623-8700
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K (X) .
The aggregate market value of voting stock held by non-affiliates of the
Registrant on February 18, 1997 was approximately $12,356,619.*
The number of shares of the Registrant's common stock, $.01 par value,
outstanding at February 18, 1997 was 1,566,305.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated
Portions of the Quipp, Inc. Proxy Statement relating to the 1997 Annual Meeting
of Shareholders (to be filed not later than 120 days after the close of the
fiscal year covered by this report on Form 10-K).
Where Incorporated
Part III
*Calculated by excluding all shares held by executive officers and directors of
Registrant without conceding that all such person are "affiliates" of
Registrant for purposes of the federal securities laws.
PART I
ITEM I - BUSINESS
Quipp, Inc. (the "Company"), through its wholly-owned subsidiary, Quipp Systems,
Inc., designs and manufactures material handling equipment for the newspaper
industry. The Company's products are generally designed to accomplish much of
the mailroom operations of a newspaper publisher. The mailroom is an area to
which newspapers flow from the pressroom in a continuous stream and in which
newspapers are stacked, bundled and moved to the shipping docks. Conveyor
systems are utilized to transport newspapers from the press to stacking machines
that transform a continuous stream of newspapers into stacks. The stacks may be
bundled and conveyed directly to the shipping docks, loaded into carts or stored
on pallets for further processing at a later time.
EQUIPMENT MANUFACTURED BY THE COMPANY FOR THE NEWSPAPER MAILROOM INDUSTRY
INCLUDES THE FOLLOWING :
NEWSPAPER STACKER - One of the Company's principal products is its Series 350
Stacker, which counts, batches and delivers stacks of newspaper via conveyor at
speeds upwards of 85,000 copies per hour. In 1996, 1995 and 1994, sales of the
Company's newspaper stackers accounted for 46%, 39% and 35%, respectively.
Also, in 1996, Quipp introduced the Quipp Sports Stacker aimed at smaller volume
newspapers. The Quipp Sport performs the same mailroom functions as the Series
350 Stacker, but at maximum speeds of 60,000 copies per hour. These slower
speeds are designed for lower circulation newspapers.
BOTTOMWRAPPER - The Company's bottomwrapper applies wrapping paper to the bottom
or three sides of a newspaper stack to protect against product damage and
utilizes inkjet printing on the wrapping paper to provide a means of
identification. The Company introduced its improved bottomwrapper the Quipp
Viper in 1996.
CART LOADING SYSTEM - This system accumulates and loads strapped bundles of
printed material into transportation carts for transport to remote distribution
centers. Empty carts are automatically transferred from the infeed staging
position to the loading position. Upon completion of loading, the full cart, is
automatically discharged from the cart loader and ready for the delivery truck.
This cart loading process involves no manual intervention. The Company
introduced an improved model of its cartloader in 1996.
OTHER PRODUCTS - Additionally, the Company manufactures a variety of other
products for mailroom operations, including several different types of
conveyors, stream aligners and centering pacers, fold compressors, newspaper
sensors, press production monitors and other mailroom equipment.
The Company's manufacturing activities consist primarily of the assembly of
components comprising its products, the fabrication of some mechanical parts and
testing of completed products. The Company uses approximately 350 vendors to
supply parts, materials and components for its various products. The Company
believes that alternative sources of supply are available for all required
components. If necessary, certain machine parts could be manufactured in the
Company's in-house machine shop, which is used primarily for custom engineering
and development of prototype parts. All of the Company's products, excluding
those not manufactured by the Company, have at least a one-year warranty, and
the Company provides personnel for both installation and repair from its Miami-
based service department. Customers are encouraged to stock spare modules and
components.
The Company sells most of its products to newspaper publishers in the United
States. The Company's foreign sales accounted for 19%, 18%, and 11% of total
sales in 1996, 1995 and 1994 respectively. The following table indicates the
amount of sales by geographic area during the past three years:
1996 1995 1994
United State $17,555,230 $19,012,140 $15,088,678
Japa 1,801,360 1,335,192 149,472
Canad 314,698 430,855 175,031
Latin Americ 203,949 166,605 1,165,028
New Zealan 128,276 1,799,382 7,160
Kore 838,612 0 0
Othe 725,748 452,597 449,479
$21,567,873 $23,196,771 $17,034,848
As of December 31, 1996, the Company's backlog represented approximately
$7,683,925 in firm sales orders, as compared to $6,488,324 on December 31, 1995.
The Company believes that it will satisfy all orders included in the backlog by
the end of 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - General" in Item 7.
For the year ended December 31, 1996, the New York Times accounted for 11% of
the Company's net sales. No customer accounted for 10% or more of the Company's
net sales in 1995. The San Diego Union Tribune and Dow Jones & Company
accounted for approximately 22% and 10%, respectively, of the Company's net
sales in 1994. Since the Company's equipment is designed to have an extended
life, the Company's largest customers in any one year are usually different from
the largest customers in a subsequent period. In connection with the
installation of equipment, the Company will, at the request of a customer,
resell related mailroom equipment to the customer that is not manufactured by
the Company. Such sales accounted for approximately 3.0%, 4.0% and 5.0% of the
Company's total sales in 1996, 1995, and 1994 respectively.
COMPETITION
The newspaper industry has experienced a decrease in size in recent years, as
the number of newspapers in the country has declined. The Company has
competition from other manufacturers and sellers of material handling equipment,
some of which have much greater financial resources than the Company's
resources. Also, there has been consolidation among manufacturers of material
handling equipment for the newspaper industry. Nevertheless, the Company
believes it has been able to compete successfully in this industry by stressing
its engineering expertise and the quality and reliability of its products. The
Company believes there are two principal competitors for the newspaper mailroom
equipment business in the United States. The first is Heidelburg Finishing
Systems, a domestic subsidiary of Heidelberger Druckmaschinen, a German Company
and, also, GMA, a domestic subsidiary of Muller-Martini Versand-Systeme AG, a
Swiss Company. In addition, there are several companies that compete with
respect to certain Company products in other segments of the business. The
Company has experienced competition on the basis of price with respect to most
of its products and anticipates that price competition will continue.
MARKETING
The Company sells its products domestically through a six person direct sales
staff and internationally through foreign dealers. Its domestic marketing
efforts include the direct solicitation by its sales staff, trade show
participation and program of national and regional trade journal advertising.
The Company's marketing efforts in international markets are coordinated through
foreign dealers, some of which are commissioned, while others purchase the
Company's products for resale. The Company uses computer aided systems that
enable customization of any part of the proposal process, including the design
of custom newspaper handling systems tailored to the specific prospective
installation.
