<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM l0-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION l3 OR l5(d) OF THE SECURITIES
EXCHANGE ACT OF l934
For the period ended September 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-1359
PUBCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 53-0246410
(State of Incorporation) (I.R.S. Employer Identification No.)
3830 Kelley Avenue, Cleveland, Ohio 44114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 881-5300
NA
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange
Act of l934 during the preceding l2 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 Common Shares Outstanding as of October 31, 1996: 3,752,473
<PAGE>
PUBCO CORPORATION
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995 . . . . . . 3
Consolidated Statements of Operations
for the Three and Nine Months Ended
September 30, 1996 and 1995. . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30,
1996 and 1995. . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . 12
Item l. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote
of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)--Note A.
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000's except share amounts)
September 30 December 31
1996 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,844 $ 7,919
Marketable securities and other short-
term investments 22,506 11,836
Trade receivables (less allowances of
$314 in 1996 and $279 in 1995) 5,025 5,058
Inventories--Note B 7,686 7,447
Prepaid expenses and other current assets 1,122 756
-------- --------
TOTAL CURRENT ASSETS 38,183 33,016
PROPERTY AND EQUIPMENT (at cost
less accumulated depreciation,
amortization of $10,234 in 1996
and $10,497 in 1995) 6,110 8,492
INTANGIBLE ASSETS
(at cost less accumulated amortization of
$625 in 1996 and $490 in 1995) 1,181 676
OTHER ASSETS 2,926 2,920
-------- --------
TOTAL ASSETS $ 48,400 $ 45,104
======== ========
See notes to consolidated financial statements.
3.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets--Continued
($ in 000's except share amounts)
September 30 December 31
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,382 $ 4,738
Accrued liabilities 8,208 9,287
Loans payable--related party - 289
Current portion of long-term debt 572 218
TOTAL CURRENT LIABILITIES 14,162 14,532
LONG-TERM DEBT 45 2,407
DEFERRED CREDITS AND NONCURRENT LIABILITIES 3,433 3,628
MINORITY INTEREST 717 3,022
STOCKHOLDERS' EQUITY
Preferred Stock:
Convertible Preferred Stock - par value $1;
20,000 shares authorized, none issued - -
Preferred Stock - par value $.01;
2,000,000 shares authorized, 70,000
Series A shares issued and outstanding
($7,000 aggregate liquidation preference
in 1996 and 1995) 1 1
Common Stock:
Common Stock - par value $.01; 5,000,000
shares authorized; 3,198,033 issued and
3,196,033 outstanding in 1996 and 2,906,697
issued and 2,904,697 outstanding in 1995 32 29
Class B Stock - par value $.01; 2,000,000
shares authorized, 556,440 issued and
outstanding in 1996 and 557,030 issued
and outstanding in 1995 6 6
Additional paid in capital 32,398 30,082
Unrealized gains on investments
available for sale 1,645 801
Retained (deficit) (4,027) (9,392)
30,055 21,527
Treasury stock at cost,
2,000 shares in 1996 and 1995 (12) (12)
TOTAL STOCKHOLDERS' EQUITY 30,043 21,515
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 48,400 $ 45,104
See notes to consolidated financial statements.
4.
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<TABLE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
($ in 000's except share amounts)
<CAPTIONS>
Three Months Ended Nine Months Ended
September 30 September 30
l996 l995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 11,716 $ 10,759 $ 39,741 $ 37,522
Cost of sales 8,222 7,990 28,511 27,452
-------- -------- -------- --------
GROSS PROFIT 3,494 2,769 11,230 10,070
Costs and expenses:
Selling, general and administrative expenses 2,715 1,841 7,799 6,094
Depreciation and amortization 230 305 716 965
Interest, net (570) (252) (1,644) (571)
-------- -------- -------- --------
2,375 1,894 6,871 6,488
Other income, net 1,173 344 1,195 324
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND MINORITY INTEREST 2,292 1,219 5,554 3,906
Provision for income taxes 25 30 116 8
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST 2,267 1,189 5,438 3,898
Minority interest (34) 2 (73) (77)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS 2,233 1,191 5,365 3,821
-------- -------- -------- --------
Income from discontinued
operations, net of taxes - 1,100 - 1,100
-------- -------- -------- --------
NET INCOME $ 2,233 $ 2,291 $ 5,365 $ 4,921
======== ======== ======== ========
Preferred stock dividend requirements 218 218 656 656
-------- -------- -------- --------
NET INCOME APPLICABLE
TO COMMON STOCKHOLDERS $ 2,015 $ 2,073 $ 4,709 $ 4,265
======== ======== ======== ========
Earnings per share:
CONTINUING OPERATIONS (NET OF PREFERRED
STOCK DIVIDEND REQUIREMENTS) $ .54 $ .28 $ 1.32 $ .91
DISCONTINUED OPERATIONS - .32 - .32
-------- -------- -------- --------
NET INCOME PER COMMON SHARE $ .54 $ .60 $ 1.32 $ 1.23
======== ======== ======== ========
Weighted average number of shares outstanding 3,752,473 3,463,727 3,562,533 3,463,727
========= ========= ========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
5.
