-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jq/MI5Jxe8BiLvx3pV0BFGT1q2CAz5ZzayLd92IyUy2Wu0QHfax6+5iQ98L7EfIG 8pXBim58z/O7TLOwV+TycQ== 0000081050-96-000025.txt : 19960517 0000081050-96-000025.hdr.sgml : 19960517 ACCESSION NUMBER: 0000081050-96-000025 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLICKER INDUSTRIES INC CENTRAL INDEX KEY: 0000081050 STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [2200] IRS NUMBER: 230991870 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03315 FILM NUMBER: 96564590 BUSINESS ADDRESS: STREET 1: 1445 E PUTNAM AVE CITY: OLD GREENWICH STATE: CT ZIP: 06870 BUSINESS PHONE: 2036374500 MAIL ADDRESS: STREET 1: 1445 EAST PUTNAM AVENUE CITY: OLD GREENWICH STATE: CT ZIP: 06870 10-K/A 1 FORM 10-K/A Amendment No. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________ (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission file number 1-3315 PUBLICKER INDUSTRIES INC. (Exact name of registrant as specified in its charter) Pennsylvania 23-0991870 (State of incorporation) (I.R.S. Employer Identification No.) 1445 East Putnam Avenue, Old Greenwich, Connecticut 06870 (Address of principal executive offices) Registrant's telephone number, including area code: (203) 637-4500 Securities Registered Pursuant to Section 12(b) of the Act: Name of exchange on Title of each class which registered Common Stock ($.10 par value) New York Stock Exchange Rights to Purchase Class A Preferred Stock, First Series New York Stock Exchange Securities Registered Pursuant To Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X As of January 31, 1996, the aggregate market value of the voting common stock held by non-affiliates of the registrant was $40,572,719. Number of shares of Common Stock outstanding as of January 31, 1996: 14,884,910 Documents Incorporated By Reference None. PART I ITEM 1. BUSINESS General Publicker Industries Inc. ("Publicker") or the ("Company") was originally incorporated in 1913 in the Commonwealth of Pennsylvania and commenced operations as a public company in 1946 when its shares were first listed on the New York Stock Exchange. At that time, the Company was one of the largest alcohol producers in the world and had over 5,000 employees. Publicker remained profitable until the early 1950s when it began a remarkable decline that spanned four decades. By early 1985, the Company had only 300 employees and was badly in need of a capital infusion. Capital Infusion - April 1985 In April 1985, a group of investors represented by Harry I. Freund and Jay S. Goldsmith of Balfour Investors Inc. (formerly known as Balfour Securities Corporation), a merchant banking firm that was then engaged in a general securities brokerage business, purchased 1,600,000 shares of Common Stock of the Company for $4 million. This amount was immediately applied to reduce the Company's working capital deficit. At that time, Messrs. Freund and Goldsmith were appointed to the Board of Directors of the Company as was David L. Herman, who later became President of the Company on March 31, 1986. Balfour also received options to purchase an additional 400,000 shares of the Company's common stock at a price of $2.50 per share for five years, which period was subsequently extended by ten years. To date, these options have not been exercised. Rights Offering - August 1985 In an offering that commenced in August 1985, the Company made a pro rata distribution to its shareholders of rights to buy additional common stock. Under this rights offering, the Company received net proceeds of approximately $5,137,000. This amount was also used to increase the Company's working capital and was primarily used to reduce outstanding accounts payable and accrued liabilities. By the end of 1985, the Company's working capital deficit had been reduced to less than $1 million and shareholders equity had increased to $12.9 million. Issuance of Subordinated Notes - December 1986 In December 1986, the Company issued $30 million principal amount of 13% Subordinated Notes which, together with the proceeds from asset dispositions, left the Company poised to commence its acquisition program. As of December 31, 1995, a total of $22.5 million of these notes have been repurchased or redeemed leaving a balance outstanding of $7.5 million. Former Alcohol Manufacturing Facility - Philadelphia, Pennsylvania When the Company departed from its historical business of manufacturing and selling alcohol, it ceased operations at its alcohol manufacturing plant and bulk liquid storage facility in Philadelphia, Pennsylvania. On March 31, 1986, the Company sold the facility for $3 million. The purchaser of the facility, a wrecking company, commenced demolition at the site and was in the process of dismantling the facility when it filed for bankruptcy in January 1987. On June 26, 1987, a fire occurred at the facility which gave rise to suspicion that there had been releases of hazardous substances at the facility. Since 1987, the United States Environmental Protection Agency (the "EPA") has been conducting remedial actions at the facility. In December 1990, the EPA commenced an action in the United States District Court, Eastern District of Pennsylvania, against the Company. In the complaint, the EPA alleged that it has spent more than $22 million in conducting environmental response activities at the site. The complaint