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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
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OF 1934
For the transition period from to
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Commission file number 0-14870
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Quipp, Inc.
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(Exact name of registrant as specified in its charter)
Florida 59-2306191
- - - ------------------------------------------- ------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) number)
4800 N.W. 157th Street, Miami, Florida 33014
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 623-8700
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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 ( ).
The aggregate market value of voting stock held by non-affiliates of the
Registrant on March 10, 1995 was approximately $12,937,960.*
The number of shares of the Registrant's common stock, $.01 par value,
outstanding at March 10, 1995 was 1,469,465.
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated Where Incorporated
- - - --------------------- ------------------
Part III
Portions of QUIPP, INC. Proxy Statement relating
to 1995 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)
- - - ---------------------------
*Calculated by excluding all shares held by executive officers, directors, and
five percent shareholders of Registrant without conceding that all such person
are "affiliates" of Registrant for purposes of the federal securities laws.
PART I
ITEM 1. BUSINESS
- - - ----------------
Quipp, Inc. (the "Company"), through its wholly-owned subsidiary, Quipp
Systems, Inc., designs and manufactures material handling equipment for the
newspaper industry. The Company's products generally are 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.
The Company's products include the following:
Newspaper Stacker - The Company's newspaper stacker accurately counts and
automatically stacks and ejects newspapers at press speeds of up to 80,000
copies per hour.
Bottomwrapper - The Company's bottomwrapper applies wrapping paper to the
bottom and top, as required, of each newspaper stack to reduce product damage.
Twin-Belt Newspaper Conveyor - The Company's twin-belt newspaper conveyor
transports newspapers in an overlapping stream from a newspaper press to various
locations throughout the mailroom. The Company's conveyor systems include
horizontal and vertical conveyor modules, integrated with direction switching
and other special purpose components arranged to accommodate the building layout
of the newspaper printing facility in which the conveyors are used. The maximum
surface speed that the Company's twin-belt conveyor can accommodate is
approximately 80,000 newspapers per hour.
Fold Compressor - The Company's fold compressor conditions newspapers
prior to stacking or delivery to inserting machines by removing air from each
newspaper and setting a uniform leading edge-fold on each newspaper. The
compressing operation also allows smaller stacks to be produced out of the same
number of papers and improves the accuracy of newspaper counting devices.
Stream Aligner - The Company's stream aligner straightens misaligned
newspapers and centers the newspaper stream for more reliable stacking. The
stream aligner is installed at an end of a conveyor, just prior to stacking.
Newspaper Sensor - The Company's mechanical and laser newspaper sensors
accurately count newspapers at rates of up to 80,000 copies per hour.
Rollerslat Conveyor - The Company's rollerslat conveyor employs an array
of independently rotating rollers and is utilized in the processing of newspaper
stacks prior to bundling.
Centering Pacer - The Company's centering pacer aligns newspaper stacks on
a rollerslat conveyor prior to bottomwrapping or bundling.
Stacker Programmer - This microprocessor-based product controls a
newspaper stacker so that the proper number of newspapers required for each
carrier route or newsstand distributor are stacked into bundles.
Press Production Monitor - This microprocessor-based product utilizes a
variety of sensors to simultaneously count newspapers as they are printed by
multiple presses, thereby reducing waste by assuring timely press shutdown.
This system also provides a computer printout of production data.
Bundle Control System - This sensor-equipped microprocessor monitors the
delivery of bundled newspapers to the shipping dock, controlling conveyors and
diverters so that proper numbers of newspapers are supplied for delivery.
Single Gripper Conveyor - This product transports newspapers or other
printed material by holding individual copies by the spine, one gripper for each
copy. The conveyor offers several advantages over conventional conveyors, the
most significant of which is the flexibility of distribution, including the
ability to release copies at any number of processing points in the mailroom
centers.
Cart Loading System - This system accumulates and loads tied bundles of
printed material into carts for transport to remote areas of the plant or to
distribution centers.
Sort Tray Distribution System - This computer controlled system consists
of wheeled carts fastened together, forming a continuous, chain-like loop, for
transportation of bundles of newspapers from any given packaging line or storage
position to any available truck loading position or temporary storage area.
The Company's products are basically modular in construction with
electronic control circuitry.
The Company's manufacturing activities consist primarily of the assembly
of components comprising its products, the fabrication of some mechanical parts
and testing of the completed products. As of February 1, 1995, the Company's
backlog represented approximately $8,372,985 in firm sales orders, as compared
to $2,651,364 on February 1, 1994. The Company believes that it will satisfy
all orders included in such backlog by end of 1995. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
General" in Item 7.
Approximately 100 vendors supply parts, materials and components for the
Company's 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
presently used primarily for special orders and the development of prototype
parts.
The Company customarily receives a deposit upon the execution of a sales
contract and payment of a substantial portion of the balance of the purchase
price prior to shipment. Any remaining amount due is typically received upon
the completion of installation.
All of the Company's products 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, and many newspaper publishers have purchased standby equipment from
the Company.
The San Diego Union and Dow Jones & Company accounted for approximately
22% and 10%, respectively, of the Company's sales in 1994. The Sacramento Bee
and the San Bernardino Sun each accounted for approximately 10% of the Company's
sales in 1993. Fox Valley Press, Seiken Graphics, Inc. and the San Bernardino
Sun, accounted for approximately 15%, 14% and 12%, respectively, of the
Company's sales in 1992. The Company sells a significant portion of its
products to newspaper publishers in the United States; however, the Company also
has significant foreign sales, which accounted for 11%, 21% and 26% of total
sales in 1994, 1993 and 1992, respectively. The following table indicates the
amount of sales by geographic area during the past three years:
1994 1993 1992
United States $15,088,678 $11,728,815 $14,739,790
Japan 149,472 441,167 2,739,890
Canada 175,031 370,598 980,677
Latin America 1,165,028 1,313,872 0
New Zealand 7,160 5,488 810,209
Other 449,479 929,357 523,421
============ ============ ============
$17,034,848 $14,789,297 $19,793,987
============ ============ ============
In connection with the installation of equipment, the Company will, at the
request of a customer, resell to the customer related equipment that is not
manufactured by the Company. The Company realizes a small mark-up (typically no
more than 10 percent) with respect to the resale of such equipment. Such sales
accounted for approximately 4.0%, 5.0% and 6.0% of the Company's total sales in
1994, 1993 and 1992, respectively.
