<PAGE>
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
/X/ Preliminary information statement / / Confidential, For Use of the
Commission Only (As permitted by
Rule 14c-5(d)2)
/ / Definitive information statement
PUBCO CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and O-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
P U B C O C O R P O R A T I O N
3830 Kelley Avenue
Cleveland, Ohio 44114
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
October 26, 2000
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Pubco Corporation (the "Company") will be held at the Ramada
Inn, I-295 and Route 13 North, New Castle, Delaware 19720 on October 26, 2000,
at 11:00 A.M. Eastern Time to consider and act upon the following:
1. Election of a Board of Directors to serve until the next Annual
Meeting of Stockholders or until their successors are duly elected and
qualified.
2. A proposal to cashout registered stockholders holding fewer than
100 shares of the Company's stock by way of an amendment to the Company's
Certificate of Incorporation to effect a reverse stock split followed by a
forward stock split of the Company's Common and Class B Stock.
3. Transact such other business as may properly come before the
Meeting.
Stockholders of record of the Company's Common Stock and Class B Stock at
the close of business on September 22, 2000, the record date fixed by the
Board of Directors, are entitled to notice of and to vote at the Meeting or at
any adjournment thereof.
By Order of the Board of Directors
Stephen R. Kalette
Secretary
Cleveland, Ohio
September 25, 2000
SEE INFORMATION STATEMENT ENCLOSED
<PAGE>
P U B C O C O R P O R A T I O N
3830 Kelley Avenue
Cleveland, Ohio 44114
INFORMATION STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
October 26, 2000
September 25, 2000
Matters to be Considered at the Meeting
This Information Statement is furnished by Pubco Corporation, a Delaware
corporation (the "Company"), for the Annual Meeting of Stockholders to be held
October 26, 2000, and at all adjournments thereof (the "Meeting"), for the
purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The Company's Annual Report for the year ended December 31,
1999 is being mailed together with this Information Statement on or about
September 25, 2000. Stockholders of record as of the close of business on
September 22, 2000 (the "Record Date") are entitled to notice of and to vote
at the Meeting.
The only business which the Board of Directors intends to present or knows
that others will present at the Meeting is as set forth in the attached Notice
of Annual Meeting of Stockholders.
Voting
Holders of record at the close of business on the Record Date of the
Company's issued and outstanding Common Stock, par value $.01 per share
("Common Stock"), will be entitled to one vote for each share held and holders
of record at the close of business on the Record Date of the Company's Class B
Stock, par value $.01 per share ("Class B Stock"), will be entitled to 10
votes for each share held. As of September 1, 2000, the Company had 3,158,435
shares of Common Stock outstanding and 553,074 shares of Class B Stock
outstanding.
A majority of the voting power present and voting at the Meeting is
required to approve the election of the Directors (Item 1). A majority of the
voting power eligible to be cast at the Meeting is required to approve the
proposed amendment to the Company's Certificate of Incorporation to effect the
reverse and forward stock splits (Item 2). A majority of the voting power
present and voting at the Meeting is required to approve any other business
brought before the Meeting (Item 3).
<PAGE>
A stockholder who has indicated his intention to vote for the six nominees
for the Board of Directors named herein and for the Proposal to Amend the
Company's Certificate of Incorporation to Effect a Reverse Stock Split
Followed by a Forward Stock Split of the Company's Common and Class B Stock
beneficially owns shares entitled to approximately 83% of all possible votes
at the meeting, thereby assuring election of the six nominees and approval of
the Proposal to Amend the Company's Certificate of Incorporation to Effect a
Reverse Stock Split Followed by a Forward Stock Split of the Company's Common
and Class B Stock.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 1, 2000 (i) the number of
shares of the Company's stock owned, directly or indirectly, by each Director
of the Company and by all Directors, Director nominees and officers as a
group, and (ii) the number of shares of the Company's stock held by each
person who was known by the Company to beneficially own more than 5% of the
Company's stock:
<TABLE>
<CAPTION>
Common Stock Class B Stock Aggregate
Amount and Nature Amount and Nature Percent of
of Beneficial Percent of of Beneficial Percent of Voting
Name of Holder Ownership (1)(2) Class Ownership (1)(2) Class Power
<S> <C> <C> <C> <C> <C>
Glenn E. Corlett -- -- -- -- --
Jack Howard(6) 9,867 * -- -- *
Harold L. Inlow -- -- -- -- --
Stephen R. Kalette(5) 5,166 * 13,759 2.5 1.6
Robert H. Kanner(3) 2,066,894 65.4 514,044 92.9 82.9
William A. Dillingham(5) 28,725 * -- -- *
Leo L. Matthews(4) -- -- -- -- --
Maria Szubski(5) 2,550 * -- -- *
3830 Kelley Avenue
Cleveland, OH 44114
All Directors and
officers as a group 2,118,302 66.3 527,803 95.4 84.8
(9 persons)(3)(5)
FMR Corp. (7)
82 Devonshire Street
Boston, MA 02109 319,500 10.1 -- -- 3.7
<FN>
* indicates less than 1%.
(1) Except as set forth below, each owner has sole voting and investment power
with respect to the shares beneficially owned by him.
(2) Class B Stock is convertible into Common Stock on a share for share basis.
Therefore, ownership of Class B Stock may also be deemed to be beneficial
ownership of the same number of shares of Common Stock.
(3) Does not include 800 shares of Common Stock owned by Mr. Kanner as
custodian for his children, as to which shares he disclaims beneficial
ownership.
(4) Mr. Matthews owns approximately 3.6% of the Common Stock of the Company's
Allied Construction Products, Inc. subsidiary ("Allied").
(5) Includes for each respective person and the group, the following number of
shares of Common Stock which may be acquired within 60 days on exercise of
stock options: Kalette - 5,000, Dillingham - 25,000, Szubski - 2,500, all
officers and directors as a group - 37,500.
<PAGE>
(6) Does not include 1,100 shares of Common Stock owned by Mr. Howard's wife
as custodian for his children, as to which shares he disclaims beneficial
ownership.
(7) Information concerning FMR Corp. is based upon disclosure contained in a
Schedule 13(G) filed with the SEC and the Company as of February 1, 1999.
</TABLE>
ELECTION OF DIRECTORS
Six Directors are to be elected for the ensuing year to hold office until
the next Annual Meeting of Stockholders and until their successors are elected
and shall qualify. All nominees are currently serving as Directors of the
Company having been elected to the Board of Directors at the 1999 Annual
Meeting of Stockholders. Election as a Director requires the favorable vote
of the majority of the votes of the Common Stock and Class B Stock (voting
together as a single class) voting at the election of Directors.
Information Concerning Nominees
Name, Age and Position Principal Occupation
with the Company During Last Five Years
Glenn E. Corlett Dean of the College of Business at Ohio University,
56, Director since Athens, Ohio since July 1, 1997. Between November,
1997, Member of the 1996 and June, 1997, Mr. Corlett was an independent
Audit Committee and business consultant in Cleveland, Ohio. For more
Compensation Committee than five years prior to July, 1996, Mr. Corlett
was the Executive Vice President and Chief
Operating Officer of N. W. Ayer, Incorporated, a
New York City-based advertising agency he joined in
1990. Also a Director of Rocky Shoes & Boots, Inc.
and Frederick Brewing Co.
William A. Dillingham President of the Company's computer printer and
57, Director since labeling supplies businesses for more than 10 years.
1997, President of
the Company's computer
printer and labeling
supplies businesses.
Jack Howard Principal of Mutual Securities, Inc., an NASD
39, Director since registered Broker/Dealer for more than the past
1999, Member of the five years. Director of Gateway Industries, Inc.
Audit Committee and and WebFinancial Corporation.
Compensation Committee
Harold L. Inlow Independent business consultant since January 1,
66, Director since 1995.
1997, Member of the
Audit Committee and
Compensation Committee
<PAGE>
Stephen R. Kalette Director and executive officer of the Company since
50, Director since April, 1984.
1983, Vice President,
Administration, General
Counsel & Secretary
Robert H. Kanner Director and executive officer of the Company since
52, Director since December, 1983.
1983, Chairman,
President & CEO
Board of Directors
The Board of Directors establishes broad corporate policies which are
carried out by the officers of the Company who are responsible for day-to-day
operations. In 1999, the Board held two meetings and took action by unanimous
written consent on two other occasions. No Director was absent during the
year from any of the meetings of the Board of Directors or of any of the
committees of the Board on which he served.