seeks recovery of amounts already spent at the facility including interest and enforcement costs and a declaratory judgement that the Company is liable for any further clean-up costs. In May 1993, the Commonwealth of Pennsylvania Department of Environmental Protection ("PADEP") intervened in this litigation. PADEP's complaint seeks reimbursement of past response costs alleged to be approximately $1.3 million, future response costs incurred in connection with cleaning-up the facility and a declaratory judgement as to the Company's liability for those costs. Counsel for the Company and litigation counsel for the United States entered into an Agreement in Principle dated December 20, 1994, setting forth terms and conditions to be included in a Consent Decree resolving the United States' claims against the Company. Pursuant to this Agreement in Principle, on April 6, 1995, the Company deposited with the clerk of the Court the sum of $4.5 million to be held for use as payment of a portion of the United States' claim against the Company upon entry of a Consent Decree embodying the agreed terms and conditions. Counsel for the Company, litigation counsel for the United States, and counsel for PADEP agreed upon the final text of a proposed Consent Decree on October 6, 1995. The agreed Consent Decree has been executed by EPA, the U.S. Department of Justice, PADEP and the Company and was lodged with the Court on December 28, 1995. Upon entry of the Consent Decree, the Company will make another payment to the United States of $4.5 million, plus interest. Further payments to the United States totaling $4.35 million, plus interest, will be made over a six year period following the entry of the Consent Decree. The Company will pay the Commonwealth of Pennsylvania a total of $1.0 million. An initial payment of $350,000 will be made to the Commonwealth upon entry of the Consent Decree. Further payments to the Commonwealth totalling $650,000, plus interest, will be made over a four year period following the entry of the Consent Decree. These payments will be in settlement of all of the United States' and the Commonwealth of Pennsylvania's claims against the Company. The Company recorded a liability of $14,350,000 in the fourth quarter of 1993 to cover the estimated costs of settling this litigation. Reference is made to Item 3 - Legal Proceedings for additional information on this matter. Acquisition of Golding Industries, Inc. - 1987 During 1987, the Company turned its attention to the need to acquire profitable businesses. In September 1987, the Company completed the acquisition of Golding Industries, Inc. ("Golding") for $25 million in cash. Sale of Golding Industries, Inc. - 1989 During the year following the Company's acquisition of Golding, the Company continued to seek other acquisition candidates that satisfied the Company's acquisition criteria. Throughout this period, the Company observed that the prices being paid for corporate acquisitions were rising dramatically. Accordingly, late in 1988, the Company announced that it would seek a purchaser for Golding and that it was engaged in preliminary discussions with several potential purchasers. On March 28, 1989, the Company completed the sale of Golding for the aggregate sale price of $43.5 million. The Company decided to sell Golding to realize what it believed was a very favorable price, to improve its balance sheet and to increase funds available for general corporate purposes and possible future acquisitions. Acquisition of Ten Businesses - December 1990 and February 1991 Following the sale of Golding in early 1989, the Company continued to seek attractive, fairly-priced acquisitions for the Company. Throughout 1989, acquisition price levels remained extremely high and the Company found few viable acquisition candidates that it felt were fairly priced. Toward the end of 1989 and during early 1990, a significant decline in the price levels of merger and acquisition transactions occurred. During 1990, the Company pursued several acquisition efforts and, in October 1990, signed definitive agreements to purchase a group of ten businesses from HM Holdings, an indirect wholly-owned subsidiary of Hanson PLC. The acquisition of nine of these businesses was completed in December 1990 and the tenth was completed in February 1991. The purchase price of the group of ten businesses, including acquisition related costs, was approximately $32 million. KSI Systems, Inc. - 1992 Following the acquisition of the assets that were used to form KSI Systems, Inc. ("KSI") in 1990, as part of the group of ten businesses acquired from Hanson PLC, it was determined that due to intense competition, KSI could not obtain contracts that it could perform profitably. As existing contracts were completed during 1992, the operating levels of KSI were reduced and, in September 1992, all operations of KSI were discontinued. Sale of American Cryogas Industries, Inc. - 1993 In April 1993, the Company sold substantially all the assets of American Cryogas Industries, Inc. ("ACI") for $14,000,000 in cash, plus the assumption of certain liabilities. This transaction resulted in a gain of $9,397,000. The Company sold the assets of ACI to realize what it believed was an attractive price, to provide funds for operating purposes and to improve liquidity, as well as provide funds that may be used in