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 quarter ended MARCH 31, 1998.
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 (I.R.S. Employer
ncorporation or organization) 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, 1998 was 1,606,494.
<PAGE>
QUIPP, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets - 3
March 31, 1998 and December 31, 1997
Consolidated Statements of Income -
Three months ended March 31, 1998 and 1997
Consolidated Statements of Cash Flows - 5
Three months ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosure about Market Risk 8
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 9
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
QUIPP INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------
(unaudited)
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 831,797 $ 822,573
Securities available for sale - current 12,478,178 12,845,884
Accounts receivable, net 5,021,428 4,381,535
Inventories 3,695,165 3,530,609
Deferred tax asset - current 1,169,119 1,169,119
Prepaid expenses and other receivables 139,595 132,508
----------------------------------------------
TOTAL CURRENT ASSETS 23,335,282 22,882,228
Other assets:
Property, plant and equipment, net 1,795,915 1,825,906
Goodwill 429,276 437,082
Other assets 93,035 110,417
Deferred tax asset - long term 47,434 47,434
----------------------------------------------
TOTAL ASSETS $ 25,700,942 $ 25,303,067
==============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 100,000 $ 100,000
Accounts payable 848,587 1,252,375
Accrued salaries and wages 398,832 588,165
Deferred revenues 1,641,511 1,342,963
Income tax payable 282,121 184,044
Other accrued liabilities 2,160,154 2,225,676
----------------------------------------------
TOTAL CURRENT LIABILITIES 5,431,205 5,693,223
Noncurrent liabilities:
Long term debt 1,050,000 1,050,000
----------------------------------------------
TOTAL LIABILITIES 6,481,205 6,743,223
Shareholders' equity:
Common stock - par value $.01 per share,
8,000,000 shares authorized. 1,636,479
and 1,636,444 shares issued, respectively
on March 31, 1998 and December 31, 1997. 16,365 16,365
Additional paid-in capital 5,378,645 5,359,845
Retained earnings 13,953,502 13,329,609
Treasury stock, at cost,
29,950 and 33,950 shares respectively (128,775) (145,975)
----------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 19,219,737 18,559,844
----------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 25,700,942 $ 25,303,067
==============================================
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
QUIPP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net Sales $ 5,791,616 $ 5,913,068
Cost of sales (3,658,405) (3,772,817)
----------------------------------------
Gross profit 2,133,211 2,140,251
Other operating income and expense items:
Selling, general and administrative expenses 1,149,598 1,159,621
Research and developments expense 143,562 61,859
----------------------------------------
Operating profit 840,051 918,771
Other income (expense):
Interest income 127,701 64,839
Interest expense (10,781) (20,115)
----------------------------------------
116,920 44,724
----------------------------------------
Income before income taxes 956,971 963,495
Income tax (333,077) (356,493)
----------------------------------------
Net income $ 623,894 $ 607,002
----------------------------------------
Per share amounts:
Basic income per common share 0.39 0.39
Diluted income per common share 0.37 0.39
Weighted average number of common
equivalent shares outstanding 1,692,597 1,566,558
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
QUIPP INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash provided by operations:
Net income $ 623,894 $ 607,002
-----------------------------------
Reconciliation of net income to net cash
(used in) provided by operations:
Depreciation and amortization 79,236 108,308
Changes in operational assets and liabilities:
Accounts receivable, net (639,893) (906,548)
Inventories (164,556) (261,989)
Other assets, prepaid expenses and other receivables (7,087) 21,820
Accounts payable and other accrued liabilities (658,642) (275,337)
Deferred revenues 298,546 1,692,937
Income tax payable 98,077 356,493
-----------------------------------
Net cash (used in) provided by operations (370,425) 1,342,686
-----------------------------------
Cash flow from investing activities:
Securities available for sale 367,706 (1,091,142)
Capital expenditures (24,058) (2,143)
-----------------------------------
Net cash (used in) provided by investing activities 343,648 (1,093,285)
-----------------------------------
Cash flow from financing activities:
Repayment of debt - (300,000)
Conversion of stock options 36,000 -
-----------------------------------
Net cash (used in) provided by financing activities 36,000 (300,000)
-----------------------------------
Increase (decrease) in cash and cash equivalents 9,223 (50,600)
Cash and cash equivalents at the beginning of the month/year 822,573 148,429
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of the month/quarter $ 831,796 $ 97,829
- ---------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash payments made for:
Interest $ 10,781 $ 20,114
-----------------------------------
Income Taxes $ 235,066 $ 20,000
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
QUIPP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Quipp, Inc. and Quipp Systems, Inc. (a wholly owned subsidiary). All
significant intercompany transactions have been eliminated in consolidation. The
accompanying consolidated financial statements have been prepared on a basis
consistent with that used as of and for the year ended December 31, 1997 and, in
the opinion of management, reflect all adjustments (principally consisting of
normal recurring accruals) considered necessary to present fairly the financial
position of Quipp, Inc. as of March 31, 1998 and the results of its operations
and cash flows for the three months ended March 31, 1998. The results of
operations for the three months ended March 31, 1998 are not necessarily
indicative of the results to be expected for the full year ending December 31,
1998. These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The Consolidated Balance Sheet at December
31, 1997 was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. Certain
previously reported amounts have been reclassified to conform to the current
period's presentation.
