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, 1997
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 (IRS Employer Identification No.)
incorporation or organization)
4800 NW 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, 1998 was approximately $20,672,096.*
The number of shares of the Registrant's common stock, $.01 par value,
outstanding at February 18, 1998 was 1,602,494.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT INCORPORATED
Portions of the Quipp, Inc. Proxy Statement relating to the 1998 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.
1
<PAGE>
PART I
This report includes forward looking statements that address, among other
things, introduction of improved products, installation of software programs to
address the Year 2000 issue and shipment of backlog. Actual results may differ
from those in the forward looking statements due to a variety of factors,
including economic conditions generally and in the newspaper industry,
engineering difficulties in product development, unanticipated problems relating
to software enhancements, delays in shipment and cancellation of customers
orders.
ITEM I - BUSINESS
Quipp, Inc., (the "Company"), through its wholly owned subsidiary, Quipp
Systems, Inc., is engaged in the design, manufacture and sale of specialized
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 - The Series 350 Stacker counts and batches stacks of
newspapers at maximum speeds of 85,000 copies per hour. The Quipp Sport Stacker
(Quipp Sport), aimed at smaller volume newspapers, 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. In
1997, 1996 and 1995, newspaper stackers accounted for 39%, 46% and 39%,
respectively, of the Company's net sales
BOTTOMWRAPPER - The Quipp Viper, the Company's bottomwrapper, applies wrapping
paper to the bottom or three sides of a newspaper stack to protect against
product damage and can utilize inkjet printing on the wrapping paper to provide
delivery location and copy count information.
AUTOMATIC CART LOADING SYSTEM - This system automatically accumulates and loads
strapped bundles of printed material into transportation carts for transport to
remote distribution centers. Quipp's Automatic Cart Loading System handles
bundles of various shapes and sizes. Upon completion of loading, the full cart
is automatically discharged from the cart loader and ready for the delivery
truck.
NEWSPAPER CONVEYOR SYSTEMS - The Company's conveyor systems transport newspapers
from pressrooms to various locations throughout the mailroom. These conveyor
systems include both horizontal and vertical conveyor modules, which can be
integrated with directional switches, and special purpose components that can be
arranged to accommodate the layout of the newspaper printing facility. The
Company's newspaper conveyor systems include the Quipp Twin-Track and the Quipp
Rollerslat. The Quipp Twin-Track is a twin-belt newspaper conveyor that
transports newspapers in an overlapping stream with maximum surface speeds of
approximately 80,000 newspapers per hour. The Quipp Rollerslat conveyor employs
an array of independently rotating rollers and is utilized in the processing of
newspaper stacks prior to bundling.
OTHER PRODUCTS - Additionally, the Company manufactures a variety of other
products for mailroom operations, including several different types of stream
aligners, centering pacers, fold compressors, newspaper sensors, press
production monitors and other mailroom equipment.
2
<PAGE>
The Company's manufacturing activities consist primarily of the assembly of
components comprising its products, the fabrication of some mechanical parts and
the testing of completed products. The Company uses approximately 360 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.
In addition to the manufacture and sale of its products, the Company sells spare
parts for equipment purchased through the Company. In 1997 and 1996 the sale of
spare parts accounted for approximately 8% and 9%, respectively, of the
Company's net sales revenue.
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 18%, 19%, and 18% of total
sales in 1997, 1996, and 1995 respectively. The following table indicates the
amount of sales by geographic area during the past three years:
SALES BY GEOGRAPHIC AREA
1997 1996 1995
--------------------------------------------------------------------
United States $22,281,825 $17,555,230 $19,012,140
Far East 2,214,009 2,639,972 1,335,192
Canada 1,187,003 314,698 430,855
Latin America 611,787 203,949 166,605
South Africa 263,453 0 0
Other 460,205 854,024 2,251,979
--------------------------------------------------
$27,018,282 $21,567,873 $23,196,771
--------------------------------------------------------------------
As of December 31, 1997, the Company's backlog of sales orders was approximately
$5,422,619, as compared to $7,683,925 on December 31, 1996. The Company believes
that it will satisfy all orders included in the backlog by end of 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - General" in Item 7.
For the year ended December 31, 1997, no customer accounted for 10% or more of
the Company's net sales. For the year ended December 31, 1996, the NEW YORK
TIMES accounted for 11% of the Company's net sales. Since the Company's
equipment is designed to have an extended life, the Company's largest customers
in a given year are usually different from the largest customers in any other
year.
In connection with the installation of equipment, the Company, at the request of
a customer, will resell related mailroom equipment to the customer that is not
manufactured by the Company. Such sales accounted for approximately 2.0%, 3.0%
and 4.0% of the Company's total sales in 1997, 1996, and 1995 respectively.
3
<PAGE>
COMPETITION
The newspaper industry has experienced a decrease in size in recent years, as
the number of newspapers in the country has declined. Moreover, in recent years,
there has been consolidation among manufacturers of newspaper material handling
equipment. These developments have increased competition in the industry, and
some of the Company's competitors have much greater financial resources than the
Company. Nevertheless, the Company believes it has been able to compete
successfully in this environment by stressing its engineering expertise and the
quality and reliability of its products.
The Company believes it has two principal competitors for the newspaper mailroom
equipment business in the United States, Heidelberg Finishing Systems, a
domestic subsidiary of Heidelberger Druckmaschinen, a German Company and, 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 of
the Company's products. 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. Domestic marketing efforts
include direct solicitation, trade show participation and a program of national
and regional trade journal advertising. International marketing efforts are
coordinated through the foreign dealers. Some of the foreign dealers are
commissioned, while others purchase the Company's products for resale. The use
of computer aided systems enables customization of the proposal process,
including the design of custom newspaper handling systems tailored to the
specific prospective installation.
PATENTS
The Company holds 22 U.S. patents, which expire during the period from 1998 to
2015. The Company has ten 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.
TRADEMARKS
The following are registered trademarks and trademarks of Quipp, Inc. and its
subsidiary : Quipp; Quipp Grip.
RESEARCH AND DEVELOPMENT
Research and development expenditures totaled $582,839, $579,580 and $219,170 in
1997, 1996 and 1995, respectively. Research and development expenditures in 1997
were principally devoted to the improvement of the Company's newspaper stacker
and twin-track stream splitter. The Company plans to introduce these improved
products to the market in fiscal year 1998.
EMPLOYEES
As of December 31, 1997 the Company had 136 full-time employees. None of the
Company's employees are represented by a union, and the Company considers its
employee relations to be good.
4
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, business experience and ages of the executive officers of the Company
are listed below:
NAME BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS AGE
---- ---------------------------------------------- ---
RALPH M. BRANCA Mr. Branca has been President and Chief 62
Executive Officer of Quipp, Inc. since
May 1995 and a director since April 1991.
Since 1989, he has been the President and
owner of RMB Associates, a business
consulting firm.
LOUIS D. KIPP Mr. Kipp, a co-founder of the Company, has been 66
President of Quipp Systems, Inc. since July 1987
and Treasurer of the Company since October 1990.
He has been a director of the Company since
July 1995. Mr. Kipp served previously as a
director from August 1983 until January
1995. He was President of the Company from
August 1983 until July 1987.
CHRISTER A. SJOGREN Mr. Sjogren, Executive Vice President of 55
Quipp Systems, Inc. since 1994, has served
the Company in various capacities since 1983.
His responsibilities include marketing,
manufacturing and sales. Mr. Sjogren has
been a Director of Quipp Systems, Inc.
since 1996.
JEFFREY S. BAROCAS Mr. Barocas has been Chief Financial Officer 50
of the Company since July of 1996. Prior to
joining the Company, Mr. Barocas was Chief
Financial Officer of a US subsidiary Of London
International, he was promoted to that position
in 1990.
The Company recently announced that Anthony P. Peri will become President and
Chief Executive Officer for the Company on April 6, 1998. Mr. Peri was President
and Chief Operating Officer of Ctext, Inc., a pre-press systems supplier to the
newspaper industry, since May 1997. From August 1986 to May 1997, he served in
various capacities at Harris Publishing Systems Corporation, the most recent of
which was Vice President and General Manager.
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. During 1998 the Company plans to
expand its administrative facilities by approximately 3,000 square feet.
ITEM 3 - LEGAL PROCEEDINGS
Not applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
5
<PAGE>
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 for each calendar quarter in 1996 and 1997:
- -------------------------------------------------------------------------------
1997 1996
HIGH LOW HIGH LOW
- -------------------------------------------------------------------------------
FIRST QUARTER $10.25 $8.25 $13.50 $10.25
SECOND QUARTER 14.75 9.25 12.25 10.50
THIRD QUARTER 17.50 13.50 11.87 9.00
FOURTH QUARTER 17.50 14.00 11.25 8.38
- -------------------------------------------------------------------------------
As of December 31, 1997 the Company had approximately 524 record holders of the
Common Stock, including brokers and other nominees. The Company has not paid
dividends on its Common Stock since its inception.
