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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
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(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2001
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 SW Fifth Avenue, Suite 4100, Portland, Oregon 97204-3644
------------------------------------------------- -----------
(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 November 6, 2001, there were 12,834,467 shares of common stock
outstanding.
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PSC INC. AND SUBSIDIARIES
INDEX
PART I: FINANCIAL INFORMATION
Item 1 Financial Statements Page Number
-----------
Consolidated Balance Sheets as of
September 29, 2001 (Unaudited) and December 31, 2000 .......................................... 3
Consolidated Statements of Operations and Accumulated Deficit for the
three and nine months ended:
September 29, 2001 (Unaudited) and September 29, 2000 (Unaudited) ............................. 4
Consolidated Statements of Cash Flows for the nine months ended:
September 29, 2001 (Unaudited) and September 29, 2000 (Unaudited) ..............................5
Notes to Consolidated Financial Statements (Unaudited) ......................................6-13
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations ..............................................14-17
Item 3 Quantitative and Qualitative Disclosures About Market Risk ....................................18
PART II: OTHER INFORMATION
Item 1 Legal Proceedings .............................................................................19
Item 2 Changes in Securities .........................................................................19
Item 3 Defaults upon Senior Securities ...............................................................19
Item 4 Submission of Matters to a Vote of Security Holders ...........................................19
Item 5 Other Information .............................................................................20
Item 6 Exhibits and Reports on Form 8-K ..............................................................20
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
--------------------
PSC INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except per share data)
September 29, 2000 December 31, 2000
------------------ -----------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,092 $5,461
Accounts receivable, net of allowance for doubtful accounts of $1,181 and
$793, respectively 37,227 39,404
Inventories 20,565 22,286
Prepaid expenses and other 2,753 4,489
------------------ -----------------
TOTAL CURRENT ASSETS 61,637 71,640
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $28,641
and $28,692, respectively 8,504 15,809
INTANGIBLE AND OTHER ASSETS, net of accumulated amortization of $45,165
and $39,443, respectively 75,501 87,430
------------------ -----------------
TOTAL ASSETS $145,642 $174,879
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt $118,977 $7,580
Accounts payable 21,956 25,729
Accrued expenses 16,719 11,128
Accrued payroll and related employee benefits 5,338 6,899
------------------ -----------------
TOTAL CURRENT LIABILITIES 162,990 51,336
LONG-TERM DEBT, less current maturities - 124,501
OTHER LONG-TERM LIABILITIES 2,354 2,013
WARRANTS 408 254
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 shares authorized 12,834 and 12,313
shares issued and outstanding 129 123
Additional paid-in capital 73,078 73,655
Accumulated deficit (88,910) (73,127)
Accumulated other comprehensive loss (3,051) (2,520)
Less treasury stock repurchased at cost, 180 shares (1,357) (1,357)
------------------ -----------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) (20,110) (3,225)
------------------ -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) $145,642 $174,879
================== =================
See accompanying notes to the Consolidated Financial Statements.
PSC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(All amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
------------------ -----------------
September 29, September 29,
------------- -------------
2001 2000 2001 2000
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $44,610 $59,543 $145,537 $188,400
Cost of Sales 27,373 36,798 89,087 116,342
------------------------------------------------------------------------
Gross Profit 17,237 22,745 56,450 72,058
Operating Expenses:
Engineering, Research & Development 3,783 5,268 12,993 16,505
Sales & Marketing 6,708 8,450 22,233 25,447
General & Administrative 4,648 5,064 15,184 15,584
Severance & Other Costs 748 426 1,430 2,100
Merger Related Costs - - - 959
Write-down of facility - 6,009 - 6,009
Amortization Of Intangibles 2,628 2,870 8,150 8,338
------------------------------------------------------------------------
Operating Expenses 18,515 28,087 59,990 74,942
Operating Loss (1,278) (5,342) (3,540) (2,884)
Interest and Other (Income) Expense:
Interest Expense, Net 4,107 3,180 12,708 9,501
(Gain)/Loss from asset sale 73 - (208) -
Other (Income) Expense, Net (449) (54) (140) (77)
------------------------------------------------------------------------
3,731 3,126 12,360 9,424
Loss Before Taxes and Cumulative Effect (5,009) (8,468) (15,900) (12,308)
Tax Provision/(Benefit) (116) (468) 721 (1,159)
------------------------------------------------------------------------
Net Loss Before Cumulative Effect of Accounting (4,893) (8,000) (16,621) (11,149)
Change
Cumulative Effect of Accounting Change - - 838 -
------------------------------------------------------------------------
Net Loss ($4,893) ($8,000) ($15,783) ($11,149)
========================================================================
Net Loss Per Share Before Cumulative Effect of Accounting Change:
Basic and Diluted ($0.39) ($0.66) ($1.35) ($0.92)
Net Income Per Share of Cumulative Effect of Accounting Change:
Basic and Diluted $0.00 $0.00 $0.07 $0.00
Net Loss Per Share After Cumulative Effect of Accounting Change:
Basic and Diluted ($0.39) ($0.66) ($1.28) ($0.92)
Weighted Average Number Of Common and Common Equivalent Shares Outstanding:
Basic 12,499 12,120 12,353 12,059
Diluted 12,499 12,120 12,353 12,059
Accumulated Deficit:
Accumulated Deficit, beginning of period ($84,017) ($21,214) ($73,127) ($18,065)
Net Loss (4,893) (8,000) (15,783) (11,149)
Accumulated Deficit, end of period ($88,910) ($29,214) ($88,910) ($29,214)
========================================================================
See accompanying notes to the Consolidated Financial Statements.
