FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-3315
PUBLICKER INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-0991870
(State of incorporation) (I.R.S. Employer Identification No.)
1445 East Putnam Avenue, Old Greenwich, Connecticut 06870
(Address of principal executive offices)
(203) 637-4500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 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 shares of Common Stock outstanding as of June 30, 1995: 14,733,910
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS AS OF
JUNE 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
June 30,
December 31,
1995 1994
(unaudited)
(in thousands of
dollars)
ASSETS
Current assets:
Cash, including short-term investments of $1,319 in 1995 and $5,740 in 1994
<S> <S> <S>
$ 1,920 $ 6,274
Restricted cash 4,500
-
Trade receivables, less allowance for doubtful accounts (1995 - $343; 1994 -
$386) 10,775 10,838
Inventories 9,624
9,061
Net assets of discontinued operations 464
2,510
Other 1,063
825
Total current assets 28,346
29,508
Property, plant and equipment:
Land 398
398
Buildings 2,330
2,330
Machinery and equipment 8,005
7,207
Less - accumulated depreciation (3,726)
(3,091)
7,007
6,844
Goodwill 8,432
8,561
Other assets 1,575
1,517
$ 45,360
$ 46,430
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 7,703
$ 7,657
Trade accounts payable 5,393
6,539
Accrued liabilities 9,655
8,532
Total current liabilities 22,751
22,728
Long-term debt 8,810
9,780
Other non-current liabilities 15,855
16,538
Total liabilities 47,416
49,046
Shareholders' equity
Common shares, $0.10 par value,
Authorized, 30,000,000 shares
Issued - 15,278,937 shares in 1995 and 14,950,937 in 1994 1,528
1,495
Additional paid-in capital 42,327
41,942
Accumulated deficit (since January 1, 1984) (42,020)
(42,441)
Common shares held in treasury, at cost - 545,027 shares in 1995 and 418,837
shares in 1994 (3,891) (3,612)
Total shareholders' equity (2,056)
(2,616)
$ 45,360
$ 46,430
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994* 1995
1994*
(in thousands of dollars except per share data)
Net sales $ 19,985 $ 19,811$ 39,887
$ 38,133
Costs and expenses:
Cost of sales 14,397 15,477 28,993
29,794
Selling expenses 1,473 1,498 2,979
3,000
General and administrative expenses 2,858 2,809
5,845 5,296
18,728 19,784
37,817 38,090
Income (loss) from operations 1,257 27
2,070 43
Other (income) expenses:
Interest income (24) (80)
(110) (138)
Interest expense 614 789 1,193
1,567
Cost of pensions - nonoperating 190 212 382
432
Legal settlements and costs 59 190
184 265
839 1,111
1,649 2,126
Income (loss) from continuing operations 418 (1,084)
421 (2,083)
Discontinued operations:
Income (loss) from discontinued operations - 113
- 301
Gain on sale or other disposition
of discontinued operations - net - 500
- 500
Net income (loss) $ 418 $ (471)
$ 421 $ (1,282)
Earnings (loss) per common share:
Continuing operations $ .03 $ (.07)
$ .03 $ (.14)
Discontinued operations -
.04 - .05
$ .03 $ (.03)
$ .03 $ (.09)
Weighted average common shares
outstanding 14,728,910 14,520,100 14,692,737
14,519,524
*Restated for discontinued operations
<PAGE>
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(in thousands of dollars except share data)
(unaudited)
<CAPTION>
Accumulated
Common Shares
Additional Deficit Common Share-
Shares
Paid-in Since Treasury holders'
Issued Amount
Capital 1-1-84 Shares (1) Equity
Balance - December 31, 1994 14,950,937 $ 1,495 $ 41,942
$ (42,441) $ (3,612) $ (2,616)
Issuance of Common Shares 328,000 33 385
- - 418
Repurchase of Common Shares - - -
- (279) (279)
Net Income - - -
421 - 421
Balance - June 30, 1995 15,278,937 $ 1,528 $ 42,327
$ (42,020) $ (3,891) $ (2,056)
(1) Represents 545,027 and 418,837 of common shares held in treasury at
June 30, 1995 and December 31, 1994, respectively.
