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, 1998
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.)
One Post Road, Fairfield, CT 06430
(Address of principal executive offices)
(203) 254-3900
(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, 1998: 13,291,607
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS AS OF
JUNE 30, 1998 AND DECEMBER 31, 1997
(in thousands of dollars)
June 30, December 31,
1998 1997
(unaudited)
ASSETS
Current assets:
Cash, including short-term investments of
$10,738 in 1998 and $11,779 in 1997 $11,427 $13,077
Trade receivables, less allowance for doubtful accounts 3,823 3,935
Inventories 2,478 2,461
Other 362 691
Total current assets 18,090 20,164
Property, plant and equipment:
Land 234 234
Buildings 2,334 2,331
Machinery and equipment 3,866 3,555
Less - accumulated depreciation (2,473) (2,197)
3,961 3,923
Goodwill 2,849 2,672
Other assets 1,430 1,412
$26,330 $28,171
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $134 $134
Trade accounts payable 1,273 1,091
Accrued liabilities 4,986 5,331
Total current liabilities 6,393 6,556
Long-term debt 1,073 1,138
Other non-current liabilities 8,626 9,604
Total liabilities 16,092 17,298
Shareholders' equity:
Common shares, $0.10 par value,
Authorized, 40,000,000 shares
Issued - 16,951,849 shares in 1998 and
16,551,849 shares in 1997 1,695 1,655
Additional paid-in capital 50,475 49,915
Accumulated deficit (since January 1, 1984) (33,731) (32,816)
Common shares held in treasury, at cost (8,201) (7,881)
Total shareholders' equity 10,238 10,873
$26,330 $28,171
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(in thousands of dollars except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Sales and revenues:
Sales of goods $ 4,120 $ 4,957 $ 8,285 $ 9,072
Revenues from services 2,385 2,212 4,843 3,925
6,505 7,169 13,128 12,997
Costs and expenses:
Cost of sales 2,937 3,476 5,797 6,365
Cost of services 1,566 1,414 3,206 2,659
General and administrative
expenses 1,771 1,855 3,565 3,797
Selling expenses 349 296 681 596
6,623 7,041 13,249 13,417
Income (loss) from operations (118) 128 (121) (420)
Other (income) expenses:
Interest income (137) (156) (286) (350)
Interest expense 79 92 169 200
Cost of pensions - nonoperating 212 199 439 425
Other expense, net 565 19 472 289
719 154 794 564
Net income (loss) $ (837) $ (26) $ (915) $ (984)
Basic earnings (loss) per
common share $ (.06) $ - $ (.07) $ (.07)
Weighted average shares
outstanding 13,056,105 13,819,785 13,053,030 14,484,628
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(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, 1997 16,551,849 $1,655 $49,915 $(32,816) $(7,881) $10,873
Issuance of
common shares 400,000 40 560 - - 600
Purchase of
treasury shares - - - - (320) (320)
Net loss - - - (915) - (915)
Balance -
June 30, 1998 16,951,849 $1,695 $50,475 $(33,731) $(8,201) $10,238
(1) Represents 3,660,242 and 3,440,352 of common shares held in treasury at
June 30, 1998 and December 31, 1997, respectively.
<PAGE>
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(in thousands of dollars)
(unaudited)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net income (loss) $ (915) $ (984)
Adjustments to reconcile loss to net
cash used in continuing operations:
Depreciation and amortization 325 427
Changes in operating assets and
liabilities, excluding effect of acquisition:
Trade receivables 117 (1,316)
Inventories 33 411
Other current assets 329 103
Other assets (18) (34)
Trade accounts payable 182 (194)
Accrued liabilities (366) (1,189)
Other non-current liabilities (978) ( 893)
Net cash used in operating activities (1,291) (3,669)
Cash flows from investing activities:
Payments for business acquired (314) -
Proceeds from sale of discontinued operations 15 1,160
Capital expenditures (275) (149)
Net cash provided by (used in)
investing activities (574) 1,011
Cash flows from financing activities:
Repayments of term loans and notes payable (65) (426)
Proceeds from the issuance of common shares 600 25
Purchase of treasury stock (320) (2,497)
Net cash provided by (used in)
financing activities 215 (2,898)
Net decrease in cash (1,650) (5,556)
Cash - beginning of period 13,077 18,318
Cash - end of period $ 11,427 $ 12,762
<PAGE>
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated 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, 1998 and the results of their operations
and their cash flows for the three and six months ended June 30, 1998 and 1997.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These 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, 1997.