PSC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
Nine Months Ended
---------------------------------------
September 29, 2001 September 29, 2000
------------------ ------------------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net loss ($15,783) ($11,149)
Adjustments to reconcile net loss to net cash (used in)/provided by operating
activities
Depreciation and amortization 13,392 13,887
Gain on disposition of assets (208) -
Loss on royalty settlement - 2,119
Loss on write-down of assets - 6,009
Cumulative effect of accounting change (838) -
Deferred tax assets - (1,757)
Change in fair value of warrants 46 -
Decrease/(increase) in assets:
Accounts receivable 2,177 (1,203)
Inventories (339) (567)
Prepaid expenses and other 1,523 1,127
(Decrease)/increase in liabilities:
Accounts payable (3,851) 1,078
Accrued expenses 2,092 (1,996)
Accrued payroll and related employee benefits (1,600) (1,878)
Additions to other long-term liabilities, net 341 362
--------------------- -------------------
Net cash (used in)/provided by operating activities (3,048) 6,032
Cash Flows From Investing Activities:
Capital expenditures, net (1,259) (2,809)
Net cash paid for business - (53,486)
Proceeds from sale of assets 12,774 -
Additions to intangible and other assets (2,158) (4,292)
--------------------- -------------------
Net cash provided by/(used in) investing activities 9,357 (60,587)
Cash Flows From Financing Activities:
Additions to long-term debt 2,000 119,000
Payments of long-term debt (12,522) (58,058)
Exercise of options and issuance of common shares 375 1,459
Tax benefit from exercise or disposition of stock options - 28
--------------------- -------------------
Net cash (used in)/provided by financing activities (10,147) 62,429
Effect Of Exchange Rate Changes On Cash and Cash Equivalents (531) (1,957)
--------------------- -------------------
Net (Decrease)/Increase In Cash and Cash Equivalents (4,369) 5,917
Cash and Cash Equivalents:
Beginning of period 5,461 1,402
--------------------- -------------------
End of period $1,092 $7,319
===================== ===================
Supplemental Cash Flow Information:
Noncash financing activities:
Increase in debt discount and accrued expenses related to debt modification $4,100 -
See accompanying notes to the Consolidated Financial Statements.
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 29, 2001 AND SEPTEMBER 29, 2000
(All amounts in thousands, except per share data)
(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 September 29, 2001, the results of
operations for the three and nine months ended September 29, 2001 and
September 29, 2000 and its cash flows for the nine months ended September
29, 2001 and September 29, 2000. The results of operations for the three
and nine months ended September 29, 2001 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, 2000 annual report on
Form 10-K.
2. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133")
as amended as of January 1, 2001 and the effect was not material.
Effective April 13, 2001, the Company adopted Emerging Issues Task Force
Issue 00-19, "Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Company's Own Stock" ("EITF 00-19"), which
dictates how freestanding contracts that are indexed to, and potentially
settled in, a company's own stock should be classified and measured by the
company. The most recent debt modification agreements reached with the
Company's subordinate lenders contain embedded put warrants that the
Company may have to directly settle. The effect of this adoption is to
classify the outstanding warrant for 975 Common Shares as well as the
variable fee payable to the subordinated debt holders as derivative
instruments with adjustments flowing through results of operations. The
recorded value of these warrants at September 29, 2001, after effecting
this accounting change, was $408. In addition, the Company has recorded a
cumulative effect of change in accounting of $838 effective June 30, 2001
to reflect the adoption of EITF 00-19 and made a reclassification of $254
for warrants in the December 31, 2000 balance sheet.
These warrants and fee option are accounted for under SFAS 133 as
derivative instruments. These derivatives do not qualify for hedge
accounting, in accordance with SFAS 133, because they relate to the
Company's stock price and not to the underlying debt with which they were
issued. A mark to market gain of $334 and $118 on the warrants and fee
option, respectively, are recorded as other gains/losses in current
earnings for the three-month period ended September 29, 2001.
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 29, 2001 AND SEPTEMBER 29, 2000
(All amounts in thousands, except per share data)
(Unaudited)
3. NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, "Business Combinations" and
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets." The provisions of Statement No. 141 became effective
July 1, 2001. The provisions of Statement No. 142 will become effective on
January 1, 2002. Because of the recent issuance dates of these standards,
we are still evaluating their impact on our results of operations and
financial position. Our previous acquisitions have been accounted for on
the purchase method of accounting, which is continued in the new standard.
Statement No. 142 requires us to annually assess our acquired goodwill for
impairment. We will complete that initial assessment in accordance with the
standard. We will stop amortization of goodwill effective January 1, 2002.
Through September 29, 2001, amortization of goodwill that will no longer be
required to be amortized totaled $8.2 million, pretax or $0.66 cents per
diluted share.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". The standard requires entities to record the fair
value of the liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the entity
capitalizes the cost by increasing the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its present value
each period and the capitalized cost is depreciated over the useful life
of the related asset. Upon settlement of the liability, an entity either
settles the obligation for its recorded amount or incurs a gain or loss
upon settlement. The standard is effective for fiscal years beginning after
June 15, 2002. We are assessing the impact of this statement on our results
of operations and financial position.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 replaces SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 144 requires that long-lived
assets be measured at the lower of carrying amount or fair value less cost
to sell, whether reported in continuing operations or in discontinued
operations. Therefore, discontinued operations will no longer be measured
at net realizable value or include amounts for operating losses that have
not yet been incurred. SFAS No. 144 also broadens the reporting of
discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity and that
will be eliminated from the ongoing operations of the entity in a disposal
transaction. The provisions of SFAS No. 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001.