<PAGE>
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
<CAPTION>
Six Months Ended
June 30,
1995
1994*
(in thousands of
dollars)
Cash flows from operating activities:
Income (loss) from continuing operations $ 421 $
(2,083)
Adjustments to reconcile income (loss) to net cash provided by
(used in) continuing operations:
Depreciation and amortization 732
731
Provision for doubtful accounts 77
249
Changes in operating assets and liabilities:
Decrease (increase) in trade receivables (14)
(2,133)
Decrease (increase) in inventories (563)
(224)
Decrease (increase) in other current assets (238)
(107)
Decrease (increase) in other assets 5
(88)
Decrease (increase) in restricted assets (4,500)
-
Increase (decrease) in trade accounts payable (1,146)
(323)
Increase (decrease) in accrued liabilities 1,123
201
Increase (decrease) in other non-current liabilities (683)
6
Net cash provided by (used in) continuing operations
(4,786) (3,771)
Income (loss) from discontinued operations - 801
Adjustments to reconcile income to net cash provided by (used in)
discontinued operations:
Decrease (increase) in net assets of discontinued operations
(194) (636)
Net cash provided by (used in) discontinued operations
(194) 165
Net cash provided by (used in) operating activities
(4,980) (3,606)
Cash flows from investing activities:
Proceeds from sale or other disposition of discontinued operations (net)
2,240 1,446
Capital expenditures
(798) (1,164)
Net cash provided by (used in) investing activities
1,442 282
Cash flows from financing activities:
Borrowings (repayments) of term and revolving loan financing (955)
88
Proceeds from the issuance of common shares 139
2
Net cash provided by (used in) financing activities
(816) 90
Net increase (decrease) in cash (4,354)
(3,234)
Cash - beginning of period 6,274
11,675
Cash - end of period $ 1,920
$ 8,441
* Restated for discontinued operations (Note 2).<PAGE>
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial
statements reflect all normal and recurring adjustments that are, in the
opinion of management, necessary to present fairly the financial position of
Publicker Industries Inc. and subsidiary companies as of June 30,1995 and the
results of their operations and their cash flows for the three and six months
ended June 30, 1995 and 1994. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted. These condensed
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1994. Certain prior period amounts have
been reclassified to conform with the 1995 presentation.
Cash Flow Information
Cash paid for interest during the six months ended June 30, 1995 and
1994 was approximately $1,103,000 and $1,457,000, respectively. No cash was
paid for income taxes during the six months ended June 30, 1995 and 1994.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed using the weighted
average number of outstanding common shares during each period. The effect
of stock options and warrants on the computations for 1995 and 1994 were not
included as they were antidilutive.
Note 2 - DISCONTINUED OPERATIONS
During 1994 and early 1995, the Company undertook the sale or other
disposition of several of its businesses. In March 1994, the Company sold
substantially all the assets of Douglas-Randall, Inc. ("DRI") and
subsequently collected its accounts receivable for an aggregate proceeds of
approximately $831,000. In October 1994, the Company sold Chatas Glass
Company, Inc. ("CGC") and subsequently collected its accounts
receivable for an aggregate proceeds of approximately $290,000. On January
31, 1995, the Company sold substantially all the assets of Associated Testing
Laboratories, Inc. ("ATL") for $2,240,000 cash, plus the assumption of
certain liabilities. As a result, ATL has been reflected as discontinued
operation together with DRI, CGC and operations previously shut down. The
1994 interim consolidated financial statements have been restated to also
reflect ATL as a discontinued operation. As of June 30, 1995 and December
31, 1994, the Company's net investment in its discontinued operations was
included in current assets.
Note 3 - INVENTORIES
Inventories at June 30, 1995 and December 31, 1994, consisted of the
following:
June 30,
December 31,
1995
1994
(in thousands)
Raw materials and supplies $ 5,391 $ 5,058
Work in process 1,979 1,818
Finished goods 2,254 2,185
$ 9,624
$9,061
Note 4 - INCOME TAXES
As of June 30, 1995, approximately $105,000,000 of U.S. tax loss
carryforwards (subject to review by the Internal Revenue Service), expiring
from 1995 through 2009, were available to offset future taxable income. In
addition, approximately $1,600,000 of unused investment tax credits were
available to offset future federal income taxes payable through 2001. As a
result of a corporate revaluation during 1984, tax benefits resulting from
the utilization in subsequent years of net operating losses and other
investment tax credit carryforwards existing as of the date of the corporate
revaluation will be excluded from the results of operations and directly
credited to additional paid-in capital when realized. As of June 30, 1995,
approximately $30,000,000 of the Company's U.S. tax loss carryforwards and
approximately $1,600,000 of unused investment tax credits predated the
corporate revaluation.
As of June 30, 1995, deferred tax assets of approximately $39,000,000
relating to the tax benefit of the Company's U.S. tax loss carryforwards of
approximately $105,000,000 and unused investment tax credits of approximately
$1,600,000 were offset by a full valuation allowance. As of June 30, 1995,
approximately $12,000,000 of deferred tax assets predated the corporate
revaluation. Subsequent adjustments to the valuation allowance with respect
to such deferred tax assets would be directly credited to additional paid-in
capital.
