================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 17, 2003
PSC INC.
(Exact Name of Registrant as Specified in its Charter)
NEW YORK 0-9919 16-0969362
-------- ------ ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation ) File Number) 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)
Not applicable
(Former name or former address; if changed since last report.)
================================================================================
Item 5. Other Events
As previously reported, on November 22, 2002, PSC Inc. (the "Company")
filed a voluntary bankruptcy petition for relief under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of New York. Since the November 22, 2002 petition date, the Company has
operated as a debtor in possession and is in compliance with all bankruptcy
reporting requirements.
As a result of the Chapter 11 proceeding, each month the Company is
required to file with the Bankruptcy court a schedule of monthly income and
expenses, along with selected balance sheet data (the "Monthly Operating
Statement"). On January 17, 2003, the Registrant filed a Monthly Operating
Statement with the Bankruptcy Court covering the period of November 22, 2002 to
December 31, 2002. This Monthly Operating Statement is filed as Exhibit 99.1 to
this Current Report.
The financial data included in the Monthly Operating Statement is not
audited. The Monthly Operating Statement is in a format prescribed by applicable
bankruptcy laws. There can be no assurance that, from the perspective of an
investor or potential investor in the Company's securities, the Monthly
Operating Statement is complete. The Monthly Operating Statement also contains
information for periods different from those required in the Company's reports
pursuant to the Securities Exchange Act of 1934, as amended ("the Exchange
Act"). This information might not be indicative of the Company's financial
condition or operating results for the period that would be reflected in the
Company's financial statements or in its reports pursuant to the Exchange Act.
Results set forth in any Monthly Operating Statement should not be viewed as
indicative of future results.
Item 7. Financial Statements and Exhibits.
(c) EXHIBITS.
--------
EXHIBIT NO. DESCRIPTION
99.1 PSC Inc. Monthly Operating statement for the period from
November 22, 2002 to December 31, 2002
FORWARD LOOKING STATEMENTS
Certain statements in this Form 8-K are forward-looking
statements that involve risk and uncertainties, which may cause actual results
to differ materially from the statements made including market potential,
regulatory clearances, business growth and other risks listed from time to time
in the Company's Securities and Exchange Commission filings. These
forward-looking statements represent the Company's judgment, as of the date of
this release, and the Company disclaims any intent or obligation to update these
forward-looking statements.
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 hereunto duly authorized.
PSC INC.
By: /s/EDWARD J. BOREY
-----------------------------------------------
Name: Edward J. Borey
Title: President, Chief Executive Officer and Director
Dated: February 5, 2003
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
99.1 PSC Inc. Monthly Operating statement for the period from
November 22, 2002 to December 31, 2002
MONTHLY OPERATING REPORT DEBTOR: PSC INC.
----------------------
CASE #: 02-15876 (SMB)
JOINTLY ADMINISTERED
----------------------
REPORTING PERIOD: DECEMBER 31, 2002
----------------------
Monthly Operating Report Prepared By Debtor
-----------------
TABLE OF CONTENTS Form Number
-----------------
Statement of Operations MOR 1
Balance Sheet MOR 2
Cashflow Statement MOR 3
Schedule of Cash Receipts and Disbursements MOR 4
Schedule of Accounts Payable MOR 5
Status of Post-Petition Taxes
Sales Tax MOR 6
Payroll Taxes MOR 7
Property Taxes MOR 8
Accounts Receivable MOR 9
Debtor Questionnaire And Insurance Certification MOR 10
Notes To Financials MOR 11
Debtor: PSC Inc. 02-15876 (SMB)
PSC Scanning, Inc. 02-15877 (SMB)
Address: 111 SW Fifth Avenue, Suite 4100
Portland, OR 97204
Debtors Attorneys: Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
CERTIFICATION:
The undersigned, having reviewed the attached report and being familiar
with the Debtors' financial affairs, verifies under the penalty of
perjury, that the information contained therein is complete, accurate and
truthful to the best of my knowledge.
