UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant To Section 13 Or 15(D) Of The Securities
Exchange Act Of 1934
For the quarterly period ended March 31, 1997.
or
[ ] Transition Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange
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)
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 __
The number of shares of the registrant's common stock. $.01 par value,
outstanding at March 31, 1997 was 1,566,305.
QUIPP, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets - 3
March 31, 1997 and December 31, 1996
Consolidated Statements of Income - Three months 4
ended March 31, 1997 and 1996
Consolidated Statements of Cash Flows - Three months 6
ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of Consolidated 8
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
PART 1 - FINANCIAL INFORMATION
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1997 1996
----------- -----------
(Unaudited) (Summarized
from
audited
financial
statements)
ASSETS
Current assets:
Cash and cash equivalents $ 9,652,803 $ 8,612,260
Accounts receivable, net 6,981,840 6,075,292
Inventories 3,857,188 3,595,199
Deferred tax asset-current 1,087,619 1,087,619
Prepaid expenses and other receivables 103,929 125,749
----------- ------------
TOTAL CURRENT ASSETS 21,683,379 19,496,119
Property, plant and equipment, net 1,783,416 1,828,668
Goodwill 455,293 468,302
Other assets 184,157 232,623
Deferred tax asset 48,576 48,576
----------- ------------
$ 24,154,821 $ 22,074,288
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $400,000 $700,000
Accounts payable 881,852 1,066,185
Accrued salaries and wages 266,521 601,455
Deferred revenues 3,517,835 1,824,898
Income taxes payable 401,279 44,786
Other accrued liabilities 1,843,167 1,604,524
----------- ------------
TOTAL CURRENT LIABILITIES 7,310,654 5,841,848
Long-term debt 1,150,000 1,150,000
----------- ------------
TOTAL LIABILITIES 8,460,654 6,991,848
Shareholders' equity:
Common stock - par value $.01 per share
8,000,000 shares authorized. 1,635,005
and 1,634,465 shares issued and 1,566,305
and 1,565,765 shares outstanding,
respectively, in 1997 and 1996. 15,663 15,658
Additional paid-in capital 5,118,597 5,113,877
Retained earnings 10,855,307 10,248,305
Treasury stock, at cost, 68,700 shares (295,400) (295,400)
----------- ------------
TOTAL SHAREHOLDERS' EQUITY 15,694,167 15,082,440
============ ============
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $24,154,821 $22,074,288
============ ============
See accompanying notes to the consolidated financial
statements
See accompanying notes to the consolidated financial statements.
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1997 AND 1996
1997 1996
----------- -----------
Net sales $ 5,913,068 $ 4,394,440
Cost of sales (3,745,802) (2,781,475)
------------ ------------
GROSS PROFIT 2,167,266 1,612,965
Selling, general and
administrative expenses 1,195,780 923,885
Research and development 61,859 132,350
------------ ------------
1,257,639 1,056,235
------------ ------------
OPERATING INCOME 909,627 556,730
Other income (expense):
Interest income 64,839 89,541
Interest expense (10,971) (8,261)
------------ ------------
53,868 81,280
Income before income taxes 963,495 638,010
Income taxes (356,493) (229,394)
------------ ------------
NET INCOME $ 607,002 $ 408,616
============ ============
Per share amounts:
Net income per common and
common equivalent share $ 0.33 $ 0.25
============ ============
Weighted average number of common and
common equivalent shares outstanding 1,819,314 1,634,465
============ ============
See accompanying notes to the consolidated financial statements.
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1997 AND 1996
1997 1996
Cash provided by operations:
Net income $ 607,002 $ 408,616
------------ ------------
Reconciliation of net income to net cash
provided by operations:
Deferred income taxes
Depreciation and amortization 108,308 83,075
Changes in operational assets and
liabilities:
Accounts receivable (906,548) 4,146,912
Inventories (261,989) 314,542
Other assets and prepaid expenses and
other receivables 21,820 (31,177)
Accounts payable and other accrued 59,597 (900,176)
liabilities
Accrued salaries and wages (334,934) (35,786)
Deferred revenues 1,692,937 (2,501,367)
Income taxes payable 356,493 199,394
------------ ------------
NET CASH PROVIDED BY OPERATIONS 1,342,686 1,684,033
------------ ------------
Cash flow from investing activities:
Capital expenditures (2,143) (3,162)
------------ ------------
NET CASH (USED IN) PROVIDED BY INVESTING (2,143) (3,162)
ACTIVITIES
------------ ------------
Cash flow from financing activities:
Repayment of debt (300,000) -
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (300,000) -
Increase in cash and cash equivalents 1,040,543 1,680,871
Cash and cash equivalents at beginning of 8,612,260 6,737,458
year
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 9,652,803 $ 8,418,329
============ ============
Supplemental disclosure of cash payments
made for:
Interest $ 20,114 $ 8,261
============ ============
Income taxes $ 20,000 $ 30,000
============ ============
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The financial information included herein includes the accounts of Quipp, Inc.
and Quipp Systems, Inc. (a wholly-owned subsidiary) and is unaudited. The
accompanying consolidated financial statements have been prepared on a basis
consistent with that used as of and for the year ended December 31, 1996 in
conformity with generally accepted accounting principles (GAAP), and, in the
opinion of management, reflect all adjustments (principally consisting of normal
recurring accruals) necessary to present fairly the financial position of Quipp,
Inc. as of March 31, 1997 and the results of its operations, and cash flows for
the three months ended March 31, 1997. All significant intercompany
transactions have been eliminated in consolidation. The results of operations
for the three months ended March, 1997 are not necessarily indicative of the
results to be expected for the full year ending December 31, 1997.
