MIAMI, April 16 /PRNewswire-FirstCall/ -- Quipp, Inc. today announced consolidated financial results for the fourth quarter and twelve months ended December 31, 2006. Operating results for both the three month and full year periods were affected significantly by non-cash charges for goodwill impairment and a valuation allowance on Quipp's deferred tax assets.
Net sales for the fourth quarter of 2006 amounted to $6,129,000, reflecting a 23% increase when compared to net sales of $4,998,000 during the same period in 2005, largely due to increased net sales of Newstec products. The Newstec product line, acquired in August 2005, contributed 33% of total net sales in the final quarter of 2006 compared to 13% in the final three months of 2005.
Quipp reported a fourth quarter net loss of $3,180,000 ($2.18 per basic and fully diluted share) compared to a net loss of $473,000 ($0.33 per basic and fully diluted share) during the same period of a year ago. The 2006 fourth quarter loss reflects non-cash charges of $2,591,000 for goodwill impairment and $1,734,000 for the valuation allowance for deferred tax assets. Approximately $984,000 of the deferred tax asset valuation allowance relates to the goodwill impairment charge and did not further increase our fourth quarter 2006 net loss.
For the full year, 2006 net sales amounted to $26,414,000, an increase of 2.4% from the $25,783,000 reported in 2005. The net loss for 2006 totaled $3,294,000 ($2.26 per basic and fully diluted share) following net income of $254,000 in 2005. The non-cash charges for goodwill impairment and the deferred tax valuation allowance were responsible for nearly all of the loss reported for 2006.
Michael Kady, Quipp's President and Chief Executive Officer, stated: "The decline in our stock price, coupled with the requirements of Statement of Financial Accounting Standards No. 142, caused management to determine that the carrying value of goodwill within our balance sheet was impaired. In addition, after consideration of the applicable guidelines specified by Statement of Financial Accounting Standards No. 109, we concluded that the provision of a valuation allowance against our deferred tax asset account was appropriate. While both of these charges significantly affected reported operating results neither had an adverse impact on Quipp's liquidity or upon management's view of our business or its prospects."
Mr. Kady added that, "We are pleased that we have been able to increase sales in each of the past four years, despite a very challenging market environment. This has been accomplished through important additions to the Quipp product offering that address specific areas of growing customer demand. In addition, our cost structure was materially adjusted in 2006 as a result of plant consolidation and workforce reductions. We expect to benefit from these actions in 2007."
Quarter Ended Year Ended
December 31, December
2006 2005 2006 2005
(unaudited)(unaudited) (unaudited)(unaudited)
(000's omitted, except per share data)
Net Sales $ 6,129 $4,998 $26,414 $25,783
Net (Loss) Income $(3,180) $ (473) $(3,294) $ 254
Basic and diluted (loss)
earnings per share $ (2.18) $(0.33) $ (2.26) $ 0.18
New orders during the fourth quarter of 2006 amounted to $8,192,000 as compared to $8,707,000 in the same period of a year ago. Quipp's order backlog totaled $8,909,000 as of December 31, 2006 compared to $6,775,000 at September 30, 2006 and $13,524,000 at December 31, 2005.
The company's balance of cash and marketable securities declined to $3,925,000 at December 31, 2006 from $5,865,000 at December 31, 2005. The reduction resulted from lower deferred revenues, reflecting a slowdown in new orders, costs associated with closure of the Newstec plant in Massachusetts, higher capital expenditures for the upgrade of computer equipment, and payment of quarterly dividends beginning in March 2006.
Due to the significant amount of intangible assets acquired with the purchase of Newstec, non-cash amortization charges affect operating results to a greater degree than was previously the case. Immediately following the Newstec acquisition, Quipp began reporting EBITDA principally to illustrate the impact of the non-cash amortization charges. The following table provides a reconciliation of net (loss) income to EBITDA for the three-month and twelve-month periods ended December 31, 2006 and 2005. Management believes that the presentation of EBITDA will be useful to investors because it will assist them in evaluating management's performance in connection with the Company's core operations by excluding charges that are not reflective of the day-to-day operations of the Company including, for the quarter and year ended December 31, 2006, the goodwill impairment charge and the valuation allowance.
Quarter Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
(000's omitted) (unaudited)(unaudited) (unaudited)(unaudited)
Net (Loss) Income $(3,180) $ (473) $(3,294) $ 254
Add (Deduct):
Net Interest Income (32) (22) (148) (149)
Income Taxes 574 (256) 601 (203)
Goodwill Impairment 2,591 - 2,591 -
Depreciation and
Amortization 126 60 450 239
Intangible Amortization 131 134 522 273
EBITDA $ 209 $ (557) $ 722 $ 414
Quipp, Inc., through its operating subsidiary, Quipp Systems, Inc., designs, manufactures and installs material handling systems and equipment to facilitate the automated inserting, assembly, bundling and movement of newspapers from the printing press to the delivery truck.
CAUTIONARY STATEMENT: This press release contains forward-looking statements that address, among other things, the expected benefit of 2006 cost reduction programs. Actual results could differ materially from those described in the forward looking statements due to, among other things, economic conditions generally and in the newspaper industry, our competition for new orders, cancellation of orders, and delays in shipments and installations.