6
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
The selected financial data should be read in conjunction with the financial
statements and notes thereto and also with Management's Discussion and Analysis
of Financial Condition and Results of Operations, which are included elsewhere
in this Annual Report on Form 10-K. The following selected financial data for
each of the years in the five-year period ended December 31, 1997 has been
derived from the audited balance sheets and related statements of income of the
Company.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT INFORMATION:
<S> <C> <C> <C> <C> <C>
Net sales $27,018 $21,568 $23,197 $17,035 $14,789
Gross profit 9,769 7,864 7,631 4,893 4,661
Research and development 583 580 219 362 510
Selling, general and administrative expenses 4,690 4,205 4,295 3,653 4,036
Operating profit 4,517 3,224 3,117 1,968 115
Net income 3,081 2,220 2,096 1,376 321
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE AMOUNTS:
Net income per share (basic) 1.95 1.42 1.34 0.88 0.21
Net income per share (diluted) 1.89 1.42 1.34 0.88 0.21
Book value per share 11.58 9.63 8.21 7.18 6.04
Market price per share - high 17.50 13.50 16.25 8.50 5.00
- low 8.25 8.38 6.75 2.50 2.50
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET INFORMATION
Current assets $22,882 $19,496 $18,383 $14,482 $11,959
Total assets 25,303 22,074 21,267 19,342 14,241
Current liabilities 5,693 5,842 6,855 7,444 3,669
Long-term liabilities 1,050 1,150 1,550 1,350 1,700
Shareholders' equity 18,560 15,082 12,863 10,548 8,871
Weighted average number of equivalent
shares outstanding 1,630,213 1,565,765 1,565,765 1,556,792 1,516,762
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
(Note: All dollar amounts are in thousands)
1997 vs. 1996
1997 1996
- -----------------------------------------------------------------------
NET SALES $ 27,018 $ 21,568
- -----------------------------------------------------------------------
Increase (decrease) $ 5,450
% 25
The increase in net sales reflects growth in the domestic market. This increase
was partially offset by a decrease in international sales, caused by a
significant decline in sales to the Far East. Management believes that sales in
the Far East were adversely affected by general economic difficulties in the
region.
1997 1996
- -----------------------------------------------------------------------
GROSS PROFIT $ 9,769 $ 7,864
- -----------------------------------------------------------------------
Increase (decrease) $ 1,905
% 24
Percentage of Net Sales 36% 36%
The increase in gross profit was the result of an increase in sales volume. As a
percent of net sales, gross profit remained stable, despite a higher mix of
original equipment manufactured products (which generally have lower margins).
This stability is the result of increased manufacturing efficiencies.
1997 1996
- -------------------------------------------------------------------------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ 4,690 $ 4,205
- -------------------------------------------------------------------------------
Increase (decrease) $ 485
% 11
Percentage of Net Sales 17% 19%
The increase in selling, general and administrative expenses resulted from
increases in commissions and in freight, warranty and trade show expenses. These
expenses are generally related to the level of Company sales, and the increase
reflects the higher sales volume.
1997 1996
- -------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT $ 583 $ 580
- -------------------------------------------------------------------------------
Increase (decrease) $ 3
% 1
Percentage of Net Sales 2% 3%
Research and development expenditures remained essentially unchanged. Increased
sales volume led to a decrease in research and development expenditures as a
percentage of net sales.
1997 1996
- -------------------------------------------------------------------------------
OPERATING INCOME $ 4,517 $ 3,224
- -------------------------------------------------------------------------------
Increase (decrease) $ 1,293
% 40
Percentage of Net Sales 17% 15%
The increase in operating income resulted from increased gross profit and
economies of scale in connection with expenses that are not significantly
affected by increased sales volume.
8
<PAGE>
1997 1996
- -------------------------------------------------------------------------------
OTHER INCOME AND EXPENSE (NET) $ 415 $ 284
- -------------------------------------------------------------------------------
Increase (decrease) $ 131
% 46
Percentage of Net Sales 2% 1%
The net increase in other income is principally due to an increase in interest
income. Higher cash balances throughout the year had a positive effect on
interest income. In 1997, the Company invested largely in tax-free securities.
Investments in these instruments generally contribute less to income before
income tax than taxable instruments. However, investments in tax-free
instruments contributed more to net income (after tax income) than would taxable
instruments that the Company deemed suitable for investment. Interest
obligations on indebtedness partially offset the increase in the interest
income.
RESULTS OF OPERATIONS
(Note: All dollar amounts are in thousands)
1996 vs. 1995
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, resulting in a decline in the number of
new orders received through the first half of 1996.
1996 1995
- -------------------------------------------------------------------------------
GROSS PROFIT $ 7,864 $ 7,631
- -------------------------------------------------------------------------------
Increase (decrease) $ 233
% 3
Percentage of Net Sales 36% 33%
The increased gross profit, in spite of reduced net sales, was the result of
cost reduction programs. Additionally, the Company had an improved sales mix.
1996 1995
- -------------------------------------------------------------------------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ 4,205 $ 4,295
- -------------------------------------------------------------------------------
Increase (decrease) $ (90)
% (2)
Percentage of Net Sales 19% 19%
The decrease in selling, general and administrative expenses in 1996 is
primarily attributable to a reduction in system consulting fees as compared to
1995. This was partially offset by increased selling expenses, resulting from
the expansion of the Company's sales staff to provide improved market coverage.
1996 1995
- -------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT $ 580 $ 219
- -------------------------------------------------------------------------------
Increase (decrease) $ 361
% 165
Percentage of Net Sales 3% 1%
Research and development expenses increased from 1995 to 1996 due to
management's commitment to reengineer certain existing products and introduce
new products. In addition, the Company added three engineers to better support
the planned research and development projects, and provide additional
engineering support for sales customization. The expenditures were principally
directed towards the improvement of the Company's bottomwrapper and cartloaders
and the introduction of the Company's Quipp Sport Stacker.
9
<PAGE>
1996 1995
- -------------------------------------------------------------------------------
OPERATING INCOME $ 3,224 $ 3,117
- -------------------------------------------------------------------------------
Increase (decrease) $ 107
% 3
Percentage of Net Sales 15% 13%
The increase in operating income 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.
YEAR 2000
The Company will take measures during 1998 to address the Year 2000 issue.
Specifically, the Company is purchasing additional hardware and software that
will enable its management information systems to be Year 2000 compliant.
Management anticipates that these measures will cost less than $100,000, and
will not materially affect future operating results or financial condition.
GENERAL
The majority of the Company's sales are made on a contract basis. Typically, a
deposit is received upon the execution of the sales contract. Prior to shipment,
additional payments are received, reducing the customer's balance due. Any
remaining balance is typically recognized upon shipment to the customer.
Larger orders are normally received some months in advance of delivery.
Therefore, backlog can be an important, though by no means conclusive,
indication of the Company's short-term revenue stream. The timing of revenues
can be affected by pending orders, the amount of custom engineering required,
the timetable for delivery, and the receipt and nature of new orders. The sales
order backlog, as of December 31, 1997 and December 31, 1996, was $5,422,619 and
$7,683,925, respectively. Management believes all orders in the December 31,
1997 backlog will be satisfied by the end of 1998.
LIQUIDITY AND CAPITAL RESOURCES
On December 31, 1997, cash, cash equivalents and securities available for sale
totaled $13,668,457, as compared to $8,612,260 at December 31, 1996, an increase
of $5,056,196. This increase was principally related to cash provided by
operations and a reduction of $1,693,757 in accounts receivable. Working capital
at December 31, 1997 was $17,189,005, an increase of $3,534,734 from $13,654,271
at December 31, 1996. Management believes the Company's resources are sufficient
to fund operations at current level.
INFLATION
The rate of inflation has not had a material impact on operations.
ITEM 7A - QUALITATIVE AND QUANTATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
10
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets as of December 31, 1997, and 1996
Consolidated Statements of Income For Each of the Years in the
Three-Year Period Ended December 31, 1997
Consolidated Statements of Shareholders' Equity for Each of the Years
in the Three-Year Period Ended December 31,1997
Consolidated Statements of Cash Flows for Each of the Years in the
Three-Year Period Ended December 31, 1997
Notes to Consolidated Financial Statements
11
<PAGE>
INDEPENDENT AUDITOR'S 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, 1997, and 1996 and the
related consolidated statements of income, and shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1997.