/s/ Paul M. Brown 1/15/2003
------------------------------------- -------------------------------------
Signature of Authorized Individual Date
Vice President and Chief
Paul M. Brown Financial Officer
------------------------------------- -------------------------------------
Printed Name of Authorized Individual Title of Authorized Individual
Indicated if this is an amended statement -----------
by checking here: AMENDED STATEMENT:
-----------
PSC INC.
CASE #: 02-15876 (SMB)
REPORTING PERIOD: DECEMBER 31, 2002
$ AMOUNTS IN THOUSANDS
----------------
UNAUDITED
----------------
December 31,
CONSOLIDATED STATEMENT OF OPERATIONS (MOR-1) (a) 2002 (b)
----------------
Sales to third parties $ 15,529
Cost of Sales 11,261
----------------
GROSS PROFIT 4,268
----------------
Operating Expenses
Sales & Marketing 3,526
Engineering, R&D 1,089
General & Administrative 1,304
Severance & Other Costs (202)
Debt Restructuring Fees 450
Foreign Curr. (Gain) Loss (212)
Amortization of Intangibles -
----------------
Total Operating Expenses 5,955
OPERATING PROFIT (LOSS) (1,687)
----------------
Other (Income) Expense
Other (Income) Expense (1,788)
Interest Expense 77
----------------
Other (Income) Expense (1,711)
----------------
INCOME (LOSS) BEFORE TAXES $ 24
Tax Provision (Benefit) 338
-----------------
NET INCOME (LOSS) $ (314)
=================
Notes:
(a) This Statement of Operations is for the PSC Inc., on a consolidated basis.
All foreign subsidiaries included in this statement are excluded from the
Chapter 11 filing of the debtors.
(b) Reporting period for December, 2002 is actually from November 22, 2002 (the
petition filing date) to December 31, 2002.
PAGE 2 OF 13 SCHEDULE: MOR-1
PSC INC.
CASE #: 02-15876 (SMB)
REPORTING PERIOD: DECEMBER 31, 2002
$ AMOUNTS IN THOUSANDS
----------------- ----------------
UNAUDITED UNAUDITED
----------------- ----------------
CONSOLIDATED BALANCE SHEET (MOR-2) 11/22/02
(Petition Date) 12/31/02 (a)
----------------- ----------------
ASSETS
--------------------------------------------
CURRENT ASSETS
Cash and cash equivalents 2,328 3,308
Accounts Receivable - net 29,643 29,012
Inventories - net 22,891 20,121
Prepaid Expenses and Other 2,832 3,960
-------------- ---------------
Total current assets 57,694 56,401
-------------- ---------------
PROPERTY, PLANT AND EQUIPMENT
Land - -
Buildings & Improvements 29 54
Office Furniture 13,966 14,117
Production Equipment 17,629 17,719
Leasehold Improvements 921 926
-------------- ---------------
Total property, plant and equipment 32,545 32,816
Less: Accumulated Depreciation (23,961) (24,337)
-------------- ---------------
NET PROPERTY, PLANT AND EQUIPMENT 8,584 8,479
-------------- ---------------
OTHER ASSETS
Intangibles from Acquisitions 102 50
Other Intangibles 14,751 15,119
Other Assets (358) 86
Less: Accumulated amortization (5,593) (5,742)
-------------- ---------------
Total other assets 8,902 9,513
-------------- ---------------
TOTAL ASSETS 75,180 74,393
============== ===============
PAGE 3 OF 13 SCHEDULE: MOR-2
PSC INC.