Note 5 - ENVIRONMENTAL LITIGATION
As more fully discussed under Legal Proceedings (and environmental
matters included therein) included elsewhere in this Form 10-Q, on December
19, 1990, the United States Environmental Protection Agency (the "EPA")
commenced an action in the United States District Court, Eastern District of
Pennsylvania, against the Company and two other parties. In the complaint,
the EPA alleged that it has spent more than $22 million in conducting
environmental response activities at a Philadelphia, Pennsylvania facility
previously owned by the Company. The complaint seeks recovery of amounts
already spent at the facility including interest and enforcement costs and a
declaratory judgement that the Company is liable for any further clean-up
costs. In May 1993, the Commonwealth of Pennsylvania Department of
Environmental Resources ("PADER") intervened in this litigation. PADER's
complaint seeks reimbursement of past response costs alleged to be
approximately $1,300,000, future response costs incurred in connection with
cleaning-up the facility and a declaratory judgement as to the Company's
liability for those costs. The Company has asserted defenses to liability
and has asserted a counterclaim against the federal government. In addition,
the Company has notified various of its current and former insurers of this
action, though it can not yet be determined whether all or any portion of
its costs of defending this action and any damages may be recovered through
insurance.
The Company has been engaged in settlement discussions with the EPA
since early 1991 and with PADER since 1993. On December 20, 1994, the
Company entered into an Agreement in Principle to settle the litigation
between the Company and the EPA. The Company previously recorded a liability
of $14,350,000 in the fourth quarter of 1993 to cover the estimated costs of
settling this litigation. As of June 30, 1995, $4,500,000 of this liability
is included in accrued liabilities and $9,840,000 is included in other
non-current liabilities. Settlement discussions with the Commonwealth of
Pennsylvania are continuing. The settlement of this litigation will only
become final upon the entry by the Court of approved Consent Decrees. Under the
terms of the EPA agreement in principle, on April 6, 1995, the Company
funded, a $4,500,000 Court administered escrow account which will be turned
over to the EPA when a Consent Decree, embodying the terms of the agreement
in principle, is entered by the Court. Upon entry of the Consent Decree, the
Company will make another payment of $4,500,000, plus interest. Further
payments totaling $4,350,000, plus interest, will be made over a six year
period following the entry of the Consent Decree.
The Company believes that it has sufficient liquidity to comply with
the anticipated settlement terms of this environmental litigation and to
enable the Company to continue to meet its obligations to pay principal and
interest in connection with its subordinated notes as well as meet its
operating cash requirements. The resolution of the EPA litigation
represents a significant development for the Company which will greatly
increase the Company's flexibility in expanding its existing businesses as
well as potentially acquiring businesses. In connection with its
subordinated notes, on December 15, 1995, the Company will be required to
make a sinking fund payment of $7,500,000 and a final sinking fund payment of
$7,500,000 will be required on December 15, 1996. The Company expects to
fund such sinking fund payments and the long-term payments required in
connection with the settlement of the environmental litigation from its
available cash resources, cash provided by operations, refinancing or
restructuring of existing debt or in conjunction with the issuance of new
debt securities and, if necessary, the sale of one or more of its subsidiary
companies. There can be no assurance that the foregoing debt restructuring
or refinancing efforts will be successful. <PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Agreement in Principle to Settle EPA Litigation
The Company has been engaged in settlement discussions with the
United States Environmental Protection Agency (the "EPA") since early 1991
and with the Commonwealth of Pennsylvania Department of Environmental
Resources ("PADER") since 1993, in connection with an action in the United
States District Court, Eastern District of Pennsylvania, against the Company.
In the complaint, the EPA alleged that it has spent more than $22 million in
conducting environmental response activities at a Philadelphia, Pennsylvania
facility previously owned by the Company. The complaint seeks recovery of
amounts already spent at the facility including interest and enforcement
costs and a declaratory judgement that the Company is liable for any further
clean-up costs. In May 1993, PADER intervened in this litigation. PADER's
complaint seeks reimbursement of past response costs alleged to be
approximately $1,300,000, future response costs incurred in connection with
cleaning-up the facility and a declaratory judgement as to the Company's
liability for those costs. On December 20, 1994, the Company entered into an
Agreement in Principle to settle the litigation between the Company and the
EPA.
The Company recorded a liability of $14,350,000 in the fourth quarter
of 1993 to cover the estimated costs of settling this litigation. Settlement
discussions with PADER are continuing. The settlement of this litigation
will become final only upon the entry by the Court of approved Consent
Decrees. On April 6, 1995 the Company funded a $4,500,000 court administered
escrow account. Reference is made to Part II Item 1 - Legal Proceedings for
additional information on this matter. The resolution of the EPA litigation
represents a significant development for the Company which will greatly
increase the Company's flexibility in expanding its existing businesses as
well as potentially acquiring additional businesses.
Operating Results - Second Quarter
Publicker's consolidated sales of $19,985,000 for the second quarter
of 1995 increased by approximately 1% from $19,811,000 for the second quarter
of 1994. The Company's income from operations for the second quarter of 1995
totalled $1,257,000 compared to $27,000 for the first quarter of 1994.
