<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM l0-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION l3 OR l5(d) OF THE SECURITIES
EXCHANGE ACT OF l934
For the period ended June 30, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-1359
PUBCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 53-0246410
(State of Incorporation) (I.R.S. Employer Identification No.)
3830 Kelley Avenue, Cleveland, Ohio 44114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 881-5300
NA
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange
Act of l934 during the preceding l2 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Number of Common Shares Outstanding as of August 4, 2000: 3,711,509.
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PUBCO CORPORATION
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
June 30, 2000 and December 31, 1999 . . . . . . . . 3
Consolidated Statements of Operations
for the Three and Six Months Ended
June 30, 2000 and 1999. . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 30,
2000 and 1999. . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . 12
Item l. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote
of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)--Note A.
PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000's except share amounts)
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.
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PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets--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.
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PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
($ 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>
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PUBCO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
($ 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>
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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 $3,100 outstanding at June 30, 2000 and December 31,
1999, respectively.
Certain prior year amounts have been reclassified to conform to the 2000
presentation.
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PUBCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ 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
======= ====== ======= =======
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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>
<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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS
Comparison of the Three and Six Months Ended 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
<PAGE>
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.
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.
<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
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUBCO CORPORATION
/s/ Robert H. Kanner
-----------------------------
Robert H. Kanner
Chief Executive Officer
/s/ Maria Szubski
-----------------------------
Maria Szubski
Chief Financial Officer
Dated: August 11, 2000
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EXHIBIT INDEX
Financial Data Schedule