Committees of the Board of Directors
The Company has a standing Audit Committee. The Audit Committee consists
of Mr. Corlett, Mr. Inlow and Mr. Howard. The Audit Committee (i) reviews the
internal controls of the Company and its financial reporting; (ii) meets with
the Treasurer and such other officers as it, from time to time, deems
necessary; (iii) meets with the Company's independent public accountants and
reviews the scope and results of auditing procedures, the degree of such
auditors' independence, audit and non-audit fees charged by such accountants,
and the adequacy of the Company's internal accounting controls; and (iv)
recommends to the Board the appointment of the independent accountants.
The Company also has a Compensation Committee. The Compensation
Committee consists of Mr. Corlett, Mr. Inlow and Mr. Howard.
Compensation of Directors
The Company pays its outside Directors an annual fee of $15,000, payable
monthly. The Company also reimburses its Directors for any expense reasonably
incurred while performing services for the Company. Directors who are
employees of the Company or otherwise receive compensation from the Company do
not receive any fee for acting as Directors of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Due to the Company's delay in drafting a Form 3, Initial Statement of
Beneficial Ownership of Securities, for Director Jack Howard after his
election to the Company's Board of Directors on September 9, 1999, Mr. Howard
failed to timely file such form. The form was filed before the end of 1999.
There were no other known failures to file by Mr. Howard or any other Director
of the Company.
<PAGE>
Other Executive Officers
Leo L. Matthews, age 60, has been President of Allied since it was
acquired in March, 1993.
Maria Szubski, age 41, was named the Company's Chief Financial Officer on
June 30, 1999. She has been employed by the Company as an accountant for more
than the past five years.
Certain Transactions
The Company leases a general purpose 312,000 square foot building in
Cleveland, Ohio (the "Building") on a triple net basis. The premises are used
for executive and administrative facilities, computer printer supplies and
labeling supplies manufacturing and administrative operations, and Allied's
manufacturing and administrative operations. The Company subleases a portion
of the Building to an unrelated party. The annual rental for the Building is
approximately $548,700. The Partnership that owns the Building is 80% owned
and controlled by Mr. Kanner. Mr. Dillingham, Mr. Kalette and five other
individuals have a minority interest in the Partnership.
<PAGE>
MANAGEMENT COMPENSATION
Summary Compensation Table
<TABLE>
The following table discloses compensation paid or accrued, during each of the Company's last three
fiscal years, to the Company's Chief Executive Officer and to its other executive officers.
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Name and Other Annual Restricted LTIP All Other
Principal Bonus Compensation Stock Options Payouts Compensation
Position Year Salary($) ($) ($) Awards ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. Kanner(1)
Chairman, CEO, 1999 $525,000 --- $85,631(2) --- --- --- $173,092(3,4,5)
President 1998 525,000 --- 74,710 --- --- --- 181,605
1997 525,000 --- 72,014 --- --- --- 184,691
Stephen R. Kalette
VP-Admin., 1999 $330,000 --- $28,844(6) --- 20,000 --- $ 32,494(4,5)
General Counsel 1998 330,000 --- 27,600 --- --- --- 35,757
& Secretary 1997 330,000 --- 26,416 --- --- --- 35,799
William A. Dillingham(7)
President of 1999 $450,000 --- $ 9.189(7) --- 100,000 --- $ 25,000(5,8)
Printer Supplies 1998 450,000 --- 10,091 --- --- --- 31,000
Business 1997 450,000 --- 5,473 --- --- --- 31,000
Leo L. Matthews(9)
President of 1999 $133,789 $ 60,084 $ 7,431(10) --- --- --- $ 10,816(11)
Allied 1998 130,000 70,000 5,703 --- --- --- 11,000
1997 130,000 65,055 5,163 --- --- --- 10,847
Maria Szubski
Chief Financial 1999 $137,812 --- $ 3,418(12) --- 10,000 --- $ 13,095(4,5)
Officer
<PAGE>
<FN>
(1) Mr. Kanner deferred his entire salary for each of the years reported under the terms
of deferred compensation plans established for his benefit. The amounts reported
for each year are the amounts deferred for that year. As compensation is earned by
Mr. Kanner, it is paid by the Company to deferred compensation trusts. These
amounts are being distributed to Mr. Kanner by the trusts in accordance with the
terms of the deferred compensation plans.
(2) Of the amount shown in the table, $81,087 in 1999, $70,258 in 1998 and $67,620 in
1997 represents the premiums on life insurance paid for by the Company on Mr.
Kanner's life, and for which the Company is not a beneficiary; and $4,544 in 1999,
$4,452 in 1998 and $4,394 in 1997 represents the cost of providing Mr. Kanner with
use of an automobile during the year.
(3) Of the amount reflected, $118,500 in 1999, $122,100 in 1998 and $125,400 in 1997
represents a payment by the Company toward the premium on split dollar life
insurance on Mr. Kanner's life and for which the Company is not the beneficiary.
The amounts will be repaid to the Company out of the death proceeds from such policy.
(4) In 1988, the Company adopted a non-qualified plan to provide retirement benefits for
executive officers and other key employees. The plan provides benefits upon
retirement, death or disability of the participant and benefits are subject to a
restrictive vesting schedule. $53,592 in 1999, $58,505 in 1998 and $58,291 in 1997
of the amounts shown in the table for Mr. Kanner and $31,494 in 1999, $34,757 in
1998 and $34,799 in 1997 of the amounts shown in the table for Mr. Kalette and
$12,095 of the amount shown in the table for Ms. Szubski are amounts contributed to
such plan for the benefit of such executive officers with respect to the years
noted. Vesting of benefits under the plan is phased in over 20 years and only a
portion of the amount contributed for each year has fully vested.
(5) In 1997, the Company adopted a 401-K plan to provide retirement benefits for
employees of Pubco and the Company's printer supplies business, including officers.
Participating employees make voluntary contributions to the Plan, a portion of which
the Company matches. Of the amounts shown in the 1999, 1998 and 1997 tables for Mr.
Kalette, Mr. Kanner and Ms. Szubski, $1,000 was contributed by Pubco to such plan.
Of the amount shown in the 1999, 1998 and 1997 tables for Mr. Dillingham, $1,000 was
contributed by Buckeye to such plan. Vesting of benefits under the plan is phased
in over five years.
(6) Of the amount shown in the table, $24,124 in 1999, $23,085 in 1998 and $22,210 in
1997 represents the premiums on life insurance paid for by the Company on Mr.
Kalette's life, and for which the Company is not a beneficiary; and $4,251 in 1999,
$4,057 in 1998 and $3,725 in 1997 represents the cost of providing Mr. Kalette with
use of an automobile during the year.
(7) All of the amounts shown as paid to or for Mr. Dillingham were paid by the Company's
printer supplies business. Of the amount shown in the table, $4,995 in 1999, $4,425
in 1998 and $3,885 in 1997 represents the premiums on life insurance paid for by the
Company's printer supplies business on Mr. Dillingham's life, and for which it is
not a beneficiary; and $4,194 in 1999, $5,666 in 1998 and $1,588 in 1997 represents
the cost of providing Mr. Dillingham with use of an automobile during the year.
<PAGE>
(8) In 1988, the Company's printer supplies business adopted a non-qualified plan to
provide retirement benefits for executive officers and other key employees. The
plan provides benefits upon retirement, death or disability of the participant and
benefits are subject to arestrictive vesting schedule. Of the amount shown in the
table for Mr. Dillingham, $24,000 in 1999 and $30,000 in 1998 and 1997 was
contributed to such plan for the benefit of such executive officer with respect to
each of the years noted. Vesting of benefits under the plan is phased in over 20
years and only a portion of the amount contributed for each year has fully vested.
(9) All of the amounts shown as paid to or for Mr. Matthews were paid by Allied. Mr.
Matthews has an employment agreement with such business providing for a minimum
$130,000 per year base salary; a share of Allied's earnings in excess of its
operating plan earnings, if any, and discretionary bonuses.
(10) Of the amount shown in the table, $2,126 in 1999, $1,710 in 1998 and $1,710 in 1997
represents the premiums on life insurance paid for by the construction products
business on Mr. Matthew's life, and for which it is not a beneficiary; and $5,305 in
1999, $3,993 in 1998 and $3,453 in 1997 represents the cost of providing Mr.
Matthews with use of an automobile during that year.
(11) In 1993, Allied adopted a 401-K plan (with a profit sharing component) to provide
retirement benefits for its employees, including officers. Participating employees
make voluntary contributions to the Plan, a portion of which such business
matches. All of the amount shown in the table for Mr. Matthews was contributed by
Allied to such plan. Vesting of benefits under the plan is phased in over three
years.
