SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
Amendment No.1
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 3, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-9919
PSC INC.
(Exact name of Registrant as Specified in Its Charter)
New York 16-0969362
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
675 Basket Road, Webster, New York 14580
(Address of principal executive offices) (Zip Code)
(716) 265-1600
(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 12 months preceding (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 February 2, 1998, there were 11,498,753 shares of common stock
outstanding.
===============================================================================
<PAGE>
Explanatory Note:
The undersigned registrant hereby amends Item 1 (Financial Statements) and Item
2 (Management's Discussion and Analysis of Financial Condition and Results of
Operations) in their entirety to correct an error in the computation of the loss
on the sale of the Company's TxCOM subsidiary during the second quarter of 1997.
PSC Inc. AND SUBSIDIARIES
INDEX
PAGE NUMBER
PART I FINANCIAL INFORMATION
Item 1 -Financial Statements
Consolidated Balance Sheets as of
October 3, 1997 (Unaudited) and
December 31, 1996.................................3 - 4
Consolidated Statements of Operations and
Retained Earnings for the three
and nine months ended:
October 3, 1997 (Unaudited) and
September 27, 1996 (Unaudited) ...................5 - 6
Consolidated Statements of Cash Flows
for the nine months ended:
October 3, 1997 (Unaudited) and
September 27, 1996 (Unaudited) .......................7
Notes to Consolidated Financial
Statements (Unaudited) ..........................8 - 11
Item 2 -Management's Discussion and Analysis of
Financial Condition and Results of
Operations .....................................12 - 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
<TABLE>
PSC Inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
<CAPTION>
October 3, 1997 December 31, 1996
--------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,843 $ 10,838
Accounts receivable, net of allowance
for doubtful accounts of $1,476
and $1,101, respectively 32,307 29,501
Inventories 18,670 18,306
Prepaid expenses and other 1,906 1,244
----------- ----------
TOTAL CURRENT ASSETS 56,726 59,889
PROPERTY, PLANT AND EQUIPMENT, net
of accumulated depreciation of $11,580
and $8,225, respectively 36,243 35,612
DEFERRED TAX ASSETS 23,696 24,773
INTANGIBLE AND OTHER ASSETS, net of accumulated
amortization of $11,377 and $6,238, respectively 58,997 63,087
---------- ----------
TOTAL ASSETS $175,662 $183,361
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
PSC Inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
(Continued)
<CAPTION>
October 3, 1997 December 31, 1996
--------------- -----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 11,904 $ 9,459
Accounts payable 17,627 15,681
Accrued expenses 8,774 11,448
Accrued payroll and related employee benefits 4,548 7,509
Accrued acquisition related restructuring costs 1,778 4,009
----------- ---------
TOTAL CURRENT LIABILITIES 44,631 48,106
LONG-TERM DEBT, less current maturities 102,765 117,994
OTHER LONG-TERM LIABILITIES 2,499 1,960
SHAREHOLDERS' EQUITY
Preferred shares, par value $.01;
10,000 authorized, 110 and 0 shares issued
and outstanding. $11,000 aggregate liquidation value 1 -
Common shares, par value $.01;
40,000 authorized, 11,273 and 11,161
shares issued and outstanding 112 112
Additional paid-in capital 65,766 54,891
Retained earnings (39,351) (39,432)
Cumulative translation adjustment (524) (33)
Less treasury stock, 39 shares
repurchased, at cost (237) (237)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 25,767 15,301
--------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $175,662 $183,361
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
PSC Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(All amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended
October 3, September 27,
1997 1996
---- ----
<S> <C> <C>
NET SALES $53,191 $46,486
COST OF SALES 31,024 26,203
--------- ---------
Gross profit 22,167 20,283
OPERATING EXPENSES
Engineering, research and development 3,108 3,655
Selling, general and administrative 10,377 11,430
Amortization of intangibles resulting
from business acquisitions 1,674 1,447
Acquisition related restructuring and
other costs - 70,068
----------- --------
Income/(loss) from operations 7,008 (66,317)
INTEREST AND OTHER INCOME /(EXPENSE):
Interest expense (3,039) (2,577)
Interest income 91 131
Other income/(expense) (25) (196)
----------- -----------
(2,973) (2,642)
--------- ----------
Income/(loss) from continuing operations before
income tax provision/(benefit) 4,035 (68,959)
Income tax provision/(benefit) 1,493 (25,515)
-------- ----------
Income/(loss) from continuing operations 2,542 (43,444)
Discontinued operations:
Loss from discontinued operations, net of tax - (114)
Loss on disposal of discontinued operations, net of tax - (5,217)
----------- -----------
Total loss from discontinued operations - (5,331)
----------- -----------
Net income/(loss) $2,542 ($48,775)
====== ========
NET INCOME/(LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE
Primary:
Continuing operations $0.21 ($3.99)
Discontinued operations - (0.49)