CASE #: 02-15876 (SMB)
REPORTING PERIOD: DECEMBER 31, 2002
$ AMOUNTS IN THOUSANDS
----------------- ----------------
UNAUDITED UNAUDITED
----------------- ----------------
CONSOLIDATED BALANCE SHEET (MOR-2) 11/22/02
(Petition Date) 12/31/02 (a)
----------------- ----------------
LIABILITIES & SHAREHOLDERS' EQUITY
------------------------------------------
LIABILITIES (POST-PETITION)
------------------------------------------
CURRENT LIABILITIES
DIP Financing Arrangement - 4,000
Accounts Payable - 4,945
Note Payable - -
Accrued Expenses - 151
Accrued Interest - 11
Deferred Revenue - 131
Accrued Warranty - 138
Accrued Taxes/VAT - 19
Accrued Royalties - 535
Accrued Payroll and Commissions - 947
Accr. Acq. Related Restructuring Costs - 550
Intercompany payable (receivable) - 170
------------- --------------
TOTAL CURRENT LIABILITIES - 11,597
------------- --------------
LONG-TERM LIABILITIES
Deferred Revenue - -
LT Warranty Accrual - 110
Other LT Liabilities (includes warrants) - -
------------- --------------
TOTAL LONG-TERM LIABILITIES - 110
------------- --------------
TOTAL LIABILITIES (POST-PETITION) - 11,707
------------- --------------
LIABILITIES (PRE-PETITION)
-------------------------------------------
CURRENT LIABILITIES
Secured debt 93,462 93,462
Priority debt 29,268 29,268
Note Payable 1,651 1,651
Accounts Payable 17,226 8,463
Accrued Expenses 8,543 6,956
Accrued Interest 14,128 13,927
Deferred Revenue 884 560
Accrued Warranty 1,519 1,387
Accrued Taxes/VAT (457) -
Accrued Royalties 1,637 716
Accrued Payroll and Commissions 2,983 1,639
Accr. Acq. Related Restructuring Costs - -
Intercompany payable (receivable) - -
------------- --------------
TOTAL CURRENT LIABILITIES 170,844 158,029
------------- --------------
LONG-TERM LIABILITIES
Deferred Revenue 550 555
LT Warranty Accrual 1,557 1,497
Other LT Liabilities (includes warrants) 489 495
------------- --------------
TOTAL LONG-TERM LIABILITIES 2,596 2,547
------------- --------------
TOTAL LIABILITIES (PRE-PETITION) 173,440 160,576
------------- --------------
TOTAL LIABILITIES 173,440 172,283
------------- --------------
SHAREHOLDERS' EQUITY
Common Shares 130 130
Additional Paid-in Capital 73,078 73,078
Cumulative Translation Adjustment (3,277) (2,593)
Retained earnings - prepetition (166,834) (166,834)
Retained earnings - postpetition - (314)
Less: Treasury Shares (1,357) (1,357)
------------- --------------
TOTAL SHAREHOLDERS' EQUITY (98,260) (97,890)
------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS, EQUITY 75,180 74,393
============= ==============
PAGE 4 OF 13 SCHEDULE: MOR-2
PSC INC.
CASE #: 02-15876 (SMB)
REPORTING PERIOD: DECEMBER 31, 2002
$ AMOUNTS IN THOUSANDS ---------------------
UNAUDITED
---------------------
CONSOLIDATED STATEMENT OF CASHFLOWS (MOR-3) (b) 12/31/02 (a)
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
Net income/(loss) (314)
Adjustments to reconcile net income to net cash:
Depreciation 348
Amortization 95
(Gain)/Loss on disposition of assets -
Change in fair value of warrants -
Changes to Debt Discount -
(INCREASE) DECREASE IN ASSETS:
Accounts receivable 631
Inventories 2,770
Prepaid expenses and other (1,124)
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable (6,450)
Accrued expenses 1,771
Accrued payroll & commissions (351)
Other Long-term liabilities (132)
----------
Net Cash Provided by/(Used in) Operating Activities (2,756)
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net (243)
Proceeds from sale of assets -
Write-off of goodwill -
Addition to intangible assets & other long-term assets, net (706)
----------
Net Cash Provided by/(Used in) Investing Activities (949)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to Debtor-In-Possession Financing Arrangement 4,000
Additions (Payments) of long-term debt 1
Net proceeds from exercise of options and sale of stocks -
Tax benefit from exercise or early disposition of stock options -
----------
Net Cash Provided by/(Used in) Financing Activities 4,001
----------
Effect of Exchange Rate Changes on Cash & Cash Equivalents 684
-----------
Net Increase (Decrease) in Cash & Cash Equivalents 980
CASH AND CASH EQUIVALENTS, beginning of period 2,328
-----------
CASH AND CASH EQUIVALENTS, end of period 3,308
===========
Notes:
(a) This Statement of Cashflows is for the PSC Inc., on a consolidated basis.