(12) The amount shown in the table represents the cost of providing Ms. Szubski with use
of an automobile during the year.
</TABLE>
Year 2000 Compensation Arrangement
On March 28, 2000, on the recommendation of the Compensation Committee,
the Board of Directors approved a compensation structure for Mr. Kanner, Mr.
Kalette, Mr. Dillingham, Ms. Szubski and other covered employees for the year
2000. Total compensation for the year 2000, including amounts that would be
paid in early 2001 attributable to 2000, will be directly tied to the
Company's income before income taxes and minority interest. Should the
Company's income before income taxes and minority interest in 2000 equal such
income for 1999, then total cash compensation for Mr. Kalette, Mr. Dillingham,
Ms. Szubski and certain other employees would be reduced by approximately 25%
from 1999 levels and total cash compensation for Mr. Kanner for 2000 would be
reduced by approximately 50% from 1999 levels. Should the Company's income
before income taxes and minority interest in 2000 equal such income for 1998,
then total cash compensation for Mr. Kanner, Mr. Kalette, Mr. Dillingham, Ms.
Szubski and other covered employees would equal such compensation for 1999.
Should the Company's income before income taxes and minority interest in 2000
exceed such income for 1999, then the increase or decrease in total cash
compensation for Mr. Kanner, Mr. Kalette, Mr. Dillingham, Ms. Szubski and
other covered employees from 1999 levels would adjust proportionately. In all
cases, discretionary compensation may be paid in addition to any compensation
provided in this arrangement.
<PAGE>
1998 Equity Incentive Plan
In July, 1998, the Board of Directors adopted the Company's 1998 Equity
Incentive Plan, subject to approval by the Company's stockholders which was
obtained at the Annual Meeting of Stockholders held on September 14, 1998.
The Plan provides for the grant of (i) incentive and non-statutory stock
options, (ii) stock bonuses, (iii) rights to purchase restricted stock, and
(iv) stock appreciation rights, to key employees, officers and consultants of
the Company and its affiliates. The maximum number of shares of Common Stock
issuable under the Plan as approved by the stockholders is 200,000. No stock
awards were issued under the Plan during 1998. During 1999, the Board amended
the Plan which was approved by the Stockholders in September, 1999, to
increase the number of shares issuable under the Plan by 120,000 shares to
320,000 shares. No awards of stock bonuses, restricted stock or stock
appreciation rights have been granted under the Plan. The Board made the
following grants of stock options to executive officers in 1999:
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
Percent
Number Of
Of Totals
Shares Options Exer-
Under- Granted cise Market Grant
lying In Price Price Expira- Date
Options Fiscal Per At tion Present
Name Granted Year Share Grant Date Value
Robert H. Kanner -- -- -- -- -- --
Stephen R. Kalette 20,000 8.33 $9.00 $9.75 01/20/09 $ 93,800
William A. Dillingham 100,000 41.67 $9.00 $9.75 01/20/09 $469,000
Leo R. Matthews -- -- -- -- -- --
Maria Szubski 10,000 4.17 $9.00 $9.75 01/20/09 $ 46,900
The grant date present value, calculated using the Black-Scholes calculation
method, is based on certain assumptions as to the interest rates, stock price
volatility and future dividend yield. There is no assurance that these
assumptions will be true in the future. The actual value, if any, that an
executive will realize upon exercise of an option, will be the excess of the
stock price over the exercise price.
AGGREGATE OPTIONS EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options At Options At
Shares Fiscal Year- Fiscal Year
Acquired Value End (#) End ($)
On Realized Exercisable/ Exercisable/
Name Exercise # $ Unexercisable Unexercisable
Robert H. Kanner -- -- -- --
Stephen R. Kalette -- -- 0/ 20,000 0/0
William A. Dillingham -- -- 0/100,000 0/0
Leo R. Matthews -- -- -- --
Maria Szubski -- -- 0/ 10,000 0/0
As of January 21, 2000, the options became exercisable for 1/4 of the
number of shares shown in the table. The remaining options become
exercisable over the next three years.
<PAGE>
Unless covered by an employment agreement with the Company, officers serve for
one year terms or until their respective successors are duly elected and
qualified.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Although not members of the Compensation Committee, as Directors of the
Company, Mr. Kanner, Mr. Kalette and Mr. Dillingham participate in Board of
Directors' deliberations and decisions concerning executive officer
compensation. Mr. Kanner, Mr. Kalette and Mr. Dillingham are executive
officers of the Company.
The Statement of the Board of Directors Regarding Executive Compensation
and the Stock Performance Charts which follow shall not be deemed incorporated
by reference by any general statement incorporating by reference this
Information Statement into any filing under the Securities Act of 1933 or
under the Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
STATEMENT OF THE BOARD OF DIRECTORS
REGARDING EXECUTIVE COMPENSATION
Mr. Matthews' employment arrangement includes participation in a bonus
pool related to the performance of Allied and Mr. Matthews' compensation may
include discretionary bonuses.
Historically, the compensation of the Company's executive officers was
not, as a matter of course, directly determined by Company performance through
objective criteria. Rather, the Board set compensation at levels it
determined were appropriate based upon the nature of the respective
responsibilities of such officers and their willingness to work for the
Company at such compensation levels.
Beginning in mid-1998, the Board of Directors began to create a
compensation system directly tied to Company performance. The Board's
adoption of the 1998 Equity Incentive Plan in 1998 and the granting of stock
options thereunder in 1999 tied one component of executive compensation to
price changes in the market for the Company's stock. The approval of the Year
2000 Compensation Arrangement incentivises management to improve profitability
of the Company by tying the amount of cash compensation to Company
profitability.
Glenn E. Corlett
William A. Dillingham
Harold L. Inlow
Robert H. Kanner
Stephen R. Kalette
<PAGE>
PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO EFFECT
A REVERSE STOCK SPLIT FOLLOWED BY A FORWARD STOCK SPLIT
OF THE COMPANY'S COMMON AND CLASS B STOCK
Summary of the Proposed Transaction.
The Board of Directors has authorized and recommends for Stockholder
approval, a cashout of registered stockholders owning fewer than 100 shares of
the Company's stock by way of a 1-for-100 reverse stock split followed
immediately by a 100-for-1 forward stock split of the Company's Common and
Class B Stock (the reverse and forward stock splits are referred to together
as the "Stock Splits"). As permitted by Delaware state law, registered
stockholders whose shares of stock are converted into less than 1 share in the
reverse split will receive cash payments equal to the fair value of those
fractional interests.
If approved, the Stock Splits will take place on November 10, 2000. In
order to complete the Stock Splits, stockholders holding a majority of the
voting power of the Company's Common Stock and Class B Stock entitled to vote
at the Meeting must approve the proposal to amend the Company's Certificate of
Incorporation. Attached as Exhibit A to this Information Statement is the
proposed amendment to the Company's Certificate of Incorporation which is the
subject of this Proposal.