ACQUISITION OF ASSETS OF HALL PROCESSING SYSTEMS.
- - - -------------------------------------------------
Pursuant to an agreement dated December 21, 1994, the Company purchased,
in December 1994 and January 1995, substantially all of the assets utilized by
Hall Processing Systems ("Hall") in the manufacture and design of stackers,
conveyor systems, wrappers and other related equipment. The purchase price for
the assets was $1,557,500 and 40,000 shares of Company common stock. The
$1,557,500 purchase price was comprised of $657,000 in cash and $900,000 via
delivery of a promissory note. The note is payable over three years and bears
interest at five percent per annum.
In connection with the 40,000 shares of Company Common Stock delivered to
Hall in the transaction, Hall may resell to the Company, on December 21, 1997,
all of such shares other than shares that Hall has sold, or could have sold
under Rule 144 during any three month period commencing after December 21, 1997
in which the closing bid price of the Common Stock remains at or above $6.00 per
share for at least ten consecutive business days. The resale price is $6.00 per
share.
The Company also agreed to purchase certain inventory items that are the
subject of outstanding purchase orders made by Hall prior to the date of the
agreement. The cost of such inventory will be approximately $355,000. The
Company also agreed to assume certain of Hall's warranty obligations, with
respect to which the Company has recorded a warranty reserve of $100,000 as of
December 31, 1994.
OTHER TRANSACTIONS
- - - ------------------
In August 1994, the Company granted the right to manufacture and sell
worldwide, except in the United States, all parts and assemblies associated with
the Company's "Quipp Grip" single gripper conveyor system. In exchange for
granting such right, the Company received $50,000. In addition, the assignee of
the right agreed to absorb all warranty expenses incurred at an installation
site. The Company had previously accrued a warranty reserve of $140,000 with
respect to the installation. This reserve was reversed as part of the recording
of the transaction. The Company retains the patent relating to the product, and
also retains the right to manufacture and sell the "Quipp Grip" conveyor system
worldwide.
In December 1994, the Company sold the rights, title and interest in its
tray system patent, which is utilized in its sort tray distribution system, for
$900,000. In connection with the sale, the purchaser granted to the Company a
license to make, use and sell the tray system for use in the delivery of
signatures and newspapers in the publishing and newspaper industries.
COMPETITION
- - - -----------
The Company believes that its two principal competitors for the newspaper
mailroom equipment business in the United States are IDAB, Inc., ("IDAB") a
subsidiary of EDS Technologies, Inc., and Machine Design Services, a privately
owned company that manufacturers certain types of conveyors. In addition, there
are several other companies that compete in other small segments of the
business.
The Company competes by stressing its engineering expertise and the
quality and reliability of its products and strength of its reputation. The
Company feels it has a competitive edge over certain of its competitors, in that
the Company can deliver an entire mailroom system, while some competitors can
supply only certain components of a system. However, the Company has experienced
strong competition on the basis of price with respect to most of its products.
MARKETING
- - - ---------
The Company's marketing effort is conducted by a five-person sales staff
which calls upon the support of the engineering staff as needed. The Company
has marketed its products domestically primarily through direct solicitation by
its sales staff, participation in trade shows and a modest program of trade
journal advertising. It markets its products in the export markets through
foreign dealers. Some of the foreign dealers are commissioned, while others
purchase the Company's products for resale.
The Company's marketing effort emphasizes the reliability, minimum
installation cost, ease of maintenance and careful handling of newspaper
products incorporated in the design of the Company's products. For prospective
customers, the Company is able to use computer-aided systems to design custom
newspaper handling systems and prepare proposals that describe the equipment,
schedules and prices for each project.
PATENTS
- - - -------
The Company holds 29 U.S. patents, including 14 U.S. patents acquired in
connection with the Company's purchase of Hall Processing Systems, which expire
during the period from 1995 to 2011. The Company also purchased from Hall 16
foreign patents that expire from 1995 to 2007. The Company will continue to
apply for patent protection when deemed advisable; however, the Company believes
that the success of its products ultimately is dependant upon performance,
reliability, and engineering ingenuity and that its patents are not material to
its business.
RESEARCH AND DEVELOPMENT
- - - ------------------------
Research and development expenditures totaled $361,790, $510,072 and
$365,503 in 1994, 1993 and 1992, respectively. In 1994, the Company's research
and development efforts focused on design changes to its newspaper stacker in
order to reduce the manufacturing costs. The Company is now marketing the
redesigned newspaper stacker.
EMPLOYEES
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As of February 1, 1995, the Company had 105 full-time employees. None of
the Company's employees are represented by a union, and the Company considers
its employee relations to be good.
ITEM 2. PROPERTIES
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The Company's administrative and manufacturing operations are located in a
63,000 square foot building in Miami, Florida that is owned by the Company. For
information regarding the Company's financing obligations with respect to this
property, see Note 8 to the Company's Consolidated Financial Statements included
in Item 8.
The Company owns all of the equipment utilized in its manufacturing
operations. In the opinion of management, the Company's properties are adequate
and suitable for its operations.
ITEM 3. LEGAL PROCEEDINGS
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As previously disclosed, on March 16, 1990, Ferag AG, a Swiss Corporation
("Ferag"), filed a complaint against the Company in the United States District
Court for the Southern District of Florida. The complaint alleged that the
Company committed acts of infringement of one or more claims a patent held by
the plaintiff, either directly, contributorily or by inducing others to
infringe. The plaintiff sought a preliminary and final injunction against
further infringement by the Company and certain related persons, an order
directing the Company to account for and pay damages adequate to compensate for
the infringement of the patents, interest and costs, and such other relief as
the Court may deem just and proper. The Company answered that plaintiff's
patent is invalid due to violation of U.S. patent rules and, separately, that
the Company's design does not infringe the provisions of the patent. On
September 15, 1993, the Court found that the Company infringed one of the
patents held by the plaintiff, but that the plaintiff failed to establish
willful infringement by the Company. The Company filed an appeal in the United
States Court of Appeals for the Federal Circuit. On January 24, 1995, the United
States Court of Appeals for the Federal Circuit, declaring plaintiff's patent to
be invalid, reversed the judgment of the lower court. The Company does not know
if Ferag will file a writ of certiorari with the United States Supreme Court.