Cash Flow Information
Cash paid for interest during the six months ended June 30, 1998 and 1997 was
approximately $290,000 and $349,000, respectively. No cash was paid for income
taxes during the first six months of 1998 and 1997.
Earnings (loss) per common share
During 1997, the Company adopted FASB Statement 128 Earnings Per Share.
Basic net income (loss) per common share is based on net income divided by the
weighted average number of common shares outstanding during each period.
Diluted net income (loss) per common share assumes issuance of the net
incremental shares from stock options and warrants at the later of the beginning
of the year or date of issuance. Diluted net income (loss) per share was not
computed for 1998 and 1997 as the effect of stock options and warrants were
antidilutive.
Note 2 - INVENTORIES
Inventories at June 30, 1998, and December 31, 1997, consisted of the
following:
June 30, December 31,
1998 1997
(in thousands)
Raw materials and supplies $ 1,648 $ 1,407
Work in process 254 282
Finished goods 576 772
$ 2,478 $ 2,461
Note 3 - STOCKHOLDERS' EQUITY
In August 1996, the Board of Directors of the Company authorized the
repurchase of up to 1,000,000 shares of the Company's common stock. The Board
of Directors increased the Company's share repurchase authorization to 3,300,000
shares in 1997. On April 30, 1998, the Company announced the conclusion of the
common stock buy-back program. The Company repurchased 3,094,100 shares of
common stock under the buy-back program for an aggregate cost of $4,270,000.
In March 1998, the Company initiated an odd-lot buy-back offer allowing holders
of less than 100 shares a convenient method of selling their shares of the
Company's common stock. A total of 7,990 shares were tendered under the offer
which expired on April 3, 1998.
Note 4 - INCOME TAXES
As of June 30, 1998, approximately $80,000,000 of U.S. tax loss carryforwards
(subject to review by the Internal Revenue Service), expiring from 1998 through
2018, were available to offset future taxable income. As a result of a
corporate revaluation during 1984, tax benefits resulting from the utilization
in subsequent years of net operating loss 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, 1998, approximately $5,000,000 of the Company's U.S. tax loss
carryforwards predated the corporate revaluation.
As of June 30, 1998, deferred tax assets of approximately $30,000,000,
principally relating to the tax benefit of the Company's U.S. tax loss
carryforwards, were offset by a full valuation allowance. As of June 30,
1998, approximately $2,000,000 of deferred tax assets predated the corporate
revaluation. Subsequent adjustments to the valuation allowance with respect
to the deferred tax assets which predated the corporate revaluation would be
directly credited to additional paid-in capital.
Note 5 - ENVIRONMENTAL LITIGATION
On April 12, 1996, a Consent Decree among the Company, the Environmental
Protection Agency, the U.S. Department of Justice and the Pennsylvania
Department of Environmental Protection ("PADEP") was entered by the U.S.
District Court for the Eastern District of Pennsylvania which resolved all of
the United States' and PADEP's claims against the Company for recovery of
costs incurred in responding to releases of hazardous substances at a facility
previously owned and operated by the Company. Pursuant to the Consent Decree,
the Company will pay a total of $14,350,000 plus interest to the United States
and Commonwealth of Pennsylvania. Through June 30, 1998, the Company has made
principal payments aggregating $10,992,000. Further payments totaling
$3,358,000 plus interest will be made to the United States and Commonwealth
of Pennsylvania over the next four years.
Note 6 - OTHER EXPENSE
On April 15, 1998, the Company executed a letter of intent to purchase
substantially all of the assets of a group of five businesses from Katy
Industries, Inc. On August 5, 1998, the Company announced that the letter of
intent terminated due to the inability of the parties to reach agreement on
certain aspects of the transaction. A charge of $563,000 was recorded in the
second quarter of 1998 for cost associated with the terminated transaction.
