UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 1-13780
POWER CONTROL TECHNOLOGIES INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 02-0423416
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
35 EAST 62ND STREET, NEW YORK, NEW YORK 10021
(Address of principal executive offices) (Zip Code)
212-572-8600
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(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 [ ]
The number of shares of Common Stock outstanding at August 7, 1996 was
20,656,502.
<PAGE>
Power Control Technologies Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
--------------------- ----------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ----------------------
1996 1995 1996 1995
--------------------- ----------------------
General and administrative expense $ (0.3) $ (5.0) $ (0.6) $ (10.9)
Operating expense (0.3) (5.0) (0.6) (10.9)
Interest expense -- -- -- (0.4)
Other income, net 3.2 3.0 3.8 7.7
----------- --------- ------------ ----------
Income (loss) from continuing operations 2.9 (2.0) 3.2 (3.6)
Discontinued operations
Income from operations of discontinued aerospace
business, net of foreign income taxes -- 4.0 4.4 8.0
Gain on sale of discontinued aerospace business 153.7 -- 153.7 --
----------- --------- ------------ ----------
Income before extraordinary loss 156.6 2.0 161.3 4.4
Extraordinary loss -- -- -- (1.6)
----------- --------- ------------ ----------
Net income 156.6 2.0 161.3 2.8
----------- --------- ------------ ----------
Preferred stock dividend (0.4) (0.1) (0.8) (0.1)
----------- --------- ------------ ----------
Net income available to common shareholders $ 156.2 $ 1.9 $ 160.5 $ 2.7
========== ========== ========== ==========
Income (loss) per common share and common equivalent share:
Continuing operations $ 0.12 $ (0.10) $ 0.12 $ (0.18)
Discontinued operations 7.44 0.20 7.62 0.40
----------- --------- ------------ ----------
7.56 0.10 7.74 0.22
Extraordinary loss -- -- -- (0.08)
----------- --------- ------------ ----------
Net income $ 7.56 $ 0.10 $ 7.74 $ 0.14
=========== ========== =========== ==========
Fully diluted income (loss) per common share:
Continuing operations $ 0.13 $ (0.10) $ 0.14 $ (0.18)
Discontinued operations 6.64 0.20 6.80 0.40
- ----------------------- ---------------------
6.77 0.10 6.94 0.22
Extraordinary loss -- -- -- (0.08)
- ----------------------- ---------------------
Net income $ 6.77 $ 0.10 $ 6.94 $ 0.14
=========== ========== =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
Power Control Technologies Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $198.5 $ --
Prepaid expenses and other 0.9 1.2
------------ ------------
Total current assets 199.4 1.2
Other assets 12.9 11.3
Net assets held for sale -- 38.8
------------ ------------
$212.3 $51.3
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses $4.9 $ 4.4
Long-term liabilities 4.4 4.4
------------ ------------
Total liabilities 9.3 8.8
Convertible preferred stock 20.0 20.0
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 250,000,000 shares authorized;
20,656,502 shares issued and outstanding 0.2 0.2
Additional paid-in capital 26.7 26.7
Retained earnings (accumulated deficit) 156.1 (4.4)
------------ ------------
Total stockholders' equity 183.0 22.5
------------ ------------
$212.3 $51.3
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
Power Control Technologies Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in millions)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income $161.3 $ 2.8
Adjustments to reconcile net income to total cash provided by (used in)
operating activities:
Income from discontinued aerospace business (4.4) (8.0)
Gain on discontinued aerospace business (153.7) --
Extraordinary loss -- 1.6
Depreciation -- 1.1
Changes in working capital, net of assets and liabilities of discontinued
operations:
Other current assets 0.3 2.3
Other assets (1.6) (2.0)
Accrued liabilities 0.5 (24.9)
Other long-term liabilities -- 9.5
--------- ---------
Cash provided by (used in) operating activities 2.4 (17.6)
--------- ---------
Cash flows from investing activities
Proceeds from sale of aerospace business, net of transaction costs 196.9 --
Transfer of cash -- (181.2)
--------- ---------
Cash provided by (used in) financing activities 196.9 (181.2)
--------- ---------
Cash flows from financing activities
Debt payments, net -- (31.1)
Preferred dividends (0.8) (0.1)
--------- ---------
Cash used in financing activities (0.8) (31.2)
--------- ---------
Net increase (decrease) in cash and cash equivalents 198.5 (230.0)
Cash and cash equivalents at beginning of period -- 230.0
--------- ---------
Cash and cash equivalents at end of period $198.5 $ --
========= =========
</TABLE>
4
<PAGE>
POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Power
Control Technologies Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Results for interim periods are not necessarily indicative of the results which
might be expected for a full year. The unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 1995 annual report on
Form 10-K and proxy statement for the Company's 1996 Annual Meeting of
Stockholders. All terms used but not defined elsewhere herein have the meanings
ascribed to them in the Company's 1995 annual report on Form 10-K.