4. 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:
September 29, 2001 December 31, 2000
---------------------- --------------------------
Raw materials $14,784 $12,078
Work-in-process 3,513 4,699
Finished goods 2,268 5,509
--------------------- ------------
$20,565 $22,286
===================== ============
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 29, 2001 AND SEPTEMBER 29, 2000
(All amounts in thousands, except per share data)
(Unaudited)
5. LONG-TERM DEBT
Long-term debt consists of the following:
September 29, 2001 December 31, 2000
----------------- --------------------
Term loan $60,689 $67,500
Senior revolving credit facility 30,793 34,000
Discount on Senior debt (2,461) -
Subordinated term loan 30,000 30,000
Discount on Subordinated term loan (982) (861)
Subordinated promissory note 938 938
Other - 504
------------ -------------
118,977 132,081
Less: current maturities 118,977 7,580
------------ -------------
$- $124,501
============ =============
On April 13, 2001, the Company obtained an agreement from its senior
lenders extending the maturity date of the credit facility to April 1,
2002. The agreement modifies certain provisions of the amended credit
facilities including financial covenants and is subject to certain terms
and conditions. Among other provisions, the commitment for its working
capital facility was reduced from $45.0 million to $42.0 million, and the
interest rate for the senior credit facilities was increased to prime +
2.25% from April 1, 2001 to September 30, 2001, prime + 2.50% from October
1, 2001 to December 31, 2001 and prime + 3.50% from January 1, 2002 to
April 1, 2002. As of the current date, the Company has $30.8 million
outstanding under its working capital facility excluding foreign exchange
contracts and is restricted from borrowing additional amounts as working
capital advances.
The Company was required to use at least 50% of the net cash proceeds of
the sale of the non-core assets to repay amounts borrowed under its senior
credit facilities. The Company will be required to pay from $1.5 million to
$4.5 million in bank modification fees subject to certain terms and
conditions. The term loan and senior revolving credit facilities are due
and payable on April 1, 2002.
In connection with the subordinated credit facilities, the agreement
obtained on April 13, 2001 modifies certain provisions of the credit
facilities including financial covenants as well as providing for repricing
of the warrants to purchase 975 Common Shares of the Company held by
subordinated lenders to $1.15 per share. The Company has agreed to pay the
subordinated lenders on a pro rata basis for fees up to a maximum payment
of $1.5 million based upon the average prevailing per share market price of
the Company's Common Shares on the 15 trading days immediately prior to
April 2, 2002, or if the subordinated lenders elect, April 2, 2003. Such
payment will be made in sequential installments of 30, 90 and 150 days
after April 1, 2002 or April 1, 2003, as applicable. The Company also
agreed to pay all interest being accrued from September 30, 2000 until
March 31, 2002 on April 2, 2002.
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 29, 2001 AND SEPTEMBER 29, 2000
(All amounts in thousands, except per share data)
(Unaudited)
In connection with the debt modification agreement reached with its lenders
in April 2001, the Company accrued $4.1 million for debt modification fees
payable and recorded a related discount on the debt. The amount at
September 29, 2001 was $2.5 million, net of amortization. The debt discount
is amortized over the remaining life of the debt and recorded as interest
expense.
The Company is required to meet certain financial covenants related to its
senior and subordinate credit facilities. At September 29, 2001, the
Company had received waivers from lenders on its noncompliance with its
debt covenants through November 16, 2001. However, management is uncertain
as to whether the Company will remain in compliance with these covenants
after the expiration of this waiver. The term loan and senior revolving
credit agreements expire on April 1, 2002. Accordingly, the Company has
classified the entire term loan, senior revolving credit facility and
subordinate debt as current.
The Company intends to engage in negotiations with existing creditors or
refinance the Company with new lenders and/or equity prior to April 1,
2002. While there can be no assurance, management believes that the Company
can successfully refinance amounts due under these credit agreements.
Its independent public accountants have advised the Company that if the
term loan, senior revolving credit facility and subordinated debt are not
renegotiated prior to the completion of their audit of the Company's
financial statements for the year ended December 31, 2001, their auditors'
report on those financial statements may be modified for that contingency.
6. ASSET SALES
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 and
was recorded in the first quarter of 2001.
On May 14, 2001, the Company completed the sale of its Webster, New York
facility for $5.0 million. The gain realized from the sale was $0.1 million
and was recorded in the second quarter of 2001. In November 2000, the
Company announced the consolidation of its Webster, New York headquarters
with its operations in Eugene, Oregon. As a result, the Company recorded an
$8.6 million write-down in connection with the anticipated sale of the
Webster, New York facility in accordance with Statement of Financial
Accounting Standards No. 121 (SFAS No. 121), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed of". SFAS No.
121 requires an impairment loss to be recognized if the carrying amount of
an asset held for disposal exceeds the fair value of the asset less the
cost to sell the asset. The loss recognized in 2000 was $7.9 million on the
facility and related leasehold improvements and $0.7 million on other
assets and is included in the consolidated statements of operations for the
year ended December 31, 2000. For the three months ended September 29,
2000, the Company recorded an estimated impairment loss related to the
Webster facility of $6.0 million.
