<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, 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 May 1, 1999: 3,752,473.
<PAGE>
PUBCO CORPORATION
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
March 31, 1999 and December 31, 1998. . . . . . . . 3
Consolidated Statements of Operations
for the Three Months Ended
March 31, 1999 and 1998. . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the Three Months Ended March 31,
1999 and 1998. . . . . . . . . . . . . . . . . . . . 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
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,571 $ 9,816
Marketable securities and other
investments available for sale 16,832 16,376
Trade receivables (less allowances of
$835 in 1999 and $848 in 1998) 9,645 7,972
Inventories--Note B 12,958 11,625
Deferred income taxes 1,644 1,600
Prepaid expenses and other current assets 2,102 1,449
-------- --------
TOTAL CURRENT ASSETS 53,752 48,838
PROPERTY AND EQUIPMENT (at cost
less accumulated depreciation,
amortization of $11,699 in 1999
and $11,760 in 1998) 5,823 5,488
INTANGIBLE ASSETS
(at cost less accumulated amortization of
$970 in 1999 and $1,294 in 1998) 3,709 3,891
OTHER ASSETS 26,316 27,142
-------- --------
TOTAL ASSETS $ 89,600 $ 85,359
======== ========
See notes to consolidated financial statements.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets--Continued
($ in 000's except share amounts)
March 31 December 31
1999 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 10,098 $ 6,118
Accrued liabilities 7,421 8,492
-------- --------
TOTAL CURRENT LIABILITIES 17,519 14,610
LONG-TERM DEBT 1,035 1,689
DEFERRED CREDITS AND NONCURRENT LIABILITIES 23,724 23,197
MINORITY INTEREST 738 684
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 685 263
Cumulative translation adjustment (67) (20)
Retained earnings 13,759 12,729
-------- --------
46,596 45,191
Treasury stock at cost,
2,000 shares in 1999 and 1998 (12) (12)
TOTAL STOCKHOLDERS' EQUITY 46,584 45,179
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 89,600 $ 85,359
======== ========
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
l999 l998
Net sales $ 18,302 $ 20,035
Cost of sales 12,497 13,484
-------- --------
GROSS PROFIT 5,805 6,551
Costs and expenses:
Selling, general and
administrative expenses 4,480 4,909
Interest expense 34 3
Interest income (604) (575)
Other expense (income) net 8 (146)
-------- --------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,887 2,360
Provision for income taxes 597 721
-------- --------
INCOME BEFORE MINORITY INTEREST 1,290 1,639
Minority interest (54) (72)
-------- --------
NET INCOME $ 1,236 $ 1,567
======== ========
Preferred stock dividend requirements 206 219
-------- --------
NET INCOME APPLICABLE
TO COMMON STOCKHOLDERS $ 1,030 $ 1,348
======== ========
NET INCOME PER SHARE $ .27 $ .36
======== ========
Weighted average number
of shares outstanding 3,752,473 3,752,473
========= =========
See notes to consolidated financial statements.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ in 000's except share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
l999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,236 $ 1,567
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 252 281
Deferred income taxes 801 668
Net (gain) on sales of securities (61) (185)
Net (gain) on disposal of fixed assets (80) -
Minority interest 54 72
Changes in operating assets and liabilities:
Trade receivables (1,673) (2,318)
Inventories (1,333) (834)
Accounts payable 3,980 1,968
Other current liabilities (1,071) (610)
Other, net (329) (461)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,776 148
INVESTING ACTIVITIES
Purchases of marketable securities (27) -
Proceeds from sale of marketable securities 301 3,845
Purchases of fixed assets (515) (118)
Proceeds from the sale of fixed assets 80 -
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (161) 3,727
FINANCING ACTIVITIES
Proceeds from long-term debt 5,651 10,057
Principal payments on long-term debt (6,305) (10,057)
Dividends paid (206) (219)
-------- --------
NET CASH (USED IN) FINANCING ACTIVITIES (860) (219)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 755 3,656
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,816 1,720
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,571 $ 5,376
======== ========
<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, 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 $11.75 per share.
On April 3, 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position 98-5 -- Reporting on the Cost of Start-Up
Activities ("SOP") which requires that costs related to start-up activities
be expensed as incurred. The Company adopted the SOP effective January 1,
1999. The effect of adoption of the SOP was not material to the Company's
1999 earnings or financial condition.
