================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------------------
FORM 10-Q
---------------------------------
(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 29, 2002
OR
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 0-9919
PSC INC.
(Exact name of Registrant as Specified in Its Charter)
New York 16-0969362
----------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 S.W. Fifth Avenue, Suite 4100, Portland, Oregon 97204
--------------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
503-553-3920
(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 12 months preceding (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 |_|
As of May 8, 2002, there were 12,834,467 shares of common stock outstanding.
PSC INC. AND SUBSIDIARIES
INDEX
PART I: FINANCIAL INFORMATION
Item 1 Financial Statements Page Number
-----------
Consolidated Balance Sheets as of
March 29, 2002 (Unaudited) and December 31, 2001..................3-4
Consolidated Statements of Operations and
Accumulated Deficit for the three months ended:
March 29, 2002 (Unaudited) and March 30, 2001 (Unaudited) ........5
Consolidated Statements of Cash Flows
for the three months ended:
March 29, 2002 (Unaudited) and March 30, 2001 (Unaudited) ........6
Notes to Consolidated Financial Statements (Unaudited) ........7-10
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations ................10-13
Item 3 Quantitative and Qualitative Disclosures About Market Risk.......14
PART II: OTHER INFORMATION
Item 1 Legal Proceedings ...............................................15
Item 2 Changes in Securities............................................15
Item 3 Defaults upon Senior Securities..................................15
Item 4 Submission of Matters to a Vote of Security Holders .............15
Item 5 Other Information .............................................15
Item 6 Exhibits and Reports on Form 8-K.................................15
Item 7 Critical Accounting Policies and Estimates .....................15
2
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
PSC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
December 31, 2001 March 29, 2002
----------------- -----------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $1,865 $1,675
Accounts receivable, net of allowance for doubtful
accounts of $879 and $609, respectively 33,850 32,495
Inventories, net 17,885 18,169
Prepaid expenses and other 3,195 4,836
----------------- -----------------
Total current assets 56,795 57,175
Property, Plant and Equipment, net of
accumulated depreciation of $20,707 and $21,552,
respectively 8,997 8,590
Intangible , net of accumulated
amortization of $48,135 and $48,502, respectively 69,925 69,966
----------------- -----------------
Total assets $135,717 $135,731
================= =================
See accompanying notes to the Consolidated Financial Statements.
3
PSC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
(Continued)
December 31, 2001 March 29, 2002
----------------- -----------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
Current Liabilities:
Current portion of long-term debt $119,349 $120,736
Accounts payable 17,325 16,998
Accrued expenses 19,889 22,004
Accrued payroll and related employee benefits 3,836 2,796
----------------- -----------------
Total current liabilities 160,399 162,534
Long-Term Debt, less current maturities - -
Other Long-Term Liabilities 2,497 2,629
Shareholders' Equity (Deficit):
Series A convertible preferred shares, par value $.01; 110 shares authorized,
issued and outstanding
($11,000 aggregate liquidation value) 1 1
Series B preferred shares, par value $.01; 175
authorized, no shares issued and outstanding - -
Undesignated preferred shares, par value $.01;
9,715 authorized, no shares issued and outstanding - -
Common shares, par value $.01; 100,000 authorized
12,834 and 12,834 shares issued and outstanding 129 129
Additional paid-in capital 73,078 73,078
Accumulated deficit (95,606) (96,853)
Accumulated other comprehensive loss (3,424) (4,430)
Less treasury stock repurchased at cost, 180 shares (1,357) (1,357)
----------------- -----------------
Total shareholders' equity (deficit) (27,179) (29,432)
----------------- -----------------
Total liabilities and shareholders' equity (deficit) $135,717 $135,731
================= =================
See accompanying notes to the Consolidated Financial Statements.