connection with the Company's environmental litigation. ACI has been reflected in the consolidated financial statements as a discontinued operation. Disposition of Nevco Housewares, Inc. - 1993 Following the acquisition of Nevco Housewares, Inc. ("Nevco") in 1990, Nevco failed to achieve a consistent level of profitability. Accordingly, during the third quarter of 1993, the operations of Nevco were concluded and substantially all of the inventory and purchase commitments of Nevco were sold. Nevco has been reflected in the consolidated financial statements as a discontinued operation. Sale of Douglas-Randall, Inc. - 1994 In March 1994, the Company sold substantially all the assets of Douglas-Randall, Inc. ("DRI") and subsequently collected its accounts receivable for aggregate proceeds of approximately $831,000. DRI has been reflected in the consolidated financial statements as a discontinued operation. Sale of Chatas Glass Company, Inc. - 1994 In October 1994, the Company sold Chatas Glass Company, Inc. ("CGC") and subsequently collected its accounts receivable for aggregate proceeds of approximately $290,000. CGC has been reflected in the consolidated financial statements as a discontinued operation. Sale of Assets Held for Disposition From 1985 through 1994, the Company realized approximately $28 million from the sale or other dispositions of idle assets. During 1993 and 1994 gains totaling approximately $1.6 million were recognized. The remaining idle assets consist primarily of land in Gretna, Louisiana and Muscatine, Iowa. Sale of Associated Testing Laboratories, Inc. - 1995 On January 31, 1995, the Company sold substantially all of the assets of Associated Testing Laboratories, Inc. ("ATL") for $2,240,000 in cash, plus the assumption of certain liabilities, including accounts payable, accrued liabilities and obligations under leases, contracts and agreements, to F.W. Bell, Inc. ATL has been reflected in the consolidated financial statements as a discontinued operation. Sale of Bright Star Industries, Incorporated - 1996 On February 16, 1996, the Company sold substantially all of the assets of Bright Star Industries, Incorporated ("BSI") for $5,500,000 in cash, plus the assumption of certain liabilities, including accounts payable, accrued liabilities and obligations under leases, contracts and agreements, to an affiliate of BancBoston Capital and an investor group. The proceeds on the sale will be used to repay certain debt obligations and to improve the Company's liquidity. BSI has been reflected in the consolidated financial statements as a discontinued operation. Description of Business The Company operates in two business segments: manufacturing and services. Publicker's operating companies are as follows: Fenwal Electronics, Inc. Manufacturing of electronic components Greenwald Industries, Inc. Manufacturing of coin handling equipment Masterview Window Company, Inc. Manufacturing of aluminum windows and doors Orr-Schelen-Mayeron & Associates, Inc. Engineering services Detailed descriptions and general developments of the business conducted by each segment follows: Manufacturing The Company's manufacturing segment consists of three subsidiary companies - Fenwal Electronics, Inc., Greenwald Industries, Inc. and Masterview Window Company, Inc. A description of each business follows: Fenwal Electronics, Inc. Fenwal designs and manufactures precision, high reliability, negative temperature coefficient thermistors and thermistor assemblies. Fenwal's products are sold to a broad range of appliance, automotive, industrial, consumer, oceanographic and military/aerospace companies. Fenwal enjoys a reputation as one of the world's leading manufacturers of proven superior quality thermistors. The principal raw materials used by the Company are ceramic materials, wire and various electronic components, all of which are available from many sources. Fenwal operates from a modern, high-technology facility in Massachusetts where its research and development efforts are an integral part of its design and production process. The Fenwal manufacturing facility has been surveyed and certified by various governmental, military and aerospace agencies and large manufacturers and has received numerous awards from its customers due to its quality and production capabilities. Fenwal also operates a manufacturing facility in St. Lucia, BWI for the assembly of electronic components and a sales office in the United Kingdom. Fenwal experiences a moderate level of competition for its product and is a recognized leader in the ceramic thermistor industry. Competition is primarily based on product performance, product specification and service. Approximately 30% of Fenwal's sales are to customers located outside of the United States. Greenwald Industries, Inc. Greenwald Industries, Inc. designs and manufactures coin meter systems used primarily in the commercial laundry appliance industry. In addition, Greenwald products are also sold to the vending, amusement and car wash industries. Greenwald sales are made to original equipment manufacturers as well as distributors and route operators. Established in 1954, Greenwald has developed an outstanding reputation and is the dominant manufacturer in its market. The primary raw material used by Greenwald includes rolled and strip steel, metal stamped parts and certain electronic