-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HHqxA0rSk0EzL3SFhfXg1T8edV2iBcmm2GUs6FfYdkwdoa1IUElchgj/A/hYi5KM oHIqxiUMeKlS8jfu2BSYPg== 0000897101-96-000869.txt : 19961016 0000897101-96-000869.hdr.sgml : 19961016 ACCESSION NUMBER: 0000897101-96-000869 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IPI INC CENTRAL INDEX KEY: 0000921753 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 411449312 STATE OF INCORPORATION: MN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-23902 FILM NUMBER: 96643763 BUSINESS ADDRESS: STREET 1: 15155 TECHNOLOGY DRIVE CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6129756200 MAIL ADDRESS: STREET 1: 15155 TECHNOLOGY DRIVE CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB [x] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934. FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1996. [ ] Transition report under Section 13 or 15(d) of the Exchange Act. For the transition period from _______________ to _______________ Commission file number 0-23902 IPI, INC. (Exact Name of Small Business Issuer as Specified in its Charter) MINNESOTA 41-1449312 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 15155 TECHNOLOGY DRIVE EDEN PRAIRIE, MN 55344 (Address of Principal Executive Offices) (612) 975-6200 (Issuer's Telephone Number, Including Area Code) NOT APPLICABLE (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 _____ As of October 10, 1996, there were 4,734,087 Common Shares outstanding. IPI, INC. Table of Contents Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended August 31, 1996 and 1995. 3 Condensed Consolidated Balance Sheets as of August 31, 1996 and November 30, 1995. 4 Condensed Consolidated Statements of Cash Flows for the Nine Months ended August 31, 1996 and 1995. 5 Notes to Condensed Consolidated Financial Statements. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 7-8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 9 Item 2. Changes in Securities 9 Item 3. Defaults Upon Senior Securities 9 Item 4. Submission of Matters to Vote of Security Holders 9 Item 5. Other Information 9 Item 6. Exhibits and Reports of Form 8-K 9 Signatures 10 PART I. FINANCIAL INFORMATION ITEM 1.
IPI, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended August 31, August 31, ---------------------------- ---------------------------- 1996 1995 1996 1995 ----------- ----------- ----------- ----------- REVENUES: Royalty fees $ 1,046,000 $ 952,000 $ 3,051,000 $ 2,763,000 Printing equipment, supplies and services 1,498,000 1,654,000 4,047,000 4,232,000 Finance and other income 242,000 226,000 766,000 647,000 ----------- ----------- ----------- ----------- Total Revenues 2,786,000 2,832,000 7,864,000 7,642,000 ----------- ----------- ----------- ----------- COSTS AND EXPENSES: Cost of sales 1,270,000 1,441,000 3,385,000 3,592,000 Selling, general and administrative expenses 793,000 707,000 2,495,000 2,212,000 Amortization of goodwill 58,000 68,000 173,000 126,000 ----------- ----------- ----------- ----------- Total costs and expenses 2,121,000 2,216,000 6,053,000 5,930,000 ----------- ----------- ----------- ----------- Income before provision for income taxes 665,000 616,000 1,811,000 1,712,000 PROVISION FOR INCOME TAXES (246,000) (243,000) (670,000) (676,000) ----------- ----------- ----------- ----------- NET INCOME $ 419,000 $ 373,000 $ 1,141,000 $ 1,036,000 =========== =========== =========== =========== NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ 0.09 $ 0.08 $ 0.24 $ 0.22 =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 4,734,000 4,734,000 4,734,000 4,667,000 =========== =========== =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
IPI, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS August 31,1996 November 30, (Unaudited) 1995 -------------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 998,000 $ 575,000 Short-term investments 2,748,000 2,648,000 Trade accounts receivable 1,649,000 1,485,000 Current maturities of notes receivables, net of allowance for doubtful accounts of $120,000 238,000 238,000 Inventories 395,000 266,000 Prepaid expenses and other 172,000 343,000 Deferred income taxes 531,000 531,000 ------------ ------------ Total current assets 6,731,000 6,086,000 ------------ ------------ PROPERTY AND EQUIPMENT: Property and equipment 929,000 779,000 Less - Accumulated depreciation (542,000) (544,000) ------------ ------------ Property and equipment, net 387,000 235,000 NOTES RECEIVABLE, net of current maturities and allowance for doubtful accounts of $594,000 and $535,000 3,083,000 2,751,000 GOODWILL AND OTHER INTANGIBLES, net of accumulated amortization of $876,000 and $702,000 3,676,000 3,850,000 ------------ ------------ $ 13,877,000 $ 12,922,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 468,000 $ 448,000 Accrued compensation 243,000 411,000 Accrued financing liabilities 175,000 175,000 Deferred revenues 144,000 157,000 Other accrued liabilities 459,000 484,000 ------------ ------------ Total current liabilities 1,489,000 1,675,000 ------------ ------------ SHAREHOLDERS' EQUITY: Common Stock, $.01 par value, 15,000,000 shares authorized: 4,734,087 shares issued and outstanding 47,000 47,000 Additional paid-in capital 15,584,000 15,584,000 Accumulated deficit (3,243,000) (4,384,000) ------------ ------------ Total shareholders' equity 12,388,000 11,247,000 ------------ ------------ $ 13,877,000 $ 12,922,000 ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