On April 15, 1996, the Company sold substantially all of its operating
assets and related liabilities (see Note 4). Accordingly, the consolidated
financial statements for all periods presented reflect such assets and
liabilities and related results of operations as discontinued operations.
NOTE 2. INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share for the three-month and six-month
periods ended June 30, 1995 is based on 19.9 million and 19.8 million shares of
common stock, respectively. Income (loss) per common share for the three-month
and six-month periods ended June 30, 1996 is based on 20.7 million outstanding
shares of common stock. In connection with the Aerospace Sale (see Note 4), all
of the outstanding stock options were canceled in April 1996.
Fully diluted income per common share assumes the conversion of
preferred stock into 2.5 million common shares from June 15, 1995.
NOTE 3. INCOME TAXES
At December 31, 1995 the Company had available federal net operating
loss carryforwards of approximately $172.0 million and therefore the Company
has not provided for federal income taxes for the three-month and six-month
periods ended June 30, 1996.
NOTE 4. SALES AND DISPOSITIONS OF ASSETS AND LIABILITIES
On April 15, 1996, the Company received the necessary approval from
its stockholders and consummated the Aerospace Sale pursuant to the terms of
the Master Asset Purchase Agreement for aggregate cash consideration of $201.1
million, before estimated transaction costs of approximately $4.2 million. The
Company recorded a gain of $153.7 million related to this sale, net of
estimated transaction costs. In connection with the Aerospace Sale,
Parker-Hannifin assumed the operating liabilities of the Aerospace Business,
including the existing debt of the Company. For additional
5
<PAGE>
POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
(Unaudited)
information regarding the Aerospace Sale, readers are referred to the proxy
statement for the Company's 1996 Annual Meeting of Stockholders.
6
<PAGE>
POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
As a result of the April 15, 1996 sale of the Aerospace Business to
Parker-Hannifin, the Company has classified those operations as discontinued in
the accompanying consolidated financial statements.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared to the Three Months Ended June 30,
1995
General and administrative expenses from continuing operations were
$0.3 million for the three months ended June 30, 1996, compared to $5.0 million
for the three months ended June 30, 1995. The 1996 expenses primarily relate to
on-going corporate costs. The 1995 expenses primarily relate to costs
associated with the former Hampton, NH office of Abex before the Abex Transfer
and the Merger.
Other income, net was $3.2 million for the three months ended June 30,
1996, compared to $3.0 million for the three months ended June 30, 1995. Other
income during the 1996 period represents interest income on cash proceeds
received from the Aerospace Sale and income recognized on the Company's
overfunded pension plan. Other income during the 1995 period relates primarily
to interest income on cash held by Abex before the Abex Transfer and Merger and
income recognized on overfunded pension plans.