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 13, 1997 and 1996 and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1997 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Miami, Florida
February 23, 1998
12
<PAGE>
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 822,573 $ 148,429
Securities available for sale 12,845,884 8,463,831
Accounts receivable, net 4,381,535 6,075,292
Inventories 3,530,609 3,595,199
Deferred tax assets-current 1,169,119 1,087,619
Prepaid expenses and other receivables 132,508 125,749
------------ ------------
TOTAL CURRENT ASSETS 22,882,228 19,496,119
Property, plant and equipment, net 1,825,906 1,828,668
Goodwill 437,082 468,302
Other assets 110,417 232,623
Deferred tax assets 47,434 48,576
------------ ------------
TOTAL ASSETS $ 25,303,067 $ 22,074,288
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 100,000 $ 700,000
Accounts payable 1,252,375 1,066,185
Accrued salaries and wages 588,165 601,455
Deferred revenues 1,342,963 1,824,898
Income taxes payable 184,044 44,786
Other accrued liabilities 2,225,676 1,604,524
------------ ------------
TOTAL CURRENT LIABILITIES 5,693,223 5,841,848
Long-term debt 1,050,000 1,150,000
------------ ------------
TOTAL LIABILITIES 6,743,223 6,991,848
Shareholders' Equity:
Common stock - par value $.01 per share, authorized 8,000,000
shares. Issued 1,636,444 in 1997 and 1,634,465 shares in 1996 16,365 16,345
Additional paid-in capital 5,359,845 5,113,190
Retained earnings 13,329,609 10,248,305
Treasury stock, at cost, 1997 - 33,950 and 1996 - 68,700 shares
(145,975) (295,400)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 18,559,844 15,082,440
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 25,303,067 $ 22,074,288
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
13
<PAGE>
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 27,018,282 $ 21,567,873 $ 23,196,771
Cost of sales (17,248,863) (13,703,717) (15,565,945)
GROSS PROFIT 9,769,419 7,864,156 7,630,826
------------ ------------ ------------
Other operating income and (expense) items:
Sale of patent and license rights 19,865 145,037 --
Selling, general and administrative expenses (4,689,557) (4,205,480) (4,294,970)
Research and development (582,839) (579,580) (219,170)
------------ ------------ ------------
OPERATING PROFIT 4,516,888 3,224,133 3,116,686
Other income (expense):
Interest income 476,430 345,120 355,148
Interest expense (61,704) (61,032) (90,314)
------------ ------------ ------------
414,726 284,088 264,834
INCOME BEFORE INCOME TAXES 4,931,614 3,508,221 3,381,520
Income taxes (1,850,310) (1,288,393) (1,285,292)
------------ ------------ ------------
NET INCOME $ 3,081,304 $ 2,219,828 $ 2,096,228
PER SHARE AMOUNTS:
Basic income per common share $ 1.95 $ 1.42 $ 1.34
Diluted income per common share $ 1.89 $ 1.42 $ 1.34
------------ ------------ ------------
Weighted average number of common
Equivalent shares outstanding 1,630,213 1,565,765 1,565,765
------------ ------------ ------------
</TABLE>
See accompanying notes to the consolidated financial statements
14
<PAGE>
<TABLE>
<CAPTION>
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDING DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash provided by operations:
Net Income $ 3,081,304 $ 2,219,828 $ 2,096,228
----------- ----------- -----------
Reconciliation of net income to net cash
Provided by (used in) operations:
Deferred income taxes (81,500) 84,720 (84,358)
Depreciation and amortization 342,845 333,321 325,569
Other noncash items 21,538 -- --
Changes in operational assets and liabilities:
Restricted cash -- -- 1,023,765
Accounts receivable, net 1,693,757 832,110 (4,286,173)
Inventories 64,590 (120,314) 908,376
Other assets and prepaid expenses and
other receivables 1,616 81,224 490,318
Accounts payables and other accrued liabilities 794,052 71,860 (1,167,096)
Deferred revenues (481,935) (1,334,604) 686,139
Income tax payable 139,258 (169,211) (408,723)
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATIONS 5,575,525 1,998,934 (415,955)
----------- ----------- -----------
Cash flows from investing activities:
Securities available for sale (4,382,053) (2,977,393) 1,527,651
Capital expenditures (193,890) (24,132) (144,196)
Acquisition of business -- -- (280,000)
----------- ----------- -----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (4,575,943) (3,001,525) 1,103,455
----------- ----------- -----------
Cash flows from financing activities:
Repayment of debt (700,000) (100,000) (400,000)
Conversion of stock options 374,562 -- 218,750
----------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (325,438) (100,000) (181,250)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents 674,144 (1,102,591) 506,250
Cash and cash equivalents at beginning of year 148,429 1,251,020 744,770
----------- ----------- -----------
Cash and cash equivalents at end of year $ 822,573 $ 148,429 $ 1,251,020
----------- ----------- -----------
Supplemental disclosure of cash payments made for:
Interest $ 61,704 $ 61,032 $ 90,314
Income taxes $ 1,375,000 $ 1,326,000 $ 1,778,373
----------- ----------- -----------
</TABLE>
See accompanying notes to the consolidated financial statements.
15
<PAGE>
<TABLE>
<CAPTION>
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
ADDITIONAL COMMON TOTAL
COMMON STOCK PAID-IN STOCK RETAINED TREASURY STOCK SHAREHOLDERS'
SHARES AMOUNT CAPITAL SUBSCRIBED EARNINGS SHARES AMOUNT EQUITY
--------- ------- ---------- ----------- ----------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances
January 1,1995 1,594,465 $15,945 $4,813,590 $ 300,000 $ 5,932,249 68,700 $ (295,400) $ 10,766,384
Net Income 2,096,228 2,096,228
Issuance of shares for
acquisitions 40,000 400 299,600 300,000
Common Stock Subscribed (300,000) (300,000)
--------- ------- ---------- ----------- ----------- ------- ----------- ------------
Balances
December 31, 1995 1,634,465 16,345 5,113,190 -- 8,028,477 68,700 (295,400) 12,862,612
Net Income 2,219,828 2,219,828
--------- ------- ---------- ----------- ----------- ------- ----------- ------------
Balances
December 31, 1996 1,634,465 16,345 5,113,190 -- 10,248,305 68,700 (295,400) 15,082,440
Net Income 3,081,304 3,081,304
Issuance of shares for
directors' fees 1,979 20 21,518 21,538
Conversion of employee
stock options 225,137 (34,750) 149,425 374,562
--------- ------- ---------- ----------- ----------- ------- ----------- ------------
BALANCES
DECEMBER 31, 1997 1,636,444 $16,365 $5,359,845 $ -- $13,329,609 33,950 $ (145,975) $ 18,559,844
========= ======= ========== =========== =========== ======= =========== ============
</TABLE>
See accompanying notes to the consolidated financial statements.
16
<PAGE>
QUIPP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of Quipp, Inc. and Quipp Systems, Inc., a wholly owned
subsidiary (collectively, the Company). All material intercompany balances and
transactions have been eliminated in consolidation.
NATURE OF BUSINESS - The Company designs, manufactures and installs material
handling equipment, to facilitate the automated bundling and movement of
newspapers from the printing press to the delivery truck.
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 provides 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. If the contract includes installation, the installation
revenue is recognized upon completion of installation at the customer's site.
Accounts receivable is net of an allowance for doubtful accounts of $715,275 for
both 1997 and 1996.
GOODWILL - Goodwill, resulting from a business acquisition, represents the
excess of purchase price over fair value of net assets acquired, and 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. 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 affected if estimated future operating cash flows are not
achieved.
RESEARCH AND DEVELOPMENT COSTS - Research and development costs consist of
expenditures incurred for the discovery of new knowledge that will be used in
the development of new, or the significant enhancement of existing products
and/or production processes, and the implementation of such knowledge through
design, testing and construction of prototypes. 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 over
the estimated useful lives of the assets. 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 the period in which
such assets are retired. Repairs and maintenance are expensed as incurred;
alterations and major overhauls that extend the lives or increase the capacity
of plant assets are capitalized.
INCOME TAXES - Income taxes are accounted for using an 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 to 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. 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 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, demand deposits and short-term investments with
original maturities of three months or less. The Company classifies investments
with an original maturity of more than three months as securities available for
sale.
17
<PAGE>
SECURITIES AVAILABLE FOR SALE - Securities available for sale include any
securities that are not held for trading or are not intended to be held to
maturity, and are 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
sale of securities are computed using the specific identification method, and
are included in net income. Fair value of the securities is determined based
upon market prices or discounted cash flow. A decline in the market value of any
available for sale security below cost that is deemed to be other than temporary
would result in a reduction in carrying amount. 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.
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.
DEFERRED BOND FINANCING COST - Deferred bond financing costs, which were
incurred upon issuance of the industrial revenue bonds (see Note 6), are
included in other assets and are 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 affect the reported amounts of revenues and
expenses. 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 RESERVE - Warranty reserves are determined based on the Company's
experience with customers' claims arising from the sale of merchandise. The
Company's exposure, based on previous experience, 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 and
sold by the Company because they are not covered by a Company warranty.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company determines impairment of
long-lived assets under the requirements that long-lived assets and certain
identifiable intangibles to be held and used by the Company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets 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 exceeds the
fair value of the assets. There was no impairment of long-lived assets in 1997
and 1996.
STOCK-BASED COMPENSATION - The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
(APB 25) and related interpretations in accounting for its employee stock
options. Under APB 25, because the exercise price of employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation cost is recorded. The Company has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation," (Statement 123).
RECLASSIFICATIONS - Certain reclassifications have been made to prior years
financial statements to conform to the current year's presentation.
