<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 June 30, 1999
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 August 6, 1999: 3,752,473.
<PAGE>
PUBCO CORPORATION
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
June 30, 1999 and December 31, 1998 . . . . . . . . 3
Consolidated Statements of Operations
for the Three and Six Months Ended
June 30, 1999 and 1998. . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 30,
1999 and 1998. . . . . . . . . . . . . . . . . . . . 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
<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)
June 30 December 31
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 12,354 $ 9,816
Marketable securities and other
investments available for sale 16,852 16,376
Trade receivables (less allowances of
$764 in 1999 and $848 in 1998) 8,778 7,972
Inventories--Note B 13,176 11,625
Deferred income taxes 1,644 1,600
Prepaid expenses and other current assets 1,585 1,449
-------- --------
TOTAL CURRENT ASSETS 54,389 48,838
PROPERTY AND EQUIPMENT (at cost
less accumulated depreciation,
amortization of $11,885 in 1999
and $11,760 in 1998) 6,356 5,488
INTANGIBLE ASSETS
(at cost less accumulated amortization of
$1,024 in 1999 and $1,294 in 1998) 3,655 3,891
OTHER ASSETS 27,029 27,142
-------- --------
TOTAL ASSETS $ 91,429 $ 85,359
======== ========
See notes to consolidated financial statements.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets--Continued
($ in 000's except share amounts)
June 30 December 31
1999 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 8,585 $ 6,118
Accrued liabilities 7,539 8,492
-------- --------
TOTAL CURRENT LIABILITIES 16,124 14,610
LONG-TERM DEBT 1,459 1,689
DEFERRED CREDITS AND NONCURRENT LIABILITIES 25,385 23,197
MINORITY INTEREST 806 684
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 1 1
Common Stock:
Common Stock - par value $.01; 5,000,000
shares authorized; 3,201,141 issued and
3,199,141 outstanding in 1999 and 3,201,131
issued and 3,199,131 outstanding in 1998 32 32
Class B Stock - par value $.01; 2,000,000
shares authorized, 553,332 issued and
outstanding in 1999 and 553,342 issued
and outstanding in 1998 6 6
Additional paid in capital 32,180 32,180
Unrealized gains on investments
available for sale 1,097 263
Cumulative translation adjustment (98) (20)
Retained earnings 14,449 12,729
-------- --------
47,667 45,191
Treasury stock at cost,
2,000 shares in 1999 and 1998 (12) (12)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 47,655 45,179
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 91,429 $ 85,359
======== ========
See notes to consolidated financial statements.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
<TABLE>
Consolidated Statements of Operations
($ in 000's except share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
l999 l998 1999 1998
<S> <C> <C> <C> <C>
Net sales $ 17,787 $ 17,286 $ 36,089 $ 37,321
Cost of sales 12,037 11,574 24,534 25,058
--------- --------- --------- ---------
GROSS PROFIT 5,750 5,712 11,555 12,263
Costs and expenses:
Selling, general and
administrative expenses 4,758 4,821 9,238 9,730
Interest expense 19 31 53 34
Interest income (555) (626) (1,159) (1,201)
Other income, net (46) (487) (38) (633)
--------- -------- --------- ---------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,574 1,973 3,461 4,333
Provision for income taxes 611 643 1,208 1,364
--------- -------- --------- ---------
INCOME BEFORE MINORITY INTEREST 963 1,330 2,253 2,969
Minority interest (68) (49) (122) (121)
--------- -------- --------- ---------
NET INCOME $ 895 1,281 $ 2,131 $ 2,848
========= ======== ========= =========
Preferred stock dividend requirements 205 219 411 438
--------- -------- --------- ---------
NET INCOME APPLICABLE
TO COMMON STOCKHOLDERS $ 690 $ 1,062 $ 1,720 $ 2,410
========= ========= ========= =========
NET INCOME PER SHARE $ .19 $ .28 $ .46 $ .64
========= ========= ========= =========
Weighted average number
of shares outstanding 3,752,473 3,752,473 3,752,473 3,752,473
========= ========= ========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
<TABLE>
Consolidated Statements of Cash Flows
($ in 000's except share amounts)
<CAPTION>
Six Months Ended
June 30
l999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,131 $ 2,848
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 478 555
Deferred income taxes 1,530 1,198
Net (gain) on sales of securities (96) (643)
Net (gain) on disposal of fixed assets (80) -
Minority interest 122 121
Changes in operating assets and liabilities:
Trade receivables (806) (876)
Inventories (1,551) (2,276)
Accounts payable 2,467 444
Other current liabilities (953) (1,106)
Other, net 135 174
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,377 439
INVESTING ACTIVITIES
Purchases of marketable securities (27) (841)
Proceeds from sale of marketable securities 970 5,650
Purchases of fixed assets (1,221) (388)
Proceeds from the sale of fixed assets 80 -
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (198) 4,421
FINANCING ACTIVITIES
Proceeds from long-term debt 11,737 14,029
Principal payments on long-term debt (11,967) (13,004)
Dividends paid (411) (438)
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (641) 587
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 2,538 5,447
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,816 1,720
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 12,354 $ 7,167
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
June 30, 1999
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, 1998.