On July 13, 2001, the Company announced the completion of the sale of its
LazerData business as part of its plan to divest non-core assets, and
recorded a loss on disposition of that business of $2.9 million into the
second quarter of 2001. Net assets to be disposed of in connection with the
sale totaled $6.4 million.
The Company was required to use 50% of the net cash proceeds from each of
these sales to repay amounts borrowed under its senior credit facilities.
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 29, 2001 AND SEPTEMBER 29, 2000
(All amounts in thousands, except per share data)
(Unaudited)
7. SEVERANCE AND OTHER COSTS
During the nine-month period ended September 29, 2001, the Company recorded
a pretax charge of $1.4 million for employee severance and benefit costs
associated with the elimination of positions resulting primarily from
continued consolidation of the Webster, New York operations with its
Eugene, Oregon operations.
As of December 31, 2000, the amount of the severance accruals was
approximately $2.7 million. Approximately $3.1 million has been paid out in
severance accruals in the nine-month period ended September 29, 2001. It is
anticipated that all current severance should be fully paid by September
30, 2002. As of September 29, 2001, the amount of the severance accruals
was approximately $1.0 million, which relates to current contractual
obligations.
8. 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 Nine months ended
------------------ -----------------
September 29, September 29, September 29, September 29,
-------- -------- -------- --------
2001 2000 2001 2000
-------- -------- -------- --------
Net loss ($4,893) ($8,000) ($15,783) ($11,149)
Foreign currency translation adjustment 848 (966) (531) (1,957)
--------------------------------------------------------
Comprehensive loss ($4,045) ($8,966) ($16,314) ($13,106)
========================================================
During the nine month period ended September 29, 2001, employees purchased
493 shares at approximately $0.71 per share under the provisions of the
Company's Employee Stock Purchase Plan.
Pursuant to the Company's Compensation Plan for Non-Employee Directors, 29
shares at a price of $0.75 per share were issued to Directors for services
rendered in 2000.
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 29, 2001 AND SEPTEMBER 29, 2000
(All amounts in thousands, except per share data)
(Unaudited)
Changes in the status of options under the Company's stock option plans are
summarized as follows:
January 1, 2001 Weighted January 1, 2000 Weighted
to Average to Average
September 29, 2001 Price December 31, 2000 Price
--------------------- ------------ ----------------------- -------------
Options outstanding at
beginning of period 3,222 $4.00 3,221 $7.84
Options granted 609 1.11 1,025 2.83
Options exercised - - (78) 6.38
Options forfeited/canceled (332) 3.91 (946) 8.35
-------- --------
Options outstanding at
End of period 3,499 $2.74 3,222 $4.00
======== ========
Number of options at end
of period:
Exercisable 1,816 $3.82 1,969 $5.02
Available for grant 770 255
During the nine month period ended September 29, 2001, 207 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.
9. NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE
Basic EPS was computed by dividing reported losses available to common
shareholders by the weighted average shares outstanding during the year.
Diluted EPS was the same as basic EPS for the three and nine-month period
ended September 29, 2001.
The following options, warrants and preferred shares were not included in
the computation of diluted EPS since the effect of these securities would
have been antidilutive. Options to purchase 3,455 and 2,883 shares of
common stock at a weighted average price of $2.76 and $7.81 per share were
outstanding for the three months ended September 29, 2001 and September 29,
2000, respectively. Options to purchase 3,455 and 2,883 shares of common
stock at a weighted average price of $2.67 and $7.78 per share were
outstanding for the nine months ended September 29, 2001 and September 29,
2000, respectively. Warrants to purchase 1,155 common shares at a weighted
average price of $2.23 and $3.72 were outstanding for the three and nine
months ended September 29, 2001, respectively. Warrants to purchase 180
common shares at a price of $8.00 per share were outstanding for the three
and nine months ended September 29, 2000. Preferred shares to purchase
1,375 common shares at a weighted average price of $8.00 were outstanding
for the three and nine months ended September 29, 2001 and September 29,
2000.
Interest Expense. Interest expense increased $0.9 million versus the comparable
period in 2000. The increase is primarily due to additional fees assessed as
part of the debt modification agreement reached in April 2001 offset by lower
interest rates.
Other Income. Other income for the three months ended September 29, 2001
consists primarily of gains of $452 from the mark to market adjustments for
warrants and fee option. See Note 10.
Income Tax Provision/(Benefit). The Company's effective tax rate was (2.3%) for
the three months ended September 29, 2001 and was 5.5% for the same period in
2000. The Company has not reflected the tax benefits associated with operating
losses by placing a full valuation allowance against its deferred tax assets
recorded. The tax provision/(benefit) is for foreign taxes offset by tax
refunds.
Results of Operations: Nine months ended September 29, 2001 and September 29,
-----------------------------------------------------------------------------
2000
----
Net Sales. Net sales during the nine months ended September 29, 2001 decreased
$42.9 million or 22.8% compared with the same period in 2000. The decrease in
net sales is attributed primarily to the loss of the sales of the U-Scan(R)
Express Self-Checkout System of $33.5 million, decreased sales of handheld
scanners of $6.6 million and decreased sales of verifiers and other products of
$8.4 million, offset by increased sales of Mobile & Wireless products of $5.6
million.
