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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 2002.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- --------------------
Commission file number 0-14870
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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 (I.R.S. Employer Identification No.)
incorporation or organization)
4800 N.W. 157th Street, Miami, Florida 33014
--------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (305) 623-8700
---------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----------- -----------
The number of shares of the registrant's common stock, $.01 par value,
outstanding at August 1, 2002 was 1,417,775.
QUIPP, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets - 3
June 30, 2002 and December 31, 2001
Unaudited Condensed Consolidated Statements of Income - 4
Three and six months ended June 30, 2002 and 2001
Unaudited Condensed Consolidated Statements of Cash Flows - 5
Six months ended June 30, 2002 and 2001
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosure about Market Risk 10
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 11
2
PART 1 - FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
QUIPP, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 December 31, 2001
- -------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,408,410 $ 1,627,937
Securities available for sale 5,769,633 6,123,240
Accounts receivable, net 3,033,476 3,382,105
Inventories 2,696,597 2,498,935
Deferred tax asset-current 837,448 837,448
Prepaid expenses and other receivables 357,952 320,475
Current portion of notes receivable 238,940 238,940
------------ ------------
TOTAL CURRENT ASSETS 14,342,456 15,029,080
Other assets:
Property, plant and equipment, net 1,857,717 1,959,258
Notes receivable 330,635 477,882
Goodwill 281,001 312,201
Other assets 57,260 60,620
------------ ------------
$ 16,869,069 $ 17,839,041
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 100,000 $ 100,000
Accounts payable 959,252 1,113,510
Accrued salaries & wages 544,054 433,359
Deferred revenues 1,593,761 2,275,351
Contract contingencies 716,112 857,976
Other accrued liabilities 1,067,844 1,073,314
------------ ------------
TOTAL CURRENT LIABILITIES 4,981,023 5,853,510
Long-term debt 650,000 650,000
------------ ------------
TOTAL LIABILITIES 5,631,023 6,503,510
Shareholders' equity:
Common stock - par value $.01 per share, authorized
8,000,000 shares, issued 1,426,025 in 2002 and 2001 14,260 14,260
Additional paid-in capital -- --
Treasury stock, at cost (9,250 shares in 2002 and 2001) (148,375) (148,375)
Retained earnings 11,314,407 11,414,178
Other comprehensive income 57,754 55,468
------------ ------------
11,238,046 11,335,531
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 16,869,069 $ 17,839,041
============ ============
See accompanying notes to the unaudited condensed consolidated financial
statements
3
QUIPP INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 2002 June 30, 2001 JUNE 30, 2002 June 30, 2001
- ---------------------------------------------------------------------------------------------------------
Net sales $ 4,470,885 $ 6,492,852 $ 8,175,368 $ 12,593,588
Cost of sales 3,221,666 4,425,248 6,116,609 8,390,656
------------------------------------------------------------
GROSS PROFIT 1,249,219 2,067,604 2,058,759 4,202,932
Operating expenses:
Selling , general and
administrative expenses 1,166,617 1,395,011 2,254,362 2,854,154
Research and development 119,697 162,898 168,606 329,410
------------------------------------------------------------
OPERATING (LOSS) PROFIT (37,095) 509,695 (364,209) 1,019,368
------------------------------------------------------------
Other income (expense):
Miscellaneous income (expense) 1,413 -- 73,471 (33,417)
Interest income 49,438 140,395 109,043 350,484
Interest expense (3,116) (7,966) (5,922) (16,118)
------------------------------------------------------------
47,735 132,429 176,592 300,949
------------------------------------------------------------
Income (loss) before
income tax benefit (expense) 10,640 642,124 (187,617) 1,320,317
Income tax benefit (expense) 18,471 231,980 (87,846) 476,836
------------------------------------------------------------
NET INCOME (LOSS) $ 29,111 $ 410,144 $ (99,771) $ 843,481
- ---------------------------------------------------------------------------------------------------------
Per share amounts:
Basic income (loss) per common share 0.02 0.23 (0.07) 0.46
Diluted income (loss) per common share 0.02 0.23 (0.07) 0.45
Basic average number of common 1,417,775 1,778,082 1,417,587 1,840,276
shares outstanding
Diluted average number of common and
common equivalent shares outstanding 1,417,775 1,810,690 1,417,587 1,896,192
=========================================================================================================
See accompanying notes to the unaudited condensed consolidated financial
statements.
4
QUIPP INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
2002 2001
- ---------------------------------------------------------------------------------------------------------
Cash provided by (used in) operations:
Net (loss) income $ (99,771) $ 843,480
Reconciliation of net income to net cash (used in) provided by operations:
Depreciation and amortization 138,054 146,062
Goodwill impairment 31,200 --
Issuance of shares to employees -- 215,675
Changes in operational assets and liabilities:
Accounts receivable, net 348,629 (408,795)
Inventories (197,662) (507,456)
Other assets, prepaid expenses and
other receivables (34,117) 339,942
Notes receivable 147,247 (129,407)
Accounts payable and accrued liabilities (49,033) (858,550)
Deferred revenues (681,590) (363,509)
Contract contingencies (141,864) 182,522
Income taxes payable -- 143,336
----------------------------
NET CASH USED IN OPERATIONS (538,907) (396,700)
----------------------------
Cash flow from investing activities:
Securities purchased (2,927,591) (6,539,486)
Securities sold 3,283,484 18,528,209
Capital expenditures (36,513) (100,339)
----------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 319,380 11,888,384
----------------------------
Cash flow from financing activities:
Tender offer -- (11,449,154)
Purchase of Shares for Treasury -- (110,250)
Conversion of stock options -- 1,027,813
----------------------------
NET CASH USED IN FINANCING ACTIVITIES -- (10,531,591)
----------------------------
(Decrease) Increase in cash and cash equivalents (219,527) 960,093
Cash and cash equivalents at the beginning of the year 1,627,937 1,086,101
- ---------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE QUARTER $ 1,408,410 $ 2,046,194
=========================================================================================================
SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION:
Unrealized gain on securities available for sales, net of taxes $ 2,286 $ --
SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS:
Interest $ 5,922 $ 16,118
Income Taxes $ -- $ 333,500
=========================================================================================================
See accompanying notes to the unaudited condensed consolidated financial
statements.
5
QUIPP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of Quipp, Inc. and its wholly owned subsidiaries Quipp Systems,
Inc. and Quipp International Sales Corporation. All significant intercompany
transactions have been eliminated in consolidation. The accompanying unaudited
condensed consolidated financial statements have been prepared on a basis
consistent with that used as of and for the year ended December 31, 2001 and, in
the opinion of management, reflect all adjustments (principally consisting of
normal recurring accruals) considered necessary to present fairly the financial
position of Quipp, Inc. as of June 30, 2002 and the results of its operations
and cash flows for the six months ended June 30, 2002. The results of operations
for the six months ended June 30, 2002 are not necessarily indicative of the
results to be expected for the full year ending December 31, 2002. These
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles in the United
States of America for complete financial statements. The unaudited consolidated
balance sheet at December 31, 2001 was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
NOTE 2 - INVENTORIES
Inventories at June 30, 2002 and December 31, 2001 include material, labor and
factory overhead and are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method. The composition of
inventories at June 30, 2002 and December 31, 2001 is as follows:
JUNE 30, 2002 December 31, 2001
- --------------------------------------------------------------------------------
Raw materials $1,334,208 $1,553,020
Work in process 597,419 497,214
Finished goods 131,921 109,745
------------------------------
Subtotal
Shipped to customers 2,063,548 2,159,979
633,049 338,956
------------------------------
Total $2,696,597 $2,498,935
------------------------------
Inventory includes $633,049 and $338,956 at June 30, 2002 and December 31, 2001,
respectively, for equipment shipped to customers but not recognized as a sale.
Although the equipment has been shipped to our customer, the corresponding
revenue and cost of sales have not been recognized because either risk of loss
has not transferred to the customer or the equipment requires complex
installation services. The Company will recognize the sales and cost of sales
for this equipment when the risk of loss transfers to our customer or when
installation services are complete.
NOTE 3- REVENUE RECOGNITION
Revenue is generally recognized when all significant contractual obligations
have been satisfied and collection of the resulting accounts receivable is
reasonably assured. Revenue from equipment sales requiring basic installation
services is recognized at the time of delivery in accordance with the applicable
contractual terms and is recorded net of discounts and allowances. Revenue from
equipment sales requiring more complex installation services is recognized when
the installation services are complete according to contractual terms and is
recorded net of discounts and allowances.
6
NOTE 4 - INCOME PER SHARE
Basic income (loss) per share is based upon the weighted average number of
common shares outstanding during the periods presented. Diluted income (loss)
per share is computed using the weighted average number of common and dilutive
common equivalent shares outstanding in the periods presented. Diluted common
equivalent shares assume the exercise of options, calculated under the treasury
stock method, using the average stock market prices during the periods. For the
three and six months ended June 30, 2002, common stock equivalents were not
considered because their effect is antidilutive.
NOTE 5 - RECLASSIFICATIONS
Certain reclassifications have been made to the 2001 unaudited condensed
consolidated financial statements to conform to the 2002 presentation.
NOTE 6 - RECENT PROUNOUNCEMENTS
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141")
and Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 was effective July 1, 2001, except
with regard to business combinations initiated prior to July 1, 2001, and SFAS
142 is effective January 1, 2002. Under SFAS 142, goodwill and intangible assets
determined to have indefinite lives will no longer be amortized but will be
subject to impairment by reviewing the discounted expected future cash flow. As
of June 30, 2002, the Company determined that $31,200 ($.01 per share) of
goodwill was impaired. The impairment write-off was charged to selling, general
and administrative expenses.
In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143 "Accounting for Asset Retirement Obligations." This statement addresses the
diverse accounting practices for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. The
adoption of this standard had no effect on the unaudited condensed consolidated
financial statements.
In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-lived Assets" ("SFAS
144"). This statement is effective for fiscal years beginning after December 15,
2001. This statement supersedes SFAS 121, while retaining many of the
requirements of such statement. Under SFAS 144, assets held for sale will be
included in discontinued operations if the operations and cash flows will be or
have been eliminated from the ongoing operations of the Company. The adoption of
this standard had no effect on the unaudited condensed consolidated financial
statements.
In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment to FASB
Statement No. 13, and Technical Corrections" (SFAS 145). SFAS No. 145 rescinds
SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," SFAS No.
44, "Accounting for Intangible Assets of Motor Carriers" and SFAS No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" and amends
SFAS No. 13, "Accounting for Leases." This statement updates, clarifies and
simplifies existing accounting pronouncements. The adoption of this standard had
no effect on the unaudited condensed consolidated financial statements.
In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Exit or Disposal Activities" ("SFAS 146"). SFAS 146 will be
effective for the Company for disposal activities initiated after December 31,
2002. The Company does not expect the adoption of SFAS No. 146 to have a
significant impact on its unaudited condensed consolidated financial position.
7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS: THE FOLLOWING TABLE PRESENTS STATEMENTS OF OPERATIONS
EXPRESSED AS A PERCENTAGE OF NET SALES FOR THE PERIODS INDICATED:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
(UNAUDITED) (Unaudited) (UNAUDITED) (Unaudited)
- ---------------------------------------------------------------------------------------------------
NET SALES 100.0% 100.0% 100.0% 100.0%
GROSS PROFIT 27.9% 31.8% 25.2% 33.4%
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 26.1% 21.5% 27.6% 22.7%
RESEARCH AND DEVELOPMENT 2.7% 2.5% 2.1% 2.6%
OTHER INCOME, NET 1.1% 2.0% 2.2% 2.4%
NET INCOME 0.7% 6.3% (1.2%) 6.7%
THREE MONTHS ENDING JUNE 30, 2002
- ---------------------------------
NET SALES for the three months ended June 30, 2002 were $4,470,885, a decrease
of $2,021,967 (31.1%) from net sales of $6,492,852 for the corresponding period
in 2001. We believe that the decrease reflects a slowdown in the U.S. economy
and specifically a continued reduction in capital spending by newspaper
publishers. The decline in advertising revenues for the newspaper industry has
been widely reported, and we believe the sales of our products have been
adversely affected as a result.
GROSS PROFIT for the three months ended June 30, 2002 was $1,249,219, a decrease
of $818,385 (39.6%) as compared to $2,067,604 for the corresponding period in
2001. Gross profit as a percentage of sales for the three months ended June 30,
2002 decreased to 27.9% compared to 31.8% for the corresponding period in 2001.
Our gross profit percentage decreased primarily due to the allocation of fixed
manufacturing overhead costs to lower production and shipment volumes.
Additionally, we incurred higher than expected custom design, production and
installation costs on some larger custom orders for our palletizer and automatic
cart loading systems.
SELLING, GENERAL AND ADMINISTRATIVE expenses for the three months ended June 30,
2002 were $1,166,617, a decrease of $228,394 (16.4%) as compared to $1,395,011
for the corresponding period in 2001. During the three months ending June 30,
2001, we recorded nonrecurring charges of $118,000 with respect to efforts by
the Special Committee of our Board of Directors to evaluate strategic
alternatives for the Company. The remaining decrease in selling, general and
administrative expenses is primarily due to workforce reductions and lower
variable expenses, including bonuses and commissions.
RESEARCH AND DEVELOPMENT expenses for the three months ended June 30, 2002 were
$119,697, a decrease of $43,201 (26.5%) as compared to $162,898 for the same
period in 2001. Much of our research and development efforts were focused on the
completion of our newly released Series 500 Stacker and high-resolution ink-jet
printer for our bottomwrapper product line.
OTHER INCOME AND EXPENSE (NET) for the three months ended June 30, 2002 was
$47,735 as compared to $132,429 for the same period in 2001. The decrease in
interest income resulted primarily from lower interest rates on our securities
available for sale and lower average balances of cash and cash equivalents and
securities available for sale in 2002.
8
SIX MONTHS ENDING JUNE 30, 2002
- -------------------------------
SALES for the six months ended June 30, 2002 were $8,175,368, a decrease of
$4,418,220 (35.1%) over net sales of $12,593,588 in the same period in 2001. We
believe that the decrease reflects a slowdown in the U.S. economy and
specifically a continued reduction in capital spending by newspaper publishers.
The decline in advertising revenues for the newspaper industry has been widely
reported, and we believe the sales of our products have been affected as a
result.
GROSS PROFIT for the six months ended June 30, 2002 was $2,058,759, a decrease
of $2,144,173 (51.0%) as compared to $4,202,932 for the corresponding period in
2002. Gross profit as a percentage of sales for the six months ended June 30,
2002 decreased to 25.2% compared to 33.4% for the corresponding period in 2001.
Our gross profit percentage decreased primarily due to the allocation of fixed
manufacturing overhead costs to lower production and shipment volumes.
Additionally, we incurred higher than expected custom design, production and
installation costs on some larger custom orders for our palletizer and automatic
cart loading systems.
SELLING, GENERAL AND ADMINISTRATIVE expenses for the six months ended June 30,
2002 were $2,254,362, a decrease of $599,792 (21.0%) as compared to $2,854,154
for the same period in 2001. During the six months ending June 30, 2001, we
recorded non recurring charges of $368,000 with respect to efforts by the
Special Committee of our Board of Directors to evaluate strategic alternatives
for the Company and with respect to compensation charges relating to our payment
to several non-executive employees of an amount equal to the excess of market
value over the exercise price of options surrendered by the employees. The
remaining decrease in selling, general and administrative expenses is primarily
due to workforce reductions and lower variable expenses, including bonuses and
commissions.
RESEARCH AND DEVELOPMENT expenses for the six months ended June 30, 2002 were
$168,606, a decrease of $160,804 (48.8%) as compared to $329,410 for the same
period in 2001. For the six months ended June 30, 2002, our research and
development efforts were focused primarily on the completion of our newly
released Series 500 Stacker and high-resolution ink-jet printer for our
bottomwrapper product line.
OTHER INCOME AND EXPENSE (NET) for the six months ended June 30, 2002 was
$176,592 as compared to $300,949 for the same period in 2001. This decrease
resulted primarily from lower interest rates on our securities available for
sale and lower average balances of cash and cash equivalents and securities
available for sale in 2002. The decrease was offset in part by a gain on the
sale of securities available for sale and increase in royalty income relating to
our automatic cart loading system.
GENERAL
The Company's backlog as of June 30, 2002 was $3,224,000 compared to $6,611,000
at December 31, 2001 and $5,376,000 at June 30, 2001. Orders for the three and
six months ended June 30, 2002 were $2,614,000 and $4,500,000 respectively
compared to orders of $2,292,000 and $7,130,000 for the three and six months
ending June 30, 2001. We believe that our shipments and booked orders for the
three and six months ending June 30, 2002 reflect depressed economic conditions
resulting in reduced capital spending by newspaper publishers.
LIQUIDITY
On June 30, 2002, cash and cash equivalents and securities available for sale
totaled $7,178,043 as compared to $7,751,177 at December 31, 2001, a decrease of
$573,134 or 7.4%. This decrease was due primarily to cash used in operations as
a result of reduced sales and incoming orders. Working capital on June 30, 2002
was $9,361,435, an increase of $185,865 from $9,175,570 at December 31, 2001.
While our cash, cash equivalents and marketable securities may decline further
in the second half of 2002 if adverse economic conditions continue, we do not
anticipate that we will be required to seek external funding to support our
operations.
CRITICAL ACCOUNTING POLICIES
In preparing our financial statements, management is required to make estimates
and assumptions that, among other things, affect the reported amounts of assets
and liabilities and reported amounts of revenues and expenses. These estimates
are most significant in connection with our critical accounting polices, namely
those of our accounting policies that are most important to the representation
of our financial condition and results and require management's most difficult,
subjective or complex judgments. These judgments often result from the need to
make estimates about the effects of matters that are inherently uncertain.
9
We believe that our most critical accounting policies relate to (1) revenue
recognition involving complex installation services, (2) allowance for doubtful
accounts, (3) contract contingencies, and (4) warranty reserves.
Revenue recognition
- -------------------
Our revenue recognition policy with regard to equipment sales requiring complex
installation services calls for recognition when installation is complete.
Because complex installations often require ongoing customer consultation even
after a product is installed and is running, management must often make a
judgment as to when an installation may be considered complete. We believe that
an installation generally is complete when our customers can use the equipment
in their daily operations and collection of the resulting accounts receivable is
reasonably assured. Nevertheless, there is a degree of subjectivity involved in
making this determination, which can affect the timing of recognition of
revenues and the related cost of sales.
Allowance for doubtful accounts
- -------------------------------
We continuously monitor collections and payments from our customers and maintain
an allowance for doubtful accounts based upon our historical experience and any
specific customer collection issues that we have identified. While such credit
losses have historically been within our expectations and the provisions
established, there is a risk that credit losses in the future will exceed those
that have occurred in the past, in which case our operating results would be
adversely affected.
Contract contingencies
- ----------------------
Contract contingencies involve estimates of additional expenses that may be
incurred after installation is complete. These expenses occur when additional
efforts are required to assure customer satisfaction.
Warranty reserves
- -----------------
We record a warranty reserve based on our actual historical return rates and
repair costs at the time of sale. While our warranty costs have historically
been within our expectations and the provisions established, future returns or
repair costs could be in excess of our warranty reserves. Additionally, we do
not have extensive warranty claims experience with recently introduced products.
A significant increase in product return rates or a significant increase in the
costs to repair our products would adversely affect our operating results for
the period or periods in which such returns or additional costs materialize.
FORWARD LOOKING STATEMENTS
The statements contained in this quarterly report on Form 10-Q, including
statements concerning shipment of backlog orders, possible reduction of cash,
cash equivalents and securities available for sale, adequacy of available
resources to support operations and risk of interest rate fluctuations are
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. A number of important factors could cause actual
results to differ materially from those in the forward looking statements
including, but not limited to, economic conditions generally and specifically in
the newspaper industry, demand and market acceptance for new and existing
products, the impact of competitive products and pricing, manufacturing
capacity, delays in shipment, cancellation of customer orders, engineering and
production difficulties, and extraordinary movements in interest rates.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
MARKET RISK
We are exposed to various types of market risk, including changes in interest
rates. Market risk is the potential loss arising from adverse changes in market
rates and prices such as interest rates. We do not enter into derivatives or
other financial instruments for trading or speculative purposes. Because our
cash and investments exceed short and long-term debt, the exposure to interest
rates relates primarily to our investment portfolio. Due to the short-term
maturities of our investments, we believe we bear no significant risk arising
from interest rate fluctuations. We are managing our investment portfolios to
increase return on investments, but, in order to ensure safety and liquidity,
will only invest in instruments with credit quality and which are traded in a
secondary market. The counterparties are major financial institutions and
government agencies.
10
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report:
10.1 Change of Control agreement between Quipp, Inc. and
Michael S Kady, dated June 25, 2002.
99.1 Certificate of the Chief Executive Officer of Quipp,
Inc. pursuant to Title 18, Section 1350 of the United
States Code.
99.2 Certificate of the Principal Financial Officer of
Quipp, Inc. pursuant to Title 18, Section 1350 of the
United States Code.
(b) No reports on form 8-K were filed during the quarter for which this
report is filed.
11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUIPP, INC.
Date: August 12, 2002 By: /S/ Michael S. Kady
-------------------------
Michael S. Kady
President and Chief Executive Officer
By: /S/ Eric Bello
-------------------------
Eric Bello
Treasurer (Principal financial and accounting
officer)
12