IPI, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended August 31, ---------------------------- 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,141,000 $ 1,036,000 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 242,000 189,000 Net change in other operating items: Trade accounts receivable (164,000) (630,000) Inventories (129,000) (122,000) Prepaid expenses and other 47,000 51,000 Accounts payable, accrued liabilities and other (186,000) 428,000 ----------- ----------- Net cash provided by operating activities 951,000 952,000 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Short-term investments, net (100,000) 1,008,000 Purchase of property and equipment, net (221,000) (74,000) Cash investment in Copy Boy -- (1,200,000) Investments in partnerships -- -- Change in notes receivable, net (207,000) (998,000) ----------- ----------- Net cash used by investing activities (528,000) (1,264,000) ----------- ----------- Increase (decrease) in cash and cash equivalents 423,000 (312,000) CASH AND CASH EQUIVALENTS, beginning of year 575,000 482,000 ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 998,000 $ 170,000 =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Income taxes paid $ 606,000 $ 277,000 =========== =========== Sale of partnership interests for note receivable $ 124,000 $ -- =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
IPI, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying interim condensed consolidated financial statements of IPI, Inc. ("IPI" or the "Company") and its wholly owned subsidiaries, Insty-Prints, Inc. ("Insty-Prints") and Digital Output Center ("DOCs"), are unaudited; however, in the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been reflected in the interim periods presented. Such adjustments consisted only of normal recurring items and all intercompany transactions have been eliminated in consolidation. The significant accounting policies, certain financial information and footnote disclosures which are normally included in financial statements prepared in accordance with generally accepted accounting principles, but which are not required for interim reporting purposes, have been condensed or omitted. The operating results for the interim periods presented are not necessarily indications of the operating results to be expected for the full fiscal year. The accompanying financial statements of the Company should be read in conjunction with the Company's audited financial statements for the years ended November 30, 1995 and 1994 and the notes thereto, included in the Company's Form 10-KSB. 2. ACQUISITION OF COPY BOY In June 1995, Insty-Prints acquired the franchise contracts and IPI acquired certain notes receivable of Copy Boy Corporation ("Copy Boy"), a franchisor of 21 fast turnaround business printing locations in the Phoenix and Tucson markets, pursuant to an Asset Purchase Agreement. All 21 Copy Boy stores were converted to new 20 year Insty-Prints, Inc. franchise agreements. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW As of August 31, 1996, the Company, through its wholly-owned subsidiary Insty-Prints, had 307 franchise locations and one Company-owned store. Included in the franchise locations are 19 former Printhouse Express, Inc. (Printhouse) stores which were acquired in March 1994, and 21 former Copy Boy stores acquired in June 1995, all of which were subsequently converted to Insty-Prints stores. RESULTS OF OPERATIONS The following table sets forth certain statement of operations data as a percentage of sales for the periods indicated:
Quarter Ended Nine Months Ended August 31, August 31, --------------- ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- Revenues: Royalty fees 37.5% 33.6% 38.8% 36.1% Printing equipment, supplies and services 53.8 58.4 51.5 55.4 Finance and other income 8.7 8.0 9.7 8.5 ----- ----- ----- ----- Total revenues 100.0 100.0 100.0 100.0 ----- ----- ----- ----- Costs and expenses: Costs of sales 45.6 50.9 43.0 47.0 Selling, general and administrative expenses 28.4 25.0 31.7 29.0 Amortization of goodwill 2.1 2.4 2.2 1.6 ----- ----- ----- ----- Total costs and expenses 76.1 78.3 76.9 77.6 ----- ----- ----- ----- Income before provision for income taxes 23.9 21.7 23.0 22.4 Provision for income taxes 8.8 8.6 8.5 8.9 ----- ----- ----- ----- Net income 15.1% 13.1% 14.5% 13.5% ===== ===== ===== =====
FOR THE QUARTERS AND NINE MONTHS ENDED AUGUST 31, 1996 AND 1995 Revenues. Total revenues for the three months ended August 31, 1996, consisting of royalties, sales of printing equipment, supplies and services, franchise fees and finance and other income, totaled $2,786,000, a decrease of $46,000 or 1.6% as compared to the three months ended August 31, 1995. Total revenues for the nine months ended August 31, 1996, of $7,864,000 were up 2.9% or $222,000 as compared to the nine months ended August 31, 1995. Royalty revenue increased to $1,046,000 in the third quarter of 1996 from $952,000 in 1995, an increase of 9.9%. For the nine months ended August 31, 1996, royalty revenue was $3,051,000, an increase of 10.4% or $288,000 as compared to the same period a year ago. Royalties increased primarily as a result of the increased number of franchise locations open during the respective periods and increased same store sales in 1996 over 1995. Sales of printing equipment, supplies and services for the third quarter of 1996 decreased $156,000 or 9.4% to $1,498,000 from $1,654,000 for 1995. For the nine months ended August 31, 1996, sales of products were $4,047,000 or 4.4% below the sales of $4,232,000 for the same period a year ago. The slight decrease in 1996 was primarily the result of decreased sales