The Company recorded a gain of $153.7 million related to the Aerospace
Sale, net of estimated transaction expenses, in the three months ended June 30,
1996. There were no income taxes provided in connection with the sale as the
tax bases of the assets and liabilities sold approximated the net proceeds.
Six Months Ended June 30, 1996 Compared to the Six Months Ended June 30, 1995
General and administrative expenses from continuing operations were
$0.6 million for the six months ended June 30, 1996, compared to $10.9 million
for the six months ended June 30, 1995. The 1996 expenses primarily relate to
on-going corporate costs. The 1995 expenses primarily relate to costs
associated with the former Hampton, NH office of Abex before the Abex Transfer
and the Merger.
Other income, net was $3.8 million for the six months ended June 30,
1996, compared to $7.7 million for the six months ended June 30, 1995. Other
income during the 1996 period reflects interest income on cash proceeds
received from the Aerospace Sale and income recognized on the Company's
overfunded pension plans. Other income during the 1995 period relates primarily
to interest income on cash held by Abex before the Abex Transfer and Merger and
income recognized on overfunded pension plans.
7
<PAGE>
POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Income from operations of discontinued aerospace business was $4.4
million in the six months ended June 30, 1996 and $8.0 million in the six
months ended June 30, 1995. The 1996 period represents aerospace operations
through the date of sale while the 1995 period represents aerospace operations
for the full period.
The Company recorded a gain of $153.7 million related to the Aerospace
Sale in the six months ended June 30, 1996. There were no income taxes provided
in connection with the sale as the tax bases of the assets and liabilities sold
approximated the net proceeds.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $198.5 million at June
30, 1996.
In connection with the Aerospace Sale, on April 15, 1996, the Company
terminated its existing Credit Agreement with Chemical Bank and Bank of America
(the "Credit Agreement") and entered into an agreement with Chemical Bank
pursuant to which certain letters of credit granted by Chemical Bank on behalf
of the Company pursuant to the Credit Agreement will remain outstanding.
On February 5, 1996, the Company, through Pneumo Abex, entered into a
Reimbursement Agreement with Chemical Bank and Mafco Consolidated. The
Reimbursement Agreement provides for letters of credit totaling $20.8 million
covering certain environmental issues not related to the Company's former
Aerospace Business. In connection with the Abex Transfer, Mafco Consolidated
has agreed to indemnify the Company for these contingent liabilities, which are
generally paid by third party indemnitors and insurers, including the cost of
the letters of credit.
At December 31, 1995, the Company had available federal net operating
loss carryforwards of approximately $172.0 million.
The Company is considering alternatives for the investment of the net
proceeds of the Aerospace Sale consistent with the Company's goal of enhancing
shareholder value.
8
<PAGE>
POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit Description
27* Financial Data Schedule.
*filed herein
(b) Reports on Form 8-K:
A report on Form 8-K was filed on April 30, 1996 to provide
the information required by Item 7(a) in connection with the Aerospace Sale.
9
<PAGE>
SIGNATURE
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.
POWER CONTROL TECHNOLOGIES INC.
(Registrant)
Date: August 7, 1996 By:/s/Irwin Engelman
Irwin Engelman
Executive Vice President and
Chief Financial Officer
Date: August 7, 1996 By:/s/Laurence Winoker
Laurence Winoker
Vice President and Controller
(Principal Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Power
Control Technologies Inc. Consolidated Balance Sheet and Statement of Income
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000945235
<NAME> POWER CONTROL TECHNOLOGIES INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 199
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 199
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 212
<CURRENT-LIABILITIES> 5
<BONDS> 0
20
0
<COMMON> 0
<OTHER-SE> 183
<TOTAL-LIABILITY-AND-EQUITY> 212
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (1)
<OTHER-EXPENSES> 4
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3
<INCOME-TAX> 0
<INCOME-CONTINUING> 3
<DISCONTINUED> 161
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 161
<EPS-PRIMARY> 7.74
<EPS-DILUTED> 6.94
</TABLE>