18
<PAGE>
NOTE 2 - 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. Due to the short-term maturity provisions of these instruments, the
carrying value of securities available for sale approximates fair value as of
December 31, 1997 and 1996. The Company's securities available for sale at
December 31, 1997 and 1996 consisted of the following:
1997 1996
------------ ------------
Securities:
Commercial Paper $ 5,000,000 $ 2,975,454
Municipal Securities 4,850,000 4,488,491
Federal Govt. Agency Obligations 3,000,000 --
Money Market Investments -- 999,886
Less discount on Investments (4,116) --
------------ ------------
Total $ 12,845,884 $ 8,463,831
============ ============
NOTE 3 - INVENTORIES
Components of inventory as of December 31, 1997, were as follows:
1997 1996
---------- ----------
Raw Materials $2,631,601 $1,916,968
Work in Process 731,850 1,541,605
Finished Goods 167,157 136,626
---------- ----------
Total $3,532,605 $3,595,199
========== ==========
NOTE 4 - INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1997, 1996 and
1995 is as follows: [OBJECT OMITTED]
CURRENT DEFERRED TOTAL
----------- ----------- -----------
1997
U.S. FEDERAL $ 1,771,939 ($ 74,220) $ 1,697,719
STATE AND LOCAL 159,872 (7,281) 152,591
----------- ----------- -----------
$ 1,931,811 ($ 81,501) $ 1,850,310
=========== =========== ===========
1996
U.S. Federal $ 1,072,267 $ 75,471 $ 1,147,738
State and local 131,406 9,249 140,655
----------- ----------- -----------
$ 1,203,673 $ 84,720 $ 1,288,393
=========== =========== ===========
1995
U.S. Federal $ 1,169,605 ($ 72,171) $ 1,097,434
State and local 200,045 (12,187) 187,858
----------- ----------- -----------
$ 1,369,650 ($ 84,358) $ 1,285,292
=========== =========== ===========
-19-
<PAGE>
The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, 1997 and
1996 are as follows:
1997 1996
----------- -----------
Deferred Tax Assets:
Warranty reserve $ 93,359 $ 94,456
Inventory obsolescence 170,562 225,630
Allowance for bad debts 258,428 264,651
Contract reserves 116,877 80,351
Depreciation 106,321 60,720
Vacation Accrual 66,634 91,872
Unicap 82,770 73,299
Other taxes 129,461 161,706
Other 192,141 83,510
----------- -----------
Total gross deferred tax assets $ 1,216,553 $ 1,136,195
Less valuation allowance 0 0
----------- -----------
Net deferred tax assets $ 1,216,553 $ 1,136,195
Deferred tax liability 0 0
----------- -----------
Less noncurrent portion
of depreciation (47,434) (48,576)
Net noncurrent deferred assets $ 1,169,119 $ 1,087,619
=========== ===========
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, 1997, 1996, and 1995:
Year Ending December 31,
` --------------------------------
1997 1996 1995
------ ------ ------
Statutory federal income tax rate 34.0% 34.0% 34.0%
Increase resulting from:
State and Local taxes, net of
Federal income tax benefit 2.1% 2.6% 3.7%
Other 1.4% 0.4% 0.3%
------ ------ ------
37.5% 37.0% 38.0%
====== ====== ======
20
<PAGE>
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET
The property, plant and equipment, net balances at December 31, 1997 and 1996
consist of the following:
ESTIMATED
USEFUL LIFE
1997 1996 (IN YEARS)
---------- ---------- ----------
Land $ 500,500 $ 500,500 31
Building 1,431,771 1,431,772 10
Building Improvements 366,930 245,692 5
Machinery 719,130 717,827 5
Furniture and Fixtures 173,151 147,160 5
Computer Equipment 541,481 496,122 5
Automobiles 58,740 58,740
---------- ----------
3,791,703 3,597,813
Less: Accumulated depreciation 1,965,797 1,769,145
---------- ----------
$1,825,906 $1,828,668
========== ==========
Depreciation expense charged to income was $196,651, $187,128, and $179,377 in
1997, 1996, and 1995, respectively.
NOTE 6 - 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 with a balance of $1,150,000 at December 31, 1997, 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 3.9% and 3.7% during
1997 and 1996, respectively. The bonds are payable in installments of $100,000
in years 1998 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 part of the acquisition of substantially all of the
assets of Hall Processing Systems in 1995 the Company issued a $900,000
promissory note. The note was payable over 3 years. During 1997 the outstanding
balance of $600,000 was paid when due.
21
<PAGE>
NOTE 7 - STOCK OPTION PLANS
1996 EQUITY COMPENSATION PLAN - In 1996, the Quipp, Inc. 1996 Equity
Compensation Plan (Equity Compensation Plan), was adopted by the Board of
Directors and approved by the shareholders. The Equity Compensation Plan
authorized 400,000 shares of Common Stock for issuance. The Equity Compensation
Plan replaced the Quipp, Inc. 1990 Incentive Stock Option 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 consultants and
advisors. It also provides for the grant of stock options to non-employee
members of the Company's Board of Directors. Stock options issued in connection
with the Equity Compensation Plan are granted with an exercise price per share
equal to the fair market value of a share of Company common stock at the date of
grant. All previously granted stock options have five to ten-year maximum terms
and vest either immediately or within four years of the grant date.
At December 31, 1997, there were 100,000 shares available for grant under the
Equity Compensation Plan; 116,500 shares were granted in 1997. The per share
weighted average fair value of stock options granted during 1997 ranged from
approximately $8 to $10 on the grant dates, using the Black - Scholes
option-pricing model, with the following weighted average assumptions: expected
dividend yield is zero, risk-free interest rate of 6.3%, and expected lives
ranging from five to ten years. The Company applies APB Opinion 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 123, the Company's net income and net income per common
and common equivalent shares would have been reduced to the pro forma amounts
indicated below:
1997 1996
----------- -----------
Net Income As reported $3,081,304 $2,219,828
Pro forma $2,681,076 $1,967,146
Net Income per Common and Common As reported $1.89 $1.42
Equivalent Shares Pro forma $1.64 $1.26
---------- ----------
The full impact of calculating compensation expense for stock options under SFAS
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 four years. Also, the provisions of SFAS 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, 1997, the range of weighted-average exercise prices
and remaining contractual life of outstanding options was $9 to $12.19, and 3 to
10 years, respectively. At December 31, 1997, the number of options exercisable
was 236,500, and the weighted average exercise price of those options was
$11.01.
1996 DIRECTORS FEE PURCHASE PLAN - The Quipp, Inc. Directors Fee Purchase Plan
(the Plan) was terminated on October 28,1997.
NOTE 8 - EARNINGS PER SHARE
A reconciliation of the number of shares used in computing basic and diluted EPS
follows:
1997 1996 1995
--------- -------- ---------
SHARES
Basic shares 1,576,556 1,565,765 1,565,765
Common stock equivalents
from option plan 53,657 -- --
---------- --------- ----------
Diluted 1,630,213 1,565,765 1,565,765
========= ========= =========
PER SHARE AMOUNTS:
Basic income per share $ 1.95 $ 1.42 $ 1.30
Diluted income per share $ 1.89 $ 1.42 $ 1.30
========= ========= =========
22
<PAGE>
NOTE 9 - COMPREHENSIVE INCOME
In June 1997 the FASB issued Statements on Financial Accounting Standards
No.130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 is effective for
fiscal years beginning after December 15, 1997 and establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. SFAS 130 requires all items to be
reported in a separate financial statement. The Company does not believe that
the adoption of SFAS 130 will have a significant impact on its financial
statements.
NOTE 10 - OPERATING SEGMENTS
In June 1997 the FASB issued Statements on Financial Accounting Standards
No.131, "Disclosure about Segments of Enterprise and Related Information" (SFAS
131). SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997. SFAS 131 establishes standards for the way public business
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. The Company does not believe that
adoption of SFAS 131 will have a significant impact on its financial reporting.
NOTE 11 - MAJOR CUSTOMERS
For the year ended December 31, 1997, no single customer accounted for 10% or
more of the Company's net sales. For the year ended December 31, 1996, THE NEW
YORK TIMES accounted for approximately 11% of the Company's net sales. In 1995,
no single customer accounted for 10% or more of the Company's net sales. The
Company sells a substantial portion of its products to the domestic newspaper
industry; foreign sales accounted for 13%, 19%, and 18% of total net sales in
1997, 1996 and 1995, respectively.
NOTE 12 - EMPLOYEE BENEFIT PLANS
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 to the Saving Plan to 50%, from 25% in 1995, of the first
4% of compensation deferred by each participant. The amount contributed by the
Company in 1997, 1996, and 1995, was $62,889, $71,222 and $37,935, respectively.
The administrative expenses of the Plan are paid by the Company as sponsor.
STOCK APPRECIATION RIGHT PLAN - The Company has a Stock Appreciation Right 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 no 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 per share units may be issued pursuant to the
Plan. No share units were awarded in 1997, 1996, or 1995. Payments relating to
vesting of previous awards were $4,264, $4,254 and $30,606 in 1997, 1996 and
1995 respectively.
NOTE 13 - 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, 1997 and 1996: cash and cash
equivalents, securities available for sale, accounts receivable, prepayments 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, 1997 was $1,050,000 and $763,928,
respectively, and as of December 31, 1996 was $1,150,000 and $815,207,
respectively.
23
<PAGE>
NOTE 14 - 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
24
<PAGE>
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
<PAGE>
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.)
EXHIBIT
NO.
-------
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.
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).
26
<PAGE>
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. 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).
*10.4 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).
*10.5 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).
*10.6 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.
<PAGE>
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 28, 1998 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 Officer, March 28, 1998
President and Director
/s/ RICHARD H. CAMPBELL
- -----------------------
RICHARD H. CAMPBELL Director March 28, 1998
/s/ JACK D. FINLEY
- -----------------------
JACK D. FINLEY Director March 28, 1998
/s/ CRISTINA H. KEPNER
- -----------------------
CRISTINA H. KEPNER Director March 27, 1998
/s/ WILLIAM L. ROSE
- -----------------------
WILLIAM L. ROSE Director March 28, 1998
/s/ RALPH S. ROTH
- -----------------------
RALPH S. ROTH Director March 27, 1998
/s/ LOUIS D. KIPP
- -----------------------
LOUIS D. KIPP Director and Treasurer March 26, 1998
/s/ JEFFREY S. BAROCAS
- -----------------------
JEFFREY S. BAROCAS Principal Financial and March 27, 1998
Accounting Officer
28
<PAGE>
QUIPP, INC.
ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
EXHIBIT
NO.
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.
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).
10.2.9 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).
<PAGE>
10.3 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).
