<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, 1997
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 November 1, 1997: 3,752,473.
<PAGE>
PUBCO CORPORATION
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996. . . . . . 3
Consolidated Statements of Operations
for the Three and Nine Months Ended
September 30, 1997 and 1996 . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30,
1997 and 1996. . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . 11
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. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<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
1997 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,305 $ 1,539
Marketable securities and other
investments available for sale 25,794 24,877
Trade receivables (less allowances of
$302 in 1997 and $269 in 1996) 5,934 4,410
Inventories--Note B 7,333 6,681
Deferred income taxes 735 735
Prepaid expenses and other current assets 1,217 1,085
-------- --------
TOTAL CURRENT ASSETS 46,318 39,327
PROPERTY AND EQUIPMENT (at cost
less accumulated depreciation,
amortization of $10,914 in 1997
and $10,298 in 1996) 5,274 5,929
INTANGIBLE ASSETS
(at cost less accumulated amortization of
$833 in 1997 and $677 in 1996) 973 1,129
OTHER ASSETS 21,299 16,974
-------- --------
TOTAL ASSETS $ 73,864 $ 63,359
======== ========
See notes to consolidated financial statements.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets--Continued
($ in 000's except share amounts)
September 30 December 31
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,690 $ 5,224
Accrued liabilities 7,904 8,906
Loan payable - bank 300 -
-------- --------
TOTAL CURRENT LIABILITIES 13,894 14,130
LONG-TERM DEBT 112 -
DEFERRED CREDITS AND NONCURRENT LIABILITIES 21,623 17,286
MINORITY INTEREST 771 608
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 1997 and 1996) 1 1
Common Stock:
Common Stock - par value $.01; 5,000,000
shares authorized; 3,200,406 issued and
3,198,406 outstanding in 1997 and 3,198,088
issued and 3,196,088 outstanding in 1996 32 32
Class B Stock - par value $.01; 2,000,000
shares authorized, 554,067 issued and
outstanding in 1997 and 556,385 issued
and outstanding in 1996 6 6
Additional paid in capital 31,524 32,180
Unrealized gains on investments
available for sale 3,919 2,229
Retained earnings (deficit) 1,994 (3,101)
-------- --------
37,476 31,347
Treasury stock at cost,
2,000 shares in 1997 and 1996 (12) (12)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 37,464 31,335
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 73,864 $ 63,359
======== ========
See notes to consolidated financial statements.
<PAGE>
<TABLE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
($ in 000's except share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
l997 l996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 12,161 $ 11,716 $ 38,748 $ 39,741
Cost of sales 8,567 8,222 27,477 28,511
-------- -------- -------- --------
GROSS PROFIT 3,594 3,494 11,271 11,230
Costs and expenses:
Selling, general and
administrative expenses 2,864 2,945 8,380 8,515
Interest, net (689) (570) (2,072) (1,644)
-------- -------- -------- --------
2,175 2,375 6,308 6,871
Other income, net 61 1,173 516 1,195
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,480 2,292 5,479 5,554
Provision for income taxes 55 25 221 116
-------- -------- -------- --------
INCOME BEFORE MINORITY INTEREST 1,425 2,267 5,258 5,438
Minority interest (45) (34) (163) (73)
-------- -------- -------- --------
NET INCOME $ 1,380 $ 2,233 $ 5,095 $ 5,365
======== ======== ======== ========
Preferred stock dividend requirements 218 218 656 656
-------- -------- -------- --------
NET INCOME APPLICABLE
TO COMMON STOCKHOLDERS $ 1,162 $ 2,015 $ 4,439 $ 4,709
======== ======== ======== ========
NET INCOME PER SHARE $ .31 $ .54 $ 1.18 $ 1.32
======== ======== ======== ========
Weighted average number
of shares outstanding 3,752,473 3,752,473 3,752,473 3,562,533
========= ========= ========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ in 000's except share amounts)
<CAPTION>
Nine Months Ended
September 30
l997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income from continuing operations $ 5,095 $ 5,365
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 854 1,076
Net (gain) on sales of securities (459) (321)
Net loss (gain) on disposal of fixed assets 71 (501)
Minority interest 163 73
Changes in operating assets and liabilities:
Trade receivables (1,524) 33
Inventories (652) (239)
Other assets (4,461) (402)
Accounts payable 466 644
Other current liabilities (1,002) (1,122)
Deferred credits and noncurrent liabilities 4,337 (195)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,888 4,411
INVESTING ACTIVITIES
Purchases of marketable securities (8,887) (16,733)
Proceeds from sale of marketable securities 10,119 7,228
Purchases of fixed assets (136) (118)
Proceeds from the sale of fixed assets 26 2,090
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,122 (7,533)
FINANCING ACTIVITIES
Net borrowings (repayments) on loans payable 300 (289)
Proceeds from long-term debt 13,801 21,075
Principal payments on long-term debt (13,689) (23,083)
Dividends paid (656) (656)
-------- --------
NET CASH (USED IN) FINANCING ACTIVITIES (244) (2,953)
-------- --------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,766 (6,075)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,539 7,919
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,305 $ 1,844
======== =========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
September 30, 1997
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, 1996.