The consolidated balance sheet as of December 31, 1998 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 $11.75 per share.
On April 3, 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position 98-5 -- Reporting on the Cost of Start-Up
Activities ("SOP") which requires that costs related to start-up activities
be expensed as incurred. The Company adopted the SOP effective January 1,
1999. The effect of adoption of the SOP was not material to the Company's
1999 earnings or financial condition.
The Company's financial instruments recorded on the balance sheet include
cash and cash equivalents. Because of their short maturity, the carrying
amount of cash and cash equivalents approximates fair value.
Off balance sheet financial instruments include foreign currency exchange
agreements. In the normal course of business, the Company's construction
products subsidiary purchases components from a German supplier and from
time to time, enters into foreign currency exchange contracts with banks in
order to fix its trade payables denominated in the Deutsche Mark. The
contract amounts outstanding and the net deferred gains or losses were not
significant at June 30, 1999 and December 31, 1998.
Certain prior year amounts have been reclassified to conform to the 1999
presentation.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
June 30, 1999
NOTE B -- Inventories
The components of inventories consist of the following:
June 30 December 31
1999 1998
Raw materials and supplies $ 7,334 $ 6,389
Work in process 477 303
Finished goods 5,365 4,933
------- -------
$13,176 $11,625
======= =======
NOTE C -- Comprehensive Income
Total comprehensive income consists of the following for the three and six
months ended June 30, 1999:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
l999 l998 1999 1998
<S> <C> <C> <C> <C>
Net Income $ 895 $ 1,281 $ 2,131 $ 2,848
Other Comprehensive Income:
Unrealized holding gains (losses)
on investments available for sale
arising during the period 447 (1,193) 930 (673)
Less reclassification adjustment
for gains on investments available
for sale (35) (458) (96) (643)
Unrealized currency translation adjustments
arising during the period (31) 6 (78) 53
------- ------- ------- -------
Total Other Comprehensive Income 381 (1,645) 756 (1,263)
------- ------- ------- -------
Total Comprehensive Income $ 1,276 $ (364) $ 2,887 $ 1,585
======= ======= ======= =======
</TABLE>
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
June 30, 1999
NOTE D -- Industry Segment Information
Summarized industry segment information is as follows:
<TABLE>
<CAPTION>
Printer Construction
Supplies Products
Business Business Corporate Consolidated
Three months ended
June 30, 1999
<S> <C> <C> <C> <C>
Net sales 9,620 8,167 - 17,787
Income before income taxes and
minority interest 835 806 (67) 1,574
Three months ended
June 30, 1998
Net sales 10,540 6,746 - 17,286
Income before income taxes and
minority interest 1,144 594 235 1,973
Six months ended
June 30, 1999
Net sales 20,011 16,078 - 36,089
Income before income taxes and
minority interest 2,103 1,504 (146) 3,461
Six months ended
June 30, 1998
Net sales 22,502 14,819 - 37,321
Income before income taxes and
minority interest 2,660 1,446 227 4,333
</TABLE>
The Company's operations are classified into two reportable business
segments. The Company's two reporting business segments are managed
separately based upon fundamental differences in their operations.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS
Comparison of the Three and Six Months Ended March 31, 1999 and 1998
The changes in sales in the 1999 three and six month periods from the sales
in the comparable 1998 periods were primarily the result of an increase in
sales at the construction products business offset by a decrease in sales at
the Company's printer supplies business, which sells supplies for both
impact and non-impact printing devices as well as labeling supplies and
machines. The decrease in sales in the printer supplies business is
primarily attributable to the decline in sales of supplies for impact
printers. This decline is expected to continue as additional impact
printers in the market place are replaced by other printing devices. The
Company expects to introduce new proprietary products for its printer
supplies business some time during the fourth quarter of 1999. Any impact
on sales will not begin until the first quarter of 2000. This paragraph
contains forward looking statements. No assurance can be given that any new
products introduced will be successful. A number of factors could affect
the success of any such introduction, including changes in technology,
competitive pressures, raw material costs, patent issues and other factors
which affect businesses generally.