Effect on Stockholders of Approval of Proposal
If the Company's stockholders approve the proposal to amend the Company's
Certificate of Incorporation to effect a reverse stock split followed by a
forward stock split of the Company's Common Stock and Class B Stock, the Stock
Splits will go forward on November 10, 2000 and the Company's Common and Class
B stockholders will be effected as follows:
<TABLE>
<CAPTION>
<S> <C>
----------------------------------------------------------------------------------------------
: Stockholder as of November 10, 2000 : Net Effect after Completion of Stock Splits :
:-------------------------------------------:--------------------------------------------------:
: Registered Stockholders holding 100 or : Registered stockholders holding 100 or more :
: more Shares of Common Stock or 100 or : shares of the Company's Common Stock and :
: more shares of Class B Stock : Registered stockholders holding 100 or more :
: : shares of the Company's Class B Stock will not :
: : be effected by the Stock Splits. Each holder :
: : of 100 or more of the Company's Common Stock :
: : and each holder of 100 or more of the Company's :
: : Class B Stock will continue to hold the same :
: : number of shares of Common Stock, or Class B :
: : Stock, respectively, after the Stock Splits :
: : :
-----------------------------------------------------------------------------------------------
<PAGE>
-----------------------------------------------------------------------------------------------
: Stockholder as of November 10, 2000 : Net Effect after Completion of Stock Splits :
:-------------------------------------------:--------------------------------------------------:
: Registered Stockholders holding 99 or : Registered stockholders holding 99 or fewer :
: fewer Shares of Common Stock or Class B : shares of the Company's Common Stock and :
: Stock. : Registered stockholders holding 99 or fewer :
: : shares of the Company's Class B Stock will be :
: : cashed-out at a price per share based on the :
: : Trading Value of the Company's Common Stock :
: : on the effective date of the Stock Splits (see :
: : "Trading Value" below). Stockholders whose :
: : shares of Common Stock and/or shares of Class B :
: : Stock are being cashed-out will not have to pay :
: : any commissions or other fees as a condition to :
: : the cash-out. Holders of the Common Stock :
: : and/or Class B Stock which is being cashed-out :
: : will not have any continuing equity interest in :
: : the Company after the effective date of the :
: : Stock Splits. :
: : :
: : :
: Stockholders Holding Company Common : Stockholders holding Company Common Stock in :
: Stock in Street Name Through a Nominee : street name through a nominee (such as a bank :
: (Such as a Bank or Broker). : or broker) will not be effected by the Stock :
: : Splits. In order for stockholders holding 99 :
: : or fewer shares of Company Common Stock in :
: : street name through a nominee (such as a bank :
: : or broker) to take advantage of the cash-out :
: : resulting from the Stock Splits, such stock- :
: : holders must become the Registered stockholders :
: : of their Common Stock on or before November 10, :
: : 2000, the Effective Date of the Stock Splits. :
: : Stockholders holding 99 or fewer shares of the :
: : Company's Common Stock in street name through a :
: : nominee (such as a bank or broker) and desiring :
: : to participate in the Stock Splits must :
: : therefore advise their nominee to transfer :
: : their Company Common stock from street name to :
: : their name on or before November 10, 2000. :
: : :
----------------------------------------------------------------------------------------------
</TABLE>
Reasons for the Stock Splits
The Board of Directors recommends that the Stockholders approve the Stock
Splits for the following reasons (see also "Purpose of the Stock Splits"):
<PAGE>
<TABLE>
<S> <C>
----------------------------------------------------------------------------------------------
: Concerns : Resolution of Concerns :
:-------------------------------------------:--------------------------------------------------:
: Large Number of Small Stockholders : The Company has many small stockholders :
: : primarily as a result of its August 14, 1990 :
: : 1-for-20 Reverse Stock Split, its June, 1996 :
: : acquisition of and merger with Bobbie Brooks, :
: : Incorporated, and its June, 1996 acquisition of :
: : Aspen Imaging International, Inc. Almost 7,900 :
: : registered stockholders hold fewer than 100 :
: : shares. It is costly for the Company to :
: : maintain these accounts. The Stock Splits will :
: : reduce the number of registered stockholders :
: : with small accounts and result in cost savings :
: : for the Company. :
: : :
: : :
: Difficulty in Disposing of Company Stock : It is disproportionately expensive for stock- :
: by Small Stockholders : holders with fewer than 100 shares to sell :
: : their shares on the open market. The Stock :
: : Splits cash out stockholders with small :
: : holdings without any transaction costs, such as :
: : brokerage fees. If these stockholders do not :
: : want to cash out their holdings of Company :
: : Common Stock, they may purchase additional :
: : shares on the open market to increase their :
: : record holdings to at least 100 shares. If :
: : applicable, stockholders may also consolidate :
: : several accounts into one to attain the 100 :
: : share minimum level. Beneficial stockholders :
: : who own Company stock in nominee name (for :
: : example, at a bank or broker) and desire to :
: : have those shares cashed out in the Stock :
: : Splits should instruct their nominee to :
: : transfer their shares into a record account far :
: : enough in advance so that the shares are :
: : registered in their names by November 10, 2000. :
: : :
----------------------------------------------------------------------------------------------
</TABLE>
Nature of the Stock Splits
The Stock Splits include both a reverse stock split and a forward stock
split of the Company's Common Stock and Class B Stock. If the Stock Splits
are approved at the Meeting, they will occur at the close of business on
November 10, 2000. In the reverse stock split, all registered stockholders on
November 10, 2000 will receive 1 share of Company Common Stock or Company
Class B Stock, as the case may be, for every 100 shares of Common Stock or
Class B Stock, respectively, owned by them at that time. Any stockholder
owning fewer than 100 shares of Company Common Stock or Company Class B Stock
will receive a cash payment instead of a fractional share. This cash payment
<PAGE>
will be based on the trading value of the cashed out Common Shares at that
time (see "Trading Value", below, for the method the Company will use to
determine the cash-out price).
Immediately following the reverse split, also on November 10, 2000, all
registered stockholders who are not cashed-out will receive in the forward
stock split, 100 shares of Company Common Stock or 100 shares of Company Class
B Stock, for each share of Company Common Stock and Company Class B Stock,
respectively, owned by them after completion of the reverse stock split. If a
stockholder owns 100 or more shares in record account of Common Stock or 100
or more shares in record account of Class B Stock, any fractional share in
that account will not be cashed out after the reverse split and the total
number of shares held in that account will not change as a result of the Stock
Splits.
The following examples will help explain the Stock Splits and how they
effects various stockholders:
<TABLE>
<S> <C>
----------------------------------------------------------------------------------------------
: Hypothetical Stockholder Holding : Result after Stock Splits :
:-------------------------------------------:--------------------------------------------------:
: Mr. Jones is a registered stockholder : No fractional shares are being issued in the :
: who owns 75 shares of Common Stock at : reverse split (Mr. Jones' Common Stock would :
: the close of business on November 10, : have converted into 75/100ths of a share). Mr. :
: 2000. Assume the Trading Value of the : Jones will instead receive cash for his :
: Company's Common Stock on that day is : fractional interest. Using the hypothetical :
: $8.00 per share. : Trading Value of $8.00 per share, Mr. Jones :
: : would receive $600.00 (75 x $8.00) and would no :
: : longer be a stockholder. If Mr. Jones desires :
: : to remain a stockholder, he could purchase 25 :
: : shares of Common Stock in the open market and :
: : register those shares in the same Company share :
: : account far enough in advance so that on :
: : November 10, 2000 he would own 100 shares. In :
: : that case, he would not be cashed out in the :
: : reverse split. :
: : :
: : :
: Mr. Smith is a registered stockholder : No fractional shares are being issued in the :
: who owns 75 shares of Class B Stock at : reverse split (Mr. Smith's Class B Stock would :
: the close of business on November 10, : have converted into 75/100ths of a share). Mr. :
: 2000. Assume the Trading Value of the : Smith will instead receive cash for his :
: Company's Common Stock on that day is : fractional interest. Using the hypothetical :
: $8.00 per share. Class B Stock does not : Trading Value of $8.00 per share, Mr. Smith :
: trade, but is convertible at any time : would receive $600.00 (75 x $8.00) and would no :
: into Common Stock on a share for share : longer be a stockholder. Because Class B stock :
: basis. : does not trade, Mr. Smith is unable to purchase :
: : 25 additional shares of Class B stock and own :
: : 100 shares on November 10, 2000. Class B and :
: : Common Stock can not be combined to own a :
: : mixture of 100 shares. But Mr. Smith can :
: : convert his 75 shares of Class B Stock into :
: : :
----------------------------------------------------------------------------------------------
<PAGE>
----------------------------------------------------------------------------------------------
: Hypothetical Stockholder Holding : Result after Stock Splits :
:-------------------------------------------:--------------------------------------------------:
: : Common Stock and purchase 25 shares of Common :
: : Stock in the open market and register these :
: : shares in the same Company share account far :
: : enough in advance so that on November 10, 2000 :
: : he would own 100 shares. In that case, he :
: : would not be cashed-out in the reverse split.