------------- ---------
Net income/(loss) $0.21 ($4.48)
========= =======
Fully diluted:
Continuing operations $0.20 ($3.99)
Discontinued operations - (0.49)
------------ ------
Net income/(loss) $0.20 ($4.48)
========= =======
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING
Primary 11,838 10,895
Fully diluted 12,426 10,895
RETAINED EARNINGS/(ACCUMULATED DEFICIT):
Retained earnings/(Accumulated deficit)
beginning of period ($41,893) $8,194
Net income/(loss) 2,542 (48,775)
---------- --------
Retained earnings/(Accumulated deficit),
end of period ($39,351) ($40,581)
========= ========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
PSC Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(All amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
Nine Months Ended
October 3, September 27,
1997 1996
---- ----
<S> <C> <C>
NET SALES $154,728 $90,037
COST OF SALES 91,947 52,034
------- --------
Gross profit 62,781 38,003
OPERATING EXPENSES:
Engineering, research and development 9,996 7,046
Selling, general and administrative 33,917 24,456
Severance and other costs 4,191 -
Amortization of intangibles resulting
from business acquisitions 5,022 1,893
Acquisition related restructuring and
other costs - 70,068
--------- ------
Income/(loss) from operations 9,655 (65,460)
INTEREST AND OTHER INCOME /(EXPENSE):
Interest expense (9,793) (2,603)
Interest income 342 368
Other income/(expense) 83 (238)
----------- ------------
(9,368) (2,473)
--------- -----------
Income/(loss) from continuing operations before
income tax provision/(benefit) 287 (67,933)
Income tax provision/(benefit) 105 (25,135)
Income/(loss) from continuing operations 182 (42,798)
Discontinued operations:
Gain/(loss) from discontinued operations, net of tax 164 (114)
Loss on disposal of discontinued operations,
net of tax (265) (5,217)
----------- -----------
Total loss from discontinued operations (101) (5,331)
---------- -----------
Net income/(loss) $ 81 ($48,129)
========= ========
NET INCOME/(LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Continuing operations $0.02 ($4.16)
Discontinued operations (0.01) (0.52)
------------ -----------
Net income/(loss) $0.01 ($4.68)
========= ==========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 12,148 10,274
RETAINED EARNINGS/(ACCUMULATED DEFICIT):
Retained earnings/(Accumulated deficit)
beginning of period ($39,432) $7,548
Net income/(loss) 81 (48,129)
----------- ----------
Retained earnings/(Accumulated deficit),
end of period ($39,351) ($40,581)
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
PSC INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
Nine Months Ended
October 3, September 27,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income /(loss) $81 ($48,129)
Adjustments to reconcile net income/(loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 10,466 5,612
Loss on disposition of assets 109 3,860
Acquired research and development write-off - 60,100
Loss on disposition of discontinued operations 265 5,217
Deferred tax assets 1,077 (21,046)
Decrease (increase) in assets:
Accounts receivable (3,918) 2,065
Inventories (366) (2,318)
Prepaid expenses and other (218) (5,281)
Increase (decrease) in liabilities:
Accounts payable 2,094 2,314
Accrued expenses (2,973) 4,085
Accrued payroll and commissions (2,983) (86)
Accrued acquisition related restructuring costs (3,090) 5,812
-------- ------
Net cash provided by operating activities 544 12,205
--------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (5,887) (2,376)
Additions to intangible and other assets (63) (2,005)
Cash paid for acquisition of business - (7,134)
Proceeds from sale of investments - 4,167
------------ ---------
Net cash used in investing activities (5,950) (7,348)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to debt 5,000 -
Additions to long-term liabilities 1,938 67
Principal repayments of long-term debt (17,784) (83)
Payment of other long-term liabilities (456) (38)
Issuance of preferred stock, net 10,212 -
Exercise of stock options and sale of common stock 664 1,746
Tax benefit from exercise or early disposition
of certain stock options - 70
---------- -----------
Net cash (used in) provided by financing activities (426) 1,762
--------- ---------
FOREIGN CURRENCY TRANSLATION (1,163) (188)
NET (DECREASE)/INCREASE IN CASH _____
-----------
AND CASH EQUIVALENTS (6,995) 6,431
CASH AND CASH EQUIVALENTS:
Beginning of period 10,838 5,538
-------- ---------
End of period $ 3,843 $11,969
======== =======
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PSC Inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED October 3, 1997 and September 27, 1996
(All amounts in thousands, except per share data)
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared by
the Company without audit. In the opinion of management, these financial
statements include all adjustments necessary to present fairly the
Company's financial position as of October 3, 1997, the results of
operations for the three and nine months ended October 3, 1997 and
September 27, 1996 and its cash flows for the nine months ended October 3,
1997 and September 27, 1996. The results of operations for the three and
nine months ended October 3, 1997 are not necessarily indicative of the
results to be expected for the full year.
Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's December 31, 1996 annual report on
Form 10-K.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
The Company accounts for net income per common and common equivalent share
in accordance with the provisions of Accounting Principles Board Opinion No.
15 (APB No. 15). In March 1997, Statement of Financial Accounting Standards
No. 128 (SFAS No. 128), "Earnings per Share" was issued. SFAS No. 128
replaces primary Earnings Per Share (EPS) with basic EPS. Basic EPS is
computed by dividing reported earnings available to common stockholders by
weighted average shares outstanding. No dilution for common share
equivalents is included. Fully diluted EPS, now called diluted EPS, is
still required. The Company is required to adopt SFAS No. 128 retroactively
for periods ending after December 15, 1997. On a pro forma basis, basic EPS
and diluted EPS were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 3, 1997 October 3, 1997
--------------- ----------------
<S> <C> <C>
Basic EPS:
Continuing operations $0.23 $0.02
Discontinued operations - (0.01)
------- --------
Net income $0.23 $ 0.01
===== ======
Diluted EPS:
Continuing operations $0.22 $0.02
Discontinued operations - (0.01)
-------- -------
Net income $0.22 $0.01
===== =====
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method)
or market. Elements of cost include materials, labor and overhead and
consist of the following:
October 3, 1997 December 31, 1996
Raw materials $10,338 $10,688
Work-in-process 4,101 3,547
Finished goods 4,231 4,071
--------- ---------
$18,670 $18,306
======= =======
<PAGE>
PSC Inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED October 3, 1997 and September 27, 1996
(All amounts in thousands, except per share data)
(Unaudited)
(2) LONG-TERM DEBT
Long-term debt consists of the following:
October 3, 1997 December 31, 1996
--------------- -----------------
Senior Term Loan A $49,000 $55,000
Senior Term Loan B 24,250 25,000
Senior revolving credit 6,530 12,500
Subordinated term loan 29,472 29,428
Subordinated promissory note 5,000 5,000
Other 417 525
-------- -----------
114,669 127,453
Less: current maturities 11,904 9,459
--------- ---------
$102,765 $117,994
======== ========
(3) SHAREHOLDERS' EQUITY
In September 1997, the Company completed a private placement of equity
with Hydra Investissements S.A., a Luxembourg corporation (the Purchaser).
The Company issued 110 shares of Series A Convertible Preferred Shares.
The Series A Preferred Shares are convertible at anytime and at the option
of the holders of the Series A Preferred, into Common Shares of the
Company. The conversion price is $8.00 per Common Share or one share of
Series A Preferred for 12.5 Common Shares. As a result, the Purchaser
beneficially owns 1,375 Common Shares of the Company. The net proceeds to
the Company from the offering were $10.2 million. The Company used the
proceeds for working capital purposes and to repay a portion of its senior
revolving credit facility. In connection with the issuance of preferred
stock, a warrant evidencing the right to purchase an aggregate of 180
Common Shares of the Company was issued to the Purchaser. This warrant has
an exercise price of $8.00 per share and may be exercised between
September 10, 1997 and September 10, 2001.