The Company reported net income of $418,000 or $.03 per share for
the second quarter of 1995 compared to a net loss of $471,000 or $.03 per
share for the second quarter of 1994. The 1995 second quarter results
included cost of pensions non-operating of $190,000 and legal settlements and
costs of $59,000. The 1994 second quarter results included cost of pensions
non-operating of $212,000, legal settlements and costs of $190,000 and income
from discontinued operations of $613,000. The 1994 income from discontinued
operations included a gain of $500,000 from the disposition of the Company's
UK Beverage Division. Interest expense decreased to $614,000 for the second
quarter of 1995 compared to $789,000 for the same period in 1994, due to the
repurchase or redemption of $7.4 million of 13% Subordinated Notes in 1994.
Sales for the Company's manufacturing segment (which includes the
operations of four subsidiary companies: Bright Star Industries, Inc.,
Fenwal Electronics, Inc., Greenwald Industries, Inc. and Masterview Window
Company, Inc.) for the second quarter of 1995 increased by approximately 2%
to $16,987,000 compared to sales of $16,656,000 for the second quarter of
1994. Income from operations for this segment increased by approximately
346% to $1,979,000 for the second quarter of 1995 compared to $443,000 for
the same period in 1994, primarily due to increased labor efficiencies at
several of the Company's manufacturing businesses.
Sales for the Company's services segment (which consists of one
subsidiary company: Orr-Schelen-Mayeron & Associates, Inc.) decreased by
approximately 5% to $2,998,000 for the second quarter of 1995 compared to
$3,155,000 for the second quarter of 1994. Income from operations for the
first quarter of 1995 increased slightly to $243,000 compared to $227,000 for
the same period in 1994.
Operating Results - Six Months
For the six months ended June 30, 1995, consolidated sales of
$39,887,000 increased by approximately 5% compared to sales of $38,133,000
for the first six months of 1993. The Company's income from operations for
the first six months of 1995 totaled $2,070,000 compared to $43,000 for the
first six months of 1994.
The Company reported net income of $421,000 or $.03 per share for the
six months ended June 30, 1995 compared to a net loss of $1,282,000 or $.09
per share for the comparable 1994 period. The 1994 results included a loss
from continuing operations of $2,083,000 ($.14 per share) and income from
discontinued operations of $801,000 ($.05 per share). Other expense
(interest expense - net, cost of pensions - nonoperating and legal
settlements and costs) decreased by $477,000 in the first six months of 1995
compared to the same 1994 period due principally to the reduced interest
expense on the 13% Subordinated Notes.
Sales for the Company's manufacturing segment for the first six
months of 1995 increased by approximately 5% to $34,157,000 compared to
$32,505,000 for the first six months of 1994. Income from operations for this
segment increased by approximately 205% to $3,765,000 for the first half of
1995 compared to $1,232,000 for the first half of 1994.
Sales for the Company's services segment for the first half of 1995
increased by approximately 2% to $5,730,000 compared to $5,628,000 for the
first half of 1994. Despite the gain in sales, income from operations for
this segment decreased to $232,000 for the first half of 1995 compared to
$328,000 for the same period in 1994 principally due to certain operating
inefficiencies.
In March 1994, the Company sold substantially all the assets of
Douglas-Randall, Inc. and subsequently collected its accounts receivable for
aggregate proceeds of approximately $831,000. In October 1994, the Company
sold Chatas Glass Company, Inc. and subsequently collected its accounts
receivable for an aggregrate proceeds of approximately $290,000. On January
31, 1995,the Company sold substantially all the assets of Associated Testing
Laboratories, Inc. for $2,240,000 cash, plus the assumption of certain
liabilities. The foregoing companies have been reflected in the consolidated
financial statements as discontinued operations.
Liquidity
During the first six months of 1995, cash, including short-term
investments, decreased by $4,354,000. Operating activities consumed cash of
$4,980,000 while investing activities provided cash of $1,442,000 and
financing activities consumed cash of $816,000. Operating activities
principally consisted of an increase in operating assets and liabilities of
$6,016,000 offset by depreciation and amortization of $732,000 and net income
of $421,000. The increase in operating assets was attributable to the
$4,500,000 EPA related payment. Investing activities consisted of proceeds
of $2,240,000 from the sale of Associated Testing Laboratories, Inc., offset
by capital expenditures of $798,000. Financing activities consisted of
repayments of term loan and capital equipment financings of $955,000 offset
by proceeds from the issuance of common shares upon exercise of stock options
of $139,000.
As previously discussed, the Company has entered into an Agreement
in Principle to settle litigation between the Company and the EPA. In
addition, settlement discussions with PADER are continuing. The Company
recorded a liability of $14,350,000 in the fourth quarter of 1993 to cover
the estimated costs of settling this litigation. The Company believes it has
sufficient liquidity to comply with the anticipated settlement terms of its
environmental litigation and to enable the Company to continue to meet its
obligations to pay principal and interest in connection with its subordinated
notes as well as meet its operating cash requirements. On April 6, 1995, the
Company funded a $4.5 million court administered escrow account. In
connection with its subordinated notes, on December 15, 1995, the Company
will be required to make a sinking fund payment of $7,500,000 and a final
sinking fund payment of $7,500,000 will be required on December 15, 1996.