components, all of which are readily available from multiple sources. Several of Greenwald's products are imported. Certain of Greenwald's products are manufactured overseas under the Company's patented designs and proprietary tooling. The Company believes that an interruption in the supply of imported products would have a negative short-term impact. However, production of such products can be sourced from other vendors. Greenwald successfully competes against several other companies due to its reputation for selling higher quality coin handling equipment at competitive prices. Among Greenwald's customers are several large original equipment manufacturers. Greenwald experiences a certain degree of seasonality with sales declines typically occurring during the summer months. In December 1995, Greenwald purchased a facility in Chester, Connecticut and plans on relocating its office and manufacturing operations, presently located in Brooklyn, New York, in 1996. Masterview Window Company, Inc. Masterview Window Company, located in Phoenix, Arizona, is engaged in the manufacture, sale, distribution and installation of aluminum windows and doors for the single and multi-family new housing marketplace. Masterview is a licensed contractor in the states of Arizona, California and Nevada. The principal raw materials used in the manufacture of aluminum windows and doors include aluminum extrusions and glass. These materials are readily available from numerous sources. Masterview has benefited from continued strength in housing starts in its market areas. The southwest has been among the fastest growing regions in the United States. Masterview experiences intense competition for its products but has achieved a strong position in the Arizona market. Competition is based primarily on price, quality and customer service. Masterview sells to several of the largest home manufacturers in Arizona and Nevada and two of its customers each constitute more than 10% of its an- nual sales. Masterview experiences a certain degree of seasonality and its sales tend to decline during the winter months. Services The Company's services segment consists of one subsidiary company - Orr-Schelen-Mayeron & Associates, Inc. A description is as follows: Orr-Schelen-Mayeron & Associates, Inc. Orr-Schelen-Mayeron & Associates, Inc. provides general engineering, design and architectural services. OSM is headquartered in Minneapolis, Minnesota and operates a branch office in Eau Claire, Wisconsin. OSM's primary customer base is located in the midwestern United States. OSM's capabilities include all facets of engineering of general construction projects as well as environmental, transportation and water resource management engineering services. OSM enjoys an outstanding reputation in its primary marketplace and is one of the largest firms of its type in the Minneapolis area. Com- petition for the Company's services are characterized primarily by reputation, quality of work and cost effectiveness. As of December 31, 1995 and 1994, OSM had contract backlogs of approximately $4,900,000 and $5,300,000, respectively. Substantially all of OSM's backlog is expected to be completed in 1996. Employees As of December 31, 1995, the Company had approximately 825 employees at continuing operations engaged in manufacturing operations, engineering, marketing, sales, service, and administrative activities. Approximately 12% of the Company's employees are unionized. The Company has experienced a low employee turnover rate in the past and considers its employee relations to be good. Segment Information During 1995, the Company operated in two business segments: manufacturing and services. The segments and their engaged activities are as follows: Manufacturing Engaged Activity Fenwal Electronics, Inc. Electronic components Greenwald Industries, Inc. Coin handling equipment Masterview Window Company, Inc. Aluminum windows and doors Services Orr-Schelen-Mayeron & Associates, Inc. Engineering services Information about the Company's operations by segment for the years ended December 31, 1995, 1994 and 1993 is presented in the following table. The Company's Fenwal subsidiary has a manufacturing facility in St. Lucia, BWI, and a sales office in the United Kingdom. The Company had no other foreign operations during the three years ended December 31, 1995, and identifiable foreign assets were not significant. For each of the three years ended December 31, 1995, the Company had export sales of approximately $7,100,000, $6,600,000 and $4,200,000, respectively. Such sales were primarily to Canada, Europe and the Far East. Financial Information Relating to Industry Segments and Classes of Products (in thousands of dollars) 1995 1994* 1993* Net sales to unaffiliated customers: Manufacturing $56,014 $52,578 $46,654 Services 10,276 11,884 9,972 $66,290 $64,462 $56,626 Income (loss) from operations:1 Manufacturing $6,701 $2,887 $2,791 Services (524) 798 710 Corporate and other (3,934) (3,560) (3,874) $2,243 $125 $(373) Identifiable Assets: Manufacturing $26,594 $23,454 $22,874 Services 4,006 5,654 5,038 Corporate and other 14,590 16,192 24,999 $45,190 $45,300 $52,911 Depreciation and Amortization Expense: Manufacturing $980 $792 $552 Services 281 241 193 Corporate and other 247 349 457 $1,508 $1,382 $1,202 Capital Expenditures: Manufacturing $2,810 $1,268 $913 Services 162 297 174 Corporate and other 396 5 20 $3,368 $1,570 $1,107 (1) Before interest income, interest expense and items of a nonoperating or nonrecurring nature. * Restated for discontinued operations. ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT (See Item 10 herein) The following table sets forth information about the executive officers of the Company as of March 1996. The business address of each executive officer is the address of the Company, 1445 East Putnam Avenue, Old Greenwich, Connecticut 06870, and each executive officer is a United States citizen. Name Age Office and Position James J. Weis 47 President, ChiefExecutive Officer and Director Antonio L. DeLise 34 Vice President, Chief Financial Officer and Secretary There is no family relationship between any of the executive officers of the Company. Each officer is elected to serve for a term ending with the next annual meeting of shareholders. Mr. Weis joined the Company in September 1984 as Assistant to the President. Mr. Weis was elected Vice President in November 1984, Chief Financial Officer and Secretary in April 1986, Executive Vice President-Finance in August 1989 and President, Chief Executive Officer and Director on March 8, 1995. Mr. DeLise, a Certified Public Accountant, joined the Company in April 1995 as Vice President, Chief Financial Officer and Secretary. Prior to joining the Company, Mr. DeLise was employed as a Senior Manager with the firm of Arthur Andersen LLP and had been with such firm from July 1983 through March 1995. ITEM 2. PROPERTIES Operating Properties The Company owns and leases various properties that are suitable and adequate for its present needs. All of the Company's active facilities are generally being fully utilized. Fenwal Electronics, Inc. Fenwal leases approximately 103,000 square feet of manufacturing and office space in Milford, Massachusetts under a lease expiring in 2006, approximately 9,000 square feet of manufacturing space in St. Lucia, BWI under a lease expiring in 1998 and approximately 2,000 square feet of office space in the United Kingdom under a lease expiring in 2000. Greenwald Industries, Inc. In 1995, Greenwald acquired a building of approximately 119,000 square feet containing manufacturing and office space in Chester, CT. This facility includes 28 acres of land. Greenwald is currently renting on a month-to-month basis approximately 105,000 square feet of manufacturing and office space in Brooklyn, New York. Greenwald also owns an 8,000 square foot manufacturing facility and land adjoining the rented facility for which management is actively seeking buyers. Masterview Window Company, Inc. Masterview owns a building of approximately 58,000 square feet containing manufacturing and office space in Phoenix, Arizona. This facility includes 11 acres of land. Orr-Schelen-Mayeron & Associates, Inc. OSM leases approximately 38,000 square feet of office space in Minneapolis, Minnesota, under a lease expiring in 2002. OSM also leases approximately 1,000 square feet of office space in Eau Claire, Wisconsin, under a lease expiring in 2000. Executive Offices The Company's executive offices are located in approximately 3,000 square feet of space in Old Greenwich, Connecticut, and are occupied under a lease expiring in February 1999. The Company also maintains approximately 2,600 square feet of office space, for general corporate purposes, in New York City under a lease expiring in 2004. Properties Held for Disposition The Company owns property in Gretna, Louisiana and Muscatine, Iowa for which management is actively seeking buyers. ITEM 3. LEGAL PROCEEDINGS Environmental Matters - Philadelphia, Pennsylvania A tentative settlement of the following matter has been reached with the United States and with the Commonwealth of Pennsylvania. The Company is a defendant in United States, et al., v. Publicker Industries Inc., et al., Civil Action No. 90-7984 (E.D. Pa.). The United States commenced the action in December 1990 against the Company and two other defendants, Cuyahoga Wrecking Corporation and Overland Corporation. The United States seeks to recover under the Comprehensive, Environmental Response, Compensation and Liability Act ("CERCLA") costs incurred by the United States Environmental Protection Agency ("EPA") and other federal agencies in responding to releases of hazardous substances at a site located in Philadelphia, Pennsylvania. The Company owned and operated the site as a manufacturing and storage facility until 1986, when the Company sold the facility to Overland Corporation. In May 1993, in contemplation of a settlement, the Commonwealth of Pennsylvania was granted leave by the Court to join in the litigation as a plaintiff. The Commonwealth of Pennsylvania seeks to recover money allegedly expended by its Department of Environmental Protection ("PADEP") in connection with hazardous substances at the site. Since 1992, at the parties request, the case has remained on the Court's inactive docket. During the fourth quarter of 1993, the Company recorded a liability of $14,350,000 to cover the estimated costs of settling this litigation. Counsel for the Company and litigation counsel for the United States entered into an Agreement in Principle dated December 20, 1994, setting forth terms and conditions to be included in a Consent Decree resolving the United States' claims