==============================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
Amendment No. 2
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 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
July 4, 1997 (Unaudited) and
December 31, 1996...................................3 - 4
Consolidated Statements of Operations and
Retained Earnings for the three
and six months ended:
July 4, 1997 (Unaudited) and
June 30, 1996 (Unaudited) ..........................5 - 6
Consolidated Statements of Cash Flows
for the six months ended:
July 4, 1997 (Unaudited) and
June 30, 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>
July 4, 1997 December 31, 1996
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,897 $ 10,838
Accounts receivable, net of allowance
for doubtful accounts of $1,382
and $1,101, respectively 27,099 29,501
Inventories 18,843 18,306
Prepaid expenses and other 2,045 1,244
----------- ----------
TOTAL CURRENT ASSETS 49,884 59,889
PROPERTY, PLANT AND EQUIPMENT, net
of accumulated depreciation of $10,030
and $8,225, respectively 36,599 35,612
DEFERRED TAX ASSETS 24,562 24,773
INTANGIBLE AND OTHER ASSETS, net of accumulated
amortization of $9,377 and $6,238 respectively 60,834 63,087
---------- ----------
TOTAL ASSETS $ 171,879 $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>
July 4, 1997 December 31, 1996
------------ -----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 11,088 $ 9,459
Accounts payable 17,097 15,681
Accrued expenses 7,654 11,448
Accrued payroll and related employee benefits 6,274 7,509
Accrued acquisition related restructuring costs 1,672 4,009
----------- ---------
TOTAL CURRENT LIABILITIES 43,785 48,106
LONG-TERM DEBT, less current maturities 111,823 117,994
OTHER LONG-TERM LIABILITIES 3,250 1,960
SHAREHOLDERS' EQUITY
Preferred Shares, par value $.01;
10,000 authorized, none issued 0 0
Common shares, par value $.01;
40,000 authorized, 11,196 and 11,161
shares issued and outstanding 112 112
Additional paid-in capital 55,322 54,891
Retained earnings (41,893) (39,432)
Cumulative translation adjustment (283) (33)
Less treasury stock, 39 shares
repurchased, at cost (237) (237)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY 13,021 15,301
--------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $171,879 $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
July 4, June 30,
1997 1996
---- ----
<S> <C> <C>
NET SALES $ 47,301 $22,052
COST OF SALES 29,388 13,488
-------- ---------
Gross profit 17,913 8,564
OPERATING EXPENSES
Engineering, research and development 3,447 1,611
Selling, general and administrative 10,464 6,504
Severance and other costs 4,191 0
Amortization of intangibles resulting
from business acquisitions 1,672 222
--------- --------
Income/(loss) from operations (1,861) 227
INTEREST AND OTHER INCOME /(EXPENSE):
Interest expense (3,384) (12)
Interest income 100 125
Other income/(expense) (8) (5)
------------- -----------
(3,292) 108
---------- ---------
Income/(loss) from continuing operations before
income tax provision/(benefit) (5,153) 335
Income tax provision/(benefit) (1,907) 124
------- --------
Income/(loss) from continuing operations (3,246) 211
Discontinued operations:
Gain from discontinued operations, net of tax 180 0
Loss on sale of discontinued operations, net of tax (265) 0
---------- ------------
Total loss from discontinued operations (85) 0
------------ ------------
Net income/(loss) ($3,331) $ 211
======== =========
NET INCOME/(LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE
Continuing operations ($0.29) $ 0.02
Discontinued operations (0.01) 0.00
-------- ---------
Net income/(loss) ($0.30) $ 0.02
======= =======
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 11,142 10,422
RETAINED EARNINGS/(ACCUMULATED DEFICIT):
Retained earnings/(Accumulated deficit)
beginning of period ($38,562) $ 7,983
Net income/(loss) (3,331) 211
----------- ----------
Retained earnings/(Accumulated deficit),
end of period ($41,893) $ 8,194
========= ========
</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>
Six Months Ended
July 4, June 30,
1997 1996
---- ----
<S> <C> <C>
NET SALES $101,537 $43,551
COST OF SALES 60,923 25,831
------- ---------
Gross profit 40,614 17,720
OPERATING EXPENSES:
Engineering, research and development 6,888 3,391
Selling, general and administrative 23,540 13,027
Severance and other costs 4,191 0
Amortization of intangibles resulting
from business acquisitions 3,348 445
--------- --------
Income from operations 2,647 857
INTEREST AND OTHER INCOME /(EXPENSE):
Interest expense (6,754) (25)
Interest income 251 236
Other income/(expense) 108 (42)
--------- ----------
(6,395) 169
--------- ---------
Income/(loss) from continuing operations before
income tax provision/(benefit) (3,748) 1,026
Income tax provision/(benefit) (1,388) 380
------- --------
Income/(loss) from continuing operations (2,360) 646
Discontinued operations:
Gain from discontinued operations, net of tax 164 0
Loss on sale of discontinued operations, net of tax (265) 0
----- ---------
Total loss from discontinued operations (101) 0
----------- -----------
Net income/(loss) ($2,461) $ 646
======== ========
NET INCOME/(LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Continuing operations ($0.21) $ 0.06