: : :
: : :
: Mrs. Harris is a registered stockholder : Mrs. Harris is entitled to receive cash equal :
: who owns 75 shares of Common Stock in : to the Trading Value of the Common Stock in :
: one account and 55 shares of Common : each account in lieu of a fractional interest. :
: Stock in a second account. Both : Using the hypothetical Trading Value of $8.00 :
: accounts are in her name only. : per share, Mrs. Harris would receive one check :
: : for $600 (75 x $8.00) and one check for $440 :
: : (55 x $8.00) and would no longer be a stock- :
: : holder. If she desires to remain a stock- :
: : holder she could combine the accounts into one :
: : having 130 shares. She would have to act in :
: : time to consolidate the accounts by the close :
: : of business on November 10, 2000. :
: : :
: : :
: Mr. Black is a registered stockholder : Mr. Black is entitled to receive cash equal to :
: who owns 75 shares of Common Stock in : the Trading Value of the stock in each account :
: one account and 55 shares of Class B : in lieu of a fractional interest. At the :
: Stock in a second account. Both : hypothetical Trading Value of $8.00 per share, :
: accounts are in his name only. : Mr. Black would receive a check for $600 :
: : (75 x $8.00) and a check for $440 (55 x $8.00) :
: : and would no longer be a stockholder. Mr. :
: : Black can not combine the Class B Stock with :
: : the Common Stock unless he converts the Class :
: : B Stock to Common Stock. If he desires to :
: : remain a stockholder, he would have to act :
: : to exchange the Class B Stock for Common Stock :
: : and consolidate all shares of Common Stock by :
: : the close of business on November 10, 2000. :
: : :
: : :
: Mrs. White is a registered stockholder : The transaction would have no effect on Mrs. :
: who owns 105 shares of Common Stock in : White. After the Stock Splits, she will still :
: one account and 155 Shares of Class B : own 105 shares of Common Stock and 155 Shares :
: Stock in a second account. Both : of Class B Stock. :
: accounts are in her name only. : :
: : :
----------------------------------------------------------------------------------------------
<PAGE>
----------------------------------------------------------------------------------------------
: Hypothetical Stockholder Holding : Result after Stock Splits :
:-------------------------------------------:--------------------------------------------------:
: Mrs. Green holds 75 shares of Common : It is not intended that the Stock Splits will :
: Stock in a brokerage account at Merrill : affect shares held in street name through a :
: Lynch at the close of business on : nominee (bank or broker). Stockholders holding :
: November 10, 2000. : Company Common Stock in Street name should :
: : contact their nominees to determine whether :
: : they will be impacted by the Stock Splits. :
: : If Mrs. Green desires to cash-out, she should :
: : contact her broker and ask that her shares be :
: : transferred into her own record name account so :
: : that the shares are owned by her on or before :
: : November 10, 2000. :
: : :
----------------------------------------------------------------------------------------------
</TABLE>
Purpose of the Stock Splits
The Company declared a one for twenty reverse stock split on August 14,
1990 and acquired Bobbie Brooks, Incorporated and Aspen Imaging International,
Inc. for stock in June, 1996. As a result of these transactions, the Company
has a large number of stockholders for a company its size, but many of these
stockholders have only a minimal share interest. The Company's stock is
concentrated in few large holders and as a result, the Company's stock does
not trade daily. Many of the Company's stockholders have expressed a desire
to dispose of their shares, but find the cost to be prohibitive. The Stock
Splits will provide registered Stockholders with 99 or fewer shares with a
cost-effective way to cash out their investments. This is because the Company
will not charge any service fees in connection with the Stock Splits. Absent
the Stock Splits, small stockholders would likely incur brokerage fees
disproportionately high relative to the market value of their shares when
selling such shares. In many cases, small stockholders have difficulty
finding a broker willing to handle their transactions at all. The Stock
Splits eliminate these problems for most small stockholders.
The Company will benefit from cost savings as a result of the Stock
Splits. The costs of administering each registered stockholder's account is
the same regardless of the number of shares held. Therefore the Company finds
its costs to be disproportionately high when compared with the total number of
shares involved. In 2000, the Company expects that each registered
stockholder will cost the Company in excess of $2.00 for maintaining the
account as its own transfer agent, responding to inquiries, searching for lost
holders and printing and postage to mail information statements and annual
reports. These costs are expected to increase over time.
The Board believes it to be in the best interest of both the Company and
its stockholders to eliminate the administrative burden and costs associated
with the approximately 7,900 accounts with fewer than 100 shares. The Company
expects to decrease direct and indirect costs of administering stockholder
accounts by at least $15,000 per year if the Stock Splits are completed.
<PAGE>
The Company is proposing the Stock Splits in lieu of an odd-lot tender
offer because of the time, effort and expense the Company would expend on an
effective odd-lot tender offer and because the Company is unable to locate
many stockholders with small holdings. If the Company is to acquire shares
from holders it cannot locate, it must do so by means of the proposed Stock
Splits.
The Company is proposing the forward stock split to occur after the
reverse stock split to avoid disruption to the holders of record of 100 or
more shares of Common Stock or Class B Stock and to the market for Common
Stock. Stockholders already owning 100 or more shares of Common Stock or
Class B Stock will not be affected by the Stock Splits. There should be no
direct effect on the market price for the Common Stock.
The Company has been purchasing, from time to time, in the open market,
shares of its own Common Stock. Whether or not the Stock Splits are approved,
the Company may in the future continue such purchases or take other actions
which might increase or decrease its stockholder base.
Effect of the Stock Splits on Company Stockholders
Registered Stockholders with 99 or fewer Shares
Registered Stockholders of the Company owning 99 shares or less of either
Common Stock or Class B Stock will be cashed-out if the Stock Splits are
completed. No fractional shares of the Company's Common Stock or Class B
Stock will be issued in the reverse split. Instead, stockholders will receive
cash equal to the Trading Value for their fractional interests. See "Trading
Value" below. After the Stock Splits, such stockholders will have no further
interest in the Company. They will no longer be entitled to vote as a
stockholder or share in the Company's assets, earnings or profits.
Stockholders cashing-out will not be subject to any service fee or brokerage
charge or commissions imposed by the Company.
Cashed-out stockholders will receive a letter of transmittal from the
Company as soon as practical after November 10, 2000. The letter of
transmittal will contain instructions concerning how to surrender your
certificate(s) to the Company, which acts as its own transfer agent, together
with a completed and executed letter of transmittal. PLEASE DO NOT SEND IN
ANY CERTIFICATES UNTIL YOU RECEIVE YOUR LETTER OF TRANSMITTAL.
All amounts owed to you will be subject to applicable federal and state
income tax as well as state abandoned property laws. You will not receive any
interest on cash payments owed to you as a result of the Stock Splits.
Stockholders owning 99 shares or less who wish to remain Company
stockholders after the Stock Splits may either purchase sufficient additional
shares of the Company's Common Stock to bring their record holdings to or
exceeding 100 shares, or consolidate their record accounts so as to be
holding, in one registered account, 100 or more shares on November 10, 2000,
immediately prior to the reverse split.
<PAGE>
Class B Stock may not be combined with Common Stock. Class B Stock is
convertible into Common Stock on a one share for one share basis and once
converted, may be combined with Common Stock.
Registered Stockholders with 100 or more Shares
Stockholders already owning of record 100 or more shares of Common Stock
or 100 or more shares of Class B Stock as of the close of business on November
10, 2000 will not be impacted by the Stock Splits. As a result of the reverse
split, their holdings will be converted into 1/100th of the number of shares
held immediately prior to the reverse split. Immediately after the reverse
split, their shares will be reconverted in the forward stock split into the
number of shares held before the reverse split. Stockholders owning in excess
of 100 shares will receive fractional shares in the reverse split and
therefore will retain all of their shares once the forward stock split has
been effected.
Beneficial Owners of Company Common Stock
Stockholders owing stock beneficially in street name through a nominee (a
bank or broker) are not intended to be affected by the Stock Splits, although
some nominees may have different procedures which will result in their
stockholders participating in the Stock Splits. Stockholders owning 99 or
fewer shares in street name who desire to exchange their stock for cash and
participate in the Stock Splits should instruct their nominee to tranasfer
their shares into record account in your name in a timely manner so that you
will be considered a record stockholder immediately prior to the reverse split.
Shares subject to the Company's 1998 Equity Incentive Plan
The Stock Splits are not intended to affect the number of shares subject
to the Company's 1998 Equity Incentive Plan.
Trading Value
Under Delaware law, the Company is not required to issue fractional shares
in the reverse split. The Company intends to cash-out stockholders'
fractional interests at the Trading Value of such interests. Trading Value
shall be the average, over the 10 trading days prior to and including November
10, 2000, of the high and low trading prices each day. If there is no trading
on any day, for that day, the Trading Value will be the average of the closing
bid and asked prices.
The Company believes the Stock Splits are fair to the holders of record of
99 or fewer shares because the transaction will provide them with cash for
their shares, because the cash amount will be determined by the market over a
10 day period, and because the Company will not charge such holders with any
fees or commissions in order to cash out their shares.
<PAGE>
Effect of the Stock Splits on the Company
The Stock Splits will not affect the public registration of the Company's
Common Stock and Class B Stock with the SEC under the Securities Exchange Act
of 1934, as amended.
The Company expects that the Stock Splits will not affect the eligibility
for trading of the Common Stock on the NASDAQ Small Cap Market; although it is
possible that the reduction in the number of stockholders and outstanding
shares could adversely affect liquidity and marketability, the Company does
not expect an adverse effect.