against the Company and the Company's counterclaim. Pursuant to this Agreement in Principle, on April 6, 1995, the Company deposited with the clerk of the Court the sum of $4.5 million to be held for use as payment of a portion of the United States' claim against the Company upon entry of a Consent Decree embodying the agreed terms and conditions. Counsel for the Company, litigation counsel for the United States, and counsel for PADEP agreed upon the final text of a proposed Consent Decree on October 6, 1995. The agreed Consent Decree has been executed by EPA, the U.S. Department of Justice, PADEP and the Company and was lodged with the Court on December 28, 1995. The Company anticipates that the United States will move for entry of the Consent Decree within the next several months. The Company believes that the agreed Consent Decree will be subsequently entered by the Court, although there can be no assurance of this. Upon entry of the Consent Decree, the Company will make another payment to the United States of $4.5 million, plus interest. Further payments to the United States totaling $4.35 million, plus interest, will be made over a six year period following the entry of the Consent Decree. The Company will pay the Commonwealth of Pennsylvania a total of $1.0 million. An initial payment of $350,000 will be made to the Commonwealth upon entry of the Consent Decree. Further payments to the Commonwealth totalling $650,000, plus interest, will be made over a four year period following the entry of the Consent Decree. These payments will be in settlement of all of the United States' and the Commonwealth of Pennsylvania's claims against the Company and the Company's counterclaims against the United States relating to the Philadelphia site, subject only to certain "reopener" provisions in the event future discovery of certain defined types of presently unknown conditions or information pertaining to the site. The Company may have contribution rights against other parties who sent hazardous substances to the site or arranged for storage of hazardous substances at the site for some portion of any payment the Company may be required, or may agree, to make to the United States or to the Commonwealth of Pennsylvania in this matter. However, the Company has not yet determined whether, or under what conditions, it might initiate litigation against such other parties. The Company has notified its current insurers and identifiable former insurers of this action, but no insurer has admitted liability to pay either the Company's costs of defending this action or any liability the Company may suffer in this action. The Company cannot determine at this time whether any portion of such costs or liability may be recovered through insurance. Springs Industries Inc. Litigation This Matter has been Settled In May 1990, Springs Industries, Inc., a South Carolina corporation ("Springs"), commenced an action against Golding Industries, Inc. (Raytex Division), a former subsidiary of the Company ("Golding"), in the Supreme Court of the State of New York, County of New York. The complaint alleged that Golding printed and finished fabric supplied by Springs, and that the finished fabric did not meet the color fastness and dimensional stability specifications required by Springs. The complaint sought unspecified damages exceeding $2 million on each of five causes of action and punitive damages of $5 million. During discovery, Springs increased its damage claim to an amount between $7.9 million and $10.9 million for alleged losses and lost profits. In August 1994, the Company commenced an action in the Supreme Court of the State of New York, County of New York against Home Insurance Company and Home Indemnity Company seeking a declaration that the claims asserted by Springs against Golding are covered by the comprehensive general liability policy and the umbrella policy issued by the Home companies. These actions were settled during the fourth quarter of 1995. The net cost of the settlements with Springs and the Home companies was not material. General Litigation In addition to the foregoing, various other legal proceedings are now pending against the Company. The Company considers all such proceedings to be ordinary litigation incident to the character of its businesses. Certain claims are covered by liability insurance. The Company believes that the resolution of those claims to the extent not covered by insurance will not, individually or in the aggregate, have a material adverse effect on the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS (a) The New York Stock Exchange is the principal market on which the Company's common stock is traded (trading symbol: PUL). The high and low sales prices of the Company's common stock on the New York Stock Exchange during 1995 and 1994 as reported on the Consolidated Transaction Reporting System are shown below: 1995 1994 High Low High Low First Quarter $ 2 3/8 $ 1 7/8 $ 1 1/2 $ 1 1/8 Second Quarter 2 1/8 1 3/4 1 5/8 1 3/8 Third Quarter 2 1 5/8 2 1/8 1 5/8 Fourth Quarter 2 3/8 1 1/2 2 3/8 1 3/4 (b) There were approximately 3,385 registered holders of record of common stock of the Company as of January 31, 1996. (c) The Company did not pay dividends on its common stock during the prior five fiscal years and does not anticipate paying dividends in the forseeable future. The Indenture,dated