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 March 31, 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 March 31, 1995: 14,725,910
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 1995 AND DECEMBER 31, 1994
March 31,
December 31,
1995 1994
(unaudited)
(in
thousands of dollars)
ASSETS
Current assets:
Cash, including short-term investments of $6,399 in 1995 and $5,740 in 1994
$ 6,721 $ 6,274
Trade receivables, less allowance for doubtful accounts (1995 - $343; 1994 -
$386) 11,393 10,838
Inventories 9,692
9,061
Net assets of discontinued operations 446 2,510
Other 1,125
825
Total current assets 29,377
29,508
Property, plant and equipment:
Land 398 398
Buildings 2,330
2,330
Machinery and equipment 7,657
7,207
Less - accumulated depreciation (3,409)
(3,091)
6,976
6,844
Goodwill 8,491
8,561
Other assets 1,507
1,517
$ 46,351 $
46,430
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 7,657
$ 7,657
Trade accounts payable 5,826
6,539
Accrued liabilities 9,885
8,532
Total current liabilities 23,368
22,728
Long-term debt 9,468
9,780
Other non-current liabilities 15,998
16,538
Total liabilities 48,834
49,046
Shareholders' equity
Common shares, $0.10 par value,
Authorized, 30,000,000 shares
Issued - 15,270,937 shares in 1995 and 14,950,937 in 1994 1,527
1,495
Additional paid-in capital 42,319
41,942
Accumulated deficit (since January 1, 1984) (42,438)
(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 (2,483)
(2,616)
$ 46,351
$ 46,430
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(unaudited)
Three Months Ended
March 31,
1995 1994*
(in thousands except per
share data)
Net sales $ 19,902 $
18,322
Costs and expenses:
Cost of sales 14,596
14,317
Selling expenses 1,506
1,502
General and administrative expenses 2,987 2,487
19,089 18,306
Income (loss) from operations 813 16
Other (income) expenses:
Interest income (86)
(58)
Interest expense 579
778
Cost of pensions - nonoperating 192 220
Legal settlements and costs 125 75
810 1,015
Income (loss) from continuing operations 3
(999)
Income (loss) from discontinued operations - 188
Net income (loss) $ 3 $ (811)
Earnings (loss) per common share:
Continuing operations $ - $ (.07)
Discontinued operations - .01
$ - $ (.06)
Weighted average common shares outstanding 14,664,858 14,519,100
* Restated for discontinued operations (Note 2).
<PAGE>
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(in thousands of dollars except share data)
(unaudited)
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 320,000 32 377
- - 409
Repurchase of Common Shares - - -
- (279) (279)
Net Income - - -
3 - 3
Balance - March 31, 1995 15,270,937 $ 1,527 $ 42,319
$ (42,438) $ (3,891) $ (2,483)
(1) Represents 545,027 and 418,837 of common shares held in treasury at
March 31, 1995 and December 31, 1994, respectively.
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(unaudited)
Three Months Ended
March 31,
1995
1994*
(in thousands of
dollars)
Cash flows from operating activities:
Income (loss) from continuing operations $ 3 $
(999)
Adjustments to reconcile income (loss) to net cash provided by
(used in) continuing operations:
Depreciation and amortization 441 382
Provision for doubtful accounts 21 29
Changes in operating assets and liabilities:
Decrease (increase) in trade receivables (576)
(1,054)
Decrease (increase) in inventories (631)
(561)
Decrease (increase) in other current assets (300)
(650)
Decrease (increase) in other assets (12)
4
Increase (decrease) in trade accounts payable (713)
569
Increase (decrease) in accrued liabilities 1,353 1,060
Increase (decrease) in other non-current liabilities
(540) (42)
Net cash provided by (used in) continuing operations
(954) (1,262)
Income (loss) from discontinued operations - 188
Adjustments to reconcile income to net cash provided by (used in)
discontinued operations:
Decrease (increase) in net assets of discontinued operations
(176) (113)
Net cash provided by (used in) discontinued operations
(176) 75
Net cash provided by (used in) operating activities
(1,130) (1,187)
Cash flows from investing activities:
Proceeds from sale or other disposition of discontinued operations (net)
2,240 556
Capital expenditures
(450) (701)
Net cash provided by (used in) investing activities
1,790 (145)
Cash flows from financing activities:
Repayments of term and revolving loan financing (343)
-
Proceeds from the issuance of common shares 130
2
Net cash provided by (used in) financing activities
(213) 2
Net increase (decrease) in cash 447
(1,330)
Cash - beginning of period 6,274
11,675
Cash - end of period $ 6,721
$ 10,345
* 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 March 31, 1995 and the
results of their operations and their cash flows for the three months ended
March 31, 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 three months ended March 31, 1995 and
1994 was approximately $64,000 and zero, respectively. No cash was paid for
income taxes during the three months ended March 31, 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. In connection with the Company's plans to sell or otherwise
dispose of certain businesses, during 1993 the Company recorded a provision
for disposition of $1,800,000 to reduce the net assets of discontinued
operations to their estimated net realizable values and to accrue for
anticipated phase-out period losses. As of March 31, 1995 and December 31,
1994, the Company's net investment in its discontinued operations was
included in current assets.