During the nine month period ended October 3, 1997, employees purchased
approximately 67 shares at $5.81 per share under the provisions of the
Company's Employee Stock Purchase Plan.
Changes in the status of options under the Company's stock option plans
are summarized as follows:
<TABLE>
<CAPTION>
January 1, 1997 Weighted January 1, 1996 Weighted
to Average to Average
October 3, 1997 Price Dec. 31, 1996 Price
--------------- ----- ------------- -----
<S> <C> <C> <C> <C>
Options outstanding
at beginning of period 2,818 $8.33 2,138 $8.41
Options granted 1,004 6.68 953 7.78
Options exercised (45) 6.08 (173) 6.27
Options forfeited/canceled (622) 9.03 (100) 8.06
------- -----
Options outstanding at
end of period 3,155 7.70 2,818 8.33
Number of options at end
of period:
Exercisable 1,607 1,630
Available for grant 399 784
</TABLE>
<PAGE>
PSC Inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED October 3, 1997 and September 27, 1996
(All amounts in thousands, except per share data)
(Unaudited)
(4) PRO FORMA RESULTS OF OPERATIONS
The following unaudited pro forma condensed results of operations combine
the operations of the Company with those of PSC Scanning, Inc. (formerly
Spectra-Physics Scanning Systems, Inc.), TxCOM S.A. and related businesses
("Spectra") as adjusted for the acquisition on July 12, 1996 by the
Company of certain of the assets and liabilities of Spectra. The pro forma
results of operations are presented as if the acquisition was consummated
on January 1, 1996.
The pro forma information is presented after giving effect to certain
adjustments for depreciation, amortization, interest expense and related
income tax effects. The pro forma results do not purport to be indicative
of the results that actually would have been achieved during the periods
indicated and are not intended to be indicative of future results.
<TABLE>
<CAPTION>
Pro Forma Three Months Ended Pro Forma Nine Months Ended
September 27, 1996 September 27, 1996
------------------ ------------------
<S> <C> <C>
Net sales $50,443 $154,947
Loss from operations (66,119) (57,100)
Loss from continuing operations (43,441) (41,425)
Total loss from discontinued operations (5,331) (5,331)
Net loss (48,772) (46,756)
Net loss per common and common equivalent share:
Continuing operations ($3.94) ($3.77)
Discontinued operations (0.48) (0.49)
---------- --------
Net loss ($4.42) ($4.26)
========= ======
Weighted average shares outstanding 11,026 10,974
</TABLE>
<PAGE>
(5) DERIVATIVES
The Company monitors its exposure to interest rate and foreign currency
exchange risk. The Company has limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company uses
derivative instruments solely to reduce the financial impact of these risks.
Interest Rate Risk:
The Company has entered into interest rate swap agreements with its senior
lending banks in accordance with the terms of the senior loans. The Company uses
these interest rate swap agreements to reduce its exposure to variable rates.
The differentials to be received or paid under these interest rate swap
agreements are recognized as a component of interest expense in the consolidated
income statement.
Foreign Currency Exchange Rate Risk:
The Company enters into forward foreign exchange contracts as a hedge
against currency fluctuations relating to net foreign transactions and
commitments denominated in foreign currencies. The foreign exchange contracts
generally have maturities of approximately 30 days and require the Company to
exchange foreign currencies for U.S. dollars at maturity, at rates agreed to at
the inception of the contracts. Gains and losses on forward contracts are offset
against the foreign exchange gains or losses on the underlying hedged items and
are recorded as a component of Selling, General and Administrative expenses in
the consolidated income statement.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
of the Company's December 31, 1996 annual report on Form 10-K.
Results of Operations: Three Months ended October 3, 1997 and September 27, 1996
- --------------------------------------------------------------------------------
Net Sales. Consolidated net sales during the three months ended October 3, 1997
increased $6.7 million or 14% compared with the same period in 1996. The
increase is due to the full quarter effect of Spectra product sales and
increased sales volumes of the Company's QuickScan handheld scanner products.
International net sales increased 20% primarily due to the Spectra acquisition
and represented approximately 45% of net sales in the third quarter of 1997
versus 41% of net sales in the third quarter of 1996.