PATENTS
The Company holds 25 patents, including 20 U.S. patents, with expiration dates
ranging from 1997 to 2011. The Company has four patents pending and continues
to apply for patent protection when deemed advisable. However, the Company
believes that the success of its products ultimately is dependent upon
performance, reliability and engineering, and that its patents are not material
to its business.
RESEARCH AND DEVELOPMENT
Research and development expenditures totaled $579,580, $219,170 and $361,790 in
1996, 1995 and 1994, respectively. Research and development expenditures in
1996 were principally devoted to the development of a new product and the
improvement of two existing products. The new product, the Quipp Sport
newspaper stacker, a compact version of the Quipp Series 350 stacker, was
introduced in 1996 and designed for smaller circulation newspapers. The
Company's Viper bottomwrapper and its automated cart loading system both
incorporate improvements designed to increase automation and speed.
EMPLOYEES
As of February 1, 1997, the Company had 123 full-time employees. None of the
Company's employees are represented by a union, and the Company considers its
employee relations to be good.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, business experience and ages of the executive officers of the Company
are listed below:
BUSINESS EXPERIENCE DURING
NAME THE PAST FIVE YEARS AGE
RALPH M. BRANCA Mr. Branca has been President and 61
Chief Executive Officer since May
1995 and a director of the
Company since April 1991. From
1989 to the present, he has been
President and owner of RMB Associates,
engaged in business consulting.
LOUIS D. KIPP Mr. Kipp, a co-founder of the Company, 65
has been President of Quipp Systems,
Inc., since July 1987 and a director of
the Company from August 1983 until
January 1995 and since July 1995.
Mr. Kipp was President of the Company
from August 1983 until July 1987.
He was Treasurer of the Company
from August 1983 to April 1988.
Mr. Kipp was reelected to this position
in October 1990 and has served as
Treasurer since that date.
ITEM 2 - PROPERTIES
The Company operates its business from one site located in Miami, Florida. The
building, which is owned by the Company, contains approximately 63,170 square
feet, of which approximately 48,300 square feet are utilized for the Company's
manufacturing operations, with the remaining 14,870 square feet used for its
administrative functions. The Company owns all of the equipment utilized in its
manufacturing operations. In the opinion of management, the Company's
properties are adequate and suitable for its operations.
ITEM 3 - LEGAL PROCEEDINGS
Not applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PART II
ITEM 5 - MARKET FOR THE REGISTRANT COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.01 par value, is traded on the Nasdaq National
Market under the symbol, "QUIP". The following table sets forth high and low
sales prices of the Common Stock of the Company as reported on the Nasdaq
National Market since January 1, 1995
1996 1995
HIGH LOW HIGH LOW
FIRST QUARTE $13.50 $10.25 $12.75 $6.75
SECOND QUARTE 12.25 10.50 16.25 10.50
THIRD QUARTE 11.87 9.00 14.75 9.50
FOURTH QUARTE 11.25 8.38 12.50 8.50
As of March 13, 1997, the Company had approximately 79 record holders of the
Common Stock, including brokers and other nominees. The Company has not paid
dividends on its Common Stock since its inception.
ITEM 6 - SELECTED FINANCIAL DATA
The selected financial data should be read in conjunction with the financial
statements and notes thereto which are included in elsewhere in this Annual
Report on Form 10-K and also with Management's Discussion and Analysis of
Financial Condition and Results of Operations. The following selected financial
data for each of the years in the five-year period ended December 31, 1996 has
been derived from the audited balance sheets and related statements of income of
the Company.
<TABLE>
1996 1995 1994 1993 1992
(In thousands, except
share data)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Net sales $21,568 $23,197 $17,035 $14,789 $19,794
Gross profit 7,631 4,893 4,661 5,558
7,864
Research and development 219 362 510 366
580
Selling, general and
administrative 4,205 4,295 3,653 4,036 4,245
expenses
Operating profit 3,117 1,968 115 947
3,224
Net income 2,096 1,376 321 702
2,220
Net income per common and
common equivalent 1.31 1.30 0.88 0.21 0.45
share
Weighted average number o
shares outstanding 1,625,657 1,556,792 1,510,762 1,546,600
1,693,955
1996 1995 1994 1993 1992
BALANCE SHEET DATA: (In thousands, except
share data)
Current assets $19,496 $18,383 $14,482 $11,959 $13,105
Total assets 21,267 19,342 14,241 15,194
22,074
Current liabilities 5,842 6,855 7,444 3,669 4,548
Long-term liabilities 1,550 1,350 1,700 1,800
1,150
Shareholders' equity 12,863 10,548 8,871 8,846
15,082
Book value per share 9.63 8.21 7.18 6.04 6.02
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
(Note: all dollar amounts are in thousands)
1996 1995
NET SALES $21,568 $23,197
INCREASE (DECREASE)-
(1,629)
% (7)
The Company's net sales decreased in 1996 as compared to 1995. The Company
believes that the decline reflects increased newsprint costs experienced by
newspapers in the second half of 1995 and a resulting decline in the orders
received by the Company through the first half of 1996.
1996 1995
GROSS PROFIT $7,864 $7,631
INCREASE (DECREASE)-
233
% 3
PERCENT OF NET SALE 36% 33%
The increased gross profit, in spite of reduced net sales, was a result of cost
reduction programs instituted by the Company in its principal product lines.
Additionally, the Company had an improved sales mix.
1996 1995
SELLING, GENERAL, AND
ADMINISTRATIVE $4,205 $4,295
INCREASE (DECREASE)-
(90)
(2)
PERCENT OF NET SALE 19% 19%
The decrease in selling, general and administrative expenses in 1996 is
primarily attributable to a reduction in system consulting fees incurred by the
Company in 1996 as compared to 1995. This was partially offset by increased
selling expenses, resulting from the expansion of the Company's sales staff in
order to provide additional market coverage.
1996 1995
RESEARCH AND DEVELOPMENT $580 $219
INCREASE (DECREASE)-
361
165
PERCENT OF NET SALE 3% 1%
Research and development expenses increased from 1995 to 1996 due to
management's planned commitment to reengineer certain of its existing products
and introduce new products. In addition, the Company added three engineers to
better support the planned research and development projects, and to provide
additional engineering support for sales customization. The expenditures were
principally directed towards the improvement of the Company's bottomwrapper and
cartloader and the introduction of the Company's Quipp Sport Stacker.
1996 1995
OPERATING PROFIT $3,224 $3,117
INCREASE (DECREASE)-
107
3
PERCENT OF NET SALE 15% 13%
The increase in operating profit and its related percentage of net sales for
1996, as compared to 1995, is principally a result of the increased gross
profit, offset, in part, by the increase in research and development
expenditures.