*10.4 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).
*10.5 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).
*10.6 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.
exhibit 3.2
BYLAWS
OF
QUIPP, INC.
(A FLORIDA CORPORATION)
<PAGE>
ARTICLE I
OFFICES
Section 1.01. PRINCIPAL OFFICE. The principal office of the corporation
in the State of Florida, which may be the registered office, shall be
established at such place as the board of directors shall from time to time
determine.
Section 1.02. REGISTERED OFFICE. The registered office of the
corporation in the State of Florida shall be at the office of its registered
agent as stated in the articles of incorpora tion or as the board of directors
shall from time to time determine.
Section 1.03. OTHER OFFICES. The corporation may have additional
offices at such other places, either within or without the State of Florida, as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. ANNUAL MEETING. The annual meeting of shareholders shall
be held after the close of each fiscal year on such date and at such time as
determined by the board of directors. The shareholders entitled to vote at such
meeting shall elect the directors and shall transact such other business as may
properly be brought before the meeting.
Section 2.02. SPECIAL MEETINGS. Special meetings of the shareholders of
the corporation may be called, for any purpose or purposes permitted by law, by
the board of directors on its own initiative and shall be called by the board of
directors upon written request by the chairman of the board, president of the
corporation, or, upon delivery to the secretary of one or more written demands
for the meeting describing the purpose or purposes for which it is to be held,
by the holders of not less than ten percent of all the shares entitled to be
cast on any issue proposed to be considered at the proposed special meeting.
Notice of such meeting shall be given by the secretary as provided herein. Only
business within the purpose or purposes described in such special meeting notice
may be conducted at a special shareholders meeting.
Section 2.03. PLACE OF MEETINGS. All meetings of the shareholders of
the corporation shall be held at such place within or without the State of
Florida as shall be designated from time to time by the board of directors and
stated in the notice of such meeting or in a duly executed waiver of notice
thereof.
Section 2.04. VOTING LISTS. The officer or agent of the corporation
having charge of the stock transfer books for shares of the corporation shall
make, at least ten days before each meeting of shareholders, a complete list of
the shareholders entitled to vote at the meeting and any adjournment thereof,
arranged in alphabetical order, with the address of and the
<PAGE>
number of shares held by each shareholder, which list shall be kept on file at
the place identified in the meeting notice in the city where the meeting will be
held or the corporation's principal place of business or at the office of its
registrar or transfer agent for a period of at least ten days prior to the
meeting, and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting, and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original share ledger or
transfer book, or a duplicate thereof, shall be PRIMA FACIE evidence as to who
are the shareholders entitled to examine such list or share ledger or transfer
book, or to vote, in person or by proxy, at any meeting of the shareholders.
Section 2.05. FIXING OF A RECORD DATE. The board of directors may fix
in advance a date as the record date for any determination of shareholders
entitled to notice of, or to vote at, any meeting of shareholders, or entitled
to payment of a dividend or allotment of any rights or privileges, such date in
any case to be not more than seventy days and, in the case of a meeting of
shareholders, not less than ten days prior to the date on which the particular
action, requiring such determination of shareholders, is to be taken.
If no record date is fixed for the determination of shareholders
entitled to notice of, or to vote at, a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which the secretary mails
the notice of the meeting or the date on which the resolution of the board of
directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the board of directors fixes a new
record date under this section for the adjourned meeting. The board of directors
shall fix a new record date if the meeting is adjourned to a date more than 120
days after the date fixed for the original meeting.
Section 2.06. NOTICE OF MEETINGS. Written notice stating the place, day
and hour of every meeting of the shareholders shall be given by the secretary to
each shareholder entitled to vote at such meeting, either personally or by first
class mail, at least ten days, but not more than sixty days, prior to the day
named for the meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States first-class mail postage prepaid, addressed
to the shareholder at his address as it appears on the stock transfer books of
the corporation.
Section 2.07. PRECONDITION TO DELIVERY OF NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS CALLED BY SHAREHOLDERS. The secretary shall inform shareholders who
have delivered a written request for a special meeting and otherwise complied
with section 2.02 of the reasonably estimated costs of preparing and mailing a
notice of the meeting, and, on payment of these costs to the corporation, the
secretary shall deliver notice of such meeting to each shareholder entitled
thereto.
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<PAGE>
Section 2.08. QUORUM. The presence, in person or by proxy, of
shareholders entitled to cast a majority of the votes which all shareholders are
entitled to cast shall constitute a quorum for such meeting. Treasury shares,
shares of this corporation's stock which are owned by another corporation the
majority of the voting stock of which is owned by this corporation, and shares
of this corporation's stock held by another corporation in a fiduciary capacity
for the benefit of this corporation shall not be counted in determining the
total number of outstanding shares for voting purposes at any given time. After
a quorum has been established at a shareholders' meeting, the subsequent
withdrawal of shareholders, so as to reduce the number of shareholders entitled
to vote at the meeting below the number required for a quorum, shall not affect
the validity of any action taken at the meeting or any adjournment thereof. When
a specified item of business is required to be voted on by any class or series
of stock, a majority of the shares of such class or series shall constitute a
quorum for transaction of such item of business by that class or series.
Section 2.09. ADJOURNMENT. When a meeting which is properly called is
adjourned to another time or place, it shall not be necessary to give any notice
of the adjourned meeting if the time and place to which the meeting is adjourned
are announced at the meeting at which the adjournment is taken, and at the
adjourned meeting any business may be transacted that might have been transacted
on the original date or place of the meeting. If, however, after the adjournment
the board fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given to each shareholder of record on the new record
date entitled to vote at such meeting.
The holders of a majority of the shares represented, and who would be
entitled to vote at a meeting if a quorum were present, where a quorum is not
present, may adjourn such meeting from time to time.
Section 2.10. ORGANIZATION. At every meeting of the shareholders, the
chairman of the board, if there be one, or in the case of vacancy in office or
absence of the chairman of the board, one of the following officers present in
the order stated: the vice chairman of the board, if there be one, the
president, the vice presidents in their order of rank and then seniority, or a
chairman chosen by the shareholders entitled to cast a majority of the votes
which all shareholders present in person or by proxy are entitled to cast, shall
act as chairman, and the secretary, or, in his absence, an assistant secretary,
or, in the absence of both the secretary and assistant secretaries, a person
appointed by the chairman, shall act as secretary.
Section 2.11. VOTING. If a quorum is present at any meeting, action on
a matter (other than the election of directors) is approved if the votes cast in
favor exceed the votes cast in opposition, unless the question is one for which,
by express provision of the law or of the articles of incorporation or these
bylaws, a different vote is required, in which case such express provision shall
govern and control the decision of such question.
Except as may be otherwise provided in the articles of incorporation,
every shareholder of record shall have the right, at every
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<PAGE>
shareholders' meeting, to one vote for every share, and if the corporation has
issued fractional shares, to a fraction of a vote equal to every fractional
share, of stock of the corporation standing in his name on the books of the
corporation. A shareholder may vote either in person or by proxy.
Treasury shares, shares of this corporation's stock which are owned by
another corporation the majority of the voting stock of which is owned by this
corporation, and the shares of this corporation's stock held by another
corporation in a fiduciary capacity for the benefit of this corporation shall
not be voted, directly or indirectly, at any meeting of shareholders.
At each election for directors, every shareholder entitled to vote
shall have the right to vote the number of shares owned by him, for as many
persons as there are directors to be elected at that time and for whose election
he has a right to vote or, if cumulative voting is authorized by the articles of
incorporation, to accumulate his votes by giving one candidate a number of votes
equal to the number of directors to be elected at that time multiplied by the
number of his votes or distribute such number of votes among any number of
candidates.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent, or proxy designated by the bylaws
of the corporate shareholder; or, in the absence of any applicable bylaw, by
such person as the board of directors of the corporate shareholder may
designate. Proof of such designation may be made by presentation of a certified
copy of the bylaws or other instrument of the corporate shareholder. In the
absence of any such designation, or in case of conflicting designation, by the
corporate shareholder, the chairman of the board, president, any vice president,
secretary and treasurer of the corporate shareholder shall be presumed to
possess, in that order, authority to vote such shares.
Shares held by an administrator, executor, guardian or conservator may
be voted by such person, either in person or by proxy, without a transfer of
such shares into the name of such person, provided, that if requested by the
chairman of the board, president, chief financial officer, treasurer or
secretary, such person has provided evidence of such fiduciary status acceptable
to such officer.
Shares standing in the name of a trustee may be voted by such trustee,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by such trustee without a transfer of such shares into the name of such
trustee. Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by him or the name of his nominee, without the transfer of such shares into his
name, provided, that if requested by the chairman of the board, president, chief
financial officer, treasurer or secretary, such person has provided evidence of
such status acceptable to such officer.
A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee or the nominee of the pledgee shall be
entitled to vote the shares so transferred.
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<PAGE>
Section 2.12. PROXIES. Every shareholder entitled to vote at a meeting
of shareholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy in accordance with applicable laws.
Section 2.13. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Unless
otherwise provided in the articles of incorporation, any action required to be
taken at any annual or special meeting of shareholders of the corporation, or
any action which may be taken at any annual or special meeting of the
shareholders, may be taken without a meeting, without prior notice and without a
vote, if one or more consents in writing, setting forth the action so taken,
shall be dated and signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted, and delivered to the corporation by delivery to its principal
office in Florida, its principal place of business, the corporate secretary, or
another officer or agent of the corporation having custody of the minute book.