Gross Profit. Consolidated gross profit during the three months ended October 3,
1997 increased $1.9 million or 9% compared with the same period in 1996. The
increased dollar amount is primarily due to the acquisition of Spectra and a
change in the sales mix of the Company's handheld and fixed position scanner
products. As a percentage of sales, gross profit decreased from 43.6% to 41.7%
due to lower average selling prices in the handheld and fixed position product
lines.
Engineering, Research and Development. Engineering, Research and Development
(ER&D) expenses decreased $0.5 million or 15%, as compared to the same period in
1996. As a percentage of sales, ER&D was 5.8% in the third quarter of 1997
versus 7.9% of net sales in the third quarter of 1996. As a result of
efficiencies developed due to the integration of Spectra, the Company has
reduced its ER&D expenses as a percentage of sales.
Selling, General and Administrative. Selling, General and Administrative (SG&A)
expenses decreased $1.1 million or 9%, as compared to the same period in 1996.
As a percentage of sales, SG&A was 19.5% in 1997 versus 24.6% in 1996. As a
result of efficiencies developed due to the integration of Spectra, the Company
has reduced its general and administrative expenses as a percentage of sales. In
addition, the Company is now operating under the Symbol-Spectra license
agreement which has reduced royalty expenses as a percentage of sales.
Acquisition Related Restructuring and Other Costs. During the 1994 fourth
quarter, the Company recorded a one-time pretax restructuring charge of $3.0
million. The charge related to the integration of the Company's existing fixed
position scanner product lines with those of LazerData, which was acquired in
December 1994. The restructuring program in part, provided for employee
severance and benefit costs for the elimination of approximately 12
manufacturing and engineering support positions. As of October 3, 1997, all
positions targeted in the restructuring program have been eliminated. The amount
of the restructuring accrual at October 3, 1997 was approximately $0.2 million.
Restructuring actions will be substantially completed by December 31, 1997.
There have been no reallocations or reestimates to date.
During the third quarter of 1996, the Company recorded a one-time, pretax charge
of $10.0 million for the cost of restructuring its existing operations with
those of Spectra which was acquired in July 1996. The restructuring program in
part, provided for employee severance and benefit costs for the elimination of
certain positions. As of October 3, 1997, all positions targeted in the
restructuring program have been eliminated. The amount of the restructuring
accrual at October 3, 1997 was approximately $1.7 million. Restructuring actions
will be substantially completed by December 31, 1997. There have been no
reallocations or reestimates to date.
Interest Expense. Interest expense increased $0.5 million versus the comparable
period in 1996. The interest expense relates to the debt incurred in connection
with the acquisition of Spectra in July 1996.
Provision for Income Taxes. The Company recorded a $1.5 million tax provision in
1997 primarily due to an increase in pretax income. The Company's effective tax
rate was 37% in both 1997 and 1996. The Company expects to record income tax
expense at or about the combined federal and state statutory tax rate in 1997.
<PAGE>
Discontinued Operations. During the third quarter of 1996, the Company adopted a
plan to dispose of its TxCOM subsidiary. TxCOM was acquired as part of the
Spectra acquisition. During the second quarter of 1997, the Company completed
the sale of TxCOM for approximately $1.0 million. A loss of approximately $0.3
million, net of tax, was recorded.
Results of Operations: Nine Months ended October 3, 1997 and September 27, 1996
- --------------------------------------------------------------------------------
Net Sales. Consolidated net sales during the nine months ended October 3, 1997
increased $64.7 million or 72% compared with the same period in 1996. The
increase is due to the inclusion of Spectra product sales and increased sales
volumes of the Company's QuickScan handheld scanner products. International net
sales increased 132% primarily due to the Spectra acquisition and represented
approximately 45% of net sales in the nine months of 1997 versus 32% of net
sales in the first nine months of 1996.
Gross Profit. Consolidated gross profit during the nine months ended October 3,
1997 increased $24.8 million or 65% compared with the same period in 1996. The
increased dollar amount is primarily due to the acquisition of Spectra and a
change in the sales mix of the company's handheld and fixed position scanner
products. As a percentage of sales, gross profit decreased from 42.2% to 40.6%
due to lower average selling prices in the handheld and fixed position product
lines.
Engineering, Research and Development. Engineering, Research and Development
(ER&D) expenses increased $3.0 million or 42%, as compared to the same period in
1996. The increased dollar amount is primarily due to the inclusion of Spectra.
As a percentage of sales, ER&D was 6.5% in 1997 versus 7.8% in 1996. As a result
of efficiencies developed due to the integration of Spectra, the Company has
reduced its ER&D expenses as a percentage of sales.