The consolidated balance sheet as of December 31, 1996 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 and
majority-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 receive one share of the Company's Common Stock
in exchange for each six shares of Brooks Common Stock.
On June 27, 1996, the Company acquired all of the assets of Aspen Imaging
International, Inc. ("Aspen"), subject to all of its liabilities, in
exchange for Common Stock of the Company. Immediately prior to this
acquisition, the Company owned approximately 62% of Aspen. 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 $640,000 was recognized as a
result of the Merger. The stock of the Company issued to the minority
stockholders of Aspen for the assets and business of Aspen was valued for
accounting purposes at an amount equal to the fair value of the net assets
acquired.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments considered necessary for a fair presentation have been
included, all of which are of a normal recurring nature.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
September 30, 1997
NOTE A -- Basis of Presentation--Continued
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. Because of their short
maturity, the carrying amount of cash and cash equivalents 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, 1997 and December 31, 1996.
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
NOTE B -- Inventories
The components of inventories consist of the following:
September 30 December 31
1997 1996
Raw materials and supplies $ 4,422 $ 4,472
Work in process 517 356
Finished goods 2,394 1,853
$ 7,333 $ 6,681
<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, 1997 and 1996
The Company's operations primarily consist of Buckeye Business Products,
Inc. ("Buckeye"), Allied Construction Products, Inc. ("Allied") and Aspen.
The decrease in net income in the three months ended September 30, 1997 is
due to the inclusion in the 1996 period of approximately $840,000 of gain
from the sale of a fixed asset.
Sales increased in the three months ended September 30, 1997 over the 1996
period due to sales increases at both Allied and Buckeye. Sales decreased
in the nine months ended September 30, 1997 from the comparable 1996 period
primarily as the result of lower sales at Allied and the continued erosion
of sales in the impact printing ribbon business during the first six months
of 1997.
Gross profits in 1997 reflect lower cost of sales at Allied arising from
favorable currency fluctuations.
The change in interest, net, is primarily the result of lower borrowing
levels at Allied during the 1997 periods compared to the 1996 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.
On October 20, 1997, the Company acquired Kroy, Inc. ("Kroy"), a producer of
commercial and industrial labeling equipment and supplies. The Company's
results of operations will include the results of Kroy's operations commencing
in the fourth quarter.
The Company will continue to generate interest and other income on its
available funds until used to acquire other operating businesses. While no
other acquisition is pending or has been identified, the Company routinely
reviews acquisition opportunities.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had $31,099,000 of cash, cash
equivalents, marketable securities and other short-term investments and
$112,000 of long term debt. The Company used approximately $6,100,000 to
purchase the common stock of Kroy and acquire its bank debt. The Company's
remaining marketable securities and other short term investments continue to
be subject to risk of loss and fluctuations in value. The income generated
from the remaining marketable securities and other short-term investments may
not be the same from year to year or period to period. The Company will
continue to buy, hold and sell marketable securities and other short term
investments to the extent funds are not required to make additional
acquisitions of operating businesses.
The Company also has a $10,000,000 line of credit which can be used for
other acquisitions. The Company is continually reviewing business
acquisition opportunities.
Stockholders' equity of $37,464,000 at September 30, 1997 includes Common
and Preferred stockholders' equity. In order to calculate Common
stockholders' equity at September 30, 1997, 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,
1997.
To the extent that the Company is able to utilize its net operating loss
carryforwards, there will be a positive impact on the Company's future cash
flows and liquidity.
<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
The Company filed a Form 8-K to report an Item 2 acquisition of
Kroy on October 20, 1997.
<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.
PUBCO CORPORATION
/s/ Robert H. Kanner
--------------------------------
Robert H. Kanner
Chief Executive Officer and
Chief Financial Officer
Dated: November 14, 1997
<PAGE>
EXHIBIT INDEX
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AT 09/30/97 AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE 9-MONTHS ENDED 09/30/97 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,305
<SECURITIES> 25,794
<RECEIVABLES> 6,236
<ALLOWANCES> 302
<INVENTORY> 7,333
<CURRENT-ASSETS> 46,318
<PP&E> 16,188
<DEPRECIATION> 10,914
<TOTAL-ASSETS> 73,864
<CURRENT-LIABILITIES> 13,894
<BONDS> 112
0
1
<COMMON> 38
<OTHER-SE> 37,425
<TOTAL-LIABILITY-AND-EQUITY> 73,864
<SALES> 38,748
<TOTAL-REVENUES> 38,748
<CGS> 27,477
<TOTAL-COSTS> 27,477
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,479
<INCOME-TAX> 221
<INCOME-CONTINUING> 5,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,095
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