The decrease in net income for the 1999 three and six month periods from the
net income in the comparable 1998 periods is primarily the result of a
decrease in net income in the printing supplies business because of a
decrease in sales in that segment and a decrease in other income in the 1999
periods. The 1998 six month period included gains from sales of securities
of $643,000 (most of which occurred in the three month period ended June,
1998) compared to realized gains of $96,000 in the six month period ended
June, 1999 (most of which occurred in the first three months of 1999).
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had $29,206,000 of cash, cash equivalents,
marketable securities and other short-term investments and $1,459,000 of
long term debt. The Company's 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. At June 30, 1999, there were no borrowings under this
line of credit. The Company also has a $3,000,000 working capital line of
credit for its construction products business. At June 30, 1999, borrowing
under this line of credit was $1,459,000. 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.
There were no borrowings under this line at June 30, 1999. At June 30,
1999, letters of credit with outstanding balances aggregating $3,390,600 had
been issued, primarily to purchase finished and raw material inventories
from foreign vendors for the printer supplies business. The Company is
continually reviewing business acquisition opportunities.
Regarding the functionality of the Company's computer systems for the year
2000, the systems utilized by the printer supplies business and Pubco
corporate (including stock transfer functions), are currently compliant.
All of such systems had been routinely acquired by the Company and were
already year 2000 compliant. Not all of the computer systems used by the
Company's construction products business are presently year 2000 compliant.
The construction products business expects that such systems will become
completely compliant at a cost not to exceed $350,000, most of which has
been incurred to date, and that such compliance will be completed by the end
of 1999.
Stockholders' equity of $47,655,000 at June 30, 1999 includes Common and
Preferred stockholders' equity. In order to calculate Common stockholders'
equity at June 30, 1999, 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 June 30, 1999.
<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
/s/ Maria Szubski
-----------------------------
Maria Szubski
Chief Financial Officer
Dated: August 16, 1999
<PAGE>
EXHIBIT INDEX
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AT 06/30/1999 AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE 6-MONTHS ENDED 06/30/1999 AND IS QUALIFIED IN ITS
ENTIRITY BY REFERANCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 12,354
<SECURITIES> 16,852
<RECEIVABLES> 9,542
<ALLOWANCES> 764
<INVENTORY> 13,176
<CURRENT-ASSETS> 54,389
<PP&E> 18,241
<DEPRECIATION> 11,885
<TOTAL-ASSETS> 91,429
<CURRENT-LIABILITIES> 16,124
<BONDS> 1,459
0
1
<COMMON> 38
<OTHER-SE> 47,616
<TOTAL-LIABILITY-AND-EQUITY> 91,429
<SALES> 36,089
<TOTAL-REVENUES> 36,089
<CGS> 24,534
<TOTAL-COSTS> 24,534
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53
<INCOME-PRETAX> 3,461
<INCOME-TAX> 1,208
<INCOME-CONTINUING> 2,131
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,131
<EPS-BASIC> .46
<EPS-DILUTED> .46
</TABLE>