All foreign subsidiaries included in this statement are excluded from the
Chapter 11 filing of the debtors.
(b) Reporting period for December, 2002 is actually from November 22, 2002 (the
petition filing date) to December 31, 2002.
PAGE 5 OF 13 SCHEDULE: MOR-3
PSC INC.
CASE #: 02-15876 (SMB)
REPORTING PERIOD: DECEMBER 31, 2002
$ AMOUNTS IN THOUSANDS
-----------------
UNAUDITED
-----------------
SCHEDULE OF CASH RECEIPTS & DISBURSEMENTS (MOR-4) (a), (b) 12/31/02
-----------------
Cash Receipts
-------------------------------------------------------
Accounts Receivable Collections 10,394
Cash Repatriations From International Subsidiaries 3,681
Additions to Post-Petition Debt 4,000
Other Cash Receipts -
---------------
Total Cash Receipts 18,075
---------------
OPERATING DISBURSEMENTS (c)
-------------------------------------------------------
Payroll and Payroll Taxes 2,638
Accounts Payable And Accrued Liabilities 11,774
Consulting and Professionals In The Normal Course 201
Royalty Payments 921
Director & Officer Liability Insurance Payments 307
Rents 221
Capital Expenditures 468
---------------
TOTAL OPERATING DISBURSEMENTS 16,530
---------------
BANKRUPTCY-RELATED FEES AND EXPENSES
-------------------------------------------------------
Payments To Professionals -
US Trustee Fees -
Court Costs -
Other Costs -
---------------
TOTAL BANKRUPTCY-RELATED FEES AND EXPENSES -
---------------
TOTAL CASH DISBURSEMENTS 16,530
---------------
Net Change In Cash 1,545
Beginning Cash Balance, US Bank Accounts (282)
---------------
ENDING CASH BALANCE, US BANK ACCOUNTS 1,263
===============
RECONCILIATION TO BALANCE SHEET:
Cash - US Bank Accounts 1,263
Cash - International Bank Accounts (Not In Chapter 11) 2,045
---------------
TOTAL CASH PER BALANCE SHEET 3,308
===============
(a) This schedule of Cash Receipts And Disbursements is related to US-only
disbursements that are treated in accordance with the Chapter 11 provisions.
International revenues and expenses are excluded. Note that Cash Repatriations
From International Subsidiaries is the net cash swept from foreign cash
collections, after local disbursements.
(b) Reporting period for December, 2002 is actually from November 22, 2002 (the
petition filing date) to December 31, 2002.
(c) Includes payment of Court-approved Pre-Petition items.
PAGE 6 OF 13 SCHEDULE: MOR-4
PSC, INC.
PSC INC.
Case #: 02-15876 (SMB)
Reporting Period: December 31, 2002
$ Amounts in thousands
--------------------
UNAUDITED
--------------------
SCHEDULE OF ACCOUNTS PAYABLE (MOR-5) 12/31/02
--------------------
Trade Accounts Payable
US Pre-Petition Accounts Payable 7,870
US Post-Petition Accounts Payable 4,945
Foreign Subsidiary Accounts Payable 593
--------------------
TOTAL CONSOLIDATED ACCOUNTS PAYABLE 13,408
====================
--------------------
Payable
INTERCOMPANY TRADE ACCOUNTS (a) (Receivable)
--------------------
PSC Inc. (debtor) 9,715
PSC Scanning, Inc (debtor) (19,765)
PSC UK (233)
PSC France 686
PSC Italy 2,551
PSC Germany 3,559
PSC Australia 10
PSC Japan 268
Consolidation Eliminations 3,209
--------------------
TOTAL INTERCOMPANY TRADE ACCOUNTS -
====================
Note:
(a) All cash flows within subsidiaries flow from the foreign subsidiaries to the
domestic debtors. There are no cash disbursements from the debtors to non-debtor
subsidiaries.