Gross Profit. Gross profit during the nine months ended September 29, 2001
decreased $15.6 million or 21.7% compared with the same period in 2000. As a
percentage of sales, gross profit increased for the nine-month period ended
September 29, 2001 to 38.8% from 38.2% for the same period last year. The
decrease in gross profit dollars is primarily due to the loss of sales of the
U-Scan(R) Express Self-Checkout System while the increase in gross profit
percent is due to increased sales of higher margin Mobile and Wireless products
and the impact of cost reduction activities.
Engineering, Research and Development. Engineering, Research and Development
(ER&D) expenses decreased $3.5 million or 21.3% compared to the same period in
2000. As a percentage of sales, ER&D was 8.9% for the nine months ended
September 29, 2001 versus 8.8% of sales for the same period in 2000. The
decrease in ER&D is primarily attributable to cost saving efforts brought about
by business restructuring.
Sales and Marketing. Sales and marketing expenses for the nine months ended
September 29, 2001 decreased $3.2 million or 12.6% compared to the same period
in 2000. As a percentage of sales, Sales and Marketing was 15.3% in 2001 versus
13.5% in 2000. The dollar decrease is primarily attributable to cost savings
brought about by business restructuring. The percentage increase is due to costs
being spread over a lower sales base.
General and Administrative. General and Administrative (G&A) expenses decreased
$0.4 million or 2.7% from the same period in 2000. As a percentage of sales, G&A
was 10.4% in 2001 versus 8.3% in 2000. The dollar decrease is primarily
attributable to cost savings resulting from business restructuring activities
offset by higher professional fees paid in connection with securing debt
modification agreements. The percentage increase is due to costs being spread
over a lower sales base
Severance and Other Costs. During the nine months ended September 29, 2001, the
Company recorded a pretax charge of $1.4 million for employee severance and
benefit costs resulting primarily from its plans to consolidate the Webster, New
York operations with its Eugene, Oregon operations. During the same period in
2000, the Company recorded a pretax charge of $2.1 million associated with the
acquisition of Percon and reorganization actions in connection with the
Company's sales force.
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 29, 2001 AND SEPTEMBER 29, 2000
(All amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
------------------------------------------------------------------------------------------------
September 29, 2001 September 29, 2000
---------------------------------------------- ---------------------------------------------
Per Per
Loss Shares Share Loss Shares Share
(numerator) (denominator) Amount (numerator) (denominator) Amount
----------- ------------- ------ ----------- ------------- ------
Basic and Diluted EPS:
Net loss available to
common shareholders ($4,893) 12,499 ($0.39) ($8,000) 12,120 ($0.66)
======= ======== ====== =======
Nine Months Ended
------------------------------------------------------------------------------------------------
September 29, 2001 September 29, 2000
---------------------------------------------- ---------------------------------------------
Per Per
Loss Shares Share Loss Shares Share
(numerator) (denominator) Amount (numerator) (denominator) Amount
----------- ------------- ------ ----------- ------------- ------
Basic and Diluted EPS:
Net loss available to
common shareholders ($15,783) 12,353 ($1.28) ($11,149) 12,059 ($0.92)
======= =======
10. DERIVATIVES
Foreign Currency Exchange Rate Risk:
The Company's exposure to foreign currency relates primarily to its
international subsidiaries. Sales to certain countries are denominated in
the local currency. The Company enters into foreign currency forward
exchange contracts to minimize the effect of foreign currency fluctuations
relating to these transactions and commitments denominated in foreign
currencies. The foreign exchange contracts generally have maturities of up
to 60 days and require the Company to exchange foreign currencies for U.S.
dollars at maturity, at rates agreed to at the inception of the contracts.
The foreign exchange contracts have not been designated as hedging
instruments and the gains and losses on forward contracts are recorded in
the consolidated statements of operations.
Warrants:
Effective April 13, 2001, the Company adopted Emerging Issues Task Force
Issue 00-19, "Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Company's Own Stock" ("EITF 00-19"), which
prescribes how freestanding contracts that are indexed to, and potentially
settled in, a company's own stock should be classified and measured by the
company. The warrant is for 975 Common Shares and is
PSC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 29, 2001 AND SEPTEMBER 29, 2000
(All amounts in thousands, except per share data)
(Unaudited)
held by the Company's subordinated creditors. In March 2000, the strike
price of this warrant was lowered from $8.00 to $5.25 and subsequently
lowered to $1.15 on April 13, 2001 as part of the modification agreements
reached on that date. The adoption of EITF 00-19 resulted in a
classification out of additional paid-in capital to warrants, a temporary
equity item, of $254 at December 31, 2000. Immediately prior to April 13,
2001, the warrants were repriced to fair value, resulting in an increase in
the book value of the warrants of $108, and a corresponding decrease to
cumulative effect of accounting change. Simultaneously, EITF 00-19 required
an adjustment of the original value of the warrants of $600 as well as the
increase in their fair market value determined at the time of their first
repricing of $600 less the amount previously reclassified of $254 for a
total adjustment of $946 recorded as a reduction to additional paid-in
capital and an increase to cumulative effect of accounting change. The
warrant is now marked to market at its fair value and adjusted through
gains/losses in the period in which it is revalued.