The Company expects to fund its sinking fund payments and the long-term
payments required in connection with the settlement of the environmental
litigation from its available cash resources, cash provided by operations,
refinancing or restructuring of existing debt and, if necessary the sale of
one or more of its subsidiary companies. There can be no assurance that the
foregoing debt restructuring or refinancing efforts will be successful. The
Company's failure to generate positive cash flows from operations or its
inability to arrange refinancing or restructuring of existing debt could have
a material adverse effect on the Company. The resolution of the EPA
litigation represents a significant development for the Company which will
greatly increase the Company's flexibility in expanding its existing
businesses as well as potentially acquiring additional businesses. Except
for the sale or other disposition of the remaining net assets of discontinued
operations, the Company has no current plans for the sale or disposition of any
of its businesses
The indenture under which the Company's subordinated notes were
issued contains various restrictive covenants that include, among other
things, restrictions on the payment of dividends or distributions to
shareholders, limitations on the issuance of additional senior debt (as defined)
and the maintenance of consolidated net worth (as defined) of at least
$8,000,000. If the Company's consolidated net worth (as defined) at the end
of any two consecutive fiscal quarters declines to less than $8,000,000, the
Company would be required to make an offer to purchase,on the last day of the
fiscal quarter next following such second fiscal quarter, 25% of the
aggregate principal amount of the notes then outstanding at a purchase price
equal to 100% of their principal amount plus accrued interest. The
definition of consolidated net worth excludes costs incurred in connection
with the settlement of the Company's environmental litigation. Accordingly,
as of June 30, 1995, consolidated net worth (as defined) amounted to
approximately $12,500,000.
During the first six months of 1995, the Company's capital expenditures
totalled $798,000. The Company anticipates that its level of capital
expenditures for 1995 will be consistent with those of 1994. The Company has
not entered into any material commitments for acquisitions or capital
expenditures and retains the ability to increase or decrease capital
expenditure levels as required. The Company anticipates that it will be able
to fund its capital expenditures during 1995 with its available cash
resources and its other cash flows as well as through capital equipment
financing.
At June 30, 1995, approximately $105 million of U.S. tax loss
carryforwards (subject to review by the Internal Revenue Service), expiring
from 1995 through 2009, were available to set future taxable income. In
addition, approximately $1,600,000 of unused investment tax credits were
available to offset future federal income taxes payable through 2001. <PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Environmental Matters - Philadelphia, Pennsylvania
An Agreement in Principle to settle the following matter has been
reached with the United States Environmental Protection Agency. Settlement
discussions with the Commonwealth of Pennsylvania are continuing.
From approximately 1924 to 1985, the Company owned and operated an alcohol
manufacturing plant and bulk liquid storage facility in Philadelphia,
Pennsylvania. On March 31,1986, the Company sold the facility, which covers
approximately 37 acres, to Overland Corporation ("Overland"). On or about
January 6, 1987, Overland filed a petition for relief under Chapter 11 of the
Bankruptcy Act. On June 26, 1987, a fire occurred at the facility. This fire
gave rise to suspicion, and after a subsequent inspection the United States
Environmental Protection Agency, Region III (the "EPA") alleged that there
had been releases or threatened releases of hazardous substances (as defined
under federal statutes) at the facility. The Company acknowledges that
hazardous substances were legally disposed of at the facility during the time
it owned and operated the facility. However, the Company asserts, and EPA
acknowledges, that Overland performed demolition work at the facility after
it took ownership and possession thereof. The Company further asserts that
certain conditions at the facility at the time of the EPA inspection were not
present when the Company sold the facility, which conditions resulted from
Overland's operation and possession of the facility. In addition, the
Company believes that certain materials that were present at the facility at
the time of the inspection may have resulted from Overland's operation of the
facility.
On September 4, 1987, the EPA entered into a Consent Agreement and
Order (the "Consent Agreement") with the Company pursuant to its authority
under the Comprehensive Environmental Response, Compensation and Liability
Act, as amended ("CERCLA"), regarding conditions at the facility. The
Consent Agreement provided that the Company, without admitting any liability
on its part, would conduct a site assessment and sampling operation at the
facility to determine the presence and nature of any hazardous substances.
The Consent Agreement also provided that upon request by the EPA, the Company
would undertake certain ameliorative actions at the facility.
In late July 1987, in contemplation of entering into the Consent
Agreement, the Company contracted with O.H. Materials Corporation to conduct
a site assessment study of the facility. On September 15, 1987, pursuant to
the Consent Agreement, the EPA requested the Company take certain
ameliorative actions and expand the scope of the site assessment study. The
site assessment study was completed in early November 1987, and the related
report submitted to the EPA on or about November 12, 1987. On January 7,
1988, the EPA notified the Company that the Company had fulfilled all its
obligations under the Consent Agreement. The Company spent approximately
$841,000 in connection with the site assessment study and ameliorative actions.