These costs primarily consist of legal, environmental and financing related
fees. An additional charge will be recorded in the third quarter of 1998 for
costs incurred relating to this transaction subsequent to June 30, 1998.
Total costs are expected to range from approximately $800,000 to $900,000.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Operating Results - Second Quarter
Publicker's consolidated sales and revenues of $6,505,000 for the second
quarter of 1998 decreased by approximately 9% from $7,169,000 for the second
quarter of 1997. The decline was due principally to reduced volume at the
Company's manufacturing segment. Cost of sales and services decreased from
$4,890,000 in 1997 to $4,503,000 in 1998 principally as a result of lower
sales. General and administrative expenses for the second quarter of 1998
were $1,771,000 compared to $1,855,000 in 1997. The Company's loss from
operations for the second quarter of 1998 totaled $118,000 compared to income
of $128,000 for the second quarter of 1997. The Company reported a net loss
of $837,000, or $.06 per share, for the second quarter of 1998 compared to a
net loss of $26,000 for the second quarter of 1997.
On April 15, 1998, the Company executed a letter of intent to purchase
substantially all of the assets of a group of five businesses from Katy
Industries, Inc. On August 5, 1998, the Company announced that the letter of
intent terminated due to the inability of the parties to reach agreement on
certain aspects of the transaction. A charge of $563,000 was recorded in the
second quarter of 1998 for cost associated with the terminated transaction.
These costs primarily consist of legal, environmental and financing related
fees. An additional charge will be recorded in the third quarter of 1998 for
costs incurred relating to this transaction subsequent to June 30, 1998.
Total costs are expected to range from approximately $800,000 to $900,000.
Sales for the Company's manufacturing segment (which consists of one
subsidiary company, Greenwald Industries, Inc.) for the second quarter of
1998 were $4,120,000 compared to $4,957,000 for the second quarter of 1997.
The decrease in sales was due primarily to reduced volume. This segment
had income from operations of $557,000 for the second quarter of 1998 compared
to $884,000 for the same period in 1997. In February 1998, Greenwald
Industries entered into a joint venture to develop, manufacture and market smart
card systems for the commercial laundry and other industries. The new entity,
Greenwald Intellicard, Inc., is located in Boynton Beach, Florida. Costs
associated with this investment amounted to $314,000. The second quarter 1998
results included Greenwald Intellicard operating losses of approximately
$100,000.
Revenues for the Company's services segment (which consists of one
subsidiary company, Orr-Schelen-Mayeron & Associates, Inc.) increased by
approximately 8% to $2,385,000 for the second quarter of 1998 compared to
$2,212,000 for the second quarter of 1997. An increase in production
employee headcount and improved efficiencies accounted for the improvement
in revenues versus 1997. The services segment had income from operations for
the second quarter of 1998 of $107,000 compared to $98,000 for the same period
in 1997.
Operating Results - Six months
Publicker's consolidated sales and revenues of $13,128,000 for the first
six months of 1998 increased by approximately 1% from $12,997,000 for the
first six months of 1997. The improvement in sales was due to a volume
increase at the Company's services segment which was offset by a volume
reduction at the Company's manufacturing segment. Cost of sales and services
was $9,003,000 in 1998 compared to $9,024,000 in 1997. General and
administrative expenses for the first six months of 1998 decreased by
approximately 6% to $3,565,000 from $3,797,000 in 1997 as a result of overhead
expense reductions. The Company's loss from operations for the first six
months of 1998 totaled $121,000 compared to a loss of $420,000 for 1997. The
Company reported a net loss of $915,000, or $.07 per share, for the first
six months of 1998 compared to a net loss of $984,000, or $.07 per share,
for 1997.
Sales for the Company's manufacturing segment for the first six months of
1998 were $8,285,000 compared to $9,072,000 for 1997. The decrease in sales was
due primarily to reduced volume. This segment had income from operations of
$1,268,000 for the first six months of 1998 compared to $1,518,000 for the same
period in 1997. The 1998 six month results included $140,000 of Greenwald
Intellicard start-up losses.
Revenues for the Company's services segment increased by approximately 23%
to $4,843,000 for the first six months of 1998 compared to $3,925,000 for 1997.