The Company's Certificate of Incorporation presently authorizes the
issuance of 5,000,000 shares of Common Stock, 2,000,000 shares of Class B
Stock, 2,000,000 Shares of Preferred Stock and 20,000 shares of Convertible
Preferred Stock. The number of authorized shares will not change as a result
of the Stock Splits. On September 1, 2000, there were 3,158,435 shares of
Common Stock and 553,074 shares of Class B Stock outstanding. The total
number of outstanding shares of the Company's Common Stock and Class B Stock
will be reduced by the number of shares held by the cashed out stockholders
immediately prior to the reverse split. Based upon the Company's best
estimates if the Stock Splits had taken place as of September 1, 2000, the
number of outstanding shares of the Company's Common Stock and Class B Stock
would have been reduced in the Stock Splits by approximately 131,000 shares
and 5,000 shares, respectively and the number of registered holders of the
Company's Common Stock and Class B Stock would have been reduced from
approximately 8,121 and 235 to approximately 430 and 30, respectively. At
September 1, 2000, the closing price for the Company's Common Stock was
7.4375. If the Stock Splits had been completed on that date, cash payments to
cashed-out stockholders would have been approximately $1,011,500, with
approximately 136,000 shares of Common Stock and Class B Stock purchased by
the Company. The actual amounts will vary depending on the number of cashed
out stockholders on November 10, 2000 and the Trading Price of the Company's
Common Stock.
Par value of the Company's Common Stock and Class B Stock will remain at
$.01 per share after the Stock Splits.
Stock Certificates
A new CUSIP number will be assigned to the Company's Common Stock and
Class B Stock as a result of the Stock Splits and will begin appearing on
stock certificates issued after November 10, 2000. Certificates representing
100 or more shares immediately prior to the Stock Splits will continue to
represent ownership of the same number of shares as is set forth on the face
of the certificate. Any stockholder with 100 or more shares immediately prior
to the reverse split who wants to receive a certificate bearing the new CUSIP
number can do so at any time by contacting the Company which acts as its own
transfer agent at (800) 837-5501 x 3206 for instructions on how to surrender
old certificates. After November 10, 2000, an old certificate presented to
the Company in settlement of a trade will be exchanged for a new certificate
bearing the new CUSIP number.
<PAGE>
Stockholders must complete and sign a letter of transmittal and return it
to the Company with their stock certificate(s) before they can receive cash
payment for those shares.
Federal Income Tax Consequences
THE FOLLOWING IS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE PROPOSED STOCK SPLITS TO STOCKHOLDERS WHO ARE CITIZENS OR RESIDENTS OF THE
UNITED STATES. THIS DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY. NO
OPINION OF COUNSEL OR RULING FROM THE INTERNAL REVENUE SERVICE HAS BEEN SOUGHT
OR OBTAINED WITH RESPECT TO THE FEDERAL, STATE OR LOCAL INCOME TAX
CONSEQUENCES OF THE STOCK SPLITS. BECAUSE OF THE COMPLEXITY OF THE INTERNAL
REVENUE CODE AND BECAUSE TAX CONSEQUENCES MAY VARY DEPENDING ON THE PARTICULAR
FACTS RELATING TO EACH STOCKHOLDER, STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX EFFECTS OF THE STOCK
SPLITS IN LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES.
The Company believes that the Stock Splits will be treated as a tax-free
"recapitalization" for federal income tax purposes and will result in no
material federal income tax consequences to the Company.
The federal income tax consequences to individual stockholders will
depend, in part, on whether the stockholder is cashed-out in the Stock Splits.
Federal Income Tax Consequences to Stockholders
Who are not Cashed Out in the Stock Splits
A stockholder who receives no cash in the Stock Splits and continues to
own his stock in the Company will not recognize any gain or loss in the Stock
Splits. The stockholder will retain the same adjusted tax basis and be
subject to the same holding period in the new Common Stock or Class B Stock
received as existed in the old Common Stock or Class B Stock immediately
before the Stock Splits.
Federal Income Tax Consequences to Stockholders
Who Receive Cash in the Stock Splits
A stockholder who receives cash as a result of the Stock Splits will have
tax consequences as a result of the Stock Splits, depending upon whether the
stockholder owns any stock in the Company or is treated as owning any stock in
the Company after the Stock Splits.
A stockholder who receives only cash as a result of the Stock Splits and
who is not treated as owning any Common Stock or Class B Stock immediately
following the Stock Splits will generally be treated as having sold such
stockholder's interest and will recognize gain or loss to the extent that the
cash received differs from such stockholder's adjusted basis in the stock
sold. Assuming the stock was held as a capital asset, the gain or loss
recognized will be capital gain or loss, which will be long-term gain or loss
if the stockholder's holding period for the stock exceeds one year.
If a stockholder receives cash in lieu of fractional interest in the Stock
Splits but continues to own either Common Stock or Class B Stock (or is
<PAGE>
treated under the Internal Revenue Code as continuing to own Common Stock or
Class B Stock constructively (see below)), the treatment of the cash received
will be the same as described above unless it is determined that the cash
received is essentially equivalent to a dividend under the Code. If it is
treated as essentially equivalent to a dividend, the cash received will be
treated as a dividend to the extent of the Stockholder's ratable share of the
Company's undistributed earnings and profits, and the balance of the cash will
be treated as received in exchange for property. Assuming the shares are held
as a capital asset, taxable gain or loss will be realized on this exchange for
property in an amount equal to the difference between the portion of the cash
not treated as a dividend and the stockholders's adjusted tax basis in the
stock exchanged for cash. The Code provisions that dictate whether the cash
received will be essentially equivalent to a dividend are complex and are
beyond the scope of this discussion.
Generally, a taxpayer will be deemed to own shares of Common Stock or
Class B Stock actually owned by him and in certain instances, constructively
owned by certain family members, corporations in which the stockholder has a
major interest, partnerships, trusts and estates in which the stockholder has
an interest, or which the taxpayer may acquire by exercise of an option or by
conversion of a security. In addition, a taxpayer which is a partnership,
trust or estate is deemed to own shares owned by persons having an interest in
the taxpayer and a taxpayer which is a corporation will be deemed
constructively to own shares owned by major stockholders of the corporation.
Stockholders who receive cash in the Stock Splits will be required to
provide their social security or other taxpayer identification numbers in
connection with the Stock Splits to avoid backup withholding requirements that
might otherwise apply. The transmittal form will require each stockholder to
deliver such information when old certificates are surrendered following the
effective date of the Stock Splits. Failure to provide such information may
result in backup withholding.
Appraisal Rights
No appraisal rights are available under the Delaware General Corporation
Law to any stockholder who dissents from the Stock Splits proposal.
Reservation of Rights
The Company's Board of Directors reserves the right to abandon the Stock
Splits without further action by the Stockholders at any time before the
filing of the amendments to the Company's Certificate of Incorporation with
the Delaware Secretary of State, even if the Stock Splits have been authorized
by the stockholders at the meeting.
Interim Financial Statements
Attached beginning at page F-1 of this Information Statement are the
Company's unaudited interim financial statements and the related Management's
Discussion and Analysis for the quarter and six months ended June 30, 2000.
<PAGE>
STOCK PERFORMANCE CHART
The following chart is a comparison of the Cumulative Total Return on the
Company's Common Stock over the five year period ending December 31, 1999,
with the Cumulative Total Return on the Center for Research in Security Prices
("CRSP") Index for Nasdaq Stock Market (US Companies) and a self-determined
peer group.