The Company's financial instruments recorded on the balance sheet include
cash and cash equivalents. Because of their short maturity, the carrying
amount of cash and cash equivalents approximates fair value.
Off balance sheet financial instruments include foreign currency exchange
agreements. In the normal course of business, the Company's construction
products subsidiary purchases components from a German supplier and from
time to time, enters into foreign currency exchange contracts with banks in
order to fix its trade payables denominated in the Deutsche Mark. The
contract amounts outstanding and the net deferred gains or losses were not
significant at March 31, 1999 and December 31, 1998.
Certain prior year amounts have been reclassified to conform to the 1999
presentation.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
March 31, 1999
NOTE B -- Inventories
The components of inventories consist of the following:
March 31 December 31
1999 1998
Raw materials and supplies $ 7,337 $ 6,389
Work in process 612 303
Finished goods 5,009 4,933
------- -------
$12,958 $11,625
======= =======
NOTE C -- Comprehensive Income
Total comprehensive income consists of the following for the three months
ended March 31
1999 1998
Net Income $ 1,236 $ 1,567
Other Comprehensive Income:
Unrealized holding gains on
investments available for sale
arising during the period 483 520
Less reclassification adjustment
for gains on investments available
for sale (61) (185)
Unrealized currency translation adjustments
arising during the period (47) 47
------- -------
Total Other Comprehensive Income 375 382
------- -------
Total Comprehensive Income $ 1,611 $ 1,949
======= =======
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
March 31, 1999
NOTE D -- Industry Segment Information
Summarized industry segment information is as follows:
<TABLE>
<CAPTION>
Printer Construction
Supplies Products
Business Business Corporate Consolidated
<C> <C> <C> <C> <C>
Three months ended
March 31, 1999
Net sales 10,391 7,911 - 18,302
Income before income taxes and
minority interest 1,268 698 (79) 1,887
Three months ended
March 31, 1998
Net sales 11,962 8,073 - 20,035
Income before income taxes and
minority interest 1,516 852 (8) 2,360
</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 Months Ended March 31, 1999 and 1998
Sales declined in 1999 from 1998 primarily because of decreases 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. The
Company expects to introduce new proprietary products for its supplies
business some time during the fourth quarter of 1999. Any impact on sales
will not begin until after such introduction. 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.
Income before income taxes and minority interest decreased in 1999 from 1998
primarily because of the decrease in sales at the Company's printer supplies
business and the corresponding decrease in gross profit dollars generated.
The decrease in net income at the printer supplies business was partially
offset by a reduction in expenses at the printer supplies business. The
construction products business also had a slight decrease in net income
before taxes and minority interest. Gross profit dollars at the
construction products business decreased because of a change in the mix of
products sold.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company had $27,403,000 of cash, cash equivalents,
marketable securities and other short-term investments. The Company's
marketable securities and other short term investments are subject to risk
of loss and fluctuations in value. The income generated from the 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 acquisitions of operating businesses.
The Company also has a $2,500,000 working capital line for its printer
supplies business. At March 31, 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 March 31, 1999, borrowing
under this line of credit was $1,035,000. 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. At
March 31, 1999, letters of credit aggregating $1,661,000 were outstanding,
but there were no borrowings under this line. 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 and that such
compliance will be completed by the end of 1999.
Stockholders' equity of $46,584,000 at March 31, 1999 includes Common and
Preferred stockholders' equity. In order to calculate Common stockholders'
equity at March 31, 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 March 31, 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 and
Chief Financial Officer
Dated: May 14, 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 3/31/99 AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE 3 MONTHS ENDED 3/31/99. 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-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 10,571
<SECURITIES> 16,832
<RECEIVABLES> 10,480
<ALLOWANCES> 835
<INVENTORY> 12,958
<CURRENT-ASSETS> 53,752
<PP&E> 17,522
<DEPRECIATION> 11,699
<TOTAL-ASSETS> 89,600
<CURRENT-LIABILITIES> 17,519
<BONDS> 1,035
0
1
<COMMON> 38
<OTHER-SE> 46,545
<TOTAL-LIABILITY-AND-EQUITY> 89,600
<SALES> 18,302
<TOTAL-REVENUES> 18,302
<CGS> 12,478
<TOTAL-COSTS> 12,478
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> 1,887
<INCOME-TAX> 597
<INCOME-CONTINUING> 1,236
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,236
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
