FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-3315
PUBLICKER INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-0991870
(State of incorporation) (I.R.S. Employer
Identification No.)
One Post Road, Fairfield, CT 06430
(Address of principal executive offices)
(203) 254-3900
(Registrant's telephone number, including area code)
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 .
Number of shares of Common Stock outstanding as of March 31, 1998: 12,899,597
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 1998 AND DECEMBER 31, 1997
(in thousands of dollars)
March 31, December 31,
1998 1997
(unaudited)
ASSETS
Current assets:
Cash, including short-term investments of $11,457
in 1998 and $11,779 in 1997 $11,981 $13,077
Trade receivables, less allowance for doubtful accounts 4,046 3,935
Inventories 2,463 2,461
Other 374 691
Total current assets 18,864 20,164
Property, plant and equipment:
Land 234 234
Buildings 2,334 2,331
Machinery and equipment 3,798 3,555
Less - accumulated depreciation (2,333) (2,197)
4,033 3,923
Goodwill 2,860 2,672
Other assets 1,398 1,412
$27,155 $28,171
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 134 $ 134
Trade accounts payable 1,170 1,091
Accrued liabilities 4,690 5,331
Total current liabilities 5,994 6,556
Long-term debt 1,106 1,138
Other non-current liabilities 9,566 9,604
Total liabilities 16,666 17,298
Shareholders' equity:
Common shares, $0.10 par value,
Authorized, 40,000,000 shares
Issued - 16,551,849 shares in 1998 and 1997 1,655 1,655
Additional paid-in capital 49,915 49,915
Accumulated deficit (since January 1, 1984) (32,894) (32,816)
Common shares held in treasury, at cost (8,187) (7,881)
Total shareholders' equity 10,489 10,873
$27,155 $28,171
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(in thousands of dollars except per share data)
(unaudited)
Three Months Ended
March 31,
1998 1997
Sales and revenues:
Sales of goods $ 4,165 $ 4,115
Revenues from services 2,458 1,713
6,623 5,828
Costs and expenses:
Cost of sales 2,860 2,889
Cost of services 1,640 1,245
General and administrative expenses 1,794 1,942
Selling expenses 332 300
6,626 6,376
Income (loss) from operations (3) (548)
Other (income) expenses:
Interest income (149) (194)
Interest expense 90 108
Cost of pensions - nonoperating 227 226
Other (income) expense (93) 270
75 410
Net income (loss) $ (78) $ (958)
Basic earnings (loss) per common share $ (.01) $ (.06)
Weighted average shares outstanding 13,011,597 15,152,960
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(in thousands of dollars except share data)
(unaudited)
Accumulated
Common Shares Additional Deficit Common Share-
Shares Paid-in Since Treasury holders'
Issued Amount Capital 1-1-84 Shares (1) Equity
Balance -
Dec. 31, 1997 16,551,849 $1,655 $49,915 $(32,816) $(7,881) $10,873
Purchase of
treasury shares - - - - (306) (306)
Net loss - - - (78) - (78)
Balance -
March 31, 1998 16,551,849 $1,655 $49,915 $(32,894) $(8,187) $10,489
(1) Represents 3,652,252 and 3,440,352 of common shares held in treasury at
March 31, 1998 and December 31, 1997, respectively.
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(in thousands of dollars)
(unaudited)
Three Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net income (loss) $ (78) $ (958)
Adjustments to reconcile loss to net cash
used in continuing operations:
Depreciation and amortization 155 275
Changes in operating assets and
liabilities, excluding effect of acquisition:
Trade receivables (106) (544)
Inventories 48 408
Other current assets 317 41
Other assets 14 (2)
Trade accounts payable 79 (428)
Accrued liabilities (652) (1,046)
Other non-current liabilities (38) 184
Net cash used in operating operations (261) (2,070)
Cash flows from investing activities:
Payments for business acquired (295) -
Proceeds from sale of discontinued operations 5 1,145
Capital expenditures (207) (48)
Net cash provided by (used in)
investing activities (497) 1,097
Cash flows from financing activities:
Repayments of term loans and notes payable (32) (395)
Proceeds from the issuance of common shares - 25
Purchase of treasury stock (306) (1,209)
Net cash used in financing activities (338) (1,579)
Net decrease in cash (1,096) (2,552)
Cash - beginning of period 13,077 18,318
Cash - end of period $ 11,981 $ 15,766
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements reflect all
normal and recurring adjustments that are, in the opinion of management,
necessary to present fairly the financial position of Publicker Industries Inc.
and subsidiary companies as of March 31, 1998 and the results of their
operations and their cash flows for the three months ended March 31, 1998 and
1997. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Cash Flow Information
Cash paid for interest during the three months ended March 31, 1998 and 1997
was approximately $34,000 and $42,000, respectively. No cash was paid for
income taxes during the first three months of 1998 and 1997.
Earnings (loss) per common share
During 1997, the Company adopted FASB Statement 128 Earnings Per Share.