In April 1994, the Company entered into an agreement with the plaintiff to
stipulate the entry of an order by the District Court providing that, if the
Company's appeal was unsuccessful, the Company will pay a maximum of $1,000,000
in damages plus interest accrued in an escrow account in which the Company would
deposit the $1,000,000. The order was entered by the Court on May 10, 1994 and
the Company deposited $1,000,000 into the escrow account. The court order
provides that if the appeal were successful, amounts in the escrow account would
be returned to the Company, and the Company would be free of all obligations to
Ferag with respect to the use of the invention that was subject to Ferag's
patent claim. The parties also agreed that in the event of a reversal by the
appellate court on some but not all issues, the maximum damages would be
$1,000,000 plus interest on the escrow account. In light of the decision of the
United States Court of Appeals for the Federal Circuit, the Company anticipates
that the $1,000,000, plus interest less escrow agent fees, should be returned to
the Company by April 17, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - - -----------------------------------------------------------
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
- - - ------------------------------------
The names, business experience and ages of all executive officers of the
Company are listed below:
Business Experience During
Name the Past Five Years Age
- - - ----- -------------------------- ------------------
James E. Pruitt President, Chief Executive 60
Officer and Director of the
Company since April 1989.
From April 1986 to
April 1989, Mr. Pruitt was
engaged in his own consulting
business in the graphic
arts and electronics industries.
From 1983 through 1986, he was
President and Chief Executive
Officer of Harris Graphics
Corporation and also served
as its Chairman from 1983
through 1985.
Louis D. Kipp President of Quipp Systems, Inc., 63
since July 1987. Director of the
Company from August 1987 to January
1995. President of the Company from
August 1983 to July 1987, when he
became President of Quipp Systems,
Inc. Treasurer of the Company from
August 1983 to April 1988.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holding
- - - -----------------------------------------------------------------------------
Matters
- - - -------
The Company's Common Stock, $.01 par value, is traded on the Nasdaq
National Market. The following table represents the quarterly high and low
sales prices of the Common Stock during 1994 and 1993, as reported by Nasdaq:
1994 1993
High Low High Low
---- ---- ---- ----
1st Quarter 3 3/4 2 1/2 4 3/8 3 3/4
2nd Quarter 4 3 1/4 4 5/8 3 1/2
3rd Quarter 3 7/8 3 5 4
4th Quarter 8 1/2 3 4 1/4 2 1/2
The number of shareholders of record of the Company's Common Stock as of
March 10, 1995 was 111.
The Company has not paid dividends on its Common Stock since its
inception.
Item 6. Selected Financial Data
- - - -------------------------------
Year ended December 31
------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In thousands, except per share data)
Income Statement
Information:
Net sales $17,035 $14,789 $19,794 $12,976 $12,589
Gross profit 4,893 4,661 5,558 3,316 3,008
Research and
development 362 510 366 590 491
Sale of patent and
license rights 1,090 0 0 0 0
Selling, general
and administrative
expenses 3,653 4,036 4,245 2,721 2,873
Net income (loss) 1,376 321 702 160 (31)
Net income (loss)
per share 0.88 0.21 0.45 0.11 (0.02)
Balance Sheet Information:
(at end of period)
Current assets $14,482 $11,959 $13,105 $11,802 $8,189
Total assets 19,342 14,241 15,194 14,930 11,649
Current liabilities 7,444 3,669 4,548 4,886 1,665
Long-term liabilities 1,350 1,700 1,800 1,900 2,000
Shareholders' equity 10,548 8,871 8,846 8,144 7,984
Book value per share 7.52 6.33 6.02 5.54 5.43
Item 7. Management's Discussion and Analysis of Financial Conditions and Results
- - - -------------------------------------------------------------------------------
of Operations
- - - -------------
Results of Operations
- - - ---------------------
1994 vs. 1993
- - - -------------
Sales during 1994 increased 15% to $17,034,848 from $14,789,297 in 1993.
This increase reflects increased demand and the Company's ability to gain a
greater share of the market. Gross profit as a percentage of sales decreased to
29% in 1994 from 32% in 1993. Although the Company realized increased margins
due to lower manufacturing costs on its newspaper stacker, which comprises
approximately 43% of net sales, gross profit was adversely affected by the
establishment of additional reserves. The reserves were established to provide
for anticipated followup costs on certain installations.
Selling, general and administrative expenses decreased to $3,653,007 in
1994 from $4,036,432 in 1993. As a percentage of sales, selling, general and
administrative expenses decreased to 21% in 1994 from 27% in 1993. The decrease
was primarily due to a decrease in legal expenses and the reversal of a royalty
reserve in the amount of $550,598 established by the Company for the possible
payment of damages in connection with the litigation described in Note 13 to the
Company's Consolidated Financial Statements. This decrease was partially offset
by an increase in bad debts of $274,000.
Research and development expenses decreased $148,282 to $361,790 in 1994
compared to $510,072 in 1993. This decrease was primarily due to the completion
of a program designed to decrease manufacturing costs of the Company. The
Company is now marketing the improved newspaper stacker.
Operating profit was $1,967,930, an increase of $1,853,146, compared to
$114,784 in 1993. This increase was partially due to an increase in the volume
of sales and a decrease in selling, general and administrative expenses, offset
by additional reserves established by the Company for followup costs and bad
debts. Additionally, as discussed in Item 1 above, the Company sold rights in
August 1994 to manufacture and sell worldwide, except in the United States, its
single gripper conveyor system for $50,000 and the assumption by the purchaser
of certain warranty expenses (for which the Company had established a reserve of
$140,000, which has been reversed). In addition, operating income reflects the
Company's sale, in November 1994, of the right, title and interest in its tray
system patent which is utilized in the sort tray distribution system for
$900,000. The Company has retained a license to make, use and sell the tilt
tray system for use in delivery of signatures and newspapers in the publishing
and newspaper industries.
Interest income increased in 1994 by $67,695 due to the increase in the
Company's interest bearing accounts and the increase in interest rates on these
accounts. Interest expense declined $1,426 in 1994 due to the decrease in the
principal balance of the Company's long-term debt.
1993 vs. 1992
- - - -------------
Sales during 1993 decreased 25% to $14,789,297 from $19,793,987 in 1992.
The decrease was attributable to a softening of demand. Gross profit, as a
percentage of sales, increased to 32% in 1993 from 28% in 1992, due to an
increased proportion of sales of standard products, which have lower production
costs than products that are customized to customer specifications.