The Company has notified various of its current and former insurers of
this matter, but it cannot yet be determined whether all or any portion of
such expenditures may be recovered through insurance. The Company may have a
claim against other potentially responsible parties ("PRPs") for all or a
portion of these costs. Overland, its mortgagors, and many parties that
transported materials to or stored materials at the facility, including many
customers of the Company's former bulk liquid storae business conducted at
the facility, may be PRPs. The Company has filed a claim with respect to
this matter in the Overland bankruptcy proceeding, but it cannot yet be
determined whether there will be any recovery under such claim.
On February 24, 1988, pursuant to an agreement with the United
States Attorney for the Eastern District of Pennsylvania, the Company pleaded
guilty to a one count information charging the Company with the illegal
storage of hazardous waste at the facility in violation of the Resource
Conservation Recovery Act and paid a fine of $50,000.
The EPA, in a notice published in the Federal Register on October 4,
1989, added the facility to the National Priorities List (the "NPL") for
hazardous waste sites. Inclusion of a facility or site on the NPL does not
in itself reflect a judgment of the activities of its owner or operator, it
does not require those persons to undertake any action, nor does it assign
any liability to any person.
In 1988, the EPA began a "surface removal" of hazardous substances at
the facility that, following placement of the facility on the NPL, continued
as an "interim remedial" action subsequently designated as Operable Unit #1
in a record of decision issued by EPA in June 1989. The EPA authorized
approximately $22.8 million for this aspect of site remediation, which
included characterizing, bulking and disposing off-site of a number of
wastes; draining of above-ground process lines; and disposing off-site of
laboratory containers. On October 19, 1989, pursuant to CERCLA, the
Commonwealth of Pennsylvania Department of Environmental Resources ("PADER")
announced its commitment of $1.39 million toward the interim remedial
response costs. This amount did not increase the total funding authorized by
the EPA, but instead represents a portion of the state's share of such
funding as required under CERCLA. The interim remedial action was completed
on or about December 17, 1990. In May 1989, the EPA notified more than 35
parties, including the Company, of their potential liability with regard to the
clean-up of the facility and encouraged each of them, if financially capable,
to implement voluntarily the interim remedial action. The Company declined
to undertake this work. In or about June 1990, the EPA sent letters to
eighty-five companies and individuals asking them to provide information,
that the EPA believes they may possess, regarding the storage and
transportation of hazardous substances at and to the facility. The Company does
not know whether the EPA presently intends to pursue claims against any or all
of these companies or individuals.
In September 1989, the EPA notified the Company that it intended to
conduct a remedial investigation and feasibility study ("RI/FS") at the
facility unless it determined that a responsible party will undertake such
actions. A RI/FS would investigate both surface and subsurface conditions at
the facility and would develop recommendations for any remedial actions to be
taken beyond the interim remedial actions noted above. The EPA invited the
Company to undertake voluntarily the RI/FS and to enter into good faith
negotiations with the EPA and other PRPs regarding the planned actions and
any corrective measures that may be required. The Company declined to
perform the RI/FS, but has continued its dialogue with the EPA regarding the
facility and has provided the EPA with information regarding other
potentially responsible parties. The EPA began a remedial investigation in
or about August 1990. In June 1991, the EPA issued a record of decision
setting forth selected remedial action to remove and dispose of asbestos waste
that remained at the facility, to be implemented as Operable Unit #2 of site
cleanup. The action selected would cost an estimated $293,420. In August
1991, the EPA advised the Company of the EPA's intention to implement this
Operable Unit. According to the EPA, this Operable Unit was completed in May
1995. In March 1995 EPA released the Remedial Investigation Report ("RI")
and the Feasibility Study Report ("FS") for the Site. The RI provides a
detailed characterization of contamination conditions and potential
environmental risks at the Site. The FS identifies, develops and evaluates
remedial technology alternatives with the objective of identifying the
optimal remedy for the Site. The FS identifies alternative remedial actions
for surface soil contamination, subsurface soil contamination, groundwater,
contaminated electric utilities, contaminated stormwater utilities, and
miscellaneous wastes at specific locations on the Site. The remedial action
alternatives considered in the FS include, in addition to no-action
alternatives, measures whose costs, as estimated in the FS, range from
approximately $81,000 to approximately $7.2 million. Depending on which, if
any, of these measures EPA were to select for implementation at the Site,
total future costs of response at the Site could range from zero to
approximately $9.75 million. It is not possible to determine which, if any,
of these measures EPA may select for implementation at the Site or,
therefore, what the costs of such action, if any, will be. As a prior owner
of the facility, the Company is a PRP. The Company and other PRPs may be
held jointly and severally liable for the full amount of past and future
response costs incurred by the EPA and PADER, subject to rights of
contribution among themselves.