<PAGE>
<TABLE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ in 000's except share amounts)
<CAPTIONS>
Nine Months Ended
June 30
l996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net income from continuing operations $ 5,365 $ 3,821
Adjustments to reconcile net income to
net cash provided by operating activities:
Income from discontinued operations - 1,100
Depreciation and amortization 1,076 1,042
Net (gain) on sales of securities (321) (75)
Net (gain) on disposal of fixed assets (501) (279)
Minority interest 73 77
Changes in operating assets and liabilities:
Trade receivables 33 976
Inventories (239) (1,074)
Other assets (402) (60)
Accounts payable 644 (1,130)
Other current liabilities (1,122) (3,576)
Deferred credits and noncurrent liabilities (195) (576)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,411 246
INVESTING ACTIVITIES
Purchases of marketable securities (16,733) (8,613)
Proceeds from sale of marketable securities 7,228 1,367
Purchases of fixed assets (118) (243)
Proceeds from the sale of fixed assets 2,090 2,617
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (7,533) (4,872)
FINANCING ACTIVITIES
Net (repayments) on loans payable (289) (1,911)
Proceeds from long-term debt 21,075 24,030
Principal payments on long-term debt (23,083) (23,079)
Dividends paid (656) (656)
-------- --------
NET CASH (USED IN) FINANCING ACTIVITIES (2,953) (1,616)
-------- --------
(DECREASE) IN CASH AND CASH EQUIVALENTS (6,075) (6,242)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,919 12,583
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,844 $ 6,341
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
6.
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PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
September 30, 1996
NOTE A -- Basis of Presentation
The financial information presented herein should be read in conjunction
with the consolidated financial statements and footnotes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
The consolidated balance sheet as of December 31, 1995 has been derived from
the audited financial statements at that date.
The accompanying unaudited consolidated financial statements reflect
consolidation of the operations of the Company's wholly-owned subsidiaries
and Bobbie Brooks, Incorporated ("Brooks"), an approximately 90%-owned
subsidiary until June 27, 1996, whereupon it merged with and into the
Company. As a result of the merger, each Brooks stockholder is entitled to
received one share of the Company's Common Stock in exchange for each six
shares of Brooks Common Stock.
Brooks increased its ownership in Aspen Imaging International, Inc.
("Aspen") at year-end 1995 from approximately 41% to approximately 62%. The
Company's Consolidated Balance Sheets at September 30, 1996 and December 31,
1995 include the accounts of Aspen. The Company's Consolidated Statements
of Operations for the three and nine months ended September 30, 1996 include
the results of Aspen's operations whereas the Company's Consolidated
Statements of Operations for the three and nine months months ended
September 30, 1995 account for Aspen's operations on the equity method.
On June 27, 1996, the Company acquired all of the assets of Aspen, subject
to all of its liabilities, in exchange for Common Stock of the Company. As
a result of the acquisition, each Aspen stockholder is entitled to receive
one share of the Company's Common Stock in exchange for each seven shares of
Aspen Common Stock.
The merger of Brooks into the Company and the acquisition by the Company of
the assets and business of Aspen, resulted in the Company issuing
approximately 290,746 shares of the Company's Common Stock to the Brooks and
Aspen minority stockholders. The Merger of Brooks into the Company was
accounted for under the purchase method of accounting. The minority
interest of Brooks acquired in the Merger was valued for accounting purposes
at an amount equal to the market value of the stock of the Company issued to
the Brooks minority stockholders. Goodwill of $640,000 was recognized as a
result of the Merger. The stock of the Company issued to the minority
stockholders of Aspen for the assets and business of Aspen was valued for
accounting purposes at an amount equal to the fair value of the net assets
acquired.
7.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
September 30, 1996
NOTE A -- Basis of Presentation--Continued
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments considered necessary for a fair presentation have been
included, all of which are of a normal recurring nature.
Net income per common share has been computed by dividing net income after
preferred dividend requirements by the weighted average number of shares of
Common Stock and Class B Stock outstanding during the periods. The
Preferred Stock dividend requirement is an annual variable dividend,
currently $12.50 per share.
Financial Instruments: The Company's financial instruments recorded on the
balance sheet include cash and cash equivalents and long-term debt. Because
of their short maturity, the carrying amount of cash and cash equivalents
approximates fair value. Because the majority of long-term debt is at
market rates of interest that adjust frequently, the carrying amount of
long-term debt approximates fair value.
Off balance sheet financial instruments include foreign currency exchange
agreements. In the normal course of business, the Company's construction
products subsidiary purchases components from a German supplier and from
time to time, enters into foreign currency exchange contracts with banks in
order to fix its trade payables denominated in the Deutsche Mark. The
contract amounts outstanding and the net deferred gains or losses were not
significant at September 30, 1996 and December 31, 1995.
Effective January 1, 1996, the Company adopted SFAS No. 121 - "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." SFAS No. 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used, and for long-lived
assets and certain identifiable intangibles to be disposed of. The effect
of its adoption is immaterial to results of operations.