In connection with the debt modification, the Company has agreed to pay the
subordinated lenders on a pro rata basis for fees up to a maximum payment
of $1.5 million based upon the average prevailing per share market price of
the Company's Common Shares on the 15 trading days immediately prior to
April 2, 2002, or, if the subordinated lenders elect, April 2, 2003.
These warrants and fee option are accounted for under SFAS 133 as
derivative instruments. These derivatives do not qualify for hedge
accounting, in accordance with SFAS 133, because they relate to the
Company's stock price and not to the underlying debt with which they were
issued. A mark to market gain of $334 and $118 on the warrants and fee
option, respectively, are recorded as other gains/losses in current
earnings for the three-month period ended September 29, 2001.
11. RECLASSIFICATIONS
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, 2000 annual report on Form 10-K.
Overview
--------
As part of a previously announced restructuring plan to reduce debt and achieve
greater profitability, certain non-core assets were identified for disposition.
On February 16, 2001, the Company sold its verification and imager product lines
for $3.8 million. On May 14, 2001, the Company sold its Webster, New York
headquarters for $5.0 million. On July 13, 2001, the Company sold its LazerData
business for $3.5 million.
Results of Operations: Three Months ended September 29, 2001 and September 29,
------------------------------------------------------------------------------
2000
----
Net Sales. Net sales during the three months ended September 29, 2001 decreased
$14.9 million or 25.1% compared with the same period in 2000. The decrease in
net sales is attributed primarily to the loss of the sales of the U-Scan(R)
Express Self-Checkout System of $9.1 million, decreased sales of handheld
automated data collection scanners of $3.2 million and decreased sales of
verifiers and other products of $6.2 million, offset by increased sales of
Mobile & Wireless products of $3.6 million.
Gross Profit. Gross profit during the three months ended September 29, 2001
decreased $5.5 million or 24.3% compared with the same period in 2000. As a
percentage of sales, gross profit increased for the three-month period ended
September 29, 2001 to 38.6% from 38.2% for the same period last year. The
decrease in gross profit dollars is primarily due to the loss of sales of the
U-Scan(R) Express Self-Checkout System while the increase in gross profit
percent is due to increased sales of higher margin Mobile and Wireless products.
Engineering, Research and Development. Engineering, Research and Development
(ER&D) expenses decreased $1.5 million or 28.2% compared to the same period in
2000. As a percentage of sales, ER&D was 8.5% for the three months ended
September 29, 2001 versus 8.8% of sales for the same period in 2000. The
decrease in ER&D is primarily attributable to cost savings efforts brought about
by business restructuring.
Sales and Marketing. Sales and marketing expenses for the three months ended
September 29, 2001 decreased $1.7 million or 20.6% compared to the same period
in 2000. As a percentage of sales, Sales and Marketing was 15.0% in 2001 versus
14.2% in 2000. The dollar decrease is primarily attributable to cost savings
brought about by business restructuring. The percentage increase is due to costs
being spread over a lower sales base.
General and Administrative. General and Administrative (G&A) expenses decreased
$0.4 million or 8.2% compared to the third quarter of 2000. As a percentage of
sales, G&A was 10.4% in 2001 versus 8.5% in 2000. The dollar decrease is
primarily attributable to cost savings brought about by business restructuring
offset by higher professional fees paid in connection with securing debt
modification agreements. The percentage increase is due to costs being spread
over a lower sales base.
Severance and Other Costs. During the three months ended September 29, 2001, the
Company recorded a pretax charge of $0.7 million for employee severance and
benefit costs resulting from a reduction in staffing levels primarily from its
Eugene, Oregon operations. During the same period in 2000, the Company recorded
a charge of $0.4 million associated with the termination of senior executives.
Interest Expense. Interest expense increased $0.9 million versus the comparable
period in 2000. The increase is primarily due to additional fees assessed as
part of the debt modification agreement reached in April 2001 offset by lower
interest rates.
Other Income. Other income for the three months ended September 29, 2001
consists primarily of gains of $452 from the mark to market adjustments for
warrants and fee option. See Note 10.
Income Tax Provision/(Benefit). The Company's effective tax rate was (2.3%) for
the three months ended September 29, 2001 and was 5.5% for the same period in
2000. The Company has not reflected the tax benefits associated with operating
losses by placing a full valuation allowance against its deferred tax assets
recorded. The tax provision/(benefit) is for foreign taxes offset by tax
refunds.
Results of Operations: Nine months ended September 29, 2001 and September 29,
-----------------------------------------------------------------------------
2000
----
Net Sales. Net sales during the nine months ended September 29, 2001 decreased
$42.9 million or 22.8% compared with the same period in 2000. The decrease in
net sales is attributed primarily to the loss of the sales of the U-Scan(R)
Express Self-Checkout System of $33.5 million, decreased sales of handheld
scanners of $6.6 million and decreased sales of verifiers and other products of
$8.4 million, offset by increased sales of Mobile & Wireless products of $5.6
million.
Gross Profit. Gross profit during the nine months ended September 29, 2001
decreased $15.6 million or 21.7% compared with the same period in 2000. As a
percentage of sales, gross profit increased for the nine-month period ended
September 29, 2001 to 38.8% from 38.2% for the same period last year. The
decrease in gross profit dollars is primarily due to the loss of sales of the
U-Scan(R) Express Self-Checkout System while the increase in gross profit
percent is due to increased sales of higher margin Mobile and Wireless products
and the impact of cost reduction activities.