Selling, general and administrative expenses decreased to $4,036,432 in
1993 from $4,245,280 in 1992. The decrease was primarily due to a decline in
salary, travel, advertising and trade show expenses as a result of improved
control of these expenses. However, as a percentage of sales, selling, general
and administrative expenses increased to 27% in 1993 from 21% in 1992 primarily
due to an increase in legal costs of the Company's patent litigation, and an
increase in warranty expenses due to a possible product performance problem.
Research and development expenses increased $144,569 to $510,072 in 1993
compared to $365,503 in 1992. This increase resulted from expenditures on a
program designed to decrease manufacturing costs of an existing product.
Operating profit was $114,784, a decrease of $832,540 compared to $947,324
in 1992. This decrease was primarily due to a lower volume of sales and an
increase in legal and warranty expenses. The Company's adoption, effective
January 31, 1993, of Statement of Financial Accounting Standards ("SFAS No.
109"), Accounting for Income Taxes, had a cumulative effect of $156,566, thereby
increasing income on the consolidated statement of operations for the year ended
December 31, 1993. See Note 6 to the Company's Consolidated Financial
Statements.
Interest income declined by $15,392 due to the reduction in interest rates
on the Company's interest bearing accounts. Interest expense declined $12,157
due to the reduced interest rates and decrease in the principal balance of the
Company's long-term debt.
General
- - - -------
The Company's backlog as of February 1, 1995 was $8,372,985 compared to
$2,651,364 at the same date last year. All of the February 1, 1995 backlog is
scheduled for shipment in 1995.
The Company currently reserves 1 1/2% of its contract sales revenue for
warranty expenses and believes that such reserves are generally adequate to
cover its anticipated warranty expense.
Liquidity and Capital Resources
- - - -------------------------------
On December 31, 1994, the Company's cash and cash equivalents and current
securities totalled $7,382,624 and the Company's working capital was $7,038,044.
The Company believes its resources are sufficient to fund operations at its
current levels, including the expected expansion of business resulting from its
recent acquisition of the inventory assets of Hall Processing Systems.
See Note 2 to the Company's Consolidated Financial Statements.
Inflation
- - - ---------
The rate of inflation has not had a material impact on the operations of
the Company.
Item 8. Financial Statements
- - - ----------------------------
Index to Financial Statements
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Operations For Each of the Years
in the Three-Year Period Ended December 31, 1994
Consolidated Statements of Shareholders' Equity for Each of
the Years in the Three-Year Period Ended December 31, 1994
Consolidated Statements of Cash Flows for Each of the Years
in the Three-Year Period Ended December 31, 1994
Notes to Consolidated Financial Statements
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Quipp, Inc.:
We have audited the accompanying consolidated balance sheets of Quipp, Inc. and
subsidiary as of December 31, 1994 and 1993 (the "Company") and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1994. 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 Quipp, Inc. and
subsidiary as of December 31, 1994 and 1993 and the results of their operations
and their cash flows for each of the years in the three-year period ended
December 31, 1994, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
March 10, 1995
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
December 31 December 31
ASSETS 1994 1993
---- ----
Current Assets:
Cash and cash equivalents $6,258,859 $4,590,223
Securities available for
sale-current 100,000 600,000
Restricted cash 1,023,765 0
Accounts receivable, net of
allowance of $499,000 in
1994 and $353,000 in 1993 2,621,229 2,639,151
Inventories (Note 5) 3,203,261 2,881,209
Deferred tax asset-current (Note 6) 1,104,432 905,980
Prepaid income tax 0 154,209
Prepaid expenses and other
receivables 170,696 188,539
----------- ----------
Total current assets 14,482,242 11,959,311
Property, plant and equipment, net (Note 7) 2,026,846 1,986,588
Securities available for sale 1,400,000 0
Goodwill (Note 2) 530,742 0
Other assets 874,192 240,552
Deferred tax asset (Note 6) 27,810 54,136
----------- ----------
$19,341,832 $14,240,587
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term
debt (Note 8) $100,000 $100,000
Accounts payable 1,253,719 708,752
Accrued salaries and wages 778,829 553,193
Customer deposits 2,473,363 352,594
Current tax liability 622,720 0
Other accrued liabilities (Note 9) 2,215,567 1,954,620
----------- -----------
Total current liabilities 7,444,198 3,669,159
----------- -----------
Long-term debt (Note 8) 1,350,000 1,700,000
---------- -----------
Contingencies (Note 13)
Total liabilities 8,794,198 5,369,159
----------- -----------
Shareholders' Equity
Common stock - par value $.01 per share
authorized 3,000,000 shares, issued
and outstanding 1,469,465 shares 14,695 14,695
Additional paid-in capital 4,596,090 4,596,090
Retained earnings 5,932,249 4,556,043
Common stock subscribed 300,000 0
Less treasury stock 68,700 shares
at cost (295,400) (295,400)
----------- -----------
Total shareholders' equity 10,547,634 8,871,428
----------- -----------
$19,341,832 $14,240,587
=========== ===========
See accompanying notes to the consolidated financial statements.
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
For Each of the Years in the Three-Year Period Ended December 31, 1994
1994 1993 1992
---- ---- ----
Sales $17,034,848 $14,789,297 $19,793,987
Cost of sales 12,142,121 10,128,009 14,235,880
----------- ----------- -----------
Gross profit 4,892,727 4,661,288 5,558,107
----------- ----------- -----------
Other operating income
and (expense) items:
Sale of patent and license
rights 1,090,000 0 0
Selling, general and
administrative expenses (3,653,007) (4,036,432) (4,245,280)
Research and development (361,790) (510,072) (365,503)
----------- ----------- -----------
(2,924,797) (4,546,504) (4,610,783)
----------- ----------- -----------
Operating profit 1,967,930 114,784 947,324
----------- ----------- -----------
Other income (expense):
Interest income 274,895 207,200 222,592
Interest expense (53,436) (54,862) (67,019)
----------- ----------- -----------
221,459 152,338 155,573
----------- ----------- -----------
Income before income taxes,
extraordinary item, and
cumulative effect of
change in accounting
for income taxes 2,189,389 267,122 1,102,897
Income tax provision 813,183 102,552 423,863
----------- ----------- -----------
Income before extraordinary
item, and cumulative effect
of change in accounting
for income taxes 1,376,206 164,570 679,034
Extraordinary item:
Utilization of net loss
carryforward 0 0 22,936
Cumulative effect of change
in accounting for income
taxes 0 156,566 0
----------- ---------- ----------
Net income $1,376,206 $321,136 $701,970
=========== ========== ==========
Per share amounts:
Income before extraordinary
item and cumulative effect
of change in accounting for
income taxes 0.88 0.11 0.44
Extraordinary item 0.00 0.00 0.01
Cumulative effect of change
in accounting for income
taxes 0.00 0.10 0.00
--------- --------- ----------
Net income per common and
common equivalent share $0.88 $0.21 $0.45
========= ========= ==========
Weighted average number of 1,556,972 1,510,762 1,546,600
common equivalent shares ========= ========= ==========
outstanding
See accompanying notes to the consolidated financial statements.