Discontinued operations ( 0.01) 0.00
-------- ---------
Net income/(loss) ($0.22) $ 0.06
======= =======
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 11,139 10,412
RETAINED EARNINGS/(ACCUMULATED DEFICIT):
Retained earnings/(Accumulated deficit)
beginning of period ($39,432) $ 7,548
Net income/(loss) (2,461) 646
----------- ----------
Retained earnings/(Accumulated deficit),
end of period ($41,893) $ 8,194
========= ========
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
PSC INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
<CAPTION>
Six Months Ended
July 4, June 30,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income /(loss) ($2,461) $ 646
Adjustments to reconcile net income/(loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 7,112 2,170
Loss on disposition of assets 109 37
Loss on disposition of discontinued operations 265 0
Deferred tax assets 211 128
Decrease (increase) in assets:
Accounts receivable 1,290 665
Inventories (539) (1,880)
Prepaid expenses and other (357) (2,132)
Increase (decrease) in liabilities:
Accounts payable 1,564 2,081
Accrued expenses (4,112) (523)
Accrued payroll and commissions (1,230) (648)
Accrued acquisition related restructuring costs (2,605) (331)
--------- ----------
Net cash (used in) provided by
operating activities (753) 213
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (4,693) (967)
Additions to intangible and other assets (104) (780)
Proceeds from sale of investments 0 4,167
------------ ---------
Net cash (used in) provided by investing activities (4,797) 2,420
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term liabilities 1,938 0
Principal repayments of long-term debt (4,542) (63)
Payment of other long-term liabilities (296) 0
Exercise of stock options and sale of common stock 431 627
Tax benefit from exercise or early disposition
of certain stock options 0 70
----------- -----------
Net cash (used in) provided by financing activities (2,469) 634
--------- ----------
FOREIGN CURRENCY TRANSLATION (922) (23)
NET INCREASE/(DECREASE) IN CASH _____
-----------
AND CASH EQUIVALENTS (8,941) 3,244
CASH AND CASH EQUIVALENTS:
Beginning of period 10,838 5,538
-------- -------
End of period $ 1,897 $ 8,782
======== =======
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
PSC Inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED July 4, 1997 and June 30, 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 July 4, 1997, the results of operations
for the three and six months ended July 4, 1997 and June 30, 1996 and its
cash flows for the six months ended July 4, 1997 and June 30, 1996. The
results of operations for the three and six months ended July 4, 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 for the three and six months ended
July 4, 1997 were ($0.30) and ($0.22), respectively, the same as reported
EPS.
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:
July 4, 1997 December 31, 1996
------------ -----------------
Raw materials $12,347 $ 10,688
Work-in-process 3,219 3,547
Finished goods 3,277 4,071
--------- ---------
$18,843 $18,306
======= =======
<PAGE>
PSC Inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED July 4, 1997 and June 30, 1996
(All amounts in thousands, except per share data)
(Unaudited)
(2) LONG-TERM DEBT
Long-term debt consists of the following:
July 4, 1997 December 31, 1996
------------- -----------------
Senior Term Loan A $51,000 $55,000
Senior Term Loan B 24,500 25,000
Senior revolving credit 12,500 12,500
Subordinated term loan 29,443 29,428
Subordinated promissory note 5,000 5,000
Other 468 525
-------- -----------
122,911 127,453
Less: current maturities 11,088 9,459
--------- ---------
$111,823 $117,994
======== ========
(3) SHAREHOLDERS' EQUITY
During the six month period ended July 4, 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
July 4, 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 369 6.55 953 7.78
Options exercised (7) 6.06 (173) 6.27
Options forfeited/canceled (542) 9.05 (100) 8.06
------- -----
Options outstanding at
end of period 2,638 7.94 2,818 8.33
Number of options at end
of period:
Exercisable 1,725 1,630
Available for grant 957 784
</TABLE>
<PAGE>
PSC Inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED July 4, 1997 and June 30, 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 Six Months Ended
June 30,1996 June 30, 1996
<S> <C> <C>
Net sales $51,487 $104,504
Income from operations 3,409 8,976
Income from continuing operations 206 1,818
Net income 206 1,818
Net income per common and common equivalent share:
Continuing operations $0.02 $0.16
Discontinued operations 0.00 0.00
-------- ------
Net income $0.02 $0.16
======= =====
Weighted average shares outstanding 11,424 11,389
</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 July 4, 1997 and June 30, 1996
- -------------------------------------------------------------------------
Net Sales. Consolidated net sales during the three months ended July 4, 1997
increased $25.2 million or 115% 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 327% primarily due to the Spectra acquisition and represented
approximately 44% of net sales in the second quarter of 1997 versus 22% of net
sales in the second quarter of 1996.