as of December 15, 1986, under which the Company's 13% Subordinated Notes due December 15, 1996 were issued, contains certain restrictions with respect to the payment of dividends by the Company. Generally, while the Notes are outstanding, the Company may not declare or pay any dividend or make any payments or distributions on its capital stock or to its stockholders (other than dividends or distributions payable in its capital stock) if at the time of such action or as a result thereof: (A) the Company is in default on the Notes or (B) the cumulative amount of such dividends and distributions after December 31, 1986 exceeds the sum of (i) 50% of the Company's cumulative consolidated net income (as defined in the Indenture) after December 31, 1986 (or, in the event such amount is a deficit, minus 100% of such deficit) and (ii) the aggregate gross proceeds received after December 31, 1986 by the Company from the sale of capital stock (other than capital stock subject to mandatory redemption before December 15, 1996). Because the most restrictive of these tests, the cumulative consolidated net income test, relates to periods after December 31, 1986, the Company is restricted from declaring or paying any cash dividends. The final sinking fund payment under the Notes is due December 1996. ITEM 6. SELECTED FINANCIAL DATA The selected financial data of the Company presented below for the five year period ended December 31, 1995, have been derived from the consolidated financial statements of the Company, which have been audited by Arthur Andersen LLP. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements and the Notes thereto included elsewhere in this report. Year Ended December 31, 1995 1994* 1993* 1992* 1991* (In thousands, except per share amounts) Income Statement Data: Net sales $66,290 $64,462 $56,626 $50,712 $48,282 Income (loss) from operations1 2,243 125 (373) (1,713) (719) Income (loss) from continuing operations (834)2 (3,264)3 (18,830)4 (6,559)5 (5,918)6 Income (loss) from discontinued operations 543 975 1,076 2,227 2,975 Gain on sale of discontinued operations, net - - 8,307 - - Net income (loss) $(291) $(2,289) $(9,447) $(4,332) $(2,943) Per common share: Income (loss) from continuing operations $ (.06) $(.22) $(1.30) $(.45) $(.41) Income (loss) from discontinued operations .04 .07 .65 .15 .21 Net income (loss) per common share $ (.02) $(.15) $(.65) $(.30) $(.20) December 31, 1995 1994* 1993* 1992* 1991* (In thousands) Balance Sheet Data:7 Working capital $(5,788) $6,916 $20,761 $23,510 $ 31,016 Total assets 45,190 45,300 52,911 49,395 54,241 Total debt8 14,693 17,437 22,082 25,557 26,097 Non-current liabilities 11,473 16,538 21,593 6,552 6,710 Shareholders' equity (2,594) (2,616) (340) 9,082 13,414 (1) Represents income (loss) before interest income, interest expense and items of a nonoperating or nonrecurring nature. (2) Includes cost of pensions - nonoperating of $744,000, legal settlements and costs of $365,000 and a gain from repurchase of notes of $75,000. (3) Includes cost of pensions - nonoperating of $768,000, legal settlements and costs of $507,000 and a gain from repurchase of notes of $640,000. (4) Includes cost of pensions - nonoperating of $776,000, legal settlements and costs of $14,791,000 and a gain from repurchase of notes of $370,000. (5) Includes cost of pensions - nonoperating of $930,000, legal settlements and costs of $790,000 and a gain from repurchase of notes of $352,000 (6) Includes cost of pensions - nonoperating of $941,000 and legal settlements and costs of $1,050,000. (7) No dividends on common shares have been declared or paid during the last five years. (8) Includes current maturities of long term debt and revolving credit line borrowing. * Restated for discontinued operations. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 Publicker's consolidated sales of $66,290,000 for the year ended December 31, 1995 increased by approximately 3% from $64,462,000 for 1994. The increase in sales was due to a 4% increase in selling prices offset by a slight decrease in volume. The Company's income from operations for 1995 totaled $2,243,000 compared to $125,000 for 1994. The Company reported a net loss of $291,000 ($.02 per share) for 1995 compared to a net loss of $2,289,000 ($.15 per share) for 1994. The 1995 results included costs of pensions-nonoperating of $744,000, legal settlements and costs of $365,000, a gain from the repurchase of notes of $75,000 and income from discontinued operations of $543,000. The 1994 results included cost of pensions-nonoperating of $768,000, legal settlements and costs of $507,000, a gain from the repurchase of notes of $640,000 and income from discontinued operations of $975,000. For the year ended December 31, 1995, cost of sales and services of $48,509,000 decreased by approximately 3% from $49,892,000 in 1994. The decrease in cost of sales and services was due to productivity increases in the Company's manufacturing segment. Selling expenses of $4,219,000 in 1995 were comparable to $4,244,000 in 1994. General and administrative expenses for the year ended December 31, 1995, increased by 11% to $11,319,000 from $10,201,000 for 1994. The increase relates to increased salaries and rental expense. Interest income decreased to $138,000 for 1995 compared to $309,000 for 1994 due to lower amounts of investible