Basic net income (loss) per common share is based on net income divided by the
weighted average number of common shares outstanding during each period
(13,011,597 in 1998 and 15,152,960 in 1997). Diluted net income (loss) per
common share assumes issuance of the net incremental shares from stock options
and warrants at the later of the beginning of the year or date of issuance.
Diluted net income (loss) per share was not computed for 1998 and 1997 as the
effect of stock options and warrants were antidilutive.
Note 2 - INVENTORIES
Inventories at March 31, 1998, and December 31, 1997, consisted of the
following:
March 31, December 31,
1998 1997
(in thousands)
Raw materials and supplies $ 1,432 $ 1,407
Work in process 511 282
Finished goods 520 772
$ 2,463 $ 2,461
Note 3 - STOCKHOLDERS' EQUITY
In August 1996, the Board of Directors of the Company authorized the
repurchase of up to 1,000,000 shares of the Company's common stock. The Board
of Directors increased the Company's share repurchase authorization to 3,300,000
shares in 1997. Through March 31, 1998, the Company repurchased 3,094,100
shares of common stock under the buy-back program for an aggregate cost of
$4,270,000. On April 30, 1998, the Company announced the conclusion of the
common stock buy-back program.
In March 1998, the Company initiated an odd-lot buy-back offer allowing
holders of less than 100 shares a convenient method of selling their shares of
the Company's common stock. A total of 7,112 shares were tendered under the
offer which expired on April 3, 1998.
Note 4 - INCOME TAXES
As of March 31, 1998, approximately $79,000,000 of U.S. tax loss
carryforwards (subject to review by the Internal Revenue Service), expiring from
1998 through 2012, were available to offset future taxable income. As a result
of a corporate revaluation during 1984, tax benefits resulting from the
utilization in subsequent years of net operating loss carryforwards existing as
of the date of the corporate revaluation will be excluded from the results of
operations and directly credited to additional paid-in capital when realized.
As of March 31, 1998, approximately $5,000,000 of the Company's U.S. tax loss
carryforwards predated the corporate revaluation.
As of March 31, 1998, deferred tax assets of approximately $30,000,000,
principally relating to the tax benefit of the Company's U.S. tax loss
carryforwards, were offset by a full valuation allowance. As of March 31, 1998,
approximately $2,000,000 of deferred tax assets predated the corporate
revaluation. Subsequent adjustments to the valuation allowance with respect to
the deferred tax assets which predated the corporate revaluation would be
directly credited to additional paid-in capital.
Note 5 - ENVIRONMENTAL LITIGATION
On April 12, 1996, a Consent Decree among the Company, the Environmental
Protection Agency, the U.S. Department of Justice and the Pennsylvania
Department of Environmental Protection ("PADEP") was entered by the U.S.
District Court for the Eastern District of Pennsylvania which resolved all of
the United States' and PADEP's claims against the Company for recovery of costs
incurred in responding to releases of hazardous substances at a facility
previously owned and operated by the Company. Pursuant to the Consent Decree,
the Company will pay a total of $14,350,000 plus interest to the United States
and the Commonwealth of Pennsylvania. Through March 31, 1998, the Company
has made principal payments aggregating $10,146,000. In April 1998, the
Company made additional payments totaling $846,000 plus interest. Further
payments totaling $3,358,000 plus interest will be made to the United States
and Commonwealth of Pennsylvania over the next four years.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Operating Results - First Quarter
Publicker's consolidated sales and revenues of $6,623,000 for the first
quarter of 1998 increased by approximately 14% from $5,828,000 for the first
quarter of 1997. The improvement was due to increased revenues at the
Company's services segment. Cost of sales and services increased from
$4,134,000 in 1997 to $4,500,000 in 1998 principally as a result of higher
revenues. General and administrative expenses for the first quarter of 1998
decreased by approximately 8% to $1,794,000 from $1,942,000 in 1997 as a result
of overhead expense reductions. The Company's loss from operations for the
first quarter of 1998 totaled $3,000 compared to a loss of $548,000 for the
first quarter of 1997. The Company reported a net loss of $78,000, or $.01 per
share, for the first quarter of 1998 compared to a net loss of $958,000, or
$.06 per share, for the first quarter of 1997.
Sales for the Company's manufacturing segment (which consists of one
subsidiary company, Greenwald Industries, Inc.) for the first quarter of 1998
were $4,165,000 compared to $4,115,000 for the first quarter of 1997. This
segment had income from operations of $711,000 for the first quarter of 1998
compared to $674,000 for the same period in 1997. In February 1998, Greenwald
Industries entered into a joint venture to develop, manufacture and market
smart card systems for the commercial laundry and other industries. The new
entity, Greenwald Intellicard, Inc., is located in Boynton Beach, Florida.
Costs associated with this investment amounted to $295,000. The 1998 results
were negatively impacted by Greenwald Intellicard start-up costs of
approximately $40,000.
