Document K61vRp1n8aeqx3wqQagrzaRGQ

pimmms EXHIBIT-; UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 me- -> ; FORM 10-Q pq 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_____ Commission file number 1-13780 POWER CONTROL TECHNOLOGIES INC (Exact name of registrant as specified m its charter) Delaware (State or other jurisdiction of incorporation or organization) 02-0423416 (I.R.S Employer Identification No ) 35 East 62nd Street, New York, New York 10021 (Address of principal executive offices) (Zip Code) 212-572-8600 (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 V No___ The number of shares of Common Stock outstanding at August 7, 1996 was 20,656,502 SCF-ABEX-3280 Power Control Technologies Inc. and Subsidiaries Consolidated Statements of Income (Dollars in millions, except per share data) (unaudited) General and administrative expense Operating expense Interest expense Other income, net Income (loss) from continuing operations Discontinued operations Income from operations of discontinued aerospace business, net of foreign income taxes Gam on sale of discontinued aerospace business Income before extraordinary loss Extraordinary loss Net income Preferred stock dividend Net income available to common shareholders Three Months Ended June 30, 1996 1995 S (0.3) S (5 0) (0 3) (5.0) -32 3.0 29 (2 0) Six Months Ended June 30, 1996 1995 $ (0.6) $ (10 9) (0.6) (10.9) - (0.4) 3.8 7.7 3.2 (3-6) 153 7 156 6 40 - 20 - 156 6 - 20 (0 4) (0 1) S 156 2 S 19 44 153 7 161 3 8.0 - 4.4 - 161.3 (16) 2.8 (0 8) (0 1) S 160.5 $ 27 Income (loss) per common share and common equivalent share Continuing operations Discontinued operations Extraordinary loss Net income S 0 12 7 44 7.56 - S 7 56 S (0 10) 0 20 0.10 - S 0 10 S 0.12 7.62 7.74 - S 7.74 $(0.18) 0.40 0 22 (0 08) $ 0.14 Fully diluted income (loss) per common share Continuing operations Discontinued operations Extraordinary loss Net income S 0 13 6 64 6 77 - S 6.77 S (0 10) 020 0 10 - S 0 10 $ 0.14 6 80 6 94 - $ 6.94 $ (0.18) 0.40 022 (0.08) $ 0.14 See Notes to Consolidated Financial Statements Power Control Technologies Inc. and Subsidiaries Consolidated Balance Sheets (Dollars in millions, except per share data) (unaudited) ASSETS Current assets Cash and cash equivalents Prepaid expenses and other Total current assets Other assets Net assets held for sale LIABILITIES AND STOCKHOLDERS' EQUITY Accrued expenses Long-term liabilities Total liabilities June 30, 1996 December 31, 1995 S 198 5 S 09 199.4 12.9 s 212 3 S 1.2 12 113 38.8 513 s 4.9 s 44 44 44 93 88 Convertible preferred stock Commitments and contingencies Stockholders' equity. Common stock, par value $ 01, 250,000,000 shares authorized. 20,656,502 shares issued and outstanding Additional paid-in capital Retained earnings (accumulated deficit) Total stockholders' equity 20.0 20.0 0.2 26.7 156.1 183 0 s 212 3 s 03 26 7 (4 4) 225 513 See Notes to Consolidated Financial Statements 3 Power Control Technologies Inc. and Subsidiaries Consolidated Statements of Cash Flows ' (Dollars in millions) (unaudited) Cash flows from operating activities Net income Adjustments to reconcile net income to total cash provided by (used in) operating activities Income from discontinued aerospace business Gam on discontinued aerospace business Extraordinary loss Depreciation Changes in working capital, net of assets and liabilities of discontinued operations Other current assets Other assets Accrued liabilities Other long-term liabilities Cash provided by (used in) operating activities Cash flows from investing activities Proceeds from sale of aerospace business, net of transaction costs Transfer of cash Cash provided by (used in) financing activities Cash flows from financing activities Debt payments, net Preferred dividends Cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Six Months Ended June 30, 1996 1995 $ 1613 $ 2.8 (4 4) 053 7) - (8 0) - 16 1.1 03 2.3 (16) (2.0) 0.5 (24 9) - 9.5 2.4 (17 6) 196 9 - 196.9 (1813) (1813) (0 8) (0 8) 198 5 - S 198.5 (31.1) (0 1) (313) (230.0) 230.0 $ 0.0 See Notes to Consolidated Financial Statements 4 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 mclude 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 die 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 Aprd 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 gam 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 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 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 m 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 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 gam of $153.7 million related to the Aerospace Sale, net of estimated transaction expenses, m 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 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 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 POWER CONTROL TECHNOLOGIES INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PART n - 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 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 Date- August 7, 1996 Bv:/s/Irwin Enselman Irwm Engelman Executive Vice President and Chief Financial Officer Bv./s/Laurence Winoker Laurence Winoker Vice President and Controller (Principal Accounting Officer) 10