If any class of shares is entitled to vote thereon as a class, such written
consent shall be required of the holders of a majority of the shares of such
class and of the total shares entitled to vote. No written consent shall be
effective to take the corporate action referred to therein unless, within sixty
days of the date of the earliest dated consent delivered in the manner set forth
above, written consents signed by the holders of the number of shares required
to take action are delivered to the corporation by delivery as set forth above.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. POWERS AND DUTIES. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, a board of directors,
except as may be otherwise provided in the Florida Business Corporation Act or
the articles of incorporation.
A director shall perform his duties as a director, including duties as
a member of any committee of the board upon which the director may serve, in
good faith, in a manner the director reasonably believes to be in the best
interests of the corporation, and with such care as an ordinarily prudent person
in a like position would use under similar circumstances. In performing his
duties, a director shall be entitled to rely on information, opinions, reports
or statements, including financial statements and other financial data, in each
case prepared or presented by:
(1) one or more officers or employees of the corporation whom
the director reasonably believes to be reliable and
competent in the matters presented,
(2) counsel, public accountants or other persons as to matters
which the director reasonably believes to be within such
person's professional or expert competence, or
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<PAGE>
(3) a committee of the board upon which the director does not
serve, duly designated in accordance with provisions of the
articles of incorporation or these bylaws, as to matters
within its designated authority, which committee the
director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if the
director has knowledge concerning the matter in question that would cause such
reliance described in the preceding subsection to be unwarranted.
A person who performs his duties in compliance with this section shall
not be liable for any action taken as a director or any failure to take any
action.
A director of the corporation who is present at a meeting of the board
of directors at which action on any corporate matter is taken shall be presumed
to have assented to the action taken, unless the director votes against such
action or abstains from voting in respect thereto.
Section 3.02. QUALIFICATION AND ELECTION. Unless otherwise provided in
the articles of incorporation, directors need not be residents of Florida or
shareholders in the corpora tion. Except in the case of vacancies, directors
shall be elected by the shareholders. If the board of directors is classified
with respect to the power to elect directors or with respect to the terms of
directors and if, due to a vacancy or vacancies, or otherwise, directors of more
than one class are to be elected, each class of directors to be elected at the
meeting shall be nominated and elected separately. The candidates receiving the
greatest number of votes, up to the number of directors to be elected, shall be
elected directors.
Section 3.03. NUMBER AND TERM OF OFFICE. The board of directors shall
consist of the number of directors serving at the time of adoption of this
Section 3.03, or such other number as may thereafter be from time to time (i) be
determined by the board of directors or (ii) be set forth in a notice of a
meeting of shareholders called for the election of the board of directors.
Notwithstanding the foregoing, no decrease shall have the effect of shortening
the term of any incumbent director. Each director shall serve until the next
annual meeting of the shareholders and until his successor shall have been
elected and qualified or until his earlier resignation, removal from office or
death.
Section 3.04. ORGANIZATION. At every meeting of the board of
directors, the chairman of the board, if there be one, or in the absence of the
chairman of the board, the president of the corporation or a chairman chosen by
a majority of the directors present, shall preside, and the secretary or any
person appointed by the chairman of the meeting shall act as secretary.
Section 3.05. PLACE OF MEETINGS. Meetings of the board of directors of
the corporation, regular or special, may be held either within or without the
State of Florida.
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<PAGE>
Section 3.06. ANNUAL MEETINGS. The board of directors shall hold an
annual meeting each year immediately following the annual meeting of the
shareholders at the place where such meeting of the shareholders was held for
the purpose of election of officers and consideration of any other business that
may be properly brought before the meeting. Notice of such annual meetings need
not be given to either old or new members of the board of directors.
Section 3.07. REGULAR MEETINGS. If the board of directors determines
to hold regular meetings, the board of directors may, at the annual meeting of
the board of directors, fix by resolution the date, time and place of other
regular meetings of the board. Notice of such regular meetings need not be given
to any member of the board of directors, unless the same is held at other than
the date, time and place of such meeting as fixed in accordance with this
Section 3.07, in which event notice shall be given in the same manner as is
provided in Section 3.08 with respect to special meetings of the board of
directors. In addition, announcement of a changed date, time or place at a
meeting of the board of directors shall be deemed adequate notice to the
directors present at such meeting.
Section 3.08. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by any two directors, the chairman of the board or the
president. Notice of any special meeting of directors shall be given to each
director at his business or residence in writing by first class or overnight
mail or courier service, telegram or facsimile transmission, orally by telephone
or by hand delivery. If mailed by first class mail, such notice shall be deemed
adequately delivered when deposited in the United States mail so addressed, with
postage prepaid, at least five days before such meeting. If by telegram,
overnight mail or courier service, such notice shall be deemed adequately
delivered when the telegram is delivered to the telegraph company or the notice
is delivered to the overnight mail or courier service company at any time during
a day that is at least two days prior to the date of such meeting. If by
facsimile transmission, such notice shall be deemed adequately delivered when
the notice is transmitted at least 12 hours prior to the time set for the
meeting. If by telephone or by hand delivery, the notice shall be given at least
12 hours prior to the time set for the meeting.
Section 3.09. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
of the board of directors or of any committee thereof, which is required or
permitted to be taken at a regular or special meeting, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, signed
by all of the members of the board of directors or of the committee, as the case
may be, is filed in the minutes of the proceedings of the board of directors or
committee.
Section 3.10. CONFERENCE TELEPHONE MEETINGS. One or more members of
the board of directors may participate in meetings of the board or a committee
of the board by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting pursuant to this section shall constitute
presence in person at such meeting.
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<PAGE>
Section 3.11. QUORUM. A majority of the directors in office shall be
present at each meeting in order to constitute a quorum for the transaction of
business. An interested director may be counted in determining the presence of a
quorum at a meeting of the board of directors which authorizes, approves or
ratifies a contract or transaction in which such director has an interest.
Section 3.12. VOTING. Except as otherwise specified in the articles of
incorporation or these bylaws or provided by statute, the acts of a majority of
the directors present at a meeting at which a quorum is present shall be the
acts of the board of directors.
Section 3.13. ADJOURNMENT. A majority of the directors present,
regardless of whether or not a quorum exists, may adjourn any meeting of the
board of directors, to another time and place and no notice of any adjourned
meeting need be given, other than by announcement at the meeting.
Section 3.14. COMPENSATION. The board of directors shall have the
authority to fix the compensation of directors for their attendance at meetings
of the board of directors or committees thereof, or otherwise, and such
compensation may include expenses, if any, associated with attendance at such
meetings.
Section 3.15. RESIGNATIONS. Any director of the corporation may resign
at any time by giving written notice to the president or the secretary of the
corporation. Such resignation shall take effect at the date of the receipt of
such notice or at any later time specified therein and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 3.16. VACANCIES. Any vacancy occurring in the board of
directors, including any vacancy created by reason of an increase in the number
of directors, may be filled by the affirmative vote of a majority of the
remaining directors, or by the shareholders in the manner provided in the
Florida Business Corporation Act. A director elected to fill a vacancy shall
hold office only until the next election of directors by the shareholders.
Section 3.17. REMOVAL. The shareholders may remove one or more
directors from office, with or without cause (unless the articles of
incorporation provide that directors may be removed only for cause), by a vote
or written consent of the holders of a majority of the shares then entitled to
vote. In case the board of directors or any one or more directors is so removed,
new directors may be elected at the same meeting or by the same written consent.
If the corporation has cumulative voting and if less than the entire board is to
be removed, no individual director may be removed if the votes cast against the
resolution for his removal would be sufficient to elect him if then cumulatively
voted at an election of the entire board or a class of which he is part.
Section 3.18. EXECUTIVE AND OTHER COMMITTEES. The board of directors,
by resolution adopted by a majority of the entire board, may designate from
among its members an
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<PAGE>
executive committee and one or more other committees, each committee to consist
of two or more directors. The board may designate as alternate members of any
committee, one or more directors who may replace any absent or disqualified
member at any meeting of the committee.
The executive committee or other committee shall have and exercise all
of the authority of the board to the extent provided in the resolution
designating the committee, except that no such committee of the board shall have
the authority of the board to:
(1) approve or recommend to shareholders actions or proposals
required by law to be approved by shareholders;
(2) fill vacancies on the board of directors or any committee
thereof;
(3) amend or repeal these bylaws;
(4) authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the
board of directors; or
(5) authorize or approve the issuance or sale of or contract for
the sale of shares or determine the designation and relative
rights, preferences and limitations of a voting group unless
within limits specifically prescribed by the board of
directors.
A majority of the directors in office designated to a committee, or
directors designated to replace them as provided in this section, shall be
present at each meeting to constitute a quorum for the transaction of business,
and the acts of a majority of the directors in office designated to a committee
or their replacements shall be the acts of the committee.
Each committee shall keep regular minutes of its proceedings and
report such proceedings periodically to the board of directors.
Sections 3.05, 3.08, 3.09, 3.10 and 3.11 shall be applicable to
committees of the board of directors.