In June 1995 EPA issued a Proposed Plan for Operable Unit #3 at the
Site, which EPA described as a "final remedy for the Site." According to the
Proposed Plan, the remedial objective of Operable Unit #3 is to minimize
human and environmental exposure to Site-related contaminants in the soil,
ground water and sediments. The Proposed Plan describes EPA's Preferred
Alternative for Operable Unit #3 as including abandonment and closure of
certain on-site wells in order to prevent migration of contaminants from
shallower aquifers to deeper ones at the Site; cleaning, removal and disposal
of liquids and sediments in contaminated electric and storm water utilities
to prevent potentially contaminated runoff to the Delaware River; removal and
disposal of certain miscellaneous wastes; and placement of a deed notice on
the Site property to restrict its future use.
The Proposed Plan estimates the total capital cost of these actions
to be approxmimately $600,000. Although EPA has indicated its intention to
issue a Record of Decision for Operable Unit #3, the Company cannot foresee
whether that Record of Decision will adopt the Preferred Alternative without
change. It is not possible to determine which, if any, of these measures EPA
may select for implementation at the Site or, therefore, what the costs of
such further remedial action, if any, will be.
As a prior owner of the facility, the Company is a PRP. The Company
and other PRPs may be held jointly and severally liable for the full amount
of past and future response costs incurred by the EPA and PADER, subject to
rights of contribution among themselves. On December 19, 1990, the United
States of America, at the request of the Administrator of the EPA, commenced
an action in the United States District Court, Eastern District of
Pennsylvania, against the Company, Overland and Cuyahoga Wrecking
Corporation, an affiliate of Overland ("Cuyahoga"). In the complaint, the
United States alleges that the EPA has spent more than $22 million at the
facility in conducting response activities "including, among other activities,
the assessment of site risks, planning and design or response activities, and
the treatment, staging, and removal from the site of large quantities of
hazardous substances and/or hazardous wastes and associated structures."
However, by letter dated April 19, 1991, the United States informed the
Company that, subject to an audited accounting to be conducted at a later
date, its then-current estimate of the total costs incurred in connection
with response actions at the facility was $14,125,755.60. This estimate
includes contractor invoice payments through February 28, 1991,and EPA
payroll and indirect costs through March 5, 1991, and does not include
Department of Justice enforcement costs. The complaint seeks recovery of
amounts already spent at the facility from the three defendants, including
interest and enforcement costs, a declaratory judgment that the three
defendants are liable for any further cleanup costs, and other relief deemed
appropriate,including injunctive relief preventing the Company from disposing
of its assets or exchanging its assets in a manner that will prevent or
hinder the United States from collecting on any money judgment it might
obtain. On February 13, 1991, the Company filed its answer to the complaint.
In its answer, the Company has admitted that it owned and operated the
facility at a time or times when hazardous substances were disposed of there.
The Company, however, has asserted defenses to liability and asserts
vigorously that many of the expenses incurred by the EPA have been improper
in that they were not consistent with the national contingency plan. In
addition, the Company has asserted a counterclaim against the federal
government, alleging that the United States is liable for cleanup costs
because it built, owned and operated key portions of the facility and
underlying real estate during and after World War II. The parties have
conducted a substantial amount of pretrial discovery. The Company intends to
defend its interests vigorously. The Company is considering naming other PRPs
as defendants if the claims against the Company cannot be settled.
On May 12, 1993, PADER filed a Complaint in Intervention and Motion
to Intervene in the United States District Court for the Eastern District of
Pennsylvania in the United States' case against the Company, Cuyahoga and
Overland. The District Court entered an order granting PADER's Motion to
Intervene on July 6, 1993. The Complaint in Intervention alleges that the
United States will not adequately represent PADER's interest in its case
against the three defendants and PADER will have to recover response costs
directly from the defendants.
PADER's complaint seeks reimbursement of past response costs (alleged
to be approximately $1,281,540), future reponse costs incurred in connection
with cleaning-up the facility and a declaratory judgement as to defendants'
liability for those costs.
The Company has notified its current insurers and those former
insurers it has been able to identify of this action, but it cannot yet be
determined whether all or any portion of its costs of defending this action
and any damages that may be awarded the United States may be recovered
through insurance. To date, five insurers have responded to the Company's
notice. No insurer
has admitted liability for the government's underlying claims. Such insurers have cited various
policy provisions that they assert, pending further investigation, relieve them from such liability.
The insurers have requested further information regarding the litigation and one insurer has
asserted that it cannot document the existence of an insurance policy for the Company. The
Company is continuing to investigate the possibility of recovering from its insurers part or all of
its costs in defending this action and any settlement costs or damages that may by awarded the
United States.
The Company has been engaged in settlement discussions with the EPA and PADER with
a view toward settling all their claims and potential claims in connection with the facility. In May
1992, the United States, Publicker and the other defendants jointly agreed to a suspension of the
litigation. The litigation has been suspended since that time to provide the opportunity for
ongoing settlement discussions to continue among the parties, including additional appropriate
discovery.