of printing related equipment, which was partially offset by an increase in the sale of electronic publishing equipment, both reflecting store owner needs. Finance and other income was $242,000 for the quarter ended August 31, 1996, which is a $16,000 or 7.1% increase from the same quarter a year ago. For the nine months ended August 31, 1996, finance and other income was $766,000 or 18.4% greater than the $647,000 for the same period a year ago. For the nine month period of 1996, the increased revenues were primarily as a result of increased franchise fee income, which was $88,000 higher than in the 1995 period. Overall, franchise fee revenues are not significant in 1996 or 1995 due to the Company's emphasis during such periods on increasing existing franchise location sales and growth through acquisitions. Cost of Sales. Cost of sales decreased to $1,270,000 for the third quarter of 1996 from $1,441,000 for 1995, a decrease of 11.9% for the quarter. Average margins in products and services were slightly higher for the nine months of 1996 at 16.4% compared to 15.1% for the 1995 period. The decrease in the third quarter is the result of a related decrease in sales of printing equipment, supplies and services. Nine month cost of sales amounts totaled $3,385,000 in 1996, compared to $3,592,000 in 1995, a decrease of $207,000 or 5.8%. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $793,000 for the third quarter 1996 compared to $707,000 for 1995, an increase of 12.2%. Total expenses for the nine months ended August 31, 1996 were $2,495,000 compared to $2,212,000 for 1995, representing a 12.8% increase. The increase in expenses was due primarily to increased compensation expense for salary increases, staff additions, incentive program accruals and the start-up of the DOCs subsidiary in March 1996. Amortization of Goodwill. Increases in the amortization of goodwill for the nine month period in 1996 results from the June 1995 Copy Boy acquisition. Income Tax Expense. The Company's effective combined federal and state income tax rate is estimated to be 37% for 1996 due primarily to the effect of state income taxes, non-taxable income on municipal securities and non-deductible goodwill amortization. LIQUIDITY AND CAPITAL RESOURCES During the nine months ending August 31, 1996, the Company generated $951,000 from operating activities, compared to $952,000 of funds provided from operating activities for the nine month period of 1995. While net cash provided by operations was essentially the same for the two periods, there were offsetting factors as shown on the Statements of Cash Flow. The Company has no bank debt or credit facility. Operations are funded from cash generated by the business. Franchise owners may finance their equipment purchases through a $6,000,000 equipment financing facility established with First Bank Systems by Insty-Prints for the benefit of the franchise owners. This facility is guaranteed by IPI and Insty-Prints, whose contingent liability under this agreement is capped at $2,400,000. A loss reserve of $175,000 is recorded on the balance sheet at August 31, 1996, representing estimated losses on these guarantees, net of equipment value. The aggregate balance outstanding under this facility as of August 31, 1996 was approximately $3,859,000. The Insty-Prints' franchise business is not highly seasonal, and franchise owners' sales generally follow overall economic trends. The business is not impacted materially by inflation. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company and its subsidiary are involved in various legal proceedings arising in the normal course of business, none of which is expected to result in any material loss to the Company or its subsidiary. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to Vote of Security-Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K Page (a) Exhibits. *11 Statement Re: Computation of per share earnings 11 (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter for which this report is filed. ---------------------- *Filed herewith SIGNATURES 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. Dated: October 10, 1996 IPI, Inc. By: /S/ Robert J. Sutter Robert J. Sutter President and Chief Executive Officer (Principal Executive Officer) By: /S/ David M. Engel David M. Engel Chief Financial Officer (Principal Financial and Accounting Officer) EX-11 2 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 IPI, INC. AND SUBSIDIARIES STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE (In Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended August 31, August 31, ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- Primary and fully diluted earnings per share Weighted average number of issued shares outstanding 4,734 4,734 4,734 4,667 Effect of: 1994 Long-Term Incentive Plan -- -- -- -- 1994 Non-Employee Directors' Stock Option Plan -- -- -- -- ------ ------ ------ ------ Shares outstanding used to compute primary and fully diluted earnings per share 4,734 4,734 4,734 4,667 ====== ====== ====== ====== Net Income $ 419 $ 373 $1,141 $1,036 ====== ====== ====== ====== Primary and fully diluted earnings per share $ 0.09 $ 0.08 $ 0.24 $ 0.22 ====== ====== ====== ======
EX-27 3 FINANCIAL DATA SCHEDULE
5 9-MOS NOV-30-1996 DEC-01-1995 AUG-31-1996 3,746,000 0 2,007,000 120,000 395,000 6,731,000 929,000 542,000 13,877,000 1,489,000 0 0 0 47,000 12,341,000 13,877,000 4,047,000 7,864,000 3,385,000 6,053,000 0 0 0 1,811,000 670,000 1,141,000 0 0 0 1,141,000 .24 .24
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