Engineering, Research and Development. Engineering, Research and Development
(ER&D) expenses decreased $3.5 million or 21.3% compared to the same period in
2000. As a percentage of sales, ER&D was 8.9% for the nine months ended
September 29, 2001 versus 8.8% of sales for the same period in 2000. The
decrease in ER&D is primarily attributable to cost saving efforts brought about
by business restructuring.
Sales and Marketing. Sales and marketing expenses for the nine months ended
September 29, 2001 decreased $3.2 million or 12.6% compared to the same period
in 2000. As a percentage of sales, Sales and Marketing was 15.3% in 2001 versus
13.5% in 2000. The dollar decrease is primarily attributable to cost savings
brought about by business restructuring. The percentage increase is due to costs
being spread over a lower sales base.
General and Administrative. General and Administrative (G&A) expenses decreased
$0.4 million or 2.7% from the same period in 2000. As a percentage of sales, G&A
was 10.4% in 2001 versus 8.3% in 2000. The dollar decrease is primarily
attributable to cost savings resulting from business restructuring activities
offset by higher professional fees paid in connection with securing debt
modification agreements. The percentage increase is due to costs being spread
over a lower sales base
Severance and Other Costs. During the nine months ended September 29, 2001, the
Company recorded a pretax charge of $1.4 million for employee severance and
benefit costs resulting primarily from its plans to consolidate the Webster, New
York operations with its Eugene, Oregon operations. During the same period in
2000, the Company recorded a pretax charge of $2.1 million associated with the
acquisition of Percon and reorganization actions in connection with the
Company's sales force.
Merger Related Costs. During the nine months ended September 29, 2000, the
Company recorded a pretax charge of $1.0 million for failed merger activity.
There was no comparable charge for the same period in 2001.
Loss on Asset Write-downs. In the three month period ended September 29, 2000,
the Company recorded a $6.0 million write-down in connection with the
anticipated sale of the Webster, New York facility. On May 14, 2001, the Company
sold its Webster, New York headquarters for $5.0 million and recorded a pretax
gain of $0.1 million. There was no comparable charge for the same period in
2001.
Interest Expense. Interest expense increased $3.2 million versus the comparable
period in 2000. The increase is primarily due to additional fees assessed as
part of the debt modification agreement reached in April 2001.
Gain on 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. On
May 14, 2001, the Company sold its Webster, New York headquarters for $5.0
million and recorded a gain of $0.1 million. On July 13, 2001, the Company sold
its LazerData business for $3.5 million and recorded a loss on assets held for
sale of $2.9 million in the period ended June 30, 2001. The disposition of these
product lines did not have a material effect on the Company's results of
operations for the nine months ended September 29, 2001, nor will the
disposition of these product lines materially impact the full year 2001. There
were no comparable transactions in the nine months ended September 29, 2000.
Income Tax Provision/(Benefit). The Company's effective tax rate was 4.5% for
the nine months ended September 29, 2001 and was (9.4%) for the same period in
2000. The Company has not reflected the tax benefits associated with operating
losses by placing a full valuation allowance against its deferred tax assets
recorded. The tax provision/(benefit) is for foreign taxes offset by tax
refunds.
Liquidity and Capital Resources:
--------------------------------
Current assets decreased $10.0 million from December 31, 2000 due to decreases
in cash, accounts receivable and inventory. Current liabilities increased $111.7
million from December 31, 2000 primarily due to the classification of the senior
term loan, senior revolver loan and the subordinated debt to current. Accrued
expenses increased $5.9 million due to the inclusion of debt fees associated
with the last debt modification agreement. As a result, net working capital
decreased $101.7 million from December 31, 2000.
Property, plant and equipment expenditures totaled $1.3 million for the nine
months ended September 29, 2001 compared with $2.8 million for the nine months
ended September 29, 2000. The 2001 expenditures are related to new product
tooling, manufacturing equipment and computer software and hardware.
On March 31, 2001, the Company obtained a waiver from its senior debt holders
that extended the expiration date of the credit facilities until April 13, 2001.
On the same date, the Company received a waiver from the subordinated lenders
that deferred interest payments until April 13, 2001.
On April 13, 2001, the Company obtained an agreement from its senior lenders
extending the maturity date of the credit facility to April 1, 2002. The
agreement modifies certain provisions of the amended credit facilities including
financial covenants and is subject to certain terms and conditions. Among other
provisions, the commitment for its working capital facility was reduced from
$45.0 million to $42.0 million, and the interest rate for the senior credit
facilities was increased to prime + 2.25% from April 1, 2001 to September 30,
2001, prime + 2.50% from October 1, 2001 to December 31, 2001 and prime + 3.50%
from January 1, 2002 to April 1, 2002. As of the current date, the Company has
$30.8 million outstanding under its working capital facility excluding foreign
exchange contracts and is restricted from borrowing additional amounts as
working capital advances. The Company was required to use at least 50% of the
net cash proceeds of the sale of the non-core assets to repay
amounts borrowed under its senior credit facilities. The Company will be
required to pay from $1.5 million to $4.5 million in bank modification fees
subject to certain terms and conditions. The term loan and senior revolving
credit facilities are due and payable on April 1, 2002.