Revenues for the Company's services segment (which consists of one
subsidiary company, Orr-Schelen-Mayeron & Associates, Inc.) increased by
approximately 43% to $2,458,000 for the first quarter of 1998 compared to
$1,713,000 for the first quarter of 1997. An increase in production employee
headcount and improved efficiencies accounted for the jump in revenues versus
1997. The services segment had income from operations for the first quarter
of 1998 of $78,000 compared to a $210,000 loss for the same period in 1997.
Liquidity
During the first three months of 1998, cash, including short-term
investments, decreased by $1,096,000 to $11,981,000 at March 31, 1998.
Operating activities consumed cash of $261,000, investing activities consumed
cash of $497,000 and financing activities consumed cash of $338,000. Operating
activities consisted of the loss from operations coupled with a slight increase
in working capital. Investing activities consisted of acquisition costs
associated with the Greenwald Intellicard investment of $295,000 and capital
expenditures of $207,000. Financing activities principally consisted treasury
stock purchases of $306,000.
On April 15, 1998, the company announced the execution of a letter of
intent to purchase substantially all of the assets of a group of five
businesses from Katy Industries, Inc. The businesses to be acquired manu-
facture machinery and equipment and other specialty industrial products.
These businesses serve the baking, wood products, metal working, railroad and
electronics industries. The five businesses had aggregate 1997 sales of
approximately $38 million. Consummation of the acquisition is subject to,
among other things, negotiation and execution of a mutually satisfactory
definitive acquisition agreement and satisfaction or waiver of the conditions
that may be specified in that agreement. The Company expects to finance the
purchase price with cash on hand and borrowings.
On April 12, 1996, the Consent Decree that settles the Company's
environmental litigation with the United States and the Commonwealth of
Pennsylvania was entered by the U.S. District Court for the Eastern District
of Pennsylvania, and became effective. Through March 31,1998, the Company
has made principal payments aggregating $10,146,000. In April 1998, the
Company made additional payments totaling $846,000 plus interest. Further
payments totaling $3,358,000 plus interest will be made to the United States
and the Commonwealth of Pennsylvania over the next four years.
In August 1996, the Board of Directors of the Company authorized the
repurchase of up to 1,000,000 shares of the Company's common stock. The Board
of Directors increased the Company's share repurchase authorization to
3,300,000 shares in 1997. Through March 31, 1998, the Company repurchased
3,094,100 shares of common stock under the buy-back program for an aggregate
cost of $4,270,000. In April 1998, the Company announced that in light of
the proposed acquisition discussed above, the common stock buy-back program
has concluded.
During the first three months of 1998, the Company's capital expenditures
totaled $207,000. The Company has not entered into any material commitments
for capital expenditures and retains the ability to increase or decrease
capital expenditure levels as required. The Company anticipates that it will
be able to fund its capital expenditures during 1998 with its available cash
resources as well as through capital equipment financing.
At March 31, 1998, approximately $79 million of U.S. tax loss
carryforwards (subject to review by the Internal Revenue Service), expiring
from 1998 through 2012, were available to offset future taxable income.
Year 2000
The Company has begun modifying and upgrading its existing computer
systems to process transactions in the year 2000 and beyond. While management
expects all systems to be year 2000 compliant, there can be no assurance that
all such modifications will be successful. Anticipated spending for these
modifications and upgrades are not expected to have a significant impact on
the Company's ongoing results of operations.
Outlook
The Company's primary objective for 1998 is to identify a suitable
acquisition candidate or candidates. As of April 30, 1998, the Company had
approximately $11,000,000 in cash on hand. The Company intends to use such
funds, together with other potential borrowings, to seek out and acquire one or
more businesses. As discussed above, the Company has executed a letter of
intent to acquire five businesses from Katy Industries, Inc. There can be no
assurance that the parties will enter into a definitive agreement or ultimately
consummate the proposed acquisition of the five businesses.
Special Note Regarding Forward-Looking Statements: A number of
statements contained in this discussion and analysis are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 that involve risks and uncertainties that could cause actual results
to differ materially from those expressed or implied in the applicable
statements. These risks and uncertainties include but are not limited to:
Greenwald's dependance on the mechanical coin meter market and its potential
vulnerability to technological obsolescence; OSM's dependence on key personnel
and general economic conditions in the Midwest; and the Company's ability to
successfully implement its acquisition strategy including the identification,
financing and consummation of any acquisition transaction.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
General Litigation
Various legal proceedings are pending against the Company. The Company
considers all such proceedings to be ordinary litigation incident to the
character of its business. Certain claims are covered by liability insurance.
The Company believes that the resolution of those claims to the extent not
covered by insurance will not, individually or in the aggregate, have a
material adverse effect on the financial position or results of operations
of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit 27: Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K: None
AND SUBSIDIARY COMPANIES
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.
PUBLICKER INDUSTRIES INC.
(Registrant)
Date: May 14, 1998 /s/ James J. Weis
James J. Weis, President and
Chief Executive Officer
/s/ Antonio L. DeLise
Antonio L. DeLise, Vice President
Finance, Principal Financial and
Accounting Officer