NOTE 2 - INVENTORIES
Inventories at March 31, 1998 include material, labor and factory overhead and
are stated 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,
1998 and December 31, 1997 is as follows:
MARCH 31, 1998 December 31, 1997
- -------------------------------------------------------------------------------
Raw materials $2,208,405 $2,631,602
Work in process 1,286,574 731,850
Finished goods 200,186 167,157
------------------------------------------------
$3,695,165 $3,530,609
NOTE 3 - EARNINGS PER SHARE
Earnings per share amounts are based upon the weighted average number of common
and common equivalent shares outstanding during the year. Common equivalent
shares are excluded from the computation in periods in which they have an
anti-dilutive effect. In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share," (SFAS 128), which specifies the computation, presentation and disclosure
requirements for earnings per share (EPS). It replaces the presentation of
primary and fully diluted EPS with basic and diluted EPS. Basic EPS excludes all
dilution, and is based upon the weighted average number of common shares
outstanding during the period. Diluted EPS reflects the potential dilution that
would occur if securities or other contracts to issue common stock were
exercised or converted into common stock. The Company has adopted the provisions
of SFAS 128, which is effective for periods ending after December 15, 1997. The
Company has restated all previously reported per share amounts to conform to the
new presentation.
6
<PAGE>
NOTE 4 - COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted the Financial Accounting Standards
Board's Statement No. 130, "Reporting Comprehensive Income" (Statement 130).
This statement establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
It does not, however, specify when to recognize or how to measure items that
make up comprehensive income. Statement 130 was issued to address the concerns
over the practice of reporting elements of comprehensive income directly in
equity. Adoption of this statement did not have a material impact on the
Company's financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 VS. THREE MONTHS ENDED
MARCH 31, 1997 The following table presents statements of income items expressed
as a percentage of net sales for the periods indicated:
PERCENTAGE OF NET SALES
THREE MONTHS ENDED MARCH 31,
1998 1997
- --------------------------------------------------------------------------------
(Unaudited) (Unaudited)
Net sales 100.0% 100.0%
Gross profit 36.8% 36.2%
Selling, general and administrative expenses 19.8% 19.6%
Research and development 2.5% 1.0%
Interest income 2.2% 1.1%
Net income 10.8% 10.3%
NET SALES for the three months ended March 31, 1998 were $5,791,616, a decrease
of $121,451 or 2.1% for net sales of $5,913,068 for the corresponding period in
1997. The decrease in net sales for the three months ended March 31, 1998 was
attributable to a decrease in foreign sales, particularly in the Far East,
partially offset by an increase in domestic sales.
GROSS PROFIT for the three months ended March 31, 1998 was $2,133,211. As a
percentage of net sales, gross profit increased as a result of increased sales
of spare parts and installations, which provide favorable margins.
SELLING, GENERAL AND ADMINISTRATIVE expenses for the three months ended March
31, 1998 were $1,149,598, a decrease of $10,023 or 0.9% from the corresponding
period of 1997. The decrease was mainly attributable to the decrease in foreign
sales agent commissions, partially offset by increases in domestic sales
commissions and legal expenses. As a percentage of net sales, selling, general
and administrative expenses for the three months ended March 31, 1998 increased
to 19.8% from 19.6% for the corresponding period in 1997. This increase reflects
the fact that certain administrative costs are relatively fixed and do not
change in direct relationship to sales.
RESEARCH AND DEVELOPMENT expenses for the three months ended March 31, 1998 were
$143,562, an increase of 132.1% over the 1997 period. As a percentage of net
sales, research and development expenses increased to 2.5% from 1.0% in the
corresponding period in 1997. The increase was mainly attributable to the
development of product enhancements for the Company's single gripper conveyer.
7
<PAGE>
INTEREST INCOME for the quarter ended March 31, 1998 was $127,701 as compared to
$64,839 for the corresponding 1997 period. The increase in interest income was
mainly attributable to higher balances in cash and cash equivalents and
securities available for sale during 1998.
GENERAL
The Company's backlog as of March 31, 1998 was approximately $7,575,703,
compared to $8,618,654 at March 31, 1997. The Company expects to ship all
backlog items within the next twelve months. Based on current backlog,
management is optimistic that the Company will achieve net sales in the quarter
ended June 30, 1998 that are comparable to those achieved in the quarter ended
March 31, 1998.
LIQUIDITY
At March 31, 1998, cash, cash equivalents and securities available for sale were
$13,309,975. The Company believes that its cash, cash equivalents and securities
available for sale are adequate to support the Company's operations at its
current level.
FORWARD LOOKING STATEMENTS
The statements contained above regarding the shipment of backlog during the next
twelve months and net sales for the quarter ended June 30, 1998 are forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. A number of important factors could cause actual results to
differ materially from those in the forward looking statements including, among
others, economic conditions generally and in the newspaper industry, change in
product demand, delays in shipment and cancellation of customers orders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable
8
<PAGE>
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.
9
<PAGE>
SIGNATURE
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 13, 1998 BY:\S\ ANTHONY P. PERI
----------------------
Anthony P. Peri
President and Chief Executive Officer
BY:\S\ JEFFREY S. BAROCAS
-------------------------
Jeffrey S. Barocas
Chief Financial Officer
10
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Quipp,
Inc., Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
and is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 831,797
<SECURITIES> 12,478,178
<RECEIVABLES> 5,736,703
<ALLOWANCES> (715,275)
<INVENTORY> 3,695,165
<CURRENT-ASSETS> 23,335,282
<PP&E> 3,815,761
<DEPRECIATION> (2,019,846)
<TOTAL-ASSETS> 25,700,942
<CURRENT-LIABILITIES> 5,431,205
<BONDS> 1,050,000
0
0
<COMMON> 16,365
<OTHER-SE> 19,203,372
<TOTAL-LIABILITY-AND-EQUITY> 25,700,942
<SALES> 5,791,616
<TOTAL-REVENUES> 5,791,616
<CGS> (3,658,405)
<TOTAL-COSTS> (4,951,565)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,781)
<INCOME-PRETAX> 956,971
<INCOME-TAX> (333,077)
<INCOME-CONTINUING> 623,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 623,894
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.37
</TABLE>