Section 3.19. NOMINATION OF DIRECTORS. Nominations for the election of
directors may be made by the board of directors, a committee designated by the
board of directors pursuant to Section 3.18 or any shareholder of record
entitled to vote in the election of directors generally at the record date of
the meeting and also on the date of the meeting at which directors are to be
elected. However, any such shareholder may nominate one or more persons for
election as directors only if written notice (the "Notice") of the shareholder's
intent to nominate a director at the meeting is given by the shareholder and
received by the secretary of the corporation in the manner and within the time
specified in this Section. The Notice shall be delivered to the secretary of the
corporation not less than 21 days nor more than 50 days prior to any meeting of
the shareholders called for the election of directors; except that if less than
28 days' notice of the meeting is given to shareholders, the Notice shall be
delivered to the secretary of the corporation
-9-
<PAGE>
not later than the earlier of the seventh day following the day on which notice
of the meeting was first mailed to shareholders or the fourth day prior to the
meeting. In lieu of delivery to the secretary, the Notice may be mailed to the
secretary by certified mail, return receipt requested, but shall be deemed to
have been given only upon actual receipt by the secretary.
The Notice shall be in writing and shall contain or be accompanied by:
(1) the name and residence address of the nominating shareholder and of the
person or persons to be nominated; (2) a representation that the shareholder is
a holder of record of voting stock of the corporation and intends to appear in
person or by proxy at the meeting to nominate the person or persons specified in
the Notice; (3) such information regarding each nominee as would have been
required to be included in a proxy statement filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, (or pursuant to any successor act or
regulation) had proxies been solicited with respect to such nominee by the
management or board of directors of the corporation; (4) a description of all
arrangements or understandings among the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; and (5) the written
consent of each nominee to serve as a director of the corporation if so elected.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that any nomination made at the meeting was not made in
accordance with the procedures of this section and, in such event, the
nomination shall be disregarded.
ARTICLE IV
NOTICE AND WAIVER OF NOTICE
Section 4.01. NOTICE. Whenever written notice is required to be given
to any director under the provisions of the articles of incorporation, these
bylaws or the Florida Business Corporation Act, it shall be given to such
director by personal delivery, telecopier, delivery to an overnight courier
service or representative, deposit in the United States first-class mail, or by
certified or registered mail, addressed to the address of such person (or, if
applicable, such person's telecopier number) appearing on the books of the
corporation, or supplied by such person to the corporation for the purpose of
notice. A notice of a meeting shall specify the place, day and hour of the
meeting. Notices to shareholders shall be given as provided in Section 2.06
hereof.
Section 4.02. WAIVER OF NOTICE. Whenever any notice is required to be
given under the Florida Business Corporation Act, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Except in the case of a special meeting of shareholders, neither the
business to be transacted at, nor the purpose of, the meeting need be specified
in the waiver of notice of such meeting.
-10-
<PAGE>
Attendance of a person, either in person or by proxy, at any meeting,
shall constitute a waiver of notice of such meeting in the manner provided in
the Florida Business Corporation Act unless: (a) in the case of a shareholders
meeting, (i) the shareholder objects at the beginning of the meeting to holding
the meeting or transacting business at the meeting or (ii) with respect to a
matter that is not within the purpose or purposes described in the meeting
notice, the shareholder objects when the matter is presented and (b) in the case
of a directors' or committee meeting, the director states, at the beginning of
the meeting or promptly upon arrival at the meeting, any objection to the
transaction of business because the meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 5.01. NUMBER AND QUALIFICATION. The officers of the
corporation shall consist of such officers and agents as may be appointed by the
board of directors. One person may hold more than one office. Officers may but
need not be directors or shareholders of the corporation. The board of directors
may elect from among the members of the board a chairman of the board who, if
elected, shall be an officer of the corporation. A duly appointed officer may
appoint one or more officers or assistant officers to the extent authorized by
the board of directors.
Section 5.02. ELECTION AND TERM OF OFFICE. Except for such officers as
may be elected pursuant to Section 5.03, the officers of the corporation shall
be appointed to hold office until the next annual organizational meeting of
directors and until a successor shall have been duly elected and qualified, or
until his death, resignation or removal.
Section 5.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS. The board
of directors may from time to time elect such officers and appoint such
committees, employees or other agents as the board deems the business of the
corporation may require, to hold office for such period, have such authority,
and perform such duties as are provided in these bylaws, or as the board of
directors may delegate.
Section 5.04. THE CHAIRMAN OF THE BOARD. The chairman of the board, if
elected, shall preside at all meetings of the shareholders and of the board of
directors, and shall, at each annual meeting of shareholders, present a report
with respect to the condition and business of the Company. He shall have the
authority to sign on behalf of the corporation, all reports, filings and other
documents with such government agencies as are required by applicable law and
shall perform such other duties as may from time to time be requested of him by
the board of directors. The chairman of the board shall assume the duties of the
president when the president is absent or otherwise unable to discharge his
responsibilities. To be eligible to serve, the chairman of the board must be a
director of the corporation.
-11-
<PAGE>
Section 5.05. THE PRESIDENT. The president shall be the chief
executive officer of the corporation and shall have general powers of
supervision, direction and control over the business and operations of the
corporation, subject, however, to the authority of the board of directors. He
shall have the authority to supervise preparation of and sign on behalf of the
corporation, all reports, filings and other documents with such government
agencies as are required by applicable law. He shall sign, execute, and
acknowledge, in the name of the corporation, deeds, mortgages, bonds, contracts
or other instruments except in cases where the signing and execution thereof
shall be expressly delegated by the board of directors, or by these bylaws, to
some other officer or agent of the corporation; and, in general, shall perform
all duties incident to the office of president and such other duties as from
time to time may be assigned to him by the chairman of the board and board of
directors. If the board of directors has elected a chairman of the board, the
president shall assume the duties of the chairman of the board when the chairman
of the board is absent or unable to discharge his responsibilities.
Section 5.06. THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall be the principal financial officer of the corporation and, unless another
officer is so designated, principal accounting officer of the corporation;
whenever required by the Board of Directors, he shall render a statement of the
financial condition of the corporation; shall keep and maintain, or cause to be
kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, including, but not limited to,
accounts of its assets, liabilities, receipts, disbursement, gains, losses,
capital surplus and shares; shall be responsible for assuming adherence to such
financial policies as are promulgated by the board of directors; and, in
general, shall discharge such other duties as may from time to time be assigned
to him by the board of directors, the chairman of the board or the president.
The books of account shall be open at all reasonable times to inspection by any
director.
Section 5.07. THE VICE PRESIDENTS. The vice presidents shall perform
duties as may from time to time be assigned to them by the board of directors,
the chairman of the board or the president.
Section 5.08. THE SECRETARY. The secretary shall attend all meetings
of the board of directors and committees thereof and shall record the time and
place of holding of such meeting, whether regular or special, and if special,
how authorized, the notice given, the names of those present at directors'
meetings or the number of shares present or represented at share holders'
meetings in books to be kept for that purpose; shall see that notices are given
and records and reports properly kept and filed by the corporation as required
by law; shall, unless otherwise designed by the board of directors, be the
custodian of the seal of the corporation and see that it is affixed to all
documents to be executed on behalf of the corporation under its seal; and, in
general, shall perform all duties incident to the office of secretary, and such
other duties as may from time to time be assigned to him by the board of
directors, the chairman of the board or the president.
Section 5.09. THE TREASURER. The treasurer shall have or provide for
the custody of the funds or other property of the corporation and shall keep a
separate book account of the same; shall collect and receive or provide for the
collection and receipt of moneys earned by or in
-12-
<PAGE>
any manner due to or received by the corporation; shall deposit all funds in his
custody as treasurer in such banks or other places of deposit as the board of
directors may from time to time designate; shall, whenever so required by the
board of directors, render an accounting showing his transactions as treasurer;
and, in general, shall discharge such other duties as may from time to time be
assigned to him by the board of directors, the chairman of the board, the
president or the Chief Financial Officer. If the board of directors fails to
elect a Chief Financial Officer, then the Treasurer shall perform the duties of
the Chief Financial Officer.
Section 5.10. SALARIES AND COMPENSATION. The salaries, if any, of the
officers elected by the board of directors shall be fixed from time to time by
the board of directors or by such officer as may be designated by resolution of
the board. The salaries or other compensation of any officers, employees and
agents elected, appointed or retained by an officer or committee to which the
board of directors has delegated such a power shall be fixed from time to time
by such officer or committee. No officer shall be prevented from receiving such
salary or other compensation by reason of the fact that he is also a director of
the corporation.
Section 5.11. RESIGNATIONS. Any officer or agent may resign at any time
by giving written notice of resignation to the board of directors or to the
president or the secretary of the corporation. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5.12. REMOVAL. Any officer, committee member, employee or agent
of the corporation may be removed, either for or without cause, by the board of
directors or other authority which elected or appointed such officer, committee
member or other agent.
Section 5.13. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, shall be filled by
the board of directors or by the officer or committee to which the power to fill
such office has been delegated, as the case may be.
Section 5.14. BOND. The chairman of the board, president, chief
financial officer and treasurer shall give such bond, if any, for the faithful
performance of the duties of such office as shall be required by the board of
directors.
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<PAGE>
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER
Section 6.01. SHARE CERTIFICATES, ISSUANCE. Every shareholder shall be
entitled to have a certificate representing all shares to which he is entitled;
and such certificate shall be signed (either manually or in facsimile) by the
chairman of the board, if any, or by the president or a vice president and by
the secretary or any assistant secretary of the corporation and may be sealed
with the corporate seal or a facsimile thereof. In the event any officer who has
signed, or whose facsimile signature has been placed upon any share certificate
shall have ceased to be such officer because of death, resignation or otherwise,
before the certificate is issued, it may be issued with the same effect as if
the officer had not ceased to be such at the date of its issue. Certificates
representing shares of the corporation shall otherwise be in such form as
provided by statute and approved by the board of directors. Every certificate
exchanged or returned to the corporation shall be marked "CANCELLED", with the
date of cancellation.