4
PSC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(All amounts in thousands, except per share data)
Three Months Ended
--------------------------------------
March 30, 2001 March 29, 2002
-------------- --------------
(Unaudited) (Unaudited)
Net Sales $50,474 $42,763
Cost of Sales 31,573 25,700
-------------- --------------
Gross profit 18,901 17,063
Operating Expenses:
Engineering, research and development 4,889 3,485
Sales & marketing expense 7,796 7,686
General & administrative expense 3,966 3,893
Severance and other costs 525 36
Debt restructuring 1,836 420
Amortization of intangibles resulting from business acquisitions 2,764 -
-------------- --------------
Income (loss) from operations (2,875) 1,543
Interest and Other (Income)/Expense:
Interest expense, net 4,270 4,112
Other income (50) (117)
-------------- --------------
(Gain) loss from asset sale (3,164) -
-------------- --------------
Loss before income tax provision/(benefit) (3,931) (2,452)
Income tax provision/(benefit) 509 (1,205)
-------------- --------------
Net loss $(4,440) $(1,247)
============== ==============
Net loss per common and common share equivalent:
Basic ($0.36) ($0.10)
Diluted ($0.36) ($0.10)
Weighted average number of common and common equivalent shares outstanding:
Basic 12,280 12,834
Diluted 12,280 12,834
See accompanying notes to the Consolidated Financial Statements.
5
PSC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
Three Months Ended
-------------------------------------------------
March 30, 2001 March 29, 2002
-------------- --------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($4,440) ($1,247)
Adjustments to reconcile net loss to net cash
Provided by (used in) operating activities:
Depreciation and amortization 4,213 2,598
Change in fair value of fee option and warrants - 39
Gain on sale of asset (3,164) -
(Increase)/decrease in assets:
Accounts receivable, net 939 1,355
Inventories (576) (284)
Prepaid expenses and other 1,028 (1,639)
Increase/(decrease) in liabilities:
Accounts payable 1,181 (327)
Accrued expenses 659 2,114
Accrued payroll and related employee benefits (906) (1,040)
Additions/(Reductions) to other long-term liabilities, net (49) 94
-------------- --------------
Net cash (used in)/provided by operating activities (1,115) 1,663
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (300) (574)
Additions to intangible and other assets (681) (370)
Proceeds from sale of assets 3,800 -
-------------- --------------
Net cash provided by/(used in) investing activities 2,819 (944)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt - 98
Payments of long-term debt (2,850) -
Exercise of options and issuance of common shares 98 -
---------------- ----------------
Net cash (used in)/provided by financing activities (2,752) 98
---------------- ----------------
Effect of exchange rate changes on cash and cash equivalents (1,131) (1,007)
---------------- ----------------
Net (decrease)/ increase in cash and cash equivalents
(2,179) (190)
CASH AND CASH EQUIVALENTS:
Beginning of period 5,461 1,865
---------------- ----------------
End of period $3,282 $1,675
================ ================
See accompanying notes to the Consolidated Financial Statements.
6
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 30, 2001 AND MARCH 29, 2002
(All amounts in thousands)
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared by
the Company without audit. In the opinion of management, these financial
statements include all adjustments necessary to present fairly the
Company's financial position as of March 29, 2002, the results of
operations for the three months ended March 30, 2001 and March 29, 2002
and its cash flows for the three months ended March 30, 2001 and March 29,
2002. The results of operations for the three months ended March 29, 2002
are not necessarily indicative of the results to be expected for the full
year.
Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's December 31, 2001 annual report on
Form 10-K.
(2) INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method. Inventory costs include material, direct labor and
overhead and consist of the following:
December 31, 2001 March 29, 2002
----------------------- ----------------------
Raw materials $14,586 $13,638
Work-in-process 3,522 4,009
Finished goods 4,071 4,542
------------ ------------
22,179 22,189
------------ ------------
Less inventory reserve (4,294) (4,020)
------------ ------------
$17,885 $18,169
============ ============
(3) CURRENT MATURITIES OF LONG TERM DEBT
Current maturities of long-term debt consists of the following:
December 31, 2001 March 29, 2002
--------------------- ------------------
Term loan, net of debt discount
of $1,265 and $0 $58,935 $60,106
Senior revolving credit 30,419 30,560
Subordinated term loan, net of
discount of $943, and $868 29,057 29,132
Subordinated promissory note 938 938
------------ ------------
Long term debt, net $119,349 $120,736
============ ============
7
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 30, 2001 AND MARCH 29, 2002
(All amounts in thousands)
(Unaudited)
(4) ASSET SALE
As part of the Company's overall restructuring plans, the Company sold its
verification and imager product lines on February 16, 2001 for $3.8
million. The gain realized on the sale was approximately $3.2 million.