PAGE 7 OF 13 SCHEDULE: MOR-5
PSC INC.
CASE #: 02-15876 (SMB) -------------
REPORTING PERIOD: DECEMBER 31, 2002 UNAUDITED
-------------
SCHEDULE OF SALES AND USE TAXES (MOR-6)
--------------- ----------------------------------------------------------------------------------
GROSS TAXABLE
SALES SALES & USE TAX LIABILITY
--------------- ----------------------------------------------------------------------------------
DECEMBER 31, 11/22/02 BALANCE TOTAL COLLECTIONS PAYMENTS MADE PAYMENT DATE 12/31/02 BALANCE
Jurisdiction 2002 (a)
---------------------------------------------- ----------------------------------------------------------------------------------
Canada (11,771) 731 787 - 1,518
Arkansas (88) 202 6 - 208
Arizona (2,283) (7,533) 148 - (7,386)
California (8,543) (2,319) 667 (40) 12/19/02 (1,692)
Colorado (5,930) 327 201 (316) 12/18/02 212
Florida (20,712) 3,898 1,382 (3,898) 12/19/02 1,382
Georgia (15,663) 3,122 995 (3,032) 12/18/02 1,085
Hawaii/adj to be made (22) - - (22)
Illinois (26,986) 696 1,666 (684) 12/13/02 1,678
Indiana (2,785) (9,324) 163 - (9,162)
Louisiana/adj to be made (6) - - (6)
Massachusetts (4,241) (873) 208 - (665)
Maryland (628) 95 31 - 126
Michigan 708 820 (708) 12/12/02 820
Minnesota (6,317) 3,456 410 - 3,866
Minnesota/adj to be made 1,305 - - 1,305
North Carolina (164,528) 1,005 11,372 (1,005) 12/12/02 11,372
New Jersey 43,745 (4,113) (2,580) - (6,693)
New York (15,156) 629 1,116 (479) 12/18/02 1,266
Ohio (17,908) 613 (1,327) (609) 12/18/02 (1,322)
Oklahoma (46) - - (46)
Pennsylvania (18,283) 389 1,139 (385) 12/18/02 1,143
Tennessee (21,175) (2,825) 1,948 - (877)
Texas (38,394) 3,133 3,104 (3,118) 12/18/02 3,120
Virginia (28,717) 278 1,268 (271) 12/18/02 1,275
Washington 6,939 266 (616) (266) 12/18/02 (616)
Posting errors to be adj 76 - - 76
- - - -
------------- ----------------------------------------------- -------------
Total (359,423) (6,132) 22,909 (14,809) 1,967
============= ===============================================
(a) Reporting period for December 2002 is actually from November 22, 2002 (the
petition filing date) to December 31, 2002.
PAGE 8 OF 13 SCHEDULE: MOR-6
PSC INC.
CASE #: 02-15876 (SMB) -------------
REPORTING PERIOD: DECEMBER 31, 2002 UNAUDITED
-------------
SCHEDULE OF PAYROLL & PAYROLL TAXES (MOR-7) (a)
---------------------------------------------------- -----------------------------------------------
GROSS SALARY/WAGES PAID EMPLOYEE PAYROLL TAXES WITHHELD
---------------------------------------------------- ------------------------------------------------
Pre Post Pre Post
Jurisdiction 11/22/02 11/22/02 12/20/02 12/24/02 Total 11/22/02 11/22/02 12/20/02 12/24/02 Total
--------------- --------------------------------------------------- ------------------------------------------------
109,855 1,139,482 1,298,464 247,068 2,794,869
Federal 9,183 83,483 164,321 28,369 285,357
EIC (4) (33) (49) (85)
Social Security 3,338 30,350 51,532 1,442 86,662
Medicare 1,078 9,797 18,364 3,580 32,819
FUTA -
California 91 824 1,466 2,381
Colorado 10 93 474 577
Florida -
Georgia 87 794 2,201 365 3,448
Indiana 6 50 78 133
Massachusetts 10 89 155 254
Maryland 67 608 210 225 1,110
North Carolina 10 90 189 289
New Jersey 5 41 307 353
Nevada -
New York 70 636 810 1,516
Ohio 20 1,543 3,363 400 5,325
Oregon 3,664 33,310 60,061 3,012 100,047
Pennslyvania 34 313 631 979
Texas -
Utah 10 90 137 236
Washington -
Canada 528 5,113 6,714 12,355 216 1,430 2,113 3,758
-------------------------------------------------- ---------------------------------------------
Total 110,383 1,144,595 1,305,178 247,068 2,807,224 17,894 163,508 306,363 37,393 525,159