Counsel for the Company and counsel for the United States entered into an Agreement in
Principle dated December 20, 1994, setting forth terms and conditions to be included in a Consent
Decree resolving the United States' claims against the Company and the Company's counterclaim.
Pursuant to the Agreement in Principle, on April 6, 1995, the Company deposited with the clerk
of the Court the sum of $4.5 million to be held for use as payment of a portion of the United
States' claim against the Company upon entry of a Consent Decree embodying these agreed terms
and conditions, the terms of which the Company is negotiating with the United States. The
Company believes that an acceptable Consent Decree will be agreed upon and subsequently
approved by the EPA and by the Court, although there can be no assurance of this. The Company
also is continuing settlement discussions with PADER and believes that these discussions will lead
to an acceptable Consent Decree that will be approved by PADER and the Court. Upon entry of
the Consent Decree, the Company will make another payment of $4.5 million, plus interest.
Further payments totaling $4,350,000, plus interest, will be made over a six year period following
the entry of the Consent Decree. During the fourth quarter of 1993, the Company recorded a
liability of $14,350,000 to cover the estimated costs of settling this litigation.
General Litigation
In May 1990, Springs Industries, Inc., a South Carolina corporation ("Springs"),
commenced an action against Golding Industries, Inc. (Raytex Division), a former subsidiary of
the Company ("Golding"), in the Supreme Court of the State of New York, County of New York.
The complaint alleges that Golding printed and finished fabric supplied by Springs, and that the
finished fabric did not meet the color fastness and dimensional stability specifications required
by Springs. The complaint seeks unspecified damages exceeding $2 million on each of five
causes of action and punitive damages of $5 million. The Company has received a letter dated
May 7, 1990, from counsel to the party that purchased Golding from the Company in March 1989,
advising it of the commencement of the action and asserting a claim against the Company for
defense and indemnification under the terms of the purchase agreement. By letter dated June 6,
1990, the Company advised counsel to the party that purchased Golding that the Company would
defend the action. By motion dated June 21, 1990, the Company moved for an order dismissing
the complaint in its entirety. That motion was submitted to the Court on October 16, 1990, and
was decided by memorandum decision dated March 11, 1991, dismissing two of the five causes
of action and the punitive damages claim. The plaintiff's time to appeal this decision has expired.
During discovery, Springs increased its damage claim to an amount between $7.9 million and
$10.9 million for alleged losses and lost profits. Pretrial discovery is continuing. In August 1994,
the Company commenced an action in the Supreme Court of the State of New York, County of
New York against Home Insurance Company and Home Indemnity Company seeking a
declaration that the claims asserted by Springs against Golding are covered by the comprehensive
general liability policy and the umbrella policy issued by the Home companies. Both carriers have
disclaimed liability. Pretrial discovery is continuing in this action.
In additon to the foregoing, various other legal proceedings are now pending against the
Company. The Company considers all such proceedings to be ordinary litigation incident to the
character of its business. The majority of such claims is covered by liability insurance. The
Company believes that the resolution of those claims to the extent not covered by insurance will
not, individually or in the aggregate, have a material adverse effect on the financial position or
results of operations of the Company.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 23, 1995, an annual meeting of the shareholders of the
Company was held at which directors were elected to serve until their
successors shall have been elected and shall have qualified. The extension
of the term of certain options to purchase shares of the Company's common
stock was approved. The appointment of the Company's outside auditors for
the year ending December 31, 1995 was ratified. The number of votes cast
for, against, or withheld/abstained and the number of broker non-votes with
regard to each nominee or matter are set forth below:
Withheld/ Broker
For Against Abstained Non-votes
Election of directors:
Harry I. Freund 12,330,789 N/A 213,759 -
Jay S. Goldsmith 12,330,786 N/A 213,762 -
David L. Herman 12,330,414 N/A 214,134 -
Clifford B. Cohn 12,329,392 N/A 215,156 -
L.G. Schafran 12,330,899 N/A 213,649 -
James J. Weis 12,330,799 N/A 213,749
Approval of extension of
term of certain stock options 10,633,867 1,370,494 540,187 -
Ratification of auditors 12,391,741 53,463 99,344 -
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) Reports on Form 8-K: No reports on Form 8-K were filed by the
registrant during the second quarter of 1995.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PUBLICKER INDUSTRIES INC.
(Registrant)
Date: August 4, 1995 _____________________________________
James J. Weis, President and Chief
Executive Officer
Antonio L. DeLise, Vice President -
Finance, Principal Financial and
Accounting Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
PUBLICKER
INDUSTRIES INC.
(Registrant)
Date: August 4, 1995
/s/ James J. Weis
James J. Weis, President and
Chief Executive Officer
/s/ Antonio L. DeLise
Antonio L. DeLise, Vice President -
Finance,Principal Financial and
Accounting Officer
</TABLE>