In connection with the sale, the Company was required to use 50% of the
net cash proceeds to repay amounts borrowed under its senior credit
facilities.
(5) SEVERANCE AND OTHER COSTS
As of December 31, 2001, the amount of the severance accruals was
approximately $0.3 million. As of March 29, 2002, the amount of the
severance accruals was approximately $0.2 million, which relates to
current contractual obligations.
(6) SHAREHOLDERS' EQUITY
Other comprehensive loss reports changes in equity that result from
transactions and economic events other than transactions with owners.
Other comprehensive loss is the total of net loss and all other non-owner
changes in equity.
Three Months Ended
--------------------------------
March 30, 2001 March 29, 2002
-------------- --------------
Net loss $(4,440) $(1,247)
Foreign currency translation adjustment (1,130) (1,006)
------------- ------------
Comprehensive loss $(5,570) $(2,253)
============= ============
8
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 30, 2001 AND MARCH 29, 2002
(All amounts in thousands)
(Unaudited)
Changes in the status of options under the Company's stock option plans
are summarized as follows:
January 1, 2001 Weighted January 1, 2002 Weighted
to Average to Average
March 30, 2001 Price March 29, 2002 Price
--------------- -------- --------------- --------
Options outstanding at
beginning of period 3,222 $3.55 3,521 $2.64
Options granted 52 1.41 161 .56
Options exercised - - - -
Options forfeited/canceled (173) 4.15 (35) 2.50
-------- --------
Options outstanding at
end of period 3,101 $3.95 3,647 $2.55
======== ========
Number of options at end
of period:
Exercisable 1,900 $4.99 2,251 $3.28
Available for grant 263 535
During the three month period ended March 29, 2002, 30 forfeited options
were cancelled due to the expiration of the 1987 Stock Option Plan in
December 1997. These options are not available for future grants.
(7) NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE
Basic EPS was computed by dividing reported earnings available to common
shareholders by weighted average shares outstanding during the period.
Diluted EPS was the same as basic EPS for the three months ended March 30,
2001 and March 29, 2002 as the affect of the dilutive securities would
have been antidilutive. Options, warrants and preferred shares to purchase
3,101, 975 and 180 common shares, respectively, were outstanding for the
three months ended March 30, 2001. Options, warrants and preferred shares
to purchase 3,647, 975 and 180 of common shares were outstanding for the
three months ended March 29, 2002.
Three Months Ended
-----------------------------------------------------------------------------------
March 30, 2001 March 29, 2002
---------------------------------------- ---------------------------------------
Per Per
Net loss Shares Share Net loss Shares Share
(numerator) (denominator) Amount (numerator) (denominator) Amount
----------- ------------- ------ ----------- ------------- ------
Basic and Diluted EPS:
Net loss available to
common shareholders ($4,440) 12,280 ($0.36) ($1,247) 12,834 ($0.10)
======== ====== ======= ======== ====== =======
9
( 8) ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
Goodwill, which represented the excess of cost over the fair value of the
acquisition, was previously being amortized using the straight-line method
over 5-10 years. Effective January 1, 2002, the Company stopped amortizing
its goodwill in accordance with Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). The
Company has completed its initial assessment of adopting SFAS 142 as to
whether any identifiable intangibles may be associated with the previously
recognized goodwill. Based on the Company's assessment, there are no
identifiable intangibles that should be carved out of the previously
recognized goodwill. Therefore, the next step, per SFAS 142, is to test
for impairment based on the fair value of the goodwill. The Company has
six months from the date it initially applies SFAS 142 to complete the
first step of that transitional goodwill impairment test. However, the
amounts used in the transitional goodwill impairment test shall be
measured as of the beginning of the year of initial application. If the
carrying amount of the net assets of a reporting unit (including goodwill)
exceeds the fair value of that reporting unit, the second step of the
transitional goodwill impairment test must be completed as soon as
possible, but no later than the end of the year of initial application.