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For Each of the Years in the Three-Year Period Ended December 31, 1994
Additional
Common Stock Paid-in
Retained
Shares Amount Capital Earnings
------ ---------- ----------- --------
Balance,
January 1, 1992 1,469,465 $14,695 $4,596,090 $3,532,937
Net income 701,970
--------- ------- ---------- ----------
Balance,
December 31, 1992 1,469,465 14,695 4,596,090 4,234,907
Net income 321,136
Purchase of
treasury stock
--------- -------- --------- ----------
Balance,
December 31, 1993 1,469,465 14,695 4,596,090 4,556,043
Net income 1,376,206
Common stock
subscribed
--------- -------- ----------- -----------
Balance,
December 31, 1994 1,469,465 14,695 4,596,090 5,932,249
========= ======== ========== ==========
Common Treasury Stock
Stock at Cost
Subscribed Shares Amount Total
------------ -------- ---------- ----------
Balance,
January 1, 1992 $0 $0 $0 $8,143,722
Net income 701,970
------------ -------- ---------- ----------
Balance,
December 31, 1992 0 0 0 8,845,692
Net income 321,136
Purchase of
treasury stock
68,700 (295,400) (295,400)
------------ ------- --------- ----------
Balance,
December 31, 1993 0 68,700 (295,400) 8,871,428
Net income 1,376,206
Common stock
subscribed 300,000 0 0 300,000
------------ ------- -------- ---------
Balance,
December 31, 1994 $300,000 68,700 ($295,400) $10,547,634
========= ======== ========== ==========
See accompanying notes to the consolidated financial statements.
QUIPP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
For Each of the Years in the Three-Year Period ended December 31, 1994
1994 1993 1992
----- ---- ----
Cash provided by operations:
Net income before extraordinary item $1,376,206 $321,136 $679,034
Extraordinary item 0 0 22,936
---------- -------- --------
Net Income 1,376,206 321,136 701,970
---------- -------- --------
Reconciliation of net income to net
cash provided by (used in)
operations:
Deferred income taxes (87,768) (123,943) (477,405)
Cumulative effect of change in
accounting for income taxes 0 (156,566) 0
Depreciation and amortization 171,424 174,325 306,000
Gain on sale of automobile 0 (4,281) 0
Changes in operational assets
and liabilities:
(Increase) in restricted cash (1,023,765) 0 0
Decrease in receivables 17,922 445,307 862,821
Decrease (increase) in inventories 36,948 (309,866) 218,444
Decrease (increase) in prepaid
income taxes 154,209 (154,209) 0
(Increase) in other assets and
prepaid expenses and other
receivables (356,156) (41,458) (43,806)
Increase in accounts payable
and other liabilities 451,550 312,518 248,611
Increase (decrease) in customer
deposits 2,120,769 (582,583) (896,972)
Increase (decrease) in income taxes
payable 622,720 (609,152) 338,901
------------ --------- --------
Net cash provided by (used in)
operations 3,484,059 (728,772) 1,258,564
------------ --------- ---------
Cash flows from investing activities:
(Increase) decrease in securities
available for sale (900,000) (600,000) 804,636
Capital expenditures (187,923) (216,324) (96,464)
Acquisition of business (377,500) 0 0
------------ --------- ----------
Net cash (used in) provided
by investing activities (1,465,423) (816,324) 708,172
Cash flows from financing activities:
Repayment of debt (350,000) (100,000) (100,000)
Repurchase of stock 0 (295,400) 0
----------- --------- ----------
Net cash used in financing activities (350,000) (395,400) (100,000)
----------- --------- ----------
Increase (decrease) in cash and cash
equivalents 1,668,636 (1,940,496) 1,866,736
Cash and cash equivalents at beginning
of year 4,590,223 6,530,719 4,663,983
----------- ----------- ----------
Cash and cash equivalents at end of $6,258,859 $4,590,223 $6,530,719
year
=========== ========== ==========
Supplemental disclosure of cash payments
made for:
Interest $53,436 $54,862 $67,019
=========== =========== =========
Income taxes $124,022 $985,000 $567,425
=========== =========== ==========
Supplemental disclosure of non-cash
investing activities:
On December 21, 1994 as discussed in Note 2, the Company acquired the
inventory assets of Hall Processing Systems. The purchase price in
1994 included the issuance of common shares of the Company valued at
$300,000 and $657,500 in cash, of which $280,000 was paid in 1995.
See accompanying notes to the consolidated financial statements.
QUIPP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Quipp, Inc. and Quipp Systems, Inc., a wholly-owned subsidiary
(the "Company"). All material intercompany transactions have been eliminated.
OPERATIONS - The Company is in the business of designing and manufacturing
material handling equipment for the newspaper industry.
RESTRICTED CASH - This represents monies held in escrow for possible payment
of damages in regards to the former litigation described in Note 13. The
monies, plus interest, less escrow agent fees, should be released to the Company
on or before April 17, 1995.
INVENTORIES - Inventories are recorded at a lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
ACCOUNTS RECEIVABLE AND CUSTOMER DEPOSITS - The majority of the Company's
sales are on a contract basis which provides for progress payments. Progress
payments are accounted for as customer deposits when received and recorded as
sales upon shipment of the equipment.
GOODWILL - The excess of cost over the fair value of net assets acquired is
amortized on a straight-line basis over 17 years.
RESEARCH AND DEVELOPMENT COSTS - Internal research and development costs are
charged to operations as incurred.
PROPERTY, PLANT AND EQUIPMENT, NET - Property, plant and equipment is carried
at cost. Depreciation is computed using straight-line and accelerated methods.