Section 6.02. TRANSFER. Transfers of shares shall be made on the books
of the corporation upon surrender of the certificates therefor, endorsed by the
person named in the certificate or by an attorney lawfully constituted in
writing.
Section 6.03. REGISTERED SHAREHOLDERS. Except as otherwise expressly
set forth in these bylaws, the corporation shall be entitled to recognize a
person registered on its books in whose name any shares of the corporation are
registered as the absolute owner thereof with the exclusive rights to receive
dividends, and to vote such shares as owner. Except as otherwise provided by
law, the corporation shall not be bound to recognize any equitable or other
claim regardless of whether the corporation shall have express or other notice
thereof.
Section 6.04. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of
any shares of the corporation shall notify the corporation of any loss,
destruction or mutilation of the certificates therefor, and the board of
directors may, in its discretion, cause new certificates to be issued to him,
upon satisfactory proof of such loss, destruction, or mutilation and, if the
board of directors shall so determine, the deposit of a bond in such form and in
such sum, and with such surety or sureties, as it may direct.
-14-
<PAGE>
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
Section 7.01. DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The
corporation shall indemnify any officer or director who was or is a party or is
threatened to be made a party (which shall include the giving of testimony or
similar involvement) to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by, or in the right of the corporation) by reason of the fact that he
is or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of any
other corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, including any appeal thereof, if he acted in good
faith in a manner he reasonably believed to be in, or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceedings, had no reasonable cause to believe that his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of NOLO CONTENDERE or its equivalent shall
not create, of itself, a presumption that the person did not act in good faith
or in a manner which he reasonably believed to be in, or not opposed to, the
best interest of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
The corporation shall indemnify any person who was or is a party, or is
threatened to be made a party (which shall include the giving of testimony or
similar involvement), to any threatened, pending, or completed action or suit by
or in the right of the corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees,
judgments, fines and amounts paid in settlement (to the extent permitted by
law), including any appeal thereof. Such indemnification shall be authorized if
such person acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable unless, and only to the
extent that, the court in which such proceeding was brought, or any other court
of competent jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
The corporation may, by action of the board of directors and to the
extent provided in such action, indemnify employees and agents as though they
were officers and directors.
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<PAGE>
Section 7.02. EXPENSES. To the extent that a director, officer,
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above, or in
any defense of any claim, issue or matter therein, the corporation shall
indemnify him against expenses (including attorneys' fees) actually and reason
ably incurred by him in connection therewith.
Section 7.03. DETERMINATION OF STANDARD OF CONDUCT. Any indemnification
hereunder, unless pursuant to a determination by a court, shall be made by the
corporation as authorized upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct set forth above. Such
determination shall be made either (1) by the board of directors by a majority
vote of a quorum consisting of directors who were not parties to such
proceeding, (2) by majority vote of a committee duly designated by the board of
directors consisting of two or more directors not at the time parties to the
proceeding, (3) by the shareholders who were not parties to such action, suit or
proceedings, or (4) by independent legal counsel selected in accordance with the
provisions of the Florida Business Corporation Act in a written opinion.
Section 7.04. ADVANCE EXPENSES. To the extent permitted by applicable
law, expenses including attorney's fees incurred by an officer, director,
employee or agent of the corporation in defending any action, suit or proceeding
shall be paid, in the case of an officer or director, and may be paid, in the
case of an employee or agent, by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized herein.
Section 7.05. BENEFIT. The indemnification provided by this Article
shall be in addition to the indemnification rights provided pursuant to the
Florida Business Corporation Act, and shall not be deemed exclusive of any other
rights to which person seeking indemnification may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office (provided that no indemnification may be made
if expressly prohibited by the Florida Business Corporation Act), and shall
continue as to a person who has ceased to be a director, officer, employee or
agent of the corporation and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 7.06. INSURANCE. The corporation shall be empowered to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions contained
herein.
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<PAGE>
Section 7.07. NO RIGHTS OF SUBROGATION. Indemnification herein shall be
a personal right and, the corporation shall have no liability under this Article
VII to any insurer or any person, corporation, partnership, association, trust
or other entity (other than the heirs, executors or administrators of any person
otherwise entitled to indemnification pursuant to the provisions of this Article
VII) by reason of subrogation, assignment or succession by any other means to
the claim of any person to indemnification hereunder.
Section 7.08. INDEMNIFICATION FOR PAST DIRECTORS. Indemnification as
provided in this section shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
Section 7.09. AFFILIATES. For the purposes of this Article, references
to "the corporation" include all constituent corporations absorbed in a
consolidation or merger, as well as the resulting or surviving corporation, so
that any person who is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
Section 7.10. RELIANCE. Each person who shall act as an authorized
representative of the corporation shall be deemed to be doing so in reliance
upon such rights of indemnification as are provided in this Article.
Section 7.11. FUND FOR PAYMENT OF EXPENSES. The corporation may create
a fund of any nature, which may, but need not be, under the control of a
trustee, or otherwise may secure in any manner its indemnification obligations,
whether arising hereunder, under the Articles, by agreement, vote of
shareholders or directors, or otherwise.
Section 7.12. AMENDMENTS. The provisions of this Article VII relating
to indemnification and to the advancement of expenses shall constitute a
contract between the corporation and each of its directors and officers which
may be modified as to any director or officer only with that person's consent or
as specifically provided in this section. Notwithstanding any other provision of
these bylaws relating to their amendment generally, any repeal or amendment of
this Article VII which is adverse to any director or officer shall apply to such
director or officer only on a prospective basis, and shall not limit the rights
of a director or officer to indemnification or to the advancement of expenses
with respect to any action or failure to act occurring prior to the time of such
repeal or amendment.
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.01. CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may designate from time to time.
Section 8.02. DIVIDENDS. The board of directors, at any regular or
special meeting thereof, subject to any restrictions contained in the articles
of incorporation, may declare and pay dividends upon the shares of the
corporation's stock in cash, property or the corporation's shares in accordance
with the Florida Business Corporation Act.
Section 8.03. DEPOSITS. All funds of the corporation shall be deposited
from time to time to the credit of the corporation in such financial
institutions or other depositaries as the board of directors may approve or
designate.
Section 8.04. FISCAL YEAR. The fiscal year of the corporation shall end
on the 31st day of December in each year.
Section 8.05. SEVERABILITY. The provisions of these bylaws shall be
separable each from any and all other provisions of these bylaws, and if any
such provision shall be adjudged to be invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provision hereof, or the powers
granted to this corporation by the articles of incorporation or bylaws.
ARTICLE IX
AMENDMENTS
Section 9.01. AMENDMENTS TO THE BYLAWS. Except as specifically set
forth elsewhere herein or in the articles of incorporation, the board of
directors may amend or repeal these bylaws. The shareholders entitled to vote
thereon may amend or repeal these bylaws even though the bylaws may also be
amended or repealed by the board of directors.
Adopted: July 18, 1995
Amended: July 16, 1996
Amended: August 15, 1997
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<TABLE>
<CAPTION>
EXHIBIT 11
QUIPP, INC. AND SUBSIDIARY
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Diluted 1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
NET INCOME (LOSS) $3,081,304 $2,219,828 $2,096,228
========== ========== ==========
Weighted average number of common
shares outstanding during the year 1,576,556 1,565,765 1,565,765
Add-common equivalent shares (determined using the
"treasury stock" method) representing shares
issuable upon exercise of employee stock options 53,657 0 0
---------- ---------- ----------
Weighted average number of shares used in calculation
of net income per share 1,630,213 1,565,765 1,565,765
========== ========== ==========
Diluted income per common and common
equivalent share 1.89 1.42 1.34
========== ========== ==========
</TABLE>
EXHIBIT 23
To Board of Directors
Quipp, Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-8 of Quipp, Inc., file number 333-6355, of our report dated February 23,
1998, relating to the consolidated balance sheets of Quipp, Inc. and subsidiary
as of December 31, 1997and 1996, 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, 1997, which report appears in the December
31, 1997 annual report on Form 10-K of Quipp, Inc.
/s/ KPMG Peat Marwick LLP
Miami, Florida
February 23, 1998
<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, 1997 and is qualified
in its entirety by reference to such Form 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 822,573
<SECURITIES> 12,845,884
<RECEIVABLES> 5,096,810
<ALLOWANCES> (715,275)
<INVENTORY> 3,530,609
<CURRENT-ASSETS> 22,882,228
<PP&E> 3,791,703
<DEPRECIATION> (1,965,797)
<TOTAL-ASSETS> 25,303,067
<CURRENT-LIABILITIES> 5,693,223
<BONDS> 1,050,000
0
0
<COMMON> 16,365
<OTHER-SE> 18,543,479
<TOTAL-LIABILITY-AND-EQUITY> 25,303,067
<SALES> 27,018,282
<TOTAL-REVENUES> 27,038,147
<CGS> (17,248,863)
<TOTAL-COSTS> (22,521,259)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (61,704)
<INCOME-PRETAX> 4,931,614
<INCOME-TAX> (1,850,310)
<INCOME-CONTINUING> 3,081,304
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,081,304
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 1.89
</TABLE>