The Company is in the process of completing its analysis and anticipates
that it will record the impact, if any, of adopting SFAS 142 as an
accounting change no later than June 30, 2002.
( 9) RECLASSIFICATION
Certain amounts in prior years have been reclassified to conform to
current year presentation.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
--------------------------------------------------------------------------------
of Operations
-------------
General
-------
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
of the Company's December 31, 2001 annual report on Form 10-K.
Results of Operations: Three Months ended March 30, 2001 and March 29, 2002
----------------------------------------------------------------------------
Net Sales. Net sales during the three months ended March 29, 2002 decreased $7.7
million or 15.3% compared with the same period in 2001. $2.7 million of this
decrease related to the sale of business and product lines in 2001, for which
there was no revenue in 2002. The remaining decrease in net sales is attributed
primarily to lower sales of handheld scanners and scan engines of $4.8.
Gross Profit. Gross profit during the three months ended March 29, 2002
decreased $1.8 million or 9.7% compared with the same period in 2001. As a
percentage of sales, gross profit percentage increased to 39.9% for the first
quarter of 2002, as compared to 37.4% in the first quarter of 2001. The increase
in gross profit was a result of the streamlining of product lines and production
operations that reduced costs.
Engineering, Research and Development (ER&D). ER&D expenses for March 29, 2002
decreased $1.4 million or 28.7 %, compared to the same period in 2001. As a
percentage of sales, ER&D was 8.1% in the first quarter of 2002, versus 9.7% of
net sales in the first quarter of 2001. The decrease in ER&D is primarily
attributable to the cost savings efforts brought about by business
restructuring.
Sales and Marketing. Sales and marketing expenses for March 29, 2002 were
relatively unchanged compared to the first quarter of 2001. As a percentage of
sales, sales and marketing expense was 18.0% in 2002 versus 15.4% in 2001. The
percentage increase is primarily attributable to the increased investment in the
direct sales organization to enhance contact with and expand relationships with
end users.
10
General and Administrative. General and administrative expenses for the first
quarter in 2002 were relatively unchanged. These costs are relatively fixed and
are not subject to changes in the sales volume.
Severance and Other Costs. During the first quarter of 2001, the Company
recorded a pretax charge of $0.5 million for employee severance and benefit
costs resulting primarily from the consolidation of the Webster, New York
operations with its Eugene, Oregon operations. For the first quarter of 2002,
there was only a nominal amount of severance expense.
Debt Restructuring. Debt restructuring costs for the first quarter in 2002
decreased 77.1% to $0.4 million from $1.8 million for the same period in 2001.
The decrease is due to reduced consulting costs necessary to manage banking
relationship.
Amortization of Goodwill. Effective January 1, 2002, the Company ceased the
amortization of goodwill, in accordance with Statement of Financial Accounting
Standards No. 142 (SEE "ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS"). The
amortization expense for goodwill was $2.8 million for the first quarter of
2001.
Interest Expense. Interest expense was relatively unchanged for the first
quarter of 2002 as compared the same period in 2001.
Income Tax Provision/(Benefit). The Company's effective tax rate was (49.1%) for
the three months ended March 31, 2002 versus 13.0% for the three months ended
March 31, 2001. The Company recognized a $1.3 million tax receivable, in the
quarter ended March 29, 2002 associated with the expected refund from a net
operating loss carryback to prior years. A valuation allowance has been placed
against the Company's deferred tax assets including the current operating
losses, based on the Company's estimate of realizing its deferred tax assets in
the future.
Liquidity and Capital Resources:
--------------------------------
Current assets were relatively unchanged from December 31, 2001. Current
liabilities increased by $2.1 million from December 31, 2001. The increase is
primarily due to the increase, in accrued interest and warranty reserves.
Property, plant and equipment expenditures totaled $0.6 million for the three
months ended March 29, 2002 compared with $0.3 million for the three months
ended March 30, 2001. The 2002 expenditures are related to new product tooling
and computer software and hardware.