When assets are retired or otherwise disposed of, the costs and related
accumulated depreciation are removed from the accounts, and any resulting gain
or loss is recognized in income for the period. The cost of maintenance and
repairs is charged to operations as incurred; significant renewals and
betterments are capitalized.
INCOME TAXES - Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", issued by
the Financial Accounting Standards Board ("FASB"). The adoption of this
statement had a cumulative effect of $156,566, thereby increasing income on the
consolidated statement of operations for the year ended December 31, 1993. FAS
109 requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statement or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax basis of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. Under SFAS No. 109,
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. Prior to
January 1, 1993, the Company accounted for income taxes for financial statement
purposes in accordance with Accounting Principles Board (APB) Opinion No.11,
Accounting for Income Taxes.
RECLASSIFICATIONS - Certain reclassifications have been made to conform to
the current year's presentation.
CASH EQUIVALENTS - The Company considers all highly liquid debt investments
purchased with original maturity of three months or less to be cash equivalents.
SECURITIES AVAILABLE FOR SALE - The Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"), effective January 1,
1994. Under SFAS 115, the Company is required to classify any debt and
marketable equity securities in one of three categories: trading, available for
sale, or held for maturity. Securities available for sale are recorded at fair
value. Realized gains and losses from the sales of securities are computed
using the specific identification method. Unrealized gains and losses, net of
the related tax effects, on noncurrent securities are recorded as a separate
component of stockholders' equity until realized.
NET INCOME PER SHARE - Net income per common stock equivalent share has been
computed on the basis of the weighted average number of common and common stock
equivalent shares outstanding.
DEFERRED BOND FINANCING COST - Deferred bond financing costs included in
other assets is being amortized using a method which approximates the effective
yield over the term of issue.
2 ACQUISITION
In December 1994 and January 1995, the Company purchased all the inventory
assets of Hall Processing Systems ("Hall"), in a series of transactions, as well
as used equipment and intellectual property (i.e. patents, drawings, etc.) for
$1.9 million. This purchase price included $657,500 in cash, a 3-year promissory
note in the principal amount of $900,000 and the issuance of 40,000 shares of
the Company's common stock valued at $300,000, or $7.50 per share. In
connection with the 40,000 shares of Company common stock delivered to Hall in
the transaction, Hall may resell to the Company, on December 21, 1997, all of
such shares other than shares Hall has sold, or could have sold under Rule 144
during any three month period commencing after December 21, 1997 in which the
closing bid price of the common stock remains at or above $6.00 per share for at
least ten consecutive business days. The purchase of approximately $900,000 of
inventory was concluded in January 1995.
The purchase has been accounted for by the purchase method in 1994 and the
net assets relating to the part of the transaction which closed in December 1994
are included in the Company's December 31, 1994 consolidated balance sheet based
upon their estimated fair values at the date of acquisition. The excess of the
purchase price over the estimated fair value of the net assets acquired was
recorded as goodwill in the amount of $530,742.
3 SALE OF PATENT AND LICENSE RIGHTS
In August 1994, the Company sold the rights to manufacture and sell
worldwide, except in the United States, its single gripper conveyor system for
$190,000. In exchange for granting such right, the Company received $50,000. In
addition, the assignee of the right agreed to absorb all warranty expenses
incurred at an installation site. The Company had previously accrued a warranty
reserve of $140,000 with respect to the installation. This reserve was reversed
as part of the recording of the transaction. The Company retains the patent and
the right to manufacture and sell the single gripper conveyor system worldwide.
In December 1994, the Company sold the rights, title and interest in their
tray system patent for $900,000. The Company, however, was granted a license to
make, use and sell the tilt-tray system for use in the delivery of signatures
and newspapers in the publishing and newspaper industries.
4 SECURITIES AVAILABLE FOR SALE
Securities available for sale are recorded at fair value and consist
primarily of United States government obligations and other short-term
investments with original maturity dates in excess of 90 days. Non current
securities available for sale in the amount of $1,400,000 mature in 1996.
5 INVENTORIES
Inventory consists of the following:
December 31
---------------------------------
1994 1993
-------------- ---------------
Raw Material $1,842,225 $2,351,477
Work in process 1,140,590 307,261
Finished goods 220,446 222,471
------------ -------------
$3,203,261 $2,881,209
============ =============
6 INCOME TAXES
The Company adopted SFAS No. 109 as of January 1, 1993. The cumulative
effect of $156,566 for this change in accounting for income taxes, was included
in the consolidated statement of operations for the year ended December 31,
1993. Prior years' financial statements have not been restated.
The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, 1994 and
1993 are as follows:
1994 1993
Deferred tax assets: ---- ----
Warranty reserve $116,712 $105,316
Inventory obsolescence 79,529 5,348
Allowance for bad debts 231,990 130,737
Contract reserves 374,708 194,725
Accrued royalties 0 203,721
Depreciation 27,810 54,136
Vacation accrual 58,685 53,034
Unicap 61,995 43,495
ANPA 82,346 77,511
Workman's compensation 11,560 0
Other taxes 86,907 92,589
-------- --------
Total gross deferred tax assets 1,132,242 960,612
Less valuation allowance 0 0
--------- --------
Net deferred tax assets 1,132,242 960,612
Deferred tax liability:
Workman's compensation 0 (496)
---------- ---------
Net deferred tax assets $1,132,242 $960,116
========== =========
Income tax expense (benefit) for the years ended December 31, 1994, 1993, and
1992 is as follows:
1994 Current Deferred Total
---- ------- -------- -----
U.S. Federal, $802,594 ($78,187) $724,407
state and local 98,357 (9,581) 88,776
-------- -------- --------
$900,951 ($87,768) $813,183
======== ======== ========
1993
----
U.S. Federal, $201,769 ($110,412) $91,357
state and local 24,726 (13,531) 11,195
-------- -------- --------
$226,495 ($123,943) $102,552
======== ======== ========
1992
----
U.S. Federal, $769,539 ($407,628) $361,911
state and local 131,729 (69,777) 61,952
-------- -------- --------
$901,268 ($477,405) $423,863
======== ======== ========
Reconciliation of the statutory Federal income tax rate and the Company's
effective rate for the years ended December 31, 1994, 1993 and 1992 are as
follows:
1994 1993 1992
------------------ ------------------ -------------
% of % of % of
pretax pretax pretax
Amount earnings Amount earnings Amount earnings
Federal
tax rate $744,392 34.0% $90,821 34.0% $374,985 34.0%
State and
local taxes,
net of
federal
income tax
benefit 58,592 2.7% 7,389 2.8% 40,888 3.7%
Other 10,199 0.4% 4,342 1.6% 7,990 0.7%
------------------- ------------------ ----------------
$813,183 37.1% $102,552 38.4% $423,863 38.4%
=================== ================== ================
In 1992, the Company utilized approximately $61,000 of net operating loss
carryforwards for financial reporting purposes. As of December 31, 1992, the
Company had no remaining net operating loss carryforwards for financial
reporting purposes.
