<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 March 31, 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 May 1, 1997: 3,752,473
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PUBCO CORPORATION
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 . . . . . . . . 3
Consolidated Statements of Operations
for the Three Months Ended March 31,
1997 and 1996. . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
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
2.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)--Note A.
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000's except share amounts)
March 31 December 31
1997 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 607 $ 1,539
Marketable securities and other
investments available for sale 26,336 24,877
Trade receivables (less allowances of
$274 in 1997 and $269 in 1996) 6,387 4,410
Inventories--Note B 7,837 6,681
Deferred income taxes 735 735
Prepaid expenses and other current assets 1,144 1,085
-------- --------
TOTAL CURRENT ASSETS 43,046 39,327
PROPERTY AND EQUIPMENT (at cost
less accumulated depreciation,
amortization of $10,450 in 1997
and $10,298 in 1996) 5,644 5,929
INTANGIBLE ASSETS
(at cost less accumulated amortization of
$729 in 1997 and $677 in 1996) 1,077 1,129
OTHER ASSETS 18,176 16,974
-------- --------
TOTAL ASSETS $ 67,943 $ 63,359
======== ========
See notes to consolidated financial statements.
3.
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PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets--Continued
($ in 000's except share amounts)
March 31 December 31
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,332 $ 5,224
Accrued liabilities 8,040 8,906
Loan payable-bank 457 -
-------- --------
TOTAL CURRENT LIABILITIES 15,829 14,130
DEFERRED CREDITS AND NONCURRENT LIABILITIES 18,719 17,286
MINORITY INTEREST 672 608
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; 3,198,223 issued and
3,196,223 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, 556,250 issued and
outstanding in 1997 and 556,385 issued
and outstanding in 1996 6 6
Additional paid in capital 31,961 32,180
Unrealized gains on investments
available for sale 1,829 2,229
Retained (deficit) (1,094) (3,101)
-------- --------
32,735 31,347
Treasury stock at cost,
2,000 shares in 1996 and 1995 (12) (12)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 32,723 31,335
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 67,943 $ 63,359
======== ========
See notes to consolidated financial statements.
4.
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PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
($ in 000's except share amounts)
Three Months Ended
March 31
l997 l996
Net sales $ 13,705 $ 14,079
Cost of sales 9,884 10,299
-------- --------
GROSS PROFIT 3,821 3,780
Costs and expenses:
Selling, general and
administrative expenses 2,687 2,539
Interest, net (686) (428)
-------- --------
2,001 2,111
Other income (expense), net 303 19
-------- --------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 2,123 1,688
Provision for income taxes 52 43
-------- --------
INCOME BEFORE MINORITY INTEREST 2,071 1,645
Minority interest (64) (70)
-------- --------
NET INCOME $ 2,007 $ 1,575
======== ========
Preferred stock dividend requirements 219 219
-------- --------
NET INCOME APPLICABLE
TO COMMON STOCKHOLDERS $ 1,788 $ 1,356
======== ========
NET INCOME PER SHARE $ .48 $ .39
======== ========
Weighted average number
of shares outstanding 3,752,473 3,461,727
========= =========
See notes to consolidated financial statements.
5.
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<TABLE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ in 000's except share amounts)
<CAPTIONS>
Three Months Ended
March 31
l997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income from continuing operations $ 2,007 $ 1,575
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 285 405
Net (gain) on sales of securities (340) (3)
Net loss on disposal of fixed assets 71 28
Minority interest 64 70
Changes in operating assets and liabilities:
Trade receivables (1,977) (544)
Inventories (1,156) (69)
Other assets (1,263) 36
Accounts payable 2,108 2,362
Other current liabilities (866) (364)
Deferred credits and noncurrent liabilities 1,433 (245)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 366 3,251
INVESTING ACTIVITIES
Purchases of marketable securities (5,894) (6,836)
Proceeds from sale of marketable securities 4,375 544
Purchases of fixed assets (43) (27)
Proceeds from the sale of fixed assets 26 436
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (1,536) (5,883)
FINANCING ACTIVITIES
Proceeds from long-term debt 5,543 6,272
Principal payments on long-term debt (5,086) (7,616)
Dividends paid (219) (219)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 238 (1,563)
-------- --------
(DECREASE) IN CASH AND CASH EQUIVALENTS (932) (4,195)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,539 7,919
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 607 $ 3,724
======== ========
<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)
March 31, 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 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 $640,000 was recognized as a
result of the Merger. The stock of the Company issued to the minority
stockholders of Aspen for the assets and business of Aspen was valued for
accounting purposes at an amount equal to the fair value of the net assets
acquired.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments considered necessary for a fair presentation have been
included, all of which are of a normal recurring nature.
7.
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PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
March 31, 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 March 31, 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:
March 31 December 31
1997 1996
Raw materials and supplies $ 4,858 $ 4,472
Work in process 457 356
Finished goods 2,522 1,853
------- -------
$ 7,837 $ 6,681
======= =======
8.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 1997 and 1996
The Company's operations primarily consist of Buckeye Business Products,
Inc. ("Buckeye"), Allied Construction Products, Inc. ("Allied") and Aspen.
As discussed below, the Company's 1997 results of operations improved over
1996 primarily as the result of an increase in interest income, gain on the
sales of securities (included in other income), as well as improvements in
Allied's operating income.
Sales decreased in the three months ended March 31, 1997, from the three
months ended March 31, 1996, primarily as the result of the continued
erosion of sales in the impact printing ribbon business.
Gross profit percentage increased in 1997 compared to 1996 as the result of
a lower cost of sales at Allied arising from favorable currency fluctuations
and more favorable product mix.
The change in interest, net, is primarily the result of lower borrowing
levels at Allied during the 1997 period compared to the 1996 period 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.
9.
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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had $26,943,000 of cash, cash equivalents,
marketable securities and other short-term investments and no long term
debt. The securities are subject to risk of loss and fluctuations in
value. The income generated from such 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 investments to the extent funds are not required to
make an acquisition of other operating businesses. The Company also has a
$10,000,000 line of credit which can be used for acquisitions. The Company
is continually reviewing business acquisition opportunities.
The increases in inventories and accounts payable from December 31, 1996 to
March 31, 1997 reflect Allied's normal seasonal change in inventories.
Stockholders' equity of $32,723,000 at March 31, 1997 includes Common and
Preferred stockholders' equity. In order to calculate Common stockholders'
equity at March 31, 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 March 31, 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.
On October 30, 1995, the Company announced that it would purchase from time
to time in the open market up to 175,000 of its shares. Through March 31,
1997, the Company had purchased 2,000 of such shares at a purchase price of
approximately $12,000.
10.
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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
11.
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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
Chief Executive Officer and
Chief Financial Officer
Dated: May 13, 1997
12.
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EXHIBIT INDEX
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AT 3/31/97 AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE 3 MONTHS ENDED 3/31/97 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 607
<SECURITIES> 26,336
<RECEIVABLES> 6,661
<ALLOWANCES> 274
<INVENTORY> 7,837
<CURRENT-ASSETS> 43,046
<PP&E> 16,094
<DEPRECIATION> 10,450
<TOTAL-ASSETS> 67,943
<CURRENT-LIABILITIES> 15,829
<BONDS> 0
0
1
<COMMON> 38
<OTHER-SE> 32,684
<TOTAL-LIABILITY-AND-EQUITY> 67,943
<SALES> 13,705
<TOTAL-REVENUES> 13,705
<CGS> 9,884
<TOTAL-COSTS> 9,884
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,123
<INCOME-TAX> 52
<INCOME-CONTINUING> 2,007
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,007
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