At March 29, 2002, liquidity immediately available to the Company consisted of
cash and cash equivalents of $1.7 million. The Company had a revolving credit
facility totaling $34.0 million, of which $30.6 million, was outstanding at
March 29, 2002. The Company is required to use at least 50% of its net cash
proceeds from its non-core asset sales to repay amounts borrowed under its
senior credit facilities.
The Company is required to meet certain financial covenants in relation to its
senior and subordinated credit facilities including, but not limited to,
adjusted EBITDA and capital expenditures. The senior debt and subordinated term
loan agreements also restrict payment of dividends and limit stock repurchases.
The Company is also required to achieve certain milestones in its
recapitalization process. The Company was in compliance with or has received
waivers for these covenants as of March 29, 2002. However, management is
uncertain as to whether the Company will remain in compliance with these
covenants.
11
In March 2002, the Company and its lenders reached an agreement in principle to
extend the maturities of the Company's existing financing facilities to August
1, 2002. The extension documents were signed and effective on April 3, 2002.
The terms of the financing arrangements with the Company's senior lenders are
substantially unchanged from the previously disclosed April 13, 2001
modification agreement. Among other provisions, the commitment from the senior
lender for the working capital facility is $34.0 million and the commitment for
fixed financing is $60.2 million. The interest rate for the senior credit
facilities is prime + 3.50%. The Company is required to apply 50% of net cash
proceeds from asset sales to repay amounts borrowed under its senior credit
facilities.
In connection with the subordinated credit facility, the terms of the financing
arrangements are substantially unchanged from the previously disclosed April 13,
2001 modification agreement.
In connection with the debt modification agreements reached with its lenders on
April 13, 2001, the Company accrued $4.1 million for debt modification fees
payable and recorded a related discount on the debt. Debt discount is being
amortized through the expiration date of the prior amendment, which was dated
April 1, 2002.
The Company has experienced recurring losses from operations, has undergone
repeated renegotiations with its lenders of senior and subordinated indebtedness
and has a significant working capital deficit. All of the Company's debt,
totaling $120.7 million at March 29, 2002, is current.
These matters present the Company with a liquidity issue and raises substantial
doubts about its ability to continue as a going concern. Management's plans in
regard to these matters are discussed below. The financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result, should the Company be unable to continue as a going concern.
Management's Plans
In November 2000, the Company announced a restructuring plan to reduce its debt
and to achieve future profitability and growth. These restructuring plans
included replacement of executive management, consolidation of redundant
administrative activities, sale or disposal of unprofitable operations and
streamlining of product lines and production operations to reduce cost and
increase profit contribution for products sold.
In February 2001, the Company sold its verification and imager product lines for
$3.8 million. The gain on the sale was $3.2 million, recorded in other
income/expense on the consolidated statement of operations.
In May 2001, the Company sold its Webster, New York facility for $5.0 million.
The transaction resulted in a gain of $0.1 million in 2001, after a write-down
of the facility value in 2000 of $7.9 million.
In July 2001, the Company sold its LazerData business for $6.4 million. The loss
on the sale was $2.9 million recorded in other (income)/expense in the
consolidated statement of operations.
During 2001, 50% of all asset disposition proceeds were applied to reduce
indebtedness to PSC's senior lenders.
In July 2001, the Company substantially completed the process of hiring a new
executive management team and relocated its Corporate headquarters to Portland
Oregon.
In September 2001, the Company completed its restructuring process with a
further reduction in costs and expenses, including staffing costs. Total
severance and other restructuring costs during 2001 and 2000 were approximately
12
$1.5 million and $4.9 million, respectively. Debt restructuring costs for legal
and consulting totaled $3.6 million in 2001. Total cost reductions related to
all restructuring activities, including sales of businesses referred to above,
was estimated to be approximately $40.0 million on an annualized basis.
Also in September 2001, the Company initiated efforts to attract new equity
capital to reduce and refinance its indebtedness and provide additional equity
resources to support ongoing operations. The Company has secured the services of
an investment banking firm to assist in this effort. At March 29, 2002. these
efforts are ongoing. These efforts relating to a restructuring may result in a
material dilution of all currently issued and outstanding equity interests, and
it is possible that under certain circumstances all such interests may be
extinguished.
Management's cash flow projections for the Company balances the cash collections
from revenue activities with the disbursement requirements for suppliers,
capital expenditures and personnel costs. The Company's cost reduction efforts
have been focused on achieving a neutral or positive cashflow from operations.
Successfully continuing to operate in this neutral to positive cashflow pattern
is dependent upon the Company's ability to effectively achieve its sales plan as
well as its continued cost control performance. Management believes that its
revenue and cost performance objectives are achievable and sustainable during
this period of recapitalization. If the Company's performance deviates
negatively from the 2002 operating plan, management intends to take all steps
necessary to reduce cash costs to rebalance the Company's operations to return
to a neutral or positive cashflow performance.
In March 2002, the Company and its lenders reached an agreement in principle to
extend the maturities of the Company's existing financing facilities to August
1, 2002. The extension documents were signed and became effective on April 3,
2002. The terms of the extended financing arrangements were substantially
unchanged from the prior agreements. The Company is required to achieve certain
milestones in its recapitalization process and maintain certain financial
covenants related to its senior and subordinated credit facilities. Management
believes that a restructuring transaction acceptable to the Company's lenders
can be achieved, although there can be no assurance that such a transaction will
be accomplished. In the event that the Company is unsuccessful in these
restructuring efforts, the lenders would be entitled to exercise their
respective rights and remedies under the credit facilities and applicable law,
in which case the Company would not have sufficient funds to repay its
outstanding debt and no assurance can be given that alternative sources of
sufficient financing would be available on acceptable terms, or not at all.
In the opinion of management, inflation has not had a material effect on the
operations of the Company.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------
No significant change in market risk from that disclosed in the
Company's December 31, 2001 annual report on Form 10-K.
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
------------------------------------------------------------------------
Securities Litigation Reform Act of 1995
----------------------------------------
Certain statements contained in this Management's Discussion and
Analysis may be forward-looking in nature, or "forward-looking
statements" as defined in the Private Securities Litigation
Reform Act of 1995. Management cautions that these statements are
estimates of future performance and are highly dependent upon a
variety of important factors, which could cause actual results to
differ materially from the estimate. These factors include the
market acceptance of existing and new products, competitive
product offerings and pricing pressures, the successful
completion of the Company's recapitalization efforts,
successfully negotiatiing extensions
13
to existing financing or the negotiation of new financing on
acceptable terms, foreign currency and interest rate
flunctuations, fulfillment of lending agreements and the
disposition of legal issues. Profits and available cash flows
also will be affected by the Company's ability to control
manufacturing and operating costs. Reference should be made to
filings with the Securities and Exchange Commission for further
discussion of factors that could affect the Company's future
results.
14
PART II: OTHER INFORMATION
Item 1: Legal Proceedings:
-----------------
The description of the Company's legal proceedings set forth in Item 3 of the
Company's Annual Report on Form 10-K for the fiscal period ended December 31,
2001 is incorporated herein by reference.
Item 2: Changes in Securities: None
---------------------
Item 3: Defaults upon Senior Securities: None
-------------------------------
Item 4: Submission of Matters of Shareholders to a Vote of Security
-----------------------------------------------------------
Holders: None
-------
Item 5: Other Information: None
-----------------
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
---------
10.1 Amendment to Borey Employment Agreement, dated
February 2, 2001
(b) Reports on Form 8-K: None
-------------------
Item 7: Critical Accounting Policies and Estimates
------------------------------------------
There has been no change in the Company's critical accounting
policies and estimates from those disclosed in the Company's
December 31, 2001 annual report on Form 10-K.
15
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.
PSC Inc.
DATE: May 14, 2002 By: /s/ Edward J. Borey
------------------------------------
Edward J. Borey
President, Chief Executive Officer and Director
DATE: May 15, 2002 By: /s/ Paul M. Brown
------------------------------------
Paul M. Brown
Vice President and Chief Financial Officer
(Principal Financial Officer)
16