Selling, General and Administrative. Selling, General and Administrative (SG&A)
expenses increased $9.5 million or 39%, as compared to the same period in 1996.
The increased dollar amount is primarily due to the inclusion of Spectra. As a
percentage of sales, SG&A was 21.9% in 1997 versus 27.2% in 1996. As a result of
efficiencies developed due to the integration of Spectra, the Company has
reduced its general and administrative expenses as a percentage of sales. In
addition, the Company is now operating under the Symbol-Spectra license
agreement which has reduced royalty expenses as a percentage of sales.
Severance and Other Costs. During the second quarter of 1997, the Company
recorded a one-time pretax charge of $4.2 million for severance and other costs.
Of the total charge, approximately $2.3 million was associated with the
Severance Agreement with the former CEO, $1.2 million was for employee severance
and benefit costs for the elimination of approximately 30 positions including
several senior executives, and $0.7 million for the centralization of research
and development efforts and the relocation of manufacturing or certain product
lines between its two manufacturing facilities.
Interest Expense. Interest expense increased $7.2 million versus the comparable
period in 1996. The interest expense relates to the debt incurred in connection
with the acquisition of Spectra in July 1996.
Provision for Income Taxes. The Company recorded a $0.1 million tax provision in
1997 primarily due to an increase in pretax income. The Company's effective tax
rate was 37% in both 1997 and 1996. The Company expects to record income tax
expense at or about the combined federal and state statutory tax rate in 1997.
Discontinued Operations. During the third quarter of 1996, the Company adopted a
plan to dispose of its TxCOM subsidiary. TxCOM was acquired as part of the
Spectra acquisition. During the second quarter of 1997, the Company completed
the sale of TxCOM for approximately $1.0 million. A loss of approximately $0.3
million, net of tax, was recorded.
Liquidity and Capital Resources:
Current assets decreased $3.2 million from December 31, 1996 due to a decrease
in cash offset in part by an increase to accounts receivable. Current
liabilities decreased $3.5 million primarily due to a reduction in accrued
expenses offset in part by an increase in accounts payable. As a result, working
capital increased $0.3 million from December 31, 1996.
<PAGE>
Property, plant and equipment expenditures totaled $5.9 million for the nine
months ended October 3, 1997 compared with $2.4 million for the nine months
ended September 27, 1996. The 1997 expenditures primarily related to
manufacturing equipment and new product tooling.
The long-term debt to capital percentage was 80.0% at October 3, 1997 versus
88.5% at December 31, 1996. At October 3, 1997, liquidity immediately available
to the Company consisted of cash and cash equivalents of $3.8 million. In
connection with the acquisition of Spectra during 1996, the Company obtained new
credit facilities totaling $130.0 million. The Company has $13.5 million
available on these facilities. During the third quarter of 1997, the preferred
stock investment was utilized for working capital purposes and to reduce a
portion of the senior revolving credit facility, thus, resulting in a decrease
to the long-term debt to capital percentage. The Company believes that its cash
resources and available credit facilities, in addition to its operating cash
flows, are sufficient to meet its requirements for the next twelve months.
<PAGE>
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.
PSC Inc.
DATE: February 5, 1998 By: /s/ Robert C. Strandberg
--------------------
Robert C. Strandberg
President and Chief Executive Officer
DATE: February 5, 1998 By: /s/ William J. Woodard
------------------
William J. Woodard
Vice President and
Chief Financial Officer
DATE: February 5, 1998 By: /s/ Michael J. Stachura
-------------------
Michael J. Stachura
Vice President of Finance
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Sheet
</LEGEND>
<CIK> 319379
<NAME> PSC Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> OCT-03-1997
<EXCHANGE-RATE> 1
<CASH> 3,843
<SECURITIES> 0
<RECEIVABLES> 32,307
<ALLOWANCES> 1,476
<INVENTORY> 18,670
<CURRENT-ASSETS> 56,726
<PP&E> 36,243
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0
1
<COMMON> 112
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<TOTAL-LIABILITY-AND-EQUITY> 25,767
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<INCOME-PRETAX> 287
<INCOME-TAX> 105
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<DISCONTINUED> (101)
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