An increase in production employee headcount and improved efficiencies accounted
for the improvement in revenues versus 1997. The services segment had income
from operations for the first six months of 1998 of $185,000 compared to a
$112,000 loss for the same period in 1997.
Liquidity
During the first six months of 1998, cash, including short-term
investments, decreased by $1,650,000 to $11,427,000 at June 30, 1998.
Operating activities consumed cash of $1,291,000, investing activities consumed
cash of $574,000 and financing activities provided cash of $215,000. Operating
activities consisted of the loss from operations coupled with the annual
payment required under the environmental litigation settlement. Investing
activities consisted of acquisition costs associated with the Greenwald
Intellicard investment of $314,000 and capital expenditures of $275,000.
Financing activities principally consisted of proceeds from the issuance of
common shares upon the exercise of stock options of $600,000 offset by
treasury stock purchases of $320,000.
As discussed above, the letter of intent to acquire five businesses from
Katy Industries,Inc. terminated on August 5, 1998. Costs associated with
the transaction are expected to range from approximately $800,000 to $900,000.
Through June 30, 1998 the Company paid a total of $255,000 of the expected
costs.
In April 1996, the Consent Decree that settled the Company's environmental
litigation with the United States and the Commonwealth of Pennsylvania was
entered by the U.S. District Court for the Eastern District of Pennsylvania, and
became effective. Pursuant to the Consent Decree, the Company will pay a total
of $14,350,000 plus interest to the United States and Commonwealth of
Pennsylvania. Through June 30,1998, the Company has made principal payments
aggregating $10,992,000. Further payments totaling $3,358,000 plus interest
will be made to the United States and the Commonwealth of Pennsylvania over the
next four years.
During the first six months of 1998, the Company's capital expenditures
totaled $275,000. The Company has not entered into any material commitments
for 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 1998 with its available cash resources as
well as through capital equipment financing.
At June 30, 1998, approximately $80 million of U.S. tax loss carryforwards
(subject to review by the Internal Revenue Service), expiring from 1998 through
2018, were available to offset future taxable income.
Year 2000
The Company has begun modifying and upgrading its existing computer systems
to process transactions in the year 2000 and beyond. While management expects
all systems to be year 2000 compliant, there can be no assurance that all such
modifications will be successful. Anticipated spending for these modifications
and upgrades are not expected to have a significant impact on the Company's
ongoing results of operations.
Outlook
The Company's primary objective for 1998 is to identify a suitable
acquisition candidate or candidates. As of July 31, 1998, the Company had
approximately $11,000,000 in cash on hand. The Company intends to use such
funds, together with other potential borrowings, to seek out and acquire one or
more businesses. As discussed above, the letter of intent to acquire five
businesses from Katy Industries, Inc., was terminated on August 5, 1998. While
the Company continues to review and consider potential acquisition candidates,
it has not yet identified any specific acquisition candidates or determined the
amount or source of any indebtedness which would be incurred to finance future
acquisitions.
Special Note Regarding Forward-Looking Statements: A number of statements
contained in this discussion and analysis are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 that involve
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied in the applicable statements. These risks and
uncertainties include but are not limited to: Greenwald's dependance on the
mechanical coin meter market and its potential vulnerability to technological
obsolescence; OSM's dependence on key personnel and general economic conditions
in the Midwest; and the Company's ability to successfully implement its
acquisition strategy including the identification, financing and consummation of
any acquisition transaction.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
General Litigation
Various legal proceedings are pending against the Company. The Company
considers all such proceedings to be ordinary litigation incident to the
character of its business. Certain claims are 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) Exhibits required by Item 601 of Regulation S-K.
Exhibit 27: Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K: None
<PAGE>
PUBLICKER INDUSTRIES INC.
AND SUBSIDIARY COMPANIES
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 12, 1998 /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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<PERIOD-END> JUN-30-1998
<CASH> 11,427
<SECURITIES> 0
<RECEIVABLES> 3,867
<ALLOWANCES> 44
<INVENTORY> 2,478
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<PP&E> 6,434
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<COMMON> 1,695
0
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<OTHER-SE> 8,543
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<INCOME-TAX> 0
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