cash. Interest expense decreased by approximately 29% to $2,181,000 during 1995 compared to $3,063,000 for 1994 due to repayments of the Company's subordinated notes in 1994. On February 16, 1996, the Company sold substantially all of the assets of Bright Star Industries, Incorporated for $5,500,000 in cash, plus the assumption of certain liabilities. In January 1995, the Company sold substantially all of the assets of Associated Testing Laboratories, Inc. for $2,240,000 in cash, plus the assumption of certain liabilities. The foregoing companies have been reflected in the consolidated financial statements as discontinued operations. Sales for the Company's manufacturing segment (which includes the operations of three subsidiary companies, Fenwal Electronics, Inc., Greenwald Industries, Inc. and Masterview Window Company, Inc.) for 1995 increased by approximately 7% to $56,014,000 for 1995 compared to sales of $52,578,000 for 1994. Income from operations for this segment increased by approximately 132% to $6,701,000 compared to $2,887,000 for 1994. The income from operations improvement is primarily attributed to increased labor efficiencies. Sales for the Company's services segment (which consists of one subsidiary company: Orr-Schelen-Mayeron & Associates, Inc.) decreased by approximately 14% to $10,276,000 for 1995 compared to $11,884,000 for 1994. The loss from operations for this segment was $524,000 in 1995 compared to income from operations of $798,000 for 1994. The significant decline in sales and income from operations was due to certain operating inefficiencies and lower contract margins. Year Ended December 31, 1994 Compared to Year Ended December 31, 1993 Operating Results The following information has been restated for discontinued operations - see Note 2 to the consolidated financial statements. Publicker's consolidated sales of $64,462,000 for the year ended December 31, 1994 increased by approximately 14% from $56,626,000 for 1993. The increase in sales was due to a 2% increase in selling prices coupled with an 12% increase in volume. The Company's income from operations for 1994 totaled $125,000 compared to a loss from operations of $373,000 for 1993. The Company reported a net loss of $2,289,000 ($.15 per share) for 1994 compared to a net loss of $9,447,000 ($.65 per share) for 1993. The 1994 results included cost of pensions - nonoperating of $768,000, legal settlements and costs of $507,000, a gain from the repurchase of subordinated notes of $640,000 and income from discontinued operations of $975,000. The 1993 results included cost of pensions - nonoperating of $776,000, legal settlements and costs of $14,791,000, a gain from the repurchase of subordinated notes of $370,000 and income from discontinued operations of $9,383,000. The 1993 legal settlements and costs included a charge of $14,350,000 to cover the estimated costs of settling the Company's environmental litigation. The 1993 income from discontinued operations included a gain of $9,397,000 from the sale of American Cryogas Industries, Inc. ("ACI") and a gain of $710,000 from the 1988 disposition of the Company's U.K. Beverage Division, offset in part by a provision for disposition of $1,800,000 to reduce the net assets of discontinued operations to their estimated net realizable values and to accrue for anticipated phase-out period losses. For the year ended December 31, 1994, cost of sales and services of $49,892,000 increased by approximately 14% from $43,764,000 for 1993. The increase in cost of sales and services was consistent with the increased level of the Company's consolidated sales, but was adversely impacted by reduced operating efficiencies and increased raw material costs at certain of the Company's subsidiaries. Selling expenses increased by approximately 18% to $4,244,000 during 1994 compared to $3,582,000 for 1993. Selling expenses increased in the areas of commissions, salaries and other selling related expenses, primarily due to increased sales levels. General and administrative expenses for the year ended December 31, 1994, increased by approximately 6% to $10,201,000 from $9,653,000 for 1993. The increase in general and administrative expenses primarily relates to increased salaries, recruiting and severance expenses. Interest income increased to $309,000 for 1994 compared to $287,000 for 1993 due to somewhat higher interest rates offset in part by slightly lower average invested amounts. Interest expense decreased to $3,063,000 during 1994 compared to $3,547,000 for 1993 due to the repurchase or redemption of $7,414,000 of subordinated notes in 1994 and the repurchase of $3,700,000 of subordinated notes in 1993. In March 1994, the Company sold substantially all the assets of Douglas-Randall, Inc. and subsequently collected its accounts receivable for aggregate proceeds of approximately $831,000. In October 1994, the Company sold Chatas Glass Company, Inc. and subsequently collected its accounts receivable for an aggregate proceeds of approximately $290,000. The foregoing companies have been reflected in the consolidated financial statements as discontinued operations. During 1994, the Company received approximately $889,000, which represented the final amounts that will be received in connection with the 1988 disposition of the Company's U.K. Beverage Division. The amount received was recognized as