================================================== =============================================
--------------------------------------------------- ----------------------------------------------------
EMPLOYER PAYROLL TAX CONTRIBUTIONS DATES TAXES REMITTED
--------------------------------------------------- ----------------------------------------------------
Pre Post
11/22/02 11/22/02 12/20/02 12/24/02 Total Pre 12/06 Pre 12/06 12/20/02 12/24/02
--------------------------------------------------- ----------------------------------------------------
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
3,338 30,350 51,532 1,442 86,662 12/6/2002 12/6/2002 12/20/2002 12/24/2002
1,078 9,797 18,364 3,580 32,819 12/6/2002 12/6/2002 12/20/2002 12/24/2002
3 28 226 1 257 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
88 88 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
252 2,287 4,470 24 7,033 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
- 12/6/2002 12/6/2002 12/20/2002 12/24/2002
8 62 70 139 12/5/2002 12/5/2002 12/19/2002 12/24/2002
-
--------------------------------------------------
4,678 42,524 74,749 5,046 126,997
==================================================
(a) Reporting period for December, 2002 is actually from November 22, 2002 (the
petition filing date) to December 31, 2002.
PAGE 9 OF 13 SCHEDULE: MOR-7
PSC INC.
CASE #: 02-15876 (SMB) -------------
REPORTING PERIOD: DECEMBER 31, 2002 UNAUDITED
-------------
SCHEDULE OF PROPERTY TAXES (MOR-8)
----------------------------------------------------------
PROPERTY TAXES
----------------------------------------------------------
11/22 - 12/31 Accrued
Jurisdication Location Asset Description Expensed Liability Total Paid Date Paid
----------------------------------------------------------------------- ----------------------------------------------------------
Boulder County Boulder, CO Tooling (scrapped in 2001) -
Orange County Santa Ana, CA Tooling -
Miami Dade County Miami, CA office furniture/equip -
Citicorp Vendor Finance Philadelphia, PA 2 photo copiers -
GE Capital Pasadena, CA 14 Sharp photo copiers
Siemens Financial Chicago, IL Manufacturing Equip. 3,943 3,943 3,943 37,616
Siemens Financial Chicago, IL Manufacturing Equip. 1,451 1,451 1,451 37,616
Siemens Financial Chicago, IL Manufacturing Equip. 2,386 2,386 2,386 37,616
Clark County Vancouver, WA Tooling 34,233 34,233 - Not Due
Lane County Eugene, OR various asset classes 24,249 24,249 - Not Due
Multnomah County Portland, OR office furniture/equip -
-------------------------------------------
TOTAL 42,013 24,249 66,262 7,780
===========================================
PAGE 10 OF 13 SCHEDULE: MOR-8
PSC INC.
CASE #: 02-15876 (SMB) -------------
REPORTING PERIOD: DECEMBER 31, 2002 UNAUDITED
-------------
SCHEDULE OF INCOME TAXES (MOR-9)
---------------------------------------------------------------------------------------------
11/22/2002 TAX TAX TAX TAX 12/31/2002
TAX LIABILITY REFUNDS DUE WITHHELD PAYMENTS TAX LIABILITY
---------------------------------------------------------------------------------------------
Federal Income Tax - - - - -
State Income Tax - - - - -
Pennsalvania Refund - (10,619.00) - - -
NY State Refund - (6,488.00) - - -
Foreign Income Tax - - - 31,500.00 (31,500.00) -
--------------------------------------------------------------------------------------------
TOTAL - (17,107.00) - 31,500.00 (31,500.00) -
============================================================================================
PAGE 11 OF 13 SCHEDULE: MOR-9
PSC INC.