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
8.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
September 30, 1996
NOTE B -- Inventories
The components of inventories consist of the following:
September 30 December 31
1996 1995
Raw materials and supplies $ 4,926 $ 4,532
Work in process 483 484
Finished goods 2,277 2,431
------- -------
$ 7,686 $ 7,447
======= =======
9.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS
Comparison of the Three and Nine Months Ended September 30, 1996 and 1995
The Company's operations primarily consist of Buckeye Business Products,
Inc. ("Buckeye"), Allied Construction Products, Inc. ("Allied") and Aspen.
The Company's Consolidated Statement of Operations for the three and nine
months ended September 30, 1996 include the results of Aspen. For the
comparable periods in 1995, the Company accounted for Aspen's results of
operations using the equity method which were not significant and were
included in other income in the Company's Consolidated Statements of
Operations.
As discussed below, the Company's 1996 results of operations improved over
1995 primarily as the result of an increase in interest income, nonrecurring
gains on sale of fixed assets (included in other income), gain on the sales
of securities (included in other income), as well as improvements in
Allied's operating income.
Sales increased in the three months and nine months ended September 30,
1996, from the three and nine months ended September 30, 1995, primarily as
the result of the inclusion of the sales of Aspen in the 1996 periods.
The gross profit percentage increase in the 1996 periods compared to the
1995 periods is the result of a lower cost of sales at Allied resulting from
favorable currency fluctuations and product mix as well as the inclusion of
Aspen in the 1996 periods.
Selling, general and administrative expenses increased in the three and nine
month periods ended September 30, 1996, from the three and nine months ended
September 30, 1995, primarily as the result of the inclusion of Aspen in the
1996 periods.
Nonmanufacturing depreciation and amortization expenses decreased in the
1996 periods as compared to the 1995 periods as the result of the sale of
nonmanufacturing fixed assets. The gains recognized on such sales are
reflected in other income.
The decrease in interest, net, is primarily the result of lower borrowing
levels at Allied during the 1996 periods compared to the 1995 periods and
the significant increase in interest income. Earnings from the Company's
cash and cash equivalents and marketable securities and other short term
investments increased because of increases in the amount of such assets.
The Company will continue to generate interest and other income on its
available funds until used to acquire other operating businesses. While no
particular acquisition is pending or has been identified, the Company
routinely reviews acquisition opportunities.
10.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had $24,350,000 of cash, cash
equivalents, marketable securities and other short-term investments, and
approximately $45,000 of long-term debt.
The increases in inventories and accounts payable from December 31, 1995 to
September 30, 1996 reflect Allied's normal seasonal change in inventories
offset by a decrease in inventories at Buckeye/Aspen.
Stockholders' equity of $30,043,000 at September 30, 1996 includes Common
and Preferred stockholders' equity. In order to calculate Common
stockholders' equity at September 30, 1996, the face value of the Preferred
Stock ($7,000,000) and any unpaid cumulative dividends on the Preferred
Stock must be subtracted from total stockholders' equity. There were no
unpaid cumulative preferred stock dividends outstanding at September 30,
1996.
The Company has not consistently generated pretax income and the potential
future tax benefits of the deferred tax assets, primarily net operating loss
carryforwards, may not be realized. Accordingly, a valuation allowance has
been provided equal to the net deferred tax assets related to these
potential future tax benefits, which totaled approximately $16,000,000 at
December 31, 1995. Should the Company generate pretax income in future
years, the tax benefits of the net operating loss carryforwards and other
items will be realized, which will have a positive impact on the future cash
flows, liquidity and capital resources of the Company.
11.
<PAGE>
PART II - OTHER INFORMATION
Item l. LEGAL PROCEEDINGS.
Not Applicable
Item 2. CHANGES IN SECURITIES.
None
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
Item 5. OTHER INFORMATION.
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Financial Data Schedule
(b) Reports on Form 8-K
None
12.
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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.
PUBCO CORPORATION
/s/ Robert H. Kanner
------------------------------
Robert H. Kanner
President and
Chief Financial Officer
Dated: November 12, 1996
<PAGE>
EXHIBIT INDEX
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AT 9/30/96 AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE 9-MONTHS ENDED 9/30/96.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,844
<SECURITIES> 22,506
<RECEIVABLES> 5,339
<ALLOWANCES> 314
<INVENTORY> 7,686
<CURRENT-ASSETS> 38,183
<PP&E> 16,344
<DEPRECIATION> 10,234
<TOTAL-ASSETS> 48,400
<CURRENT-LIABILITIES> 14,162
<BONDS> 45
0
1
<COMMON> 38
<OTHER-SE> 30,004
<TOTAL-LIABILITY-AND-EQUITY> 48,400
<SALES> 39,741
<TOTAL-REVENUES> 39,741
<CGS> 28,511
<TOTAL-COSTS> 28,511
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,554
<INCOME-TAX> 116
<INCOME-CONTINUING> 5,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,365
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.32
</TABLE>