Comparison of Five-Year Cumulative Total Returns
Performance Report for
PUBCO CORPORATION
Prepared by the Center for Research in Security Prices
Produced on 08/16/2000 including data to 12/31/1999
Date Company Index Market Index Peer Index
12/30/1994 100.000 100.000 100.000
01/31/1995 86.364 100.527 101.263
02/28/1995 93.182 105.809 105.420
03/31/1995 100.000 108.953 110.024
04/28/1995 90.909 112.385 113.215
05/31/1995 90.909 115.289 118.957
06/30/1995 81.818 124.622 120.310
07/31/1995 100.000 133.774 129.908
08/31/1995 97.727 136.489 126.760
09/29/1995 100.000 139.634 127.266
10/31/1995 104.545 138.829 124.236
11/30/1995 109.091 142.086 129.287
12/29/1995 109.091 141.335 127.558
01/31/1996 117.045 142.041 134.002
02/29/1996 125.000 147.456 139.568
03/29/1996 120.455 147.951 139.347
04/30/1996 140.909 160.209 145.283
05/31/1996 147.727 167.555 149.977
06/28/1996 152.273 160.002 150.928
07/31/1996 138.636 145.760 145.835
08/30/1996 143.182 153.950 146.391
09/30/1996 143.182 165.722 159.016
10/31/1996 143.182 163.880 152.554
11/29/1996 147.727 174.040 167.358
12/31/1996 134.091 173.893 161.732
01/31/1997 131.818 186.230 174.204
02/28/1997 140.909 175.924 182.137
03/31/1997 140.909 164.454 180.041
04/30/1997 151.136 169.580 181.766
05/30/1997 153.409 188.785 192.154
06/30/1997 150.000 194.590 200.434
07/31/1997 161.364 215.092 224.679
08/29/1997 201.136 214.772 209.674
09/30/1997 193.182 227.500 213.757
10/31/1997 196.591 215.648 198.530
11/28/1997 195.454 216.783 201.381
12/31/1997 188.636 213.048 205.735
01/30/1998 195.454 219.796 198.887
02/27/1998 208.239 240.465 221.969
03/31/1998 245.454 249.352 232.095
<PAGE>
Date Company Index Market Index Peer Index
04/30/1998 254.545 253.555 219.381
05/29/1998 236.364 239.466 204.695
06/30/1998 215.909 256.194 193.946
07/31/1998 215.909 253.205 185.367
08/31/1998 177.273 203.010 160.718
09/30/1998 186.364 231.178 156.877
10/30/1998 175.000 241.337 187.622
11/30/1998 157.955 265.874 183.128
12/31/1998 163.636 300.418 182.726
01/29/1999 172.727 344.000 179.573
02/26/1999 168.182 313.205 177.966
03/31/1999 156.818 336.892 176.846
04/30/1999 152.273 347.753 225.861
05/28/1999 162.500 338.470 213.610
06/30/1999 161.364 368.913 220.160
07/30/1999 156.818 362.139 212.544
08/31/1999 150.000 377.365 204.250
09/30/1999 150.000 377.877 183.778
10/29/1999 136.932 408.132 176.598
11/30/1999 137.500 457.792 169.141
12/31/1999 145.455 558.458 175.244
Peer Index: Companies in Self-Determined group : 7
ATI ALLEGHENY TECHNOLOGIES
ABP AMERICAN BUSINESS PRODS INC GA
IR INGERSOLL RAND CO
MCL MOORE CORP LTD
NSH NASHUA CORP
SWK STANLEY WORKS
WCS WALLACE COMPUTER SERVICES INC
<PAGE>
INDEPENDENT AUDITORS
Ernst & Young LLP was the Company's independent auditor for the fiscal
year 1999. The Company has been advised by Ernst & Young that neither the
firm nor any of its associates has any relationship with the Company or any
affiliate of the Company other than the usual relationship that exists between
independent auditor and client. A representative of that firm might be
present at the Meeting, will have an opportunity to make a statement if he
desires to do so, and will be available to respond to appropriate questions
from stockholders.
INCORPORATION BY REFERENCE
The Company hereby incorporates into this Information Statement by
reference the Financial Statements and Notes thereto, the Report of
Independent Auditors, the Selected Financial Data and Management's Discussion
and Analysis of Financial Condition and Results of Operations, all contained
in the 1999 Annual Report, which is being mailed together with this
Information Statement.
By Order of the Board of Directors
Stephen R. Kalette
Secretary
FORM 10-K REPORT
IN ADDITION TO ITS ANNUAL REPORT TO STOCKHOLDERS, THE COMPANY FILES AN
ANNUAL REPORT WITH THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K.
STOCKHOLDERS MAY OBTAIN A COPY WITHOUT EXHIBITS WITHOUT CHARGE BY WRITING TO
THE COMPANY, ATTENTION: STEPHEN R. KALETTE, SECRETARY, PUBCO CORPORATION, 3830
KELLEY AVENUE, CLEVELAND, OHIO 44114. COPIES OF EXHIBITS MAY BE OBTAINED AT
$0.25 PER PAGE TO COVER THE COMPANY'S COSTS IN FURNISHING SUCH COPIES.
<PAGE>
EXHIBIT A
Proposed Amendment to Certificate of Incorporation
To Effect A Reverse Stock Split Followed by a Forward Stock Split
RESOLVED: that ARTICLE 4 of the Company's Certificate of Incorporation is
hereby amended by adding at the end of ARTICLE 4 the following provisions:
Reverse Stock Split
Forward Stock Split
At 6:00 p.m. (Eastern Time) on the effective date of the amendment adding
these paragraphs to ARTICLE 4 (the "Effective Date"), each share of the
corporation's Common Stock held of record as of 6:00 p.m. (Eastern Time)
on the Effective Date shall be and hereby is automatically reclassified
and converted, without further action, into one-one hundreth (1/100) of
one share of the corporation's Common Stock and each share of the
corporation's Class B Stock held of record as of 6:00 p.m. (Eastern Time)
on the Effective Date shall be and hereby is automatically reclassified
and converted, without further action, into one-one hundreth (1/100) of
one share of the corporation's Class B Stock. No fractions of shares
shall be issued to any Odd-Lot Holder (as defined below), and from and
after 6:00 p.m. (Eastern Time) on the Effective Date, each Odd-Lot Holder
shall have no further interest as a stockholder in respect of such
fractions of shares, and in lieu of receiving such fractions of shares
shall be entitled to receive, upon surrender of the certificate or
certificates representing shares of Common Stock or Class B Stock held of
record by such Odd-Lot Holder, the cash value of such fractions of shares
based upon the average of the high and low trading prices per share of the
corporation's Common Stock on the NASDAQ Small Cap Market each day, (or
for any day for which the Common Stock does not trade, the average of the
closing bid and asked prices per share) averaged for the 10 trading days
immediately preceding the Effective Date, without interest. An "Odd-Lot
Holder" is defined as a holder of record of fewer than 100 shares of
Common Stock or Class B Stock as of 6:00 p.m. (Eastern Time) on the
Effective Date, who would be entitled to less than one whole share of
Common Stock or Class B Stock in respect of such shares as a result of
such reclassification and conversion.
At 7:00 p.m. (Eastern Time) on the Effective Date, each share of the
corporation's Common Stock and any fraction thereof held by a holder of
record of one or more shares of Common Stock as of 7:00 p.m. (Eastern
Time) on the Effective Date shall be and hereby is automatically
reclassified and converted, without further action, into the corporation's
Common Stock, on the basis of one hundred (100) new shares of Common Stock
for each whole share of Common Stock, and each share of the corporation's
Class B Stock and any fraction thereof held by a holder of record of one
or more shares of Class B Stock as of 7:00 p.m. (Eastern Time) on the
Effective Date shall be and hereby is automatically reclassified and
converted, without further action, into the corporation's Class B Stock,
on the basis of one hundred (100) new shares of Class B Stock for each
whole share of Class B Stock.
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets-Unaudited
($ in 000's except share amounts)
June 30 December 31
2000 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,552 $ 9,868
Marketable securities and other
investments available for sale 22,789 17,489
Trade receivables (less allowances of
$666 in 2000 and $772 in 1999) 8,692 7,890
Inventories 13,637 11,262
Deferred income taxes 1,642 1,600
Prepaid expenses and other current assets 2,586 2,465
-------- --------
TOTAL CURRENT ASSETS 54,898 50,574
PROPERTY AND EQUIPMENT (at cost
less accumulated depreciation,
amortization of $10,214 in 2000
and $12,224 in 1999) 6,595 6,096
INTANGIBLE ASSETS
(at cost less accumulated amortization of
$1,239 in 2000 and $1,132 in 1999) 3,440 3,547
OTHER ASSETS 34,005 34,213
-------- --------
TOTAL ASSETS $ 98,938 $ 94,430
======== ========
See notes to consolidated financial statements.
F-1
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets-Unaudited--Continued
($ in 000's except share amounts)
June 30 December 31
2000 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,384 $ 5,977
Accrued liabilities 5,771 7,515
-------- --------
TOTAL CURRENT LIABILITIES 13,155 13,492
LONG-TERM DEBT 2,585 771
DEFERRED CREDITS AND NONCURRENT LIABILITIES 26,865 25,562
MINORITY INTEREST 798 711
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; 3,201,397 issued and
3,158,433 outstanding in 2000 and 3,201,276
issued and 3,189,112 outstanding in 1999 32 32
Class B Stock - par value $.01; 2,000,000
shares authorized, 553,076 issued and
outstanding in 2000 and 553,197 issued
and outstanding in 1999 6 6
Additional paid in capital 32,241 32,221
Retained earnings 23,190 21,175
Accumulated other comprehensive income 390 551
-------- --------
55,860 53,986
Treasury stock at cost,
42,964 shares in 2000
12,164 shares in 1999 (325) (92)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 55,535 53,894
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 98,938 $ 94,430
======== ========
See notes to consolidated financial statements.