7 PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consists of the following:
December 31
--------------------------------- ESTIMATED
1994 1993 USEFUL
-------------------------------- LIVES
Land $500,500 $500,500
Building and Building
improvements 1,655,940 1,655,940 31.5 Years
Machinery 715,053 659,873 5.0 Years
Furniture and Fixtures 143,438 139,818 5.0 Years
Computer Equipment 379,995 250,872 5.0 Years
Automobiles 34,561 34,561 5.0 Years
---------------- ---------------
$3,429,487 $3,241,564
---------------- ---------------
Less: Accumulated depreciation
and amortization
1,402,641 1,254,976
---------------- ---------------
$2,026,846 $1,986,588
================ ===============
8 LONG-TERM DEBT
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 $1,450,000 at December 31, 1994. The proceeds from this
borrowing were used to refinance the $1,925,000 purchase price of the Company's
administrative and manufacturing facility on May 16, 1988 and to replenish funds
used for building improvements and new equipment. The Bonds are secured by a
letter of credit from a bank, and bore interest at an average rate of 3.2% and
2.8% during 1994 and 1993, respectively. The bonds are payable in installments
of $100,000 in years 1995 through 2007 and $400,000 in 2008. The letter of
credit securing the Company's obligation expires September 16, 1998.
9 OTHER ACCRUED LIABILITIES
December 31
---------------------------------
1994 1993
---------------- ---------------
Professional fees 323,250 122,547
Warranty reserve 422,558 284,636
Provision for taxes other
than income 234,885 364,574
Contract provision 1,012,723 523,950
Accrued royalties (Note 13) 0 550,598
Other 222,151 108,315
---------------- ---------------
$2,215,567 $1,954,620
================ ===============
The Company's warranty reserves are determined based on the Company's
experience with customers' claims arising from the sale of defective
merchandise. Currently, the Company reserves 1 1/2% of its contract sales
revenue for warranty expense. Amounts included in these reserves were charged to
selling expense.
10 SHAREHOLDERS' EQUITY
Stock Options - The Company has adopted an Incentive Stock Option Plan
that is open to participation by employees of the Company and the Company's
wholly-owned subsidiary, Quipp Systems, Inc. ("Quipp Systems"). The exercise
price for options granted under the plan is at least 100% of the fair market
value of the shares on the date the option is granted. Options may be granted
under the plan to purchase a maximum of 225,000 shares of Common Stock. In
1990, options to purchase 125,000 shares were granted to two of the Company's
executives at an exercise price of $1.75 per share. The options expire on March
21, 2000.
Stock Appreciation Rights Plan - Effective August 1, 1987, the Company
adopted a Stock Appreciation Rights Plan for officers and other managerial
employees. The Plan provides, among other things, incentive compensation based
upon appreciation in the market value of the Common Stock of the Company.
Vesting of share units occurs in equal increments over a five-year period.
Payments can be made annually or deferred until not later than the end of the
five year period, or such longer period as may be approved by the Board of
Directors. No more than 100,000 share units may be issued pursuant to the Plan
No share units were awarded in 1994 or 1993. In 1992, 8,500 share units were
awarded. The compensation expense relating to the plan was $132,997, $24,442 and
$38,400 in 1994, 1993, and 1992, respectively.
As a result of the part of the acquisition of Hall assets, discussed in
Note 2, that closed in December 1994, shareholders' equity as of December 31,
1994 reflects common stock subscribed in the amount of $300,000 for the shares
issued by the Company in 1995 to Hall Processing Systems. During the first
quarter of 1995, the Company reclassified this amount upon the issuance of the
stock and recorded the $400 to common stock at par value and the remainder of
$299,600 to additional paid-in capital.
In May 1993, the Board of Directors of the Company authorized a stock
repurchase program, pursuant to which a maximum of $500,000 could be utilized
through May 1994 to repurchase shares of the Company's Common Stock. During
1993, the Company purchased 68,700 shares for an aggregate purchase price of
$295,400. No additional repurchases were made through the end of the repurchase
period.
11 MAJOR CUSTOMERS
The Company sells a substantial portion of its products to newspaper
publishers in the United States; however, foreign sales accounted for 11%, 20%
and 26% of total revenue in 1994, 1993 and 1992, respectively. The San Diego
Union and Dow Jones & Company accounted for approximately 22% and 10%,
respectively, of the Company's sales in 1994. The Sacramento Bee and the San
Bernardino Sun each accounted for approximately 10% of the Company's revenues in
1993. Fox Valley Press, Seiken Graphics, Inc. and the San Bernardino Sun
accounted for approximately 15%, 14% and 12%, respectively, of the Company's
sales in 1992.
12 EMPLOYEE BENEFIT PLAN
Effective January 1, 1992, the Company adopted the Quipp Systems Employee
Savings and Investment Plan (the Plan). The Plan is a defined contribution plan
which covers substantially all full-time employees. The plan permits eligible
employees to contribute to the Plan up to 10% of annual compensation subject to
the maximum allowable contribution limits of Sections 415, 401(K) and 404 of the
Internal Revenue Code. The Company makes a matching contribution to the Plan
equal to 25% of the first 4% of compensation contributed by each participant.
The amount contributed by the Company in 1994 and 1993 was $36,357 and $23,000
respectively. The administrative expenses of the Plan are paid by the Company
as sponsor.