RESULTS OF OPERATIONS
1995 VS 1994
1995 1994
NET SALES $23,197 $17,035
INCREASE (DECREASE)-
6,162
36
The Company's increased net sales for 1995 were mainly a result of higher
stacker shipments as compared to those in 1994. The increased shipments
reflected the addition of the Hall Dual Carrier Stacker to the Company's product
line as a result of the acquisition of the inventory of Hall Processing Systems
("Hall"), in December 1994 and January 1995. See Note 2 to the Consolidated
Financial Statements for further discussion of the Hall acquisition. In
addition, the Company generated greater spare parts sales in 1995, due in part
to the Hall acquisition, as well as increased sales of bottomwrappers.
1995 1994
GROSS PROFIT $7,631 $4,893
INCREASE (DECREASE)-
2,738
56
PERCENT OF NET SALE 33% 29%
Increased gross profit reflects decreased costs of sales, as a result of price
negotiation with vendors and, in certain instances, use of lower cost vendors
for stacker parts. The higher 1995 gross profit also resulted from cost savings
in connection with the redesign of the Company's stacker, as well as, an
improved mix of the products sold.
1995 1994
SELLING, GENERAL, AND
ADMINISTRATIVE $4,295 $3,653
INCREASE (DECREASE)-
642
18
PERCENT OF NET SALE 19% 21%
Selling, general and administrative expenses increased principally due to
increased amortization resulting from the Hall acquisition. Selling, general and
administrative expenses also reflected other expenses relating to the Hall
acquisition and increased costs incurred to support higher net sales. The
Company also incurred expenses in 1995 related to an upgrade in its computer
system.
1995 1994
RESEARCH AND DEVELOPMENT $219 $362
INCREASE (DECREASE)-
(143)
(40)
PERCENT OF NET SALE 1% 2%
Research and development expenses decreased from 1994 to 1995 due to increased
utilization of the Company's engineering staff to support the Company's
increased net sales, as many orders received by the Company require some
degree of custom engineering. As noted above in the 1996 vs 1995 analysis, the
Company added new engineering personnel to better support engineering demands
relating both to sales and research and development projects.
1995 1994
OPERATING PROFIT $3,117 $1,968
INCREASE (DECREASE)-
1,149
58
PERCENT OF NET SALE 13% 12%
The significant increase in stacker shipments and improved margins were the
principal factors contributing to the increases in operating profit from 1994 to
1995.
GENERAL
A majority of the Company's sales are made on a contract basis, for which,
customarily a deposit is received upon the execution of a sales contract.
Payments on a substantial portion of the balance of the purchase price are
generally received prior to shipment. Any remaining amount due is typically
received upon the completion of the installation. Revenue is recognized upon
shipment of the equipment to the customer. If the customer contract also
includes installation of equipment, the revenue relating to the installation is
recognized at completion of the equipment installation at the customer site.
The Company's larger orders are typically received some months in advance of
delivery. Therefore, backlog can be an important, though by no means a
conclusive, indication of the Company's revenue stream over the short term. The
timing of revenues can be affected by the size of pending orders, the amount of
custom engineering required with respect to an order, the timetable for
delivery and the receipt and nature of new orders. The Company's backlog as of
December 31, 1996 was $7,683,925 compared to
$6,488,324 at the same date in 1995. The Company believes it will satisfy all
orders in the December 31, 1996 backlog by the end of 1997.
LIQUIDITY AND CAPITAL RESOURCES
On December 31, 1996, the Company's cash and cash equivalents and securities
available for sale totaled $8,612,260, as compared to $6,737,458 in 1995, an
increase of $1,874,802. The increase from 1995 was principally related to the
cash provided by operations. The Company's working capital was $13,654,271, an
increase of $2,125,841 from $11,528,430 in 1995. The Company believes its
resources are sufficient to fund operations at its current levels.
INFLATION
The rate of inflation has not had a material impact on the operations of the
Company.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets as of December 31, 1996, and 1995
Consolidated Statements of Income For Each of the Years in the Three-Year
Period Ended December 31, 1996
Consolidated Statements of Shareholders' Equity for Each of the Years in the
Three-Year Period Ended December 31,1996
Consolidated Statements of Cash Flows for Each of the Years in the Three-Year
Period Ended December 31, 1996
Notes to Consolidated Financial Statements
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Quipp, Inc.:
We have audited the accompanying consolidated balance sheets of Quipp, Inc. and
subsidiary (the "Company") as of December 31, 1996 and 1995 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 1996 and 1995 and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1996 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Miami, Florida
February 17, 1997
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
ASSETS
Cash and cash equivalents $148,429 $1,251,020
Securities available for sale 8,463,831 5,486,438
Accounts receivable, net 6,075,292 6,907,402
Inventories 3,595,199 3,474,885
Deferred tax asset-current 1,087,619 1,177,920
Prepaid expenses and other receivables 125,749 85,281
TOTAL CURRENT ASSETS 19,496,119 18,382,946
Property, plant and equipment, net 1,828,668 1,991,665
Goodwill 468,302 499,522
Other assets 232,623 354,315
Deferred tax asset 48,576 38,680
TOTAL ASSETS $22,074,288 $21,267,128
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $700,000 $400,000
Accounts payable 1,066,185 821,957
Accrued salaries and wages 601,455 499,041
Deferred revenues 1,824,898 3,159,502
Income taxes payable 44,786 213,997
Other accrued liabilities 1,604,524 1,760,019
TOTAL CURRENT LIABILITIES 5,841,848 6,854,516
Long-term debt 1,150,000 1,550,000
CONTINGENCIES
TOTAL LIABILITIES 6,991,848 8,404,516
Shareholders' Equity:
Common stock - par value $.01 per share,
8,000,000 shares authorized. 1,634,465
shares issued and
1,565,765 shares outstanding, 15,658 15,658
respectively, in 1996 and 1995
Additional paid-in capital 5,113,877 5,113,877
Retained earnings 10,248,305 8,028,477
Treasury stock, at cost, 68,700 shares (295,400) (295,400)
TOTAL SHAREHOLDERS' EQUITY 15,082,440 12,862,612
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $22,074,288 $21,267,128
See accompanying notes to the consolidated financial statements.
<TABLE>
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
Net sales $21,567,873 $23,196,771 $17,034,848
Cost of sales (13,703,717) (15,565,945) (12,142,121)
GROSS PROFIT 7,864,156 7,630,826 4,892,727
Other operating income and (expense)
items:
Sale of patent and license right 145,038 0 1,090,000
Selling, general and (4,205,480) (4,294,970) (3,653,007)
administrative expenses
Research and development (579,580) (219,170) (361,790)
OPERATING PROFIT 3,224,133 3,116,686 1,967,930
Other income (expense):
Interest income 345,120 355,148 274,895
Interest expense (61,032) (90,314) (53,436)
284,088 264,834 221,459
INCOME BEFORE INCOME TAXES 3,508,221 3,381,520 2,189,389
Income tax provision (1,288,393) (1,285,292) (813,183)
NET INCOME $2,219,828 $2,096,228 $1,376,206
PER SHARE AMOUNTS:
Net income per common and common
equivalent share $1.31 $1.30 $0.88
Weighted average number of common
equivalent shares outstanding 1,693,955 1,625,657 1,556,792
</TABLE>
See accompanying notes to the consolidated financial statements.
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDING DECEMBER 31, 1996, 1995 AND 1994
ADDITIONAL
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
Balance, January 1, 1994 1,400,765 $14,008 $4,596,777 $4,556,043
Net Income 1,376,206
Common stock subscribed
Balance, December 31, 1994 1,400,765 14,008 4,596,777 5,932,249
Net Income 2,096,228
Conversion of employee
stock options 125,000 1,250 217,500
Issuance of shares for
acquisitions 40,000 400 299,600
Common stock subscribed
Balance, December 31, 1995 1,565,765 15,658 5,113,877 8,028,477
Net Income 2,219,828
BALANCE, DECEMBER 31, 1996 1,565,765 $15,658 $5,113,877 $10,248,305
COMMON TREASURY STOCK AT COST
STOCK SHARES AMOUNT TOTAL
SUBSCRIBED
Balance, January 1, 1994 0 68,700 (295,400) 8,871,428
Net Income 1,376,206
Common stock subscribed 300,000 300,000
Balance, December 31, 1994 300,000 68,700 (295,400) 10,547,634
Net Income 2,096,228
Conversion of employee
stock options 218,750
Issuance of shares for
acquisitions 300,000
Common stock subscribed (300,000) (300,000)
Balance, December 31, 1995 0 68,700 (295,400) 12,862,612
Net Income 2,219,828
BALANCE, DECEMBER 31, 1996 $0 68,700 ($295,400) $15,082,440
See accompanying notes to the consolidated financial statements.
<TABLE>
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDING DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
Cash provided by operations:
Net Income $2,219,828 $2,096,228 $1,376,206
Reconciliation of net income to net cash
provided by (used in) operations:
Deferred income taxes 84,720 (84,358) (87,768)
Depreciation and amortization 333,321 325,569 171,424
Changes in operational assets and
liabilities:
Restricted cash 0 1,023,765 (1,023,765)
Accounts receivable 832,110 (4,286,173) 17,922
Inventories (120,314) 908,376 36,948
Other assets and prepaid expenses and 81,224 490,318 (356,156)
other receivables
Accounts payables and other accrued 71,860 (1,167,096) 451,550
liabilities
Deferred revenues (1,334,604) 686,139 2,120,769
Income taxes payable (169,211) (408,723) 776,929
Net cash provided by (used in) operations 1,998,934 (415,955) 3,484,059
Cash flows from investing activities:
Securities available for sale (2,977,393) 1,527,651 (6,414,089)
Capital expenditures (24,132) (144,196) (187,923)
Acquisition of business 0 (280,000) (377,500)
Net cash (used in) provided by investing (3,001,525) 1,103,455 (6,979,512)
activities
Cash flows from financing activities:
Repayment of debt (100,000) (400,000) (350,000)
Conversion of stock options 0 218,750 0
Net cash used in financing activities (100,000) (181,250) (350,000)
Increase (decrease) in cash and cash (1,102,591) 506,250 (3,845,453)
equivalents
Cash and cash equivalents at beginning of 1,251,020 744,770 4,590,223
year
Cash and cash equivalents at end of year $148,429 $1,251,020 $744,770
Supplemental disclosure of cash payments
made for:
Interest $61,032 $90,314 $53,436
Income taxes $1,326,000 $1,778,373 $124,022
</TABLE>
Supplemental disclosure of non-cash investing activities:
In December 1994 as discussed in Note 2, the Company acquired the inventory
($1,259,000) and other assets ($267,758) of Hall Processing Systems. The
purchase price in 1994 included the issuance of common shares of the Company
valued at $300,000 and $677,500 in cash.
See accompanying notes to the consolidated financial statements
QUIPP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION-The consolidated financial statements include the
accounts of Quipp, Inc. (the "Company") and Quipp Systems, Inc., a wholly-owned
subsidiary. All material intercompany balances and transactions have been
eliminated in consolidation.
NATURE OF BUSINESS-The Company designs and manufactures material handling
equipment for the mailroom operations of newspapers.
INVENTORIES- Inventories include material, labor and factory overhead and are
stated at the lower of cost or market. Costs are determined using the first-in,
first-out (FIFO) method.
ACCOUNTS RECEIVABLE/DEFERRED REVENUES-The majority of the Company's sales are
made on a contract basis, which provide for progress payments. These payments,
as received, are recorded to the customer's accounts receivable balance and the
revenue related to the contract is deferred. Revenue is recognized upon
shipment of the equipment to the customer. Accounts receivable are net of an
allowance for doubtful accounts of $715,275 and $846,171 in 1996 and 1995,
respectively.
GOODWILL-Goodwill, which represents the excess of purchase price over fair value
of net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally 17 years. The Company assesses the
recoverability of this intangible asset by determining whether the amortization
of the goodwill balance over its remaining life can be recovered through
undiscounted future operating cash flows of the acquired operation. The amount
of goodwill impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's average cost
of funds. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
RESEARCH AND DEVELOPMENT COSTS-The Company expenses research and development
costs as they are incurred.
PROPERTY, PLANT AND EQUIPMENT, NET-The Company provides for depreciation of
property, plant and equipment, all of which are recorded at cost by annual
charges to income. Depreciation is computed using the straight line method.
When assets are retired or otherwise disposed of, the costs and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in income for the period. Repairs and maintenance are
charged to income as incurred; significant renewals and betterments are
capitalized.
INCOME TAXES-Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
the deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment.
CASH AND CASH EQUIVALENTS- Cash and cash equivalents includes all the Company's
operating cash balances.
SECURITIES AVAILABLE FOR SALE- Securities, which are any securities that are not
held for trading or intended to be held to maturity, are classified as available
for sale and recorded at fair value. Unrealized holding gains or losses, net of
taxes, are excluded from income and recognized as a separate component of
shareholders' equity until realized. Realized gains and losses arising from the
sales of securities are computed using the specific identification method and
included in the determination of net income. Fair value of the securities is
determined based upon market prices or using discounted cash flow and investment
risk. A decline in the market value of any available for sale security below
cost, that is deemed to be other than temporary, will result in a reduction in
carrying amounts of the fair value. This impairment would be charged to income
and a new cost basis for the security would be established. Dividend and
interest income are recognized when earned.
NET INCOME PER SHARE-Net income per share is determined using the weighted
average number of common and common equivalent shares outstanding. Common
equivalent shares, which result from the assumed issuance of shares under the
Company's stock option plans, are determined using the treasury stock method.
DEFERRED BOND FINANCING COST - Deferred bond financing costs, which were
incurred upon issuance of the industrial revenue bonds, are included in other
assets and are being amortized using a method which approximates the effective
yield over the term of issue of the bonds.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. These estimates could also affect the reported amounts of revenues
and expenses during the reporting period. Significant items subject to
estimates include the allowance for doubtful accounts, warranty reserves,
provision for costs on completed contracts and inventory reserves. Actual
results could differ from those estimates.
WARRANTY RESERVES - The Company's warranty reserves are determined based on the
Company's experience with customers' claims arising from the sale of
merchandise. The Company's exposure is based upon previous experience which is
estimated at 1 1/2% of contract sales revenue. Amounts added to these reserves
were charged to selling expense. The Company does not reserve for products
manufactured by others, because they are not covered by a Company warranty.
IMPAIRMENT OF LONG-LIVED ASSETS - In March 1995, the Financial Accounting
Standards Board issued Statement on Financial Accounting Standards No. 121,"
Accounting for the Impairment of Long-Lived Assets to be Disposed Of". This
statement requires that long-lived assets and certain identifiable intangibles
to be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not
be fully recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets. This
statement was adopted by the Company in 1996. The adoption did not have a
material effect on the Company's financial position or results of operations.
STOCK OPTION PLAN - Prior to January 1, 1996, the Company accounted for its
stock option plans in accordance with the provisions of Accounting Principles
Board Opinion No. 25," Accounting for Stock Issued to Employees," ("APB No.25")
and related interpretations. APB compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock exceeded
the exercise price. On January 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 123," Accounting for Stock Based
Compensation," ("SFAS No.123") which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply
the provisions of APB No. 25 and provide pro forma net income and pro forma net
income per share and common equivalent shares disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to continue
to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
RECLASSIFICATIONS - Certain reclassifications have been made to prior years
financial statements to conform to the current year's presentation.
NOTE 2- ACQUISITION
In December 1994 and January 1995, the Company purchased the inventory of Hall
Processing Systems ("Hall"), in a series of transactions, as well as used
equipment and intellectual property (i.e. patents, drawings, etc.) for
approximately $1,900,000. The purchase price included $677,500 in cash, a 3-
year promissory note in the principal amount of $900,000 and the issuance of
40,000 shares of the Company's common stock valued at $300,000, or $7.50 per
share. The purchase of approximately $900,000 of the inventory, consisting
primarily of raw materials, was concluded in January 1995 and recorded to the
books at such time. The purchase was accounted for by the purchase method and
the assets were recorded based upon their estimated fair values at the date of
acquisition. The excess of the purchase price over the estimated fair value of
the net assets acquired as of that date, was recorded as goodwill in the amount
of $530,742 and is being amortized over 17 years.
NOTE 3- SALE OF PATENT AND LICENSE RIGHTS
In August 1994, the Company sold the rights to manufacture and sell worldwide,
except in the United States, its single gripper conveyor system for $50,000. In
addition, the assignee of the right agreed to assume all of the warranty
expenses incurred at an installation site. The Company had previously accrued a
warranty reserve of $140,000 with respect to the installation. This reserve was
reversed as part of the recording of the transaction. In December 1994, the
Company sold the rights, title and interest in its tray system patent for
$900,000. The Company, however, was granted a license to make, use and sell its
tilt-tray system for use in the delivery of newspapers. There were no comparable
amounts received by the Company in 1995. In the year ended December 31, 1996,
of the total received by the Company for the sale of patent and license rights
approximately $100,000 was for non-exclusive licensing rights on its patent for
three quarter wrap technology. The balance represented miscellaneous royalties.
NOTE 4- SECURITIES AVAILABLE FOR SALE
Securities available for sale, which are recorded at fair value, consist
primarily of state and local government obligations and other short-term
investments. The carrying value of securities available for sale approximates
fair value as of December 31, 1996 because of the short term maturity provisions
of these instruments.
NOTE 5- INVENTORIES
Components of inventory as of December 31, were as follows:
1996 1995
Raw Material $1,916,968 $2,945,575
Work in Process 1,541,605 247,572
Finished Goods 136,626 281,738
$3,595,199 $3,474,885
NOTE 6- INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1996, 1995, and
1994 is as follows:
CURRENT DEFERRED TOTAL
1996
U.S. Federal $1,072,267 $75,471 $1,147,738
State and 131,406 9,249 140,655
local
$1,203,673 $84,720 $1,288,393
1995
U.S. Federal $1,169,605 ($72,171) $1,097,434
State and 200,045 (12,187) 187,858
local
$1,369,650 ($84,358) $1,285,292
1994
U.S. Federal $802,594 ($78,187) $724,407
State and 98,357 (9,581) 88,776
local
$900,951 ($87,768) $813,183
The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, 1996 and
1995 are as follows:
1996 1995
Deferred tax assets:
Warranty reserve $94,456 $110,744
Inventory obsolescence 225,630 165,900
Allowance for bad debts 264,651 313,083
Contract reserves 80,351 163,367
Depreciation 60,720 38,680
Vacation accrual 91,872 72,160
Unicap 73,299 98,995
Workman's compensation 0 10,693
Other taxes 161,706 172,308
Other 83,510 70,670
Total gross deferred tax 1,136,195 1,216,600
assets
Less valuation allowance 0 0
Deferred tax assets 1,136,195 1,216,600
Deferred tax liability 0 0
Net deferred tax assets 1,136,195 1,216,600
Less: noncurrent portion
depreciation (48,576) (38,680)
$1,087,619 $1,177,920
The following table summarizes the differences between the Company's effective
income tax rate and the statutory federal tax rate for the years ended December
31, 1996, 1995, and 1994:
Year Ending December 31,
1996 1995 1994
Statutory federal income 34.0% 34.0% 34.0%
tax rate
Increase resulting from:
State and Local taxes,
net of
federal income tax 2.6 3.7 2.7
benefit
Other 0.4 0.3 0.4
37.0% 38.0% 37.1%
NOTE 7- PROPERTY, PLANT AND EQUIPMENT, NET
The property, plant and equipment balances net at December 31, 1996 and 1995
consist of the following:
ESTIMATED
1996 1995 USEFUL
LIFE
(YEARS)
Lan $500,500 $500,500
Buildin 1,431,772 1,431,772 31
Building Improvement 245,692 245,692 10
Machiner 717,827 717,827 5
Furniture and Fixture 147,160 145,270 5
Computer Equipmen 496,122 473,882 5
Automobile 58,740 58,740 5
3,597,813 3,573,683
Less: Accumulated 1,769,145 1,582,018
depreciation
$1,828,66 $1,991,66
8 5
Depreciation expense charged to income was $187,128, $179,377, and $167,465 in
1996, 1995, and 1994, respectively.
NOTE 8- LONG-TERM DEBT
INDUSTRIAL REVENUE BONDS-On October 4, 1988, the Company borrowed $2,340,000 by
issuing, through Dade County Industrial Development Authority, Variable Rate
Industrial Revenue Bonds which have a balance of $1,250,000 at December 31,
1996, of which $100,000 is classified as current. The Bonds are secured by a
letter of credit from a bank, and bear interest at an average rate of 3.7% and
4.2% during 1996 and 1995, respectively. The bonds are payable in installments
of $100,000 in years 1997 through 2007 and $150,000 in 2008. The letter of
credit securing the Company's obligation expires on September 16, 1998.
HALL PROCESSING NOTE-As a part of the Hall acquisition described in Note 2, the
Company entered into a $900,000 promissory note. The note is payable over three
years and bears interest at 5 percent per year. As of December 31, 1996, the
note had a balance of $600,000 classified as short-term, of which $300,000 was
paid in January, 1997, with the remainder due in December 1997.
NOTE 9- BENEFIT PLANS
1996 EQUITY COMPENSATION PLAN-In 1996, the Quipp, Inc. 1996 Equity Compensation
Plan (the "Equity Compensation Plan") was adopted by the Board of Directors and
approved by the shareholders. The Plan authorizes up to 400,000 shares of
Common Stock for issuance. The Equity Compensation Plan replaced the Quipp,
Inc. 1990 Incentive Stock Option Plan (the "1990 Plan"), which was terminated.
The Equity Compensation Plan provides for grants of stock options and stock-
based awards to employees of the Company and certain other consultants and
advisors. It also provides for the grant of stock options to non-employee
members of the Company's Board of Directors. Stocks options, issued in
connection with the Plan, are granted with an exercise price per share equal to
fair market value of a share of Company Common Stock at the date of grant. All
stock options have five to ten year maximum terms and vest ,either immediately,
or up to three years after the date of grant.
At December 31, 1996, there were 216,500 shares available for grant under the
Equity Compensation Plan, with 183,500 shares granted in 1996. The per share
weighted average fair value of stock options granted during 1996 ranged from
approximately $3 to $6 on the dates granted using the Black Scholes option-
pricing model with the following weighted-average assumptions: expected dividend
yield is zero, risk-free interest rate of 6.4%, and expected lives ranging from
five to ten years. The Company applies APB opinion No. 25 in accounting for its
stock options and, accordingly, no compensation expense has been recognized for
its stock options in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income would have been reduced to
the pro forma amounts indicated below:
1996 1995
Net Income As reported $2,219,828 $2,096,228
Pro forma $1,967,146 $2,096,228
Net Income per Commo As reported $1.31 $1.30
and
Common Equivalent Pro forma $1.16 $1.30
Share
The full impact of calculating compensation expense for stock options under SFAS
No. 123 is not reflected in the proforma net income amounts presented above
because compensation expense is reflected over the options' vesting period which
could be up to three years. Also, the provisions of SFAS No. 123 apply to
grants awarded subsequent to December 15, 1994. As the Company did not grant
any options for the year ended December 31, 1995, compensation expense for 1995
is not applicable. At December 31, 1996, the range of weighted-average exercise
prices and remaining contractual life of outstanding options was approximately
$10 to $12, and 5 to 10 years, respectively. At December 31, 1996, the number
of options exercisable was 95,250 and the weighted-average exercise price of
those options was $12.
1996 DIRECTORS FEE PURCHASE PLAN-The Quipp, Inc. Directors Fee Purchase Plan
(the "Plan") is effective with the first board meeting in 1997. The plan's
purpose is to provide members of the Boards of Directors of Quipp, Inc. (the
"Company) and its wholly-owned subsidiary Quipp Systems, Inc. ("Quipp Systems"),
with the opportunity to apply their fees for serving as members of the
respective Boards of Directors to the purchase of Common Stock of the company,
$.01 par value.
STOCK APPRECIATION RIGHTS PLAN-The Company has a Stock Appreciation Rights
Plan for managerial employees. The Plan provides, among other things,
incentive compensation based upon appreciation in the market value of the Common
Stock of the Company. Vesting of share units occurs in equal increments over a
five-year period. Payments can be made annually or deferred until not later
than the end of the five year period, or such longer period as may be approved
by the Board of Directors. No more than 100,000 share units may be issued
pursuant to the Plan. No share units were awarded in 1996, 1995, or 1994.
Payments relating to current vesting of previous Plan awards were $4,254,
$30,606, and $132,997 in 1996, 1995, and 1994, respectively.
EMPLOYEE SAVINGS AND INVESTMENT PLAN-The Quipp Systems, Inc. Employee Savings
and Investment Plan ("the Saving Plan") is a defined contribution plan which
covers substantially all full-time employees. The Saving Plan permits eligible
employees to contribute up to 20% of annual compensation, subject to the maximum
allowable contribution limits of Sections 415, 401(K) and 404 of the Internal
Revenue Code. In 1996, the Board of Directors approved an increase in the
matching contribution by the Company to the Saving Plan up to 50%, from 25% in
1995, of the first 4% of compensation deferred by each participant, The amount
contributed by the Company in 1996, 1995 and 1994 was $71,222, $37,935 and
$36,357, respectively. The administrative expenses of the Plan are paid by the
Company as sponsor.
NOTE 10- MAJOR CUSTOMERS
For the year ended December 31, 1996, the New York Times accounted for
approximately 11% of the Company's net sales. In 1995, no customer accounted
for 10% or more of the company's net sales. The San Diego Union Tribune and Dow
Jones & Company accounted for approximately 22% and 10%, respectively, of the
Company's net sales in 1994. The Company sells a substantial portion of its
products to the domestic newspaper industry; foreign sales accounted for 19%,
18%, and 11% of total net sales in 1996, 1995 and 1994, respectively.
NOTE 11- FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties. The
carrying amounts of the following approximate fair value because of the short
maturity of these instruments as of December 31, 1996 and 1995: cash and cash
equivalents, securities available for sale, accounts receivable, prepaid
expenses and other receivables, current portion of long-term debt, accounts
payable and accrued salaries and wages. The carrying value and fair value of
the Company's long-term debt as of December 31, 1996 was $1,150,000 and
$830,300, respectively, and December 31, 1995 was $1,550,000 and $1,164,400,
respectively.
NOTE 13- CONTINGENCIES
In the normal course of business, the Company is exposed to litigation,
including asserted and unasserted claims. In the opinion of management, the
resolution of these matters, would not have a material adverse effect on the
Company's financial position, results of operations or liquidity.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information (other than the information relating to executive officers
included in Part I) will be included in the Company' s Proxy Statement relating
to its Annual Meeting of Shareholders, which will be filed within 120 days after
the close of the Company's fiscal year covered by this report, and is hereby
incorporated by reference to such Proxy Statement.
ITEM 11 - EXECUTIVE COMPENSATION
This information will be included in the Company's Proxy Statement relating to
its Annual Meeting of Shareholders, which will be filed within 120 days after
the close of the Company's fiscal year covered by this report, and is hereby
incorporated by reference to such Proxy Statement.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information will be included in the Company's Proxy Statement relating to
its Annual Meeting of Shareholders, which will be filed within 120 days after
the close of the Company's fiscal year covered by this report, and is hereby
incorporated by reference to such Proxy Statement.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 Financial Statements - See Index to Financial Statements in Item 8
2 All schedules are omitted because they are inapplicable
3 Exhibits (Note: The file number of all referenced Annual and
Quarterly Reports on Forms 10-K and forms 10-Q, respectively, is 0-14870.)
3.1 Articles of Incorporation, as amended (Incorporated by reference
to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q, for the
quarter ended June 30, 1996).
3.2 By-Laws, as amended (Incorporated by reference to Exhibit 3.2 to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
10.2.1 Loan Agreement between Dade County Industrial Development
Authority and Quipp, Inc. dated as of October 1, 1988, (Incorporated by
reference to Exhibit 10.4.2 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988).
10.2.2 Indenture of Trust between Dade County Industrial
Development Authority and Mellon Bank, N.A. dated as of October 31, 1988
(Incorporated by reference to Exhibit 10.4.3 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988).
10.2.3 Specimen Bond - Dade County Industrial Development
Authority (Incorporated by reference to Exhibit 10.4.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1988).
10.2.4 Copy of Promissory Note, dated as of October 4, 1988,
from Quipp, Inc. to Dade County Industrial Development Authority (Incorporated
by reference to Exhibit 10.4.5 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988).
10.2.5 Reimbursement Agreement among NCNB National Bank of North
Carolina, Quipp Systems, Inc. and Quipp, Inc. dated as of October 4, 1988
(Incorporated by reference to Exhibit 10.4.6 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988).
10.2.6 Mortgage and Security Agreement from Quipp, Inc. to NCNB
National Bank of North Carolina and Dade County Industrial Development
Authority dated as of October 1, 1988 (Incorporated by reference to Exhibit
10.4.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988).
10.2.7 Guaranty Agreement among Quipp Systems, Inc., Quipp Inc.,
and Dade County Industrial Development Authority dated as of October 1, 1988
(Incorporated by reference to Exhibit 10.4.8 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988).
10.2.8 Guaranty Agreement among Quipp Systems, Inc., Quipp Inc.,
and NCNB NationsBank of North Carolina dated as of October 1, 1988
(Incorporated by reference to Exhibit 10.4.9 to the Registrant's Annual Report
On Form 10-K for the fiscal year ended December 31, 1988).
10.2.9 Letter Agreement dated March 26, 1992 between NCNB National
Bank of North Carolina and the Registrant dated March 27, 1991 (Incorporated
by reference to Exhibit 10.3.9 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990).
10.2.10 Amendment to Reimbursement Agreement among NationsBank of
North Carolina N.A., Quipp Systems, Inc. and Quipp, Inc. dated as of March 31,
1994 (Incorporated by reference to Exhibit 10.2.10 to the Registrant's annual
Report on Form 10-K for the fiscal year ended December 31, 1996).
*10.3 Quipp, Inc. Directors Fee Purchase Plan (Incorporated by
Reference to Exhibit 4 to the Registrant 's Registration Statement on Form S-8 (
File No. 333-17319) filed with the Commission in December 5, 1996).
*10.4 Quipp, Inc. Stock Appreciation Rights Plan (Incorporated by
reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987).
*10.5 Quipp, Inc. 1996 Equity Compensation Plan. (Incorporated by
Reference to Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
*10.6 Restated Employment Agreement, dated May 1, 1995, between
Quipp Systems, Inc. and Louis D. Kipp (Incorporated by refernece to Exhibit 10.6
to the Registrant's Annual Report on Form 10-K for the fiscal Year ended
December 31, 1995).
*10.7 Quipp Systems, Inc. Employee Savings and Investment Plan
(Incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993).
*10.8 Agreement dated as of July 16, 1996 among Quipp, Inc., Quipp
Systems, Inc. and Ralph M. Branca (incorporated by reference to Exhibit 10.8 to
the Registrant's Quarterly Report on Form 10-Q for the quarter Ended September
30, 1996).
11 Computation of Net Income Per Share.
22 Subsidiary of the Registrant. (Incorporated by reference to
Exhibit 22 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987).
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
* Constitutes management contract or compensatory plan or arrangement
required to be filed as an exhibit to this form.
(b) The Registrant filed no reports on Form 8-K during the last quarter of the
period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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:
QUIPP, INC.
Date: March 17, 1997 By: s\Ralph M. Branca
Ralph M. Branca,
Principal Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
S\_ RALPH M. BRANCA
RALPH M. BRANCA Principal Executive March 17, 1997
Officer and President
S\ RICHARD CAMPBELL
RICHARD CAMPBELL Director March 17, 1997
_S\_ JACK D. FINLEY
JACK D. FINLEY Director March 17, 1997
S\ CRISTINA H. KEPNER
CRISTINA H. KEPNER Director March 17, 1997
_________________
WILLIAM L. ROSE Director March 17, 1997
S\ LOUIS D. KIPP
LOUIS D. KIPP Treasurer March 17, 1997
_S\ JEFFREY S. BAROCAS
JEFFREY S. BAROCAS Principal Financial Officer March 17, 1997
S\_ MARY JOHNSON
MARY JOHNSON Principal Accounting Officer March 17, 1997
QUIPP, INC.
ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
(a) 1 Financial Statements - See Index to Financial Statements in Item 8
2 All schedules are omitted because they are inapplicable
3 Exhibits (Note: The file number of all referenced Annual and
Quarterly Reports on Forms 10-K and forms 10-Q, respectively, is 0-14870.)
3.1 Articles of Incorporation, as amended (Incorporated by reference
to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q, for the
quarter ended June 30, 1996).
3.2 By-Laws, as amended (Incorporated by reference to Exhibit 3.2 to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
10.2.1 Loan Agreement between Dade County Industrial Development
Authority and Quipp, Inc. dated as of October 1, 1988, (Incorporated by
reference to Exhibit 10.4.2 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988).
10.2.2 Indenture of Trust between Dade County Industrial
Development Authority and Mellon Bank, N.A. dated as of October 31, 1988
(Incorporated by reference to Exhibit 10.4.3 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988).
10.2.3 Specimen Bond - Dade County Industrial Development
Authority (Incorporated by reference to Exhibit 10.4.4 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1988).
10.2.4 Copy of Promissory Note, dated as of October 4, 1988,
from Quipp, Inc. to Dade County Industrial Development Authority (Incorporated
by reference to Exhibit 10.4.5 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1988).
10.2.5 Reimbursement Agreement among NCNB National Bank of North
Carolina, Quipp Systems, Inc. and Quipp, Inc. dated as of October 4, 1988
(Incorporated by reference to Exhibit 10.4.6 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988).
10.2.6 Mortgage and Security Agreement from Quipp, Inc. to NCNB
National Bank of North Carolina and Dade County Industrial Development
Authority dated as of October 1, 1988 (Incorporated by reference to Exhibit
10.4.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988).
10.2.7 Guaranty Agreement among Quipp Systems, Inc., Quipp Inc.,
and Dade County Industrial Development Authority dated as of October 1, 1988
(Incorporated by reference to Exhibit 10.4.8 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988).
10.2.8 Guaranty Agreement among Quipp Systems, Inc., Quipp Inc.,
and NCNB NationsBank of North Carolina dated as of October 1, 1988
(Incorporated by reference to Exhibit 10.4.9 to the Registrant's Annual Report
On Form 10-K for the fiscal year ended December 31, 1988).
10.2.9 Letter Agreement dated March 26, 1992 between NCNB National
Bank of North Carolina and the Registrant dated March 27, 1991 (Incorporated
by reference to Exhibit 10.3.9 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990).
10.2.10 Amendment to Reimbursement Agreement among NationsBank of
North Carolina N.A., Quipp Systems, Inc. and Quipp, Inc. dated as of March 31,
1994 (Incorporated by reference to Exhibit 10.2.10 to the Registrant's annual
Report on Form 10-K for the fiscal year ended December 31, 1996).
*10.3 Quipp, Inc. Directors Fee Purchase Plan (Incorporated by
Reference to Exhibit 4 to the Registrant 's Registration Statement on Form S-8 (
File No. 333-17319) filed with the Commission in December 5, 1996).
*10.4 Quipp, Inc. Stock Appreciation Rights Plan (Incorporated by
reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987).
*10.5 Quipp, Inc. 1996 Equity Compensation Plan. (Incorporated by
Reference to Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
*10.6 Restated Employment Agreement, dated May 1, 1995, between
Quipp Systems, Inc. and Louis D. Kipp (Incorporated by reference to Exhibit 10.6
to the Registrant's Annual Report on Form 10-K for the fiscal Year ended
December 31, 1995).
*10.7 Quipp Systems, Inc. Employee Savings and Investment Plan
(Incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993).
*10.8 Agreement dated as of July 16, 1996 among Quipp, Inc., Quipp
Systems, Inc. and Ralph M. Branca (incorporated by reference to Exhibit 10.8 to
the Registrant's Quarterly Report on Form 10-Q for the quarter Ended September
30, 1996).
11 Computation of Net Income Per Share.
22 Subsidiary of the Registrant. (Incorporated by reference to
Exhibit 22 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987).
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
* Constitutes management contract or compensatory plan or arrangement
required to be filed as an exhibit to this form.
(b) The Registrant filed no reports on Form 8-K during the last quarter of
the period covered by this report.
QUIPP, INC. AND SUBSIDIARY
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Primary and fully diluted
earnings per share 1996 1995 1994
NET INCOME $2,219,828 $2,096,228 $1,376,206
Weighted average number of common
shares outstanding during the 1,565,765 1,565,765 1,469,465
year
Add-common equivalent shares
(determined
using the "treasury stock"
method)
representing shares issuable
upon
exercise of employee stock 128,190 59,892 87,507
options
Weighted average number of shares
used in calculation of net
income
per share 1,693,955 1,625,657 1,556,792
Net income per common and common
equivalent share $1.31 $1.30 $0.88
To Board of Directors
Quipp, Inc.:
We consent to the incorporation by reference (File Nos. 333-17319 and 333-6355)
of Quipp, Inc. of our report dated February 17, 1997, relating to the
consolidated balance sheets of Quipp, Inc. and subsidiary as of December 31,
1996 and 1995, and the related consolidated statements of income, shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996, which report appears in the December 31, 1996 annual report
on Form 10-K of Quipp, Inc.
KPMG Peat Marwick LLP
Miami, Florida
March 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Quipp, Inc.
Annual Report on Form 10-K for the year ended December 31, 1996 and is qualified
in its entirety by reference to such 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 148,429
<SECURITIES> 8,463,831
<RECEIVABLES> 6,791,567
<ALLOWANCES> (715,275)
<INVENTORY> 3,595,199
<CURRENT-ASSETS> 19,496,119
<PP&E> 3,597,813
<DEPRECIATION> (1,769,145)
<TOTAL-ASSETS> 22,074,288
<CURRENT-LIABILITIES> 5,841,848
<BONDS> 1,150,000
0
0
<COMMON> 15,658
<OTHER-SE> 15,066,782
<TOTAL-LIABILITY-AND-EQUITY> 22,074,288
<SALES> 21,567,873
<TOTAL-REVENUES> 22,058,030
<CGS> (13,703,717)
<TOTAL-COSTS> (18,488,777)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (61,032)
<INCOME-PRETAX> 3,508,221
<INCOME-TAX> (1,288,393)
<INCOME-CONTINUING> 2,219,828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,219,828
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