Gross Profit. Consolidated gross profit during the three months ended July 4,
1997 increased $9.3 million or 109% compared with the same period in 1996. As a
percentage of sales, gross profit decreased from 38.8% to 37.9%. The decrease in
gross profit percentage is due to a $1.0 million inventory write-off for the
discontinuation of certain products to streamline the Company's handheld and
fixed position product lines. Excluding the inventory write-off, the 1997 gross
margin would have been 40.0%. This increase in gross profit percentage 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.
Engineering, Research and Development. Engineering, Research and Development
(ER&D) expenses increased $1.8 million or 114%, as compared to the same period
in 1996. As a percentage of sales, ER&D was 7.3% in the second quarter of 1997
and 1996. The dollar increases were primarily due to the inclusion of Spectra.
Selling, General and Administrative. Selling, General and Administrative (SG&A)
expenses increased $4.0 million or 61%, 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 22.1% in 1997 versus 29.5% in 1996. As a result of
the acquisition and 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 of certain product
lines between its two manufacturing facilities.
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 July 4, 1997, all
positions targeted in the restructuring program have been eliminated. The amount
of the restructuring accrual at July 4, 1997 was approximately $0.3 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 July 4, 1997, all positions targeted in the
restructuring program have been eliminated. The amount of the
<PAGE>
restructuring accrual at July 4, 1997 was approximately $2.2 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 $3.4 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 $1.9 million tax benefit in
1997 primarily due to the severance and other costs discussed above. 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.
Results of Operations: Six Months ended July 4, 1997 and June 30, 1996
- -----------------------------------------------------------------------
Net Sales. Consolidated net sales during the six months ended July 4, 1997
increased $58.0 million or 133% 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 362% primarily due to the Spectra acquisition and represented
approximately 44% of net sales in the six months of 1997 versus 22% of net sales
in the first six months of 1996.
Gross Profit. Consolidated gross profit during the six months ended July 4, 1997
increased $22.9 million or 129% compared with the same period in 1996. As a
percentage of sales, gross profit decreased from 40.7% to 40.0%. During the
second quarter of 1997, the Company took a $1.0 million inventory write-off for
the discontinuation of certain products to streamline the Company's handheld and
fixed position product lines. Excluding the inventory write-off, the 1997 gross
margin would have been 41.0%. This increase in gross profit percentage 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.
Engineering, Research and Development. Engineering, Research and Development
(ER&D) expenses increased $3.5 million or 103%, as compared to the same period
in 1996. As a percentage of sales, ER&D was 6.8% in 1997 versus 7.8% in 1996.
The dollar increase is due to the inclusion of Spectra.
Selling, General and Administrative. Selling, General and Administrative (SG&A)
expenses increased $10.5 million or 81%, 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 23.2% in 1997 versus 29.9% in 1996. As a result of
the acquisition and 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.
Interest Expense. Interest expense increased $6.7 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 $1.4 million tax benefit in
1997 primarily due to the severance and other costs discussed above. 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.
<PAGE>
Liquidity and Capital Resources:
Current assets decreased $10.0 million from December 31, 1996 due to a decrease
in cash offset in part by an increase to inventories. Current liabilities
decreased $4.3 million primarily due to a reduction in accrued expenses offset
in part by an increase in accounts payable. As a result, working capital
decreased $5.7 million from December 31, 1996.
Property, plant and equipment expenditures totaled $4.7 million for the six
months ended July 4, 1997 compared with $1.0 million for the six months ended
June 30, 1996. The 1997 expenditures primarily related to manufacturing
equipment and new product tooling.
The long-term debt to capital percentage was 89.6% at July 4, 1997 versus 88.5%
at December 31, 1996. At July 4, 1997, liquidity immediately available to the
Company consisted of cash and cash equivalents of $1.9 million. In addition, in
connection with the acquisition of Spectra, the Company obtained new credit
facilities totaling $130.0 million. The Company has $7.5 million available on
these facilities. 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>
(Replace this text with the legend)
</LEGEND>
<CIK> 319379
<NAME> PSC Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUL-04-1997
<EXCHANGE-RATE> 1
<CASH> 1,897
<SECURITIES> 0
<RECEIVABLES> 27,099
<ALLOWANCES> 1,382
<INVENTORY> 18,843
<CURRENT-ASSETS> 49,884
<PP&E> 36,599
<DEPRECIATION> 10,030
<TOTAL-ASSETS> 171,879
<CURRENT-LIABILITIES> 43,785
<BONDS> 0
0
0
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<INCOME-TAX> (1,388)
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</TABLE>