13 CONTINGENCIES
On March 16, 1990, Ferag AG, a Swiss Corporation ("Ferag"), filed a
complaint against the Company in the United States District Court for the
Southern District of Florida. The complaint alleged that the Company committed
acts of infringement of one or more claims of two patents held by the plaintiff,
either directly, contributorily or by inducing others to infringe. The
plaintiff sought a preliminary and final injunction against further infringement
by the Company and certain related persons, an order directing the Company to
account for and pay damages adequate to compensate for the infringement of the
patents, interest and costs, and such other relief as the Court may deem just
and proper. The Company argued that plaintiff's patent is invalid due to
violation of U.S. patent rules and, separately, that the Company's design does
not infringe the provision of the patent. On September 15, 1993, the Court
found that the Company infringed one of the patents held by the plaintiff, but
that the plaintiff failed to establish willful infringement by the Company. The
Company filed an appeal in the United States Court of Appeals for the Federal
Circuit. On January 24, 1995, the United States Court of Appeals for the Federal
Circuit reversed the judgement of the United States Court for the Southern
District of Florida. As a result, the Company reversed amounts previously
accrued for the possible payment of damages of $550,598, by reducing selling,
general and administrative expenses as of December 31, 1994.
In conjunction with the Hall transaction as discussed in note 2, the
Company has a commitment to repurchase 40,000 common shares from Hall Processing
Systems, Inc. at a buy-back price of $6.00 per share on December 31, 1997 at the
option of Hall.
Item 9. Changes in and Disagreements With Accountants on Accounting and
- - - -----------------------------------------------------------------------
Financial Disclosure
- - - --------------------
Not applicable
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
- - - -------------------------------------------------------
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.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- - - -----------------------------------------------------------------------
(a) 1 Financial Statements - See "Index to Financial Statements"
2 The following financial statement schedules for the years 1994,
1993 and 1992 are submitted herewith:
All schedules are omitted because they are
inapplicable.
3 Exhibits
2 Asset Purchase Agreement, dated December 21, 1994, among
the Registrant, Quipp Systems, Inc., Hall Systems Inc.,
Goss Processing Systems, Inc., and Hall Processing Systems.
3.1 Articles of Incorporation, as amended and restated.
(Incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-18, filed
with the Commission on June 30, 1986).
3.2 By-Laws, as amended (Incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-
18, filed with the Commission on June 30, 1986).
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
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988).
10.2.2 Indenture of Trust between the 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 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
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
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 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
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 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 National Bank of North Carolina dated as of
October 1, 1988. (Incorporated by reference to Exhibit
10.4.9 to 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
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990).
*10.3 Quipp, Inc. 1990 Incentive Stock Option Plan. (Incorporated
by reference to Exhibit 4.1 to Registrant's Registration
Statement on Form S-8, filed with the Commission on May
7,1990).
*10.4 Quipp, Inc. Stock Appreciation Rights Plan. (Incorporated
by reference to Exhibit 10.6 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1987).
*10.5 Restated Employment Agreement, dated May 1, 1993, between
Quipp, Inc. and James E. Pruitt (Incorporated by reference
to Exhibit 10.5 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1993).
*10.6 Restated Employment Agreement, dated May 1, 1993, between
Quipp Systems, Inc. and Louis D. Kipp (Incorporated by
reference to Exhibit 10.6 to the Registrant's Annual Report
on form 10-K for the fiscal year ended December 31, 1993).
*10.7 Quipp Systems, Inc. Employee Savings and Investment Plan
(Incorporated by reference to Exhibit 10.7 to the
Registrant's Annual Report on form 10-K for the fiscal
year ended December 31, 1993).
11 Schedule of 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 contact or compensatory plan or arrangement
required to be filed as an exhibit to this form.
(b) The Registrant filed no reports on Form 8-K during the last
quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized:
QUIPP, INC.
Date: March 30, 1995 By: s\ James E. Pruitt
------------------------------
James E. Pruitt, President and
Chief Executive Officer
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\ James E. Pruitt Principal Executive March 30, 1995
- - - ------------------------ Officer and Director
JAMES E. PRUITT
s\ Ralph M. Branca Director March 30, 1995
- - - -----------------------
RALPH M. BRANCA
s\ Jack D. Finley Director March 30, 1995
- - - ------------------------
JACK D. FINLEY
s\ Director March 30, 1995
- - - -----------------------
CRISTINA H. KEPNER
s\ William L. Rose Director March 30, 1995
- - - ------------------------
WILLIAM L. ROSE
s\ Louis D. Kipp Principal Financial March 30, 1995
- - - ------------------------ Officer
LOUIS D. KIPP
s\ Charlotte Porro Principal Accounting March 30, 1995
- - - ----------------------- Officer
CHARLOTTE PORRO
QUIPP, INC.
ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
Exhibits
2 Asset Purchase Agreement, dated December 21, 1994, among the
Registrant, Quipp Systems, Inc., Hall Systems Inc., Goss
Processing Systems, Inc., and Hall Processing Systems.
3.1 Articles of Incorporation, as amended and restated.
(Incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-18, filed
with the Commission on June 30, 1986).
3.2 By-Laws, as amended (Incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-18,
filed with the Commission on June 30, 1986).
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 Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1988).
10.2.2 Indenture of Trust between the 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 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
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 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 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 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 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 National Bank of North Carolina dated as of October
1, 1988 (Incorporated by reference to Exhibit 10.4.9 to
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
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990).
10.3 Quipp, Inc. 1990 Incentive Stock Option Plan. (Incorporated
by reference to Exhibit 4.1 to Registrant's Registration
Statement on Form S-8, filed with the Commission on May 7,
1990).
10.4 Quipp, Inc. Stock Appreciation Rights Plan. (Incorporated
by reference to Exhibit 10.6 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1987).
10.5 Restated Employment Agreement, dated May 1, 1993, between
Quipp, Inc. and James E. Pruitt (Incorporated by reference
to Exhibit 10.6 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1993)
10.6 Restated Employment Agreement, dated May 1, 1993, between
Quipp Systems, Inc. and Louis D. Kipp (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)
10.7 Quipp Systems, Inc. Employee Savings and Investment Plan
(Incorporated by reference to Exhibit 10.7 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993)
10.8 Asset Purchase Agreement, dated December 21, 1994, among the
Registrant, Quipp Systems, Inc., Hall Systems Inc., Goss
Processing Systems, Inc., and Hall Processing Systems.
11 Schedule of Computation of Net Income Per Share.
22 Subsidiary of the Registrant. (Incorporated by reference to
Exhibit 22 to the Registrants Annual Report on Form 10-K for
the fiscal year ended December 31, 1987).
23 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedules