MIAMI, March 28 /PRNewswire-FirstCall/ -- Quipp, Inc. today announced consolidated financial results for the fourth quarter and twelve months ended December 31, 2007. A non-cash charge for the impairment of intangible assets significantly affected reported net loss for both the quarter and full year.
Net sales for the fourth quarter of 2007 amounted to $9,999,000, reflecting a 63% increase when compared to net sales of $6,129,000 during the same period in 2006. The higher revenues were related to the substantial completion of four large system projects in the last three months of 2007. In addition, approximately $2,000,000 of shipments, primarily stackers and Quipp Packman packaging systems initially scheduled for third quarter shipment, occurred in the fourth quarter of 2007.
Quipp reported a fourth quarter net loss of $597,000 ($0.40 per basic and fully diluted share) compared to a net loss of $3,180,000 ($2.18 per basic and fully diluted share) during the same period of 2006. The 2007 fourth quarter loss reflects a non-cash charge of $1,090,000 for the impairment of intangible assets that are principally related to the acquisition of Newstec, Inc. in 2005. In 2006, the Company recorded non-cash charges for goodwill impairment and a deferred tax asset valuation allowance, which resulted in an aggregate charge of $3,201,000.
Full year 2007 net sales amounted to $24,617,000, a reduction of 6.8% from the $26,414,000 reported in 2006. The net loss for 2007 totaled $2,706,000 ($1.83 per basic and fully diluted share) following a net loss of $3,294,000 ($2.26 per basic and fully diluted share) in 2006.
Michael Kady, Quipp's President and Chief Executive Officer, stated: "The domestic newspaper industry has suffered from two consecutive years of declining advertising revenues and continued contraction in circulation. We believe that newspaper executives have responded to this industry slowdown by restricting capital spending, which has had an adverse affect on our business. The reduction in Quipp's sales prompted an evaluation of the intangible assets in accordance with Statement of Financial Accounting Standards No. 144. Management determined that the value of the intangible assets was impaired, and that it was appropriate to write-off a portion of these assets. While this charge significantly affected reported net income, it has no adverse impact on Quipp's liquidity or business prospects."
Mr. Kady added that, "Quipp's fourth quarter loss reflects the non-cash intangible asset impairment charge. After adjustment for this and other non- cash charges and benefits, the Company generated positive EBITDA for the quarter."
Quarter Ended Year Ended December 31, December 31, 2007 2006 2007 2006 (unaudited) (unaudited) (unaudited) (unaudited) (000's omitted, except per share data) Net Sales $9,999 $6,129 $24,617 $26,414 Net Loss $ (597) $(3,180) $(2,706) $(3,294) Basic and diluted loss per share $ (0.40) $(2.18) $(1.83) $(2.26)
New orders during the fourth quarter of 2007 amounted to $5,291,000 as compared to $8,192,000 in the same period of a year ago. Quipp's order backlog totaled $6,457,000 as of December 31, 2007 compared to $11,001,000 at September 30, 2007 and $8,909,000 at December 31, 2006.
Quipp's balance of cash and marketable securities declined to $2,391,000 at December 31, 2007 from $3,925,000 at December 31, 2006. The reduction resulted from the net operating loss for the year, coupled with lower deferred revenues (reflecting a slowdown in new orders) and increases in accounts receivable (resulting from the high volume of fourth quarter shipments) and inventory.
Due to the significant amount of intangible assets acquired with the purchase of Newstec, non-cash amortization charges affect net income to a greater degree than was previously the case. Immediately following the Newstec acquisition, Quipp began reporting EBITDA (earnings before interest, taxes, depreciation and amortization) principally to illustrate the impact of the non-cash amortization charges. The following table provides a reconciliation of net income to EBITDA for the three-month and twelve-month periods ended December 31, 2007 and 2006. 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. In particular, we incurred significant charges for intangible asset impairment in the quarter and year ended December 31, 2007 and goodwill impairment in the quarter and year ended December 31, 2006.
Quarter Ended Year Ended December 31, December 31, 2007 2006 2007 2006 (000's omitted) (unaudited) (unaudited) (unaudited) (unaudited) Net Loss $ (597) $(3,180) $(2,706) $(3,294) Add (Deduct): Net Interest Income (24) (32) (164) (148) Income Taxes (75) 574 (75) 601 Intangible Asset Impairment 1,090 - 1,090 - Goodwill Impairment - 2,591 - 2,591 Depreciation and Amortization 111 126 459 450 Intangible Amortization 185 131 686 522 EBITDA $690 $210 $ (710) $722
As previously announced, Quipp has entered into an Agreement and Plan of Merger under which Illinois Tool Works Inc. will acquire Quipp for a price between $4.30 and $5.65 per share in cash. The definitive price will be determined based on adjustments relating to Quipp's cash and cash equivalents and specified indebtedness prior to consummation of the transaction. The Company will not proceed with the transaction if the adjusted price would be less than $4.30 per share, which Quipp believes is unlikely.
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 adjusted price per share in connection with the Agreement and Plan of Merger. 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, delays in shipments and installations, and unanticipated expenditures.