CASE #: 02-15876 (SMB)
REPORTING PERIOD: DECEMBER 31, 2002
$ AMOUNTS IN THOUSANDS
SCHEDULE OF ACCOUNTS RECEIVABLE (MOR-9)
------------------
UNAUDITED
------------------
December 31,
2002
------------------
US 15,000
Europe 12,744
Asia 1,889
Total Accounts Receiveable 29,633
------------------
Allowance For Doubtful Accounts (621)
------------------
Net Accounts Receivable 29,012
==================
PAGE 12 OF 13 SCHEDULE: MOR-9
PSC INC.
Case #: 02-15876 (SMB)
Reporting Period: December 31, 2002
DEBTOR QUESTIONNAIRE (MOR-10)
---------------------
December 31, 2002
--------------------------------------------------------------------------------
Must be completed each month Yes No
--------------------------------------------------------------------------------
1. Have any assets been sold or transferred outside the X
normal course of business this period? If yes, provide
an explantion below.
2. Have any funds been disbursed for any account other X
than a debtor in possession account this reporting
period? If yes, provide an explanation below.
3. Have all postpetition tax returns been timely filed? X
If no, provide an explanation below.
4. Are workers compensation and general liability and other X
necessary insurance coverages in effect? If no,
provide an explanation below.
5. All insurance policies are fully paid for the current period. X
6. All amounts relating to workers compensation and X
disability insurance have been paid for the current period.
PAGE 13 OF 13 SCHEDULE: MOR-10
PSC INC.
CASE#: 02-15876 (SMB)
REPORTING PERIOD: DECEMBER 31, 2002
NOTES TO FINANCIALS
1. THE COMPANY
The accompanying financial statements are comprised of the accounts of PSC Inc.
(a New York corporation) (the Company) and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Certain schedules have been provided to provide direct cash
receipts and disbursement information that relates solely to the debtors.
On November 22, 2002, PSC Inc. and PSC Scanning, Inc. (both US corporations)
(the debtors) filed for protection from creditors under Chapter 11, of the US
Bankruptcy Code. The Company filed a Plan of Reorganization outlining its
anticipated treatment of various creditor classes on the same date. At the time
of the filing, the debtors had negotiated a Debtor-In-Possession financing
arrangement (DIP financing) to provide up to $20 million in working capital for
the period of reorganization, subject to certain performance covenants. This DIP
financing was subsequently approved by the Bankruptcy Court. As of December 31,
2002, the Company was in compliance with all performance covenants.
2. SUMMARY OF SIGNIFIGANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, including those
related to revenue recognition, bad debts, inventories, warranty obligations,
and income taxes. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions. We believe the following critical accounting policies
and the related judgments and estimates affect the preparation of our
consolidated financial statements.
REVENUE RECOGNITION. Our policy is to recognize revenue upon delivery of our
products to our customers and the fulfillment of all contractual terms and
conditions, pursuant to the guidance provided by Staff Accounting Bulletin No.
101, Revenue Recognition in Financial Statements (SAB 101), issued by the
Securities and Exchange Commission.
Revenue related to the sales of the Company's scanning products is generally
recognized when products are shipped or services are rendered, the risk of loss
has passed to the customer, the sales price is fixed or determinable, and
collectibility is reasonably assured. Some distributors and dealer agreements
allow for return of product and/or price protection under certain conditions
within limited time periods. The Company maintains a reserve for sales returns
and price adjustments based on historical experience and other qualitative
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factors. Estimated sales returns and price protection amounts are reserved for
against revenue in the month in which it is recognized. These estimates have not
differed materially from actual results. Service and maintenance sales are
recognized over the contract term.
