<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, 1998
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, 1998: 3,752,473.
<PAGE>
PUBCO CORPORATION
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997. . . . . . 3
Consolidated Statements of Operations
for the Three Months Ended
March 31, 1998 and 1997 . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
1998 and 1997. . . . . . . . . . . . . . . . . . . . 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)
March 31 December 31
1998 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,376 $ 1,720
Marketable securities and other
investments available for sale 22,336 25,661
Trade receivables (less allowances of
$966 in 1998 and $931 in 1997) 9,867 7,549
Inventories--Note B 11,834 11,000
Deferred income taxes 2,400 2,400
Prepaid expenses and other current assets 1,861 1,570
-------- --------
TOTAL CURRENT ASSETS 53,674 49,900
PROPERTY AND EQUIPMENT (at cost
less accumulated depreciation,
amortization of $11,357 in 1998
and $11,172 in 1997) 6,005 6,072
INTANGIBLE ASSETS
(at cost less accumulated amortization of
$1,009 in 1998 and $913 in 1997) 4,108 4,204
OTHER ASSETS 25,432 25,770
-------- --------
TOTAL ASSETS $ 89,219 $ 85,946
======== ========
See notes to consolidated financial statements.
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PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets--Continued
($ in 000's except share amounts)
March 31 December 31
1998 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,886 $ 7,918
Accrued liabilities 10,895 11,505
-------- --------
TOTAL CURRENT LIABILITIES 20,781 19,423
DEFERRED CREDITS AND NONCURRENT LIABILITIES 23,925 23,812
MINORITY INTEREST 734 662
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 1998 and 1997) 1 1
Common Stock:
Common Stock - par value $.01; 5,000,000
shares authorized; 3,201,021 issued and
3,199,021 outstanding in 1998 and 3,200,871
issued and 3,198,871 outstanding in 1997 32 32
Class B Stock - par value $.01; 2,000,000
shares authorized, 553,452 issued and
outstanding in 1998 and 553,602 issued
and outstanding in 1997 6 6
Additional paid in capital 32,180 32,180
Unrealized gains on investments
available for sale 3,921 3,586
Cumulative translation adjustment 37 (10)
Retained earnings 7,614 6,266
-------- --------
43,791 42,061
Treasury stock at cost,
2,000 shares in 1998 and 1997 (12) (12)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 43,779 42,049
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 89,219 $ 85,946
======== ========
See notes to consolidated financial statements.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
($ in 000's except share amounts)
Three Months Ended
March 31
l998 l997
Net sales $ 20,035 $ 13,705
Cost of sales 13,484 9,884
-------- --------
GROSS PROFIT 6,551 3,821
Costs and expenses:
Selling, general and
administrative expenses 4,909 2,687
Interest, net (572) (686)
-------- --------
4,337 2,001
Other income, net 146 303
-------- --------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 2,360 2,123
Provision for income taxes 721 52
-------- --------
INCOME BEFORE MINORITY INTEREST 1,639 2,071
Minority interest (72) (64)
-------- --------
NET INCOME $ 1,567 $ 2,007
======== ========
Preferred stock dividend requirements 219 219
-------- --------
NET INCOME APPLICABLE
TO COMMON STOCKHOLDERS $ 1,348 $ 1,788
======== ========
NET INCOME PER SHARE $ .36 $ .48
======== ========
Weighted average number
of shares outstanding 3,752,473 3,752,473
========= =========
See notes to consolidated financial statements.
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PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ in 000's except share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
l998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net income from continuing operations $ 1,567 $ 2,007
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 281 285
Net (gain) on sales of securities (185) (340)
Net loss on disposal of fixed assets - 71
Minority interest 72 64
Changes in operating assets and liabilities:
Trade receivables (2,318) (1,977)
Inventories (834) (1,156)
Other assets 47 (1,263)
Accounts payable 1,968 2,108
Other current liabilities (610) (866)
Deferred credits and noncurrent liabilities 160 1,433
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 148 366
INVESTING ACTIVITIES
Purchases of marketable securities - (5,894)
Proceeds from sale of marketable securities 3,845 4,375
Purchases of fixed assets (118) (43)
Proceeds from the sale of fixed assets - 26
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,727 (1,536)
FINANCING ACTIVITIES
Proceeds from long-term debt 10,057 5,543
Principal payments on long-term debt (10,057) ( 5,086)
Dividends paid (219) (219)
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (219) 238
-------- --------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,656 (932)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,720 1,539
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,376 $ 607
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
March 31, 1998
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, 1997.
The consolidated balance sheet as of December 31, 1997 has been derived from
the audited financial statements at that date.
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 $12.50 per share.
Financial Instruments: The Company's financial instruments recorded on the
balance sheet include cash and cash equivalents. Because of their short
maturity, the carrying amount of cash and cash equivalents approximates fair
value.
Off balance sheet financial instruments include foreign currency exchange
agreements. In the normal course of business, the Company's construction
products subsidiary purchases components from a German supplier and from
time to time, enters into foreign currency exchange contracts with banks in
order to fix its trade payables denominated in the Deutsche Mark. The
contract amounts outstanding and the net deferred gains or losses were not
significant at March 31, 1998 and December 31, 1997.
Certain prior year amounts have been reclassified to conform to the 1998
presentation.
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PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
March 31, 1998
NOTE B -- Inventories
The components of inventories consist of the following:
March 31 December 31
1998 1997
Raw materials and supplies $ 6,041 $ 5,585
Work in process 783 596
Finished goods 5,010 4,819
------- -------
$11,834 $11,000
======= =======
NOTE C -- Comprehensive Income
As required, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income," in the first quarter of 1998. SFAS No. 130 established new rules
for the reporting and display of comprehensive income and its components.
This standard does not impact net income or total stockholders' equity.
SFAS No. 130 requires the Company's change in its unrealized gains on
investments available for sale and foreign currency translation adjustment
to be included in other comprehensive income. The prior period's financial
statements have been reclassified to these requirements.
Total comprehensive income consists of the following for the three months
ended March 31
1998 1997
Net Income $ 1,567 $ 2,007
Other Comprehensive Income:
Unrealized holding gains (losses)
on investments available for sale
arising during the period 520 (60)
Less reclassification adjustment
for gains on investments available
for sale (185) (340)
Unrealized currency translation adjustments
arising during the period 47 -
------- -------
Total Other Comprehensive Income 382 (400)
------- -------
Total Comprehensive Income $ 1,949 $ 1,607
======= =======
<PAGE>
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, 1998 and 1997
Income from continuing operations before income taxes and minority interest
increased in 1998 from 1997 primarily because of an increase in income at
the Company's (i) printer supplies business, which since October 20, 1997
has included Kroy, a producer of commercial and industrial labeling
equipment and supplies, and (ii) construction products business.
Sales increased in 1998 from 1997 primarily because of the inclusion of Kroy
although all of the Company's operations experienced sales increases in the
1998 quarter.
Gross profit percentage increased in 1998 from 1997 primarily because of the
inclusion of Kroy, which maintains a higher gross profit percentage than the
Company's other businesses.
Selling, general and administrative expenses increased in 1998 from 1997
because of the inclusion of Kroy.
The change in interest, net, is primarily the result of a decrease in
interest income because of the purchase and funding of Kroy.
Income before income taxes and minority interest increased to $2,360,000 in
the quarter ended March 31, 1998, from $2,123,000 in the quarter ended March
31, 1997. In the year ended December 31, 1997, in accordance with SFAS No.
109, "Accounting for Income Taxes", the Company's valuation allowance on its
deferred tax assets related to net operating loss carryforwards and certain
deductible temporary differences was reduced. The increase in the provision
for income taxes in the 1998 period reflects the usage of a portion of the
deferred tax asset that was recognized at December 31, 1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had $27,712,000 of cash, cash equivalents,
marketable securities and other short-term investments and no long term
debt. In October, 1997, the Company used approximately $5,000,000 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 $2,500,000 working capital line for its printer
supplies business and a $3,000,000 working capital line of credit for its
construction products business. At March 31, 1998, there were no borrowings
under either of these lines of credit. The Company also has a $10,000,000
line of credit which it uses for the issuance of letters of credit and which
can be used for other purposes, including acquisitions. At March 31, 1998,
letters of credit aggregating $1,261,600 had been issued, but there were no
borrowings under this line. The Company is continually reviewing business
acquisition opportunities.
Stockholders' equity of $43,779,000 at March 31, 1998 includes Common and
Preferred stockholders' equity. In order to calculate Common stockholders'
equity at March 31, 1998, 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, 1998.
<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
<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: May 14, 1998
<PAGE>
EXHIBIT INDEX
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AT 03/31/98 AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE 3 MONTHS ENDED 03/31/98 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,376
<SECURITIES> 22,336
<RECEIVABLES> 10,833
<ALLOWANCES> 966
<INVENTORY> 11,834
<CURRENT-ASSETS> 53,674
<PP&E> 17,362
<DEPRECIATION> 11,357
<TOTAL-ASSETS> 89,219
<CURRENT-LIABILITIES> 20,781
<BONDS> 0
0
1
<COMMON> 38
<OTHER-SE> 43,740
<TOTAL-LIABILITY-AND-EQUITY> 89,219
<SALES> 20,035
<TOTAL-REVENUES> 20,035
<CGS> 13,484
<TOTAL-COSTS> 13,484
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,360
<INCOME-TAX> 721
<INCOME-CONTINUING> 1,567
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,567
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