F-2
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations-Unaudited
($ in 000's except share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
2000 l999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 16,249 $ 17,787 $ 32,188 $ 36,089
Cost of sales 10,504 12,037 21,227 24,534
-------- -------- -------- --------
GROSS PROFIT 5,745 5,750 10,961 11,555
Costs and expenses:
Selling, general and
administrative expenses 4,135 4,758 8,270 9,238
Interest expense 46 19 77 53
Interest income (587) (555) (1,136) (1,159)
Other expense (income), net 45 (46) (288) (38)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 2,106 1,574 4,038 3,461
Provision for income taxes 780 611 1,498 1,208
-------- -------- -------- --------
INCOME BEFORE MINORITY INTEREST 1,326 963 2,540 2,253
Minority interest (58) (68) (87) (122)
-------- -------- -------- --------
NET INCOME $ 1,268 $ 895 $ 2,453 $ 2,131
======== ======== ======== ========
Preferred stock dividend requirements 219 205 438 411
-------- -------- -------- --------
NET INCOME APPLICABLE
TO COMMON STOCKHOLDERS $ 1,049 $ 690 $ 2,015 $ 1,720
======== ======== ======== ========
BASIC AND DILUTIVE EARNINGS PER SHARE $ .28 $ .19 $ .54 $ .46
======== ======== ======== ========
Weighted average number
of shares outstanding 3,720,566 3,752,473 3,730,811 3,752,473
========= ========= ========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows-Unaudited
($ in 000's except share amounts)
<TABLE>
<CAPTION>
Six Months Ended
June 30
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,453 $ 2,131
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 551 478
Stock based compensation 20
Deferred income taxes 1,305 1,530
Net (gain) on sales of securities (451) (96)
Net loss (gain) on disposal of fixed assets 44 (80)
Minority interest 87 122
Changes in operating assets and liabilities:
Trade receivables (802) (806)
Inventories (2,375) (1,551)
Accounts payable 1,407 2,467
Other current liabilities (1,744) (953)
Other, net (200) 135
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 295 3,377
INVESTING ACTIVITIES
Purchases of marketable securities (6,873) (27)
Proceeds from sale of marketable securities 2,106 970
Purchases of fixed assets (987) (1,221)
Proceeds from the sale of fixed assets - 80
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (5,754) (198)
FINANCING ACTIVITIES
Proceeds from long-term debt 14,689 11,737
Principal payments on long-term debt (12,875) (11,967)
Dividends paid (438) (411)
Purchase of treasury stock (233) -
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,143 (641)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,316) 2,538
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,868 9,816
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,552 $ 12,354
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
June 30, 2000
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, 1999.
The consolidated balance sheet as of December 31, 1999 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.
Earnings 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.
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
Company had $1,980 and $3,100 outstanding at June 30, 2000 and December 31,
1999, respectively.
Certain prior year amounts have been reclassified to conform to the 2000
presentation.
F-5
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
June 30, 2000
NOTE B -- Inventories
The components of inventories consist of the following:
June 30 December 31
2000 1999
Raw materials and supplies $ 7,459 $ 5,838
Work in process 705 321
Finished goods 6,467 6,048
------- -------
14,631 12,207
Less inventory reserves (994) (945)
------- -------
$13,637 $11,262
======= =======
NOTE C -- Comprehensive Income
Total comprehensive income consists of the following for the three and six
months ended June 30
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Income $ 1,268 $ 895 $ 2,453 $ 2,131
Other Comprehensive Income:
Unrealized holding gains on
investments available for sale
arising during the period 158 447 502 930
Less reclassification adjustment
for gains on investments available
for sale (68) (35) (451) (96)
Unrealized currency translation
adjustments arising during the period (56) (31) (60) (78)
Pension adjustment - - (152) -
------- ------ ------- -------
Total Other Comprehensive
Income (Loss) Income 34 381 (161) 756
------- ------ ------- -------
Total Comprehensive Income $ 1,302 $1,276 $ 2,292 $ 2,887
======= ====== ======= =======
</TABLE>
F-6
<PAGE>
PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in 000's except share amounts)
June 30, 2000
NOTE D -- Industry Segment Information
Summarized industry segment information is as follows:
<TABLE>
<CAPTION>
Printer Construction
Supplies Products
Business Business Corporate Consolidated
<S> <C> <C> <C> <C>
Three months ended June 30, 2000
Net sales $ 9,036 $ 7,213 - $16,249
Income before income taxes and
minority interest 1,007 701 $398 2,106
Three months ended June 30, 1999
Net sales 9,620 8,167 - 17,787
Income before income taxes and
minority interest 633 807 134 1,574
Six months ended June 30, 2000
Net sales $18,194 $13,994 - $32,188
Income before income taxes and
minority interest 1,991 1,052 $995 4,038
Six months ended June 30, 1999
Net sales 20,011 16,078 - 36,089
Income before income taxes and
minority interest 1,708 1,505 248 3,461
</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.
F-7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of the Three and Six Months Ended June 30, 2000 and 1999
Sales declined in 2000 from 1999 because of decreases in sales at both the
Company's construction products business and its printer supplies business
for both the three and six month periods. The decrease in sales in the
construction products business is primarily attributable to lower unit
sales. The printer supplies business, which sells supplies for both impact
and non-impact printing devices as well as labeling supplies and machines,
also had a decrease in sales. This decrease is primarily attributable to
the decline in sales of supplies for impact printers offset by an increase
in the sale of labeling supplies and machines.
The gross profit percentage increase in 2000 from 1999 in both the three and
six month periods is primarily the result of an increase in gross profit
percentage at the Company's label supplies business. The Company's label
supplies business introduced its first direct-to-end-user catalog in the
first quarter of 2000 which resulted in higher gross profits on label
supplies sold. The label supplies business also closed its Wisconsin label
coating plant in the first quarter of 2000. The Company has been able to
buy the substrates previously processed in the Wisconsin plant from outside
vendors, eliminating the cost of running the Wisconsin plant. The decrease
in gross profit dollars in 2000 was more than offset by a reduction in
operating expenses in 2000. As a result, income before income taxes and
minority interest increased in the 2000 three and six month periods from the
corresponding 1999 periods.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had $28,341,000 of cash, cash equivalents,
marketable securities and other short-term investments and $2,585,000 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, 2000, 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, 2000, borrowing
under this line of credit was $2,585,000. 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.
F-8
<PAGE>
There were no borrowings under this line at June 30, 2000. At June 30,
2000, letters of credit with outstanding balances aggregating approximately
$2,326,000 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.
On June 29, 2000, the Company announced that it had entered into an
Agreement with Smith Corona Corporation (OTC-SCCOE.OB), a marketer and
distributor of typewriters and typewriter supplies, which had filed for
protection under Chapter 11 of the U.S. Bankruptcy Code on May 23, 2000.
Under the Agreement, Smith Corona would be reorganized, all existing Smith
Corona stock would be cancelled, the Company would purchase approximately
49% of newly-issued reorganized Smith Corona's stock, and the remainder of
reorganized Smith Corona's stock would be issued to Smith Corona's existing
creditors and, to the extent, if any, provided for in the Plan of
Reorganization, to Smith Corona's existing stockholders. The Agreement is
subject to Bankruptcy Court confirmation of a Plan of Reorganization and
several other conditions estimated to occur sometime in November or
December, 2000. The Company agreed to pay a purchase price equal to a
percentage of Smith Corona's asset values on the closing date. If the Plan
of Reorganization can not be confirmed for any reason, the Company agreed to
buy 100% of Smith Corona's assets for a purchase price calculated using the
same formula. Had the Agreement been consumated on June 30, 2000, the
purchase price would have been approximately $5,500,000. The Company
intends to utilize certain of its cash, cash equivalents, marketable
securities and other short-term investments to fund the purchase price and
working capital needs of Smith Corona.
The Company has commitments for capital expenditures of approximately
$450,000, most of which is for equipment for the printer supplies business.
The Company will pay these amounts in 2000 primarily from existing funds.
In October, 1995, the Company announced that it would purchase, from time to
time, in the open market, up to 175,000 of its shares. Between October 31,
1995 and July 31, 2000, the Company purchased 42,964 shares at an average
price of approximately $7.577 per share for a total of $325,540.
Stockholders' equity of $55,535,000 at June 30, 2000 includes Common and
Preferred stockholders' equity. In order to calculate Common stockholders'
equity at June 30, 2000, 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, 2000.
F-9