<PAGE>
Note 3 - INVENTORIES
Inventories at March 31, 1995 and December 31, 1994, consisted of the
following:
March 31, December 31,
1995 1994
(in thousands)
Raw materials and supplies $ 5,648 $ 5,058
Work in process 1,555 1,818
Finished goods 2,489 2,185
$ 9,692 $9,061
Note 4 - INCOME TAXES
As of March 31, 1995, approximately $105,000,000 of U.S. tax loss
carryforwards (subject to review by the Internal Revenue Service), expiring
from 1995 through 2010, 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 March 31, 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 March 31, 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 March 31, 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 March 31, 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 10, 1995, the Company
funded, a $4.5 million 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 to the EPA of $4.5 million, plus interest.
Further payments totaling $4,350,000, plus interest, will be made to the EPA
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 MONTHS ENDED MARCH 31, 1994 AND 1993
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. 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
Publicker's consolidated sales of $19,902,000 for the first quarter of
1995 increased by approximately 9% from $18,322,000 for the first quarter of
1994. For the first quarter of 1995, cost of sales of $14,596,000 increased by
approximately 2% from $14,317,000 for the same period of 1994. The gross
profit improvement was principally due to increased operating efficiencies
within the manufacturing segment.
Selling expenses increased slightly to $1,506,000 for the first quarter
of 1995 compared to $1,502,000 for the same period in 1994. General and
administrative expenses for the first quarter of 1995 increased by
approximately 20% to $2,987,000 from $2,487,000 for the first quarter of
1994. The increase in general and administrative expenses primarily relates
to increased employee benefit expenses.
The Company's income from operations for the first quarter of 1995
totalled $813,000 compared to $16,000 for the first quarter of 1994. The
Company reported net income of $3,000 ($.00 per share) for the first quarter
of 1994 compared to a net loss of $811,000 ($.06 per share) for the first
quarter of 1994. The 1995 first quarter results included cost of pensions
non-operating of $192,000 and legal settlements and costs of $125,000. The
1994 first quarter results included cost of pensions non-operating of
$220,000, legal settlements and costs of $75,000 and income from discontinued
operations of $188,000.
Interest income increased to $86,000 for the first quarter of 1995
compared to $58,000 for the same period in 1994, due to higher interest \
rates. Interest expense decreased to $579,000 for the first quarter of 1995
compared to $778,000 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 first quarter of 1995
increased by approximately 8% to $17,170,000 compared to sales of $15,849,000
for the first quarter of 1994. Income from operations for this segment
increased by approximately 126% to $1,786,000 for the first quarter of 1995
compared to $789,000 for the same period in 1994, primarily due to increased
labor efficiencies at each of the Company's manufacturing businesses.
Sales for the Company's services segment (which consists of one subsidiary
company: Orr-Schelen-Mayeron & Associates, Inc.) increased by
approximately 10% to $2,732,000 for the first quarter of 1995 compared to
$2,473,000 for the first quarter of 1994. Despite the sales gain, the
segment experienced a loss from operations for the first quarter of 1995 of
$11,000 compared to income from operations of $101,000 for the same period in
1994. The decrease is principally due to 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. As of March 31, 1995, the
carrying value of net assets of discontinued operations totaled $446,000.
Liquidity
During the first quarter of 1995, cash, including short-term
investments, increased by $447,000. Operating activities consumed cash of
$1,130,000 while investing activities provided cash of $1,790,000 and
financing activities consumed cash of $213,000. Operating activities
principally consisted of an increase in operating assets and liabilities
of $1,419,000 offset by depreciation and amortization of $441,000. Investing
activities consisted of proceeds of $2,240,000 from the sale of Associated
Testing Laboratories, Inc., offset by capital expenditrues of $450,000.
Financing activities consisted of repayments of term loan and capital
equipment financings of $343,000 offset by proceeds from the issuance of
common shares upon exercise of stock options of $130,000. As of March 31,
1995, the Company's cash, including short-term investments, amounted to
$6,721,000 as compared to $6,274,000 as of December 31, 1994.
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 10, 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.
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
March 31, 1995, consolidated net worth (as defined) amounted to approximately
$12,000,000. 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.
During the first quarter of 1995, the Company's capital expenditures
totalled $450,000. 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 March 31, 1995, approximately $105 million of U.S. tax loss
carryforwards (subject to review by the Internal Revenue Service), expiring
from 1995 through 2010, 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.
<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 storage 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. The EPA authorized approximately $22.8 million
for this aspect of site remediation. 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 is currently at the facility, to be implemented as an Operable Unit 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. It is the Company's understanding that, as of the date
of this filing, this Operable Unit has not been completed.
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. Based on the RI and FS, EPA is
expected to issue a Record of Decision selecting a remedy for the Site, which
may involve one or more of these remedial actions. 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.
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. The Company is
negotiating with the United States a Consent Decree embodying these agreed
terms and conditions of settlement. 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. During the fourth quarter of 1993, the Company recorded a
liability of $14,350,000 to cover the estimated costs of settling this
litigation. Under the terms of the EPA agreement in principle, on April 10,
1995, the Company funded, a $4.5 million 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 the entry of the Consent
Decree, the Company will make another payment to the EPA of $4.5 million, plus
interest. Further payments totaling $4,350,000, plus interest, will be made to
the EPA over a six year period following the entry of the Consent Decree.
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.
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 first 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: May 15, 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: May 15, 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
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