In connection with the subordinated credit facilities, the agreement obtained on
April 13, 2001 modifies certain provisions of the credit facilities including
financial covenants as well as providing for repricing of the warrants to
purchase 975 Common Shares of the Company held by subordinated lenders to $1.15
per share. The Company has agreed to pay the subordinated lenders on a pro rata
basis for fees up to a maximum payment of $1.5 million based upon the average
prevailing per share market price of the Company's Common Shares on the 15
trading days immediately prior to April 2, 2002, or if the subordinated lenders
elect, April 2, 2003. Such payment will be made in sequential installments of
30, 90 and 150 days after April 1, 2002 or April 1, 2003, as applicable. The
Company also agreed to pay all interest being accrued from September 30, 2000
until March 31, 2002 on April 2, 2002.
The Company's liquidity is dependent upon its ability to successfully generate
positive cash flow from operations. Provided that the Company is able to meet
the performance targets from its restructured operating plan, management
believes the Company will generate sufficient cash flows in 2001 to meet its
obligations. The Company will be required to pay up to $6.0 million in bank fees
as indicated above.
The Company is required to meet certain financial covenants related to its
senior and subordinate credit facilities. At September 29, 2001, the Company had
received waivers from lenders on its noncompliance with its debt covenants
through November 16, 2001. However, management is uncertain as to whether the
Company will remain in compliance with these covenants after the expiration of
this waiver. The term loan and senior revolving credit agreements expire on
April 1, 2002. Accordingly, the Company has classified the entire term loan,
senior revolving credit facility and subordinate debt as current.
The Company intends to engage in negotiations with existing creditors or
refinance the Company with new lenders and/or equity prior to April 1, 2002.
While there can be no assurance, management believes that the Company can
successfully refinance amounts due under these credit agreements.
Its independent public accountants have advised the Company that if the term
loan, senior revolving credit facility and subordinated debt are not
renegotiated prior to the completion of their audit of the Company's financial
statements for the year ended December 31, 2001, their auditors report on those
financial statements may be modified for that contingency.
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
-------------------------------------------------------------------
The Company uses foreign currency hedging instruments to reduce the variation in
cash flows from its foreign subsidiaries. These contracts are generally for a
period of sixty days, and are marked to market monthly with the change in fair
value flowing through foreign currency gains/losses. Because of the short
duration of these investments, the Company has not experienced significant
valuation changes. The Company does not enter into foreign currency contracts
for speculative purposes. The Company is exposed to interest rate risks. A
hypothetical 1% increase in the prime-lending rate, which the interest on all
senior debt is indexed to, would result in an additional $0.5 million in
interest expense from October 1, 2001 until the debt is due April 1, 2002.
The adoption of Emerging Issues Task Force Issue 00-19, "Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock" ("EITF 00-19") has resulted in the warrant for 975 Common
Shares now being marked to market. The effect of this is accounting treatment is
for the change in the warrant's fair value to flow through other gains/losses
when its value is adjusted. A key variable for determining the fair value of the
warrant is the Company's common stock price. In addition, the fee option on the
Company's subordinated debt is also based on the fair value of the Company's
common stock price. The mark to market adjustment on the option's fair value
flows through other gains/losses when its value is adjusted. A hypothetical 10%
increase in the Company's common stock price from the closing price would not
have a material effect on the fair value of these instruments for the period.
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
products, competitive product offerings, the disposition of legal issues and the
successful negotiation or renewal of additional financing arrangements. 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.
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,
2000 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:
--------
The following matters were submitted to a vote of security holders in the period
ended September 29, 2001.
(a) The Annual Meeting of Shareholders was held on July 11, 2001.
(b) The names of the directors elected at the Annual Meeting for a
three-year term are as follows:
Edward J. Borey
Robert S. Ehrlich
Jack E. Rosenfeld
Serge Thill (Series A Preferred Director)
The name of each other director whose term of office continued after
the Annual Meeting is as follows:
Dr. Jay M. Eastman
Thomas J. Morgan
Bert W. Wasserman
James C. O'Shea
Terry R. Peets
(c)(i) At the Annual Meeting, the tabulation of votes with respect to each
nominee for director was as follows:
Votes Authority
Nominee FOR Withheld
------- --- --------
Edward J. Borey 11,055,289 623,014
Robert S. Ehrlich 11,055,289 623,014
Jack E. Rosenfeld 11,055,289 623,014
Serge Thill 110,000 Preferred
(Series A Preferred Shares (100% of the -
Director) outstanding
Preferred Shares)
(c)(ii) At the Annual Meeting, the shareholders voted upon three other
matters. The description of the other matters voted upon and the
tabulation of votes with respect to each matter are as follows:
Votes Votes Votes
Proxy Item FOR AGAINST ABSTAINING
---------- --- ------- ----------
Increase the number of authorized
Common Shares 10,534,632 1,124,285 19,386
-------------------------------------------------------------------------------------------------------
Increase the number of Common Shares
reserved for issuance under the 1994
Stock Option Plan
4,226,465 1,104,654 23,361
-------------------------------------------------------------------------------------------------------
Increase the number of Common Shares reserved for issuance under
the 2000 Employee Stock Purchase Plan
5,024,854 307,817 21,809
-------------------------------------------------------------------------------------------------------
Item 5: Other Information: None
------------------
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits: None
---------
(b) Reports on Form 8-K: None
-------------------
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: November 9, 2001 By: /s/ Edward J. Borey
------------------------------------
Edward J. Borey
President, Chief Executive Officer
and Director
DATE: November 9, 2001 By: /s/ Paul M. Brown
-------------------------------
Paul M. Brown
Vice President and Chief Financial Officer
(Principal Financial Officer)