ALLOWANCE FOR DOUBTFUL ACCOUNTS. Our policy is to maintain allowances for
estimated losses resulting from the inability of our customers to make required
payments. Credit limits are established through a process of reviewing the
financial history and stability of each customer. Where appropriate, we obtain
credit rating reports and financial statements of the customer when determining
or modifying their credit limits. We regularly evaluate the collectibility of
our trade receivable balances based on a combination of factors. When a
customer's account balance becomes past due, we initiate dialogue with the
customer to determine the cause. If it is determined that the customer will be
unable to meet its financial obligation to us, such as in the case of a
bankruptcy filing, deterioration in the customer's operating results or
financial position or other material events impacting their business, we record
a specific allowance to reduce the related receivable to the amount we expect to
recover given all information presently available.
We also record an allowance for all other customers based on certain other
factors including the length of time the receivables are past due and historical
collection experience with individual customers. If the financial conditions of
those customers were to deteriorate, however, resulting in their inability to
make payments, we may need to record additional allowances, which would result
in additional selling, general and administrative expenses being recorded for
the period in which such determination was made.
INVENTORY RESERVES. As a designer and manufacturer of bar code verification
products, we are exposed to a number of economic and industry factors that could
result in portions of our inventory becoming either obsolete or in excess of
anticipated usage. These factors include, but are not limited to, technological
changes in our markets, our ability to meet changing customer requirements,
competitive pressures in products and prices, and the availability of key
components from our suppliers. Our policy is to establish inventory reserves
when conditions exist that suggest that our inventory may be in excess of
anticipated demand, or is obsolete based upon our assumptions about future
demand for our products and market conditions. We regularly evaluate the ability
to realize the value of our inventory based on a combination of factors
including the following: historical usage rates, forecasted sales or usage,
product end of life dates, estimated current and future market values and new
product introductions. Purchasing requirements and alternative usage avenues are
explored within these processes to mitigate inventory exposure. When recorded,
our reserves are intended to reduce the carrying value of our inventory to its
net realizable value.
PRODUCT WARRANTIES. Our products are sold with warranty provisions that require
us to remedy deficiencies in quality or performance of our products over a
specified period of time at no cost to our customers. Our policy is to establish
warranty reserves at levels that represent our estimate of the costs that will
be incurred to fulfill those warranty requirements at the time that revenue is
recognized. We believe that our recorded liability at December 31, 2002, is
adequate to cover our future cost of materials, labor and overhead for the
servicing of our products sold through that date. If actual product failures, or
material or service delivery costs differ from our estimates, our warranty
liability would need to be revised accordingly.
INCOME TAXES. The Company has recorded a valuation allowance to reduce our
deferred tax assets to the amount that is more likely than not to be realized.
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The Company has assessed the valuation allowance based upon our estimate of
future taxable income covering a relatively short time horizon given the
volatility in the markets we serve and our historic operating results. External
market data is considered in this evaluation. The availability of tax planning
strategies to utilize our recorded deferred tax assets is also considered.
DEBT. Prepetition senior secured and subordinated unsecured debt was acquired
from the Company's prior lenders by affiliates of Littlejohn & Co., LLC
(Littlejohn), a private investment firm based in Greenwich, Connecticut.
Littlejohn makes control equity investments in mid-sized companies that can
benefit from operational or financial restructuring. Immediately following the
debt purchase, and agreement with the terms of an arrangement between Littlejohn
and the Company, the debtors filed a petition from protection from creditors
under Chapter 11 of the US Bankruptcy Code. Simultaneously with the filing of
the bankruptcy petition, the debtors also filed a Plan of Reorganization (the
Plan) which, among other provisions, contemplates that all pre-petition debt
will be converted to equity upon confirmation of the Plan
As an integral part of the arrangement between Littlejohn and the Company, a DIP
financing arrangement was agreed upon, to provide working capital financing
during the period of reorganization, for amounts up to $20 million. The DIP
financing arrangement provides that the Company maintain certain financial and
non-financial performance covenants, including minimum revenue, cash receipts
and cash disbursements results and well as cash flow and EBITDA performance
measurements. In addition, there are certain non-financial performance measures
related to progressing efficiently through the reorganization process. The DIP
financing arrangement expires on March 31, 2003.
GOODWILL. In November 2002, in conjunction with the filing of the Chapter 11
reorganization, all goodwill was determined to be impaired. The write-off
resulted in a charge of $63 million recorded in November 2002.
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