NOTE 2 - INVENTORIES
Inventories at March 31, 1997 have been recorded at the lower of cost or market.
Cost is determined using the first-in, first-out (FIFO) method. The composition
of inventories at March 31, 1997 and December 31, 1996 is as follows:
MARCH 31, DECEMBER 31,
1997 1996
Raw materials $1,958,369 $1,916,968
Work in process 1,757,737 1,157,605
Finished goods 141,082 136,626
---------- ----------
$3,857,188 $3,595,199
QUIPP, INC. AND SUBSIDIARY
MANAGEMENT=S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997 VS 1996
Net sales for the three months ended March 31, 1997 increased to $5,913,068 from
$4,394,440 for the corresponding periods in 1996. The increase of $1,518,628 or
35% was primarily attributable to several large shipments to domestic newspaper
publishers during the first quarter of 1997. Gross profit was $2,167,266, or
37% of net sales, and $1,612,965, or 37% of net sales, for the three months
ended March 31, 1997 and 1996, respectively. Net income was $607,002 for the
three months ended March 31, 1997, as compared to $408,616 in the corresponding
period of 1996. The increase in gross profit of $554,301, or 34%, and increase
in net income of $198,384, or 49%, is mainly due to the increased sales volume
for the three months ended March 31. 1997. Net income per share was $0.33 for
the three months ended March 31, 1997, as compared to $0.25 for the
corresponding period in 1996. The increase of $0.08 per share, or 32%, was
affected by the weighted average number of shares outstanding during the period,
which increased as compared to 1996 as a result of options granted under the
Company's 1996 Equity Compensation Plan.
Selling, general and administrative expenses for the three months ended March
31, 1997 were $1,195,780 compared to $923,885 for the comparable 1996 quarter.
This increase of $271,895 or 30% was principally due to higher sales volume for
the first quarter of 1997.
Research and development expenses for the three months ended March 31, 1997 were
$61,859 as compared to $132,350 for the corresponding period in 1996, a decrease
of $70,491 or 53%. This decrease in research and development expenses was
primarily due to engineering resources required to support the higher level of
sales in the first quarter of 1997. Accordingly, these expenses were charged to
the cost of sales during the quarter.
Interest income for the three months ended March 31, 1997 was $64,839 as
compared to $89,541 for the corresponding 1996 period. In the second half of
1996, the Company modified its investments to include instruments which generate
income not subject to federal income tax. These tax exempt instruments
generally bear a lower interest rate than taxable securities and, consequently,
generate less income on a pre-tax basis. However, on an after-tax basis, the
Company believes that the effective yield generated by these instruments
generally compares favorably to the taxable instruments held by the Company.
GENERAL
The Company=s backlog as of March 31, 1997 was approximately $8,618,654
compared to $5,323,766 at March 31, 1996. The Company expects to ship all
orders in its backlog within the next twelve months. Management is optimistic
that the increased backlog will have a positive impact on net sales during the
remainder of 1997.
LIQUIDITY
The Company believes that its cash and cash equivalents of $9,652,803 at March
31, 1997 are adequate to support the Company=s operations at its current level.
FORWARD LOOKING STATEMENTS
The statements above under 'General' regarding the Company's expectation
relating to the shipment of orders in its backlog and the impact of increased
backlog on net sales during the remainder of 1997 are forward looking
statements. Factors that could cause actual results to differ materially from
those in the forward looking statements include, among others, cancellation of
orders, delays in shipments and unanticipated capital requirements.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
SIGNATURES
Pursuant to the requirements 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: May 6, 1997 By: s\Ralph M. Branca
------------------------
Ralph M. Branca
President and Chief Executive Officer
By: s\Jeffrey S. Barocas
------------------------
Jeffrey S. Barocas
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Quipp, Inc.
First Quarter 1997 Form 10-Q and is qualified in its entirety by reference to
such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 9,652,803
<RECEIVABLES> 7,697,115
<ALLOWANCES> (715,275)
<INVENTORY> 3,857,188
<CURRENT-ASSETS> 21,683,379
<PP&E> 3,599,956
<DEPRECIATION> (1,816,540)
<TOTAL-ASSETS> 24,154,821
<CURRENT-LIABILITIES> 7,310,654
<BONDS> 1,150,000
0
0
<COMMON> 15,663
<OTHER-SE> 15,678,504
<TOTAL-LIABILITY-AND-EQUITY> 24,154,821
<SALES> 5,913,068
<TOTAL-REVENUES> 5,977,907
<CGS> (3,745,802)
<TOTAL-COSTS> (5,003,441)
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<LOSS-PROVISION> 0
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<INCOME-TAX> (356,493)
<INCOME-CONTINUING> 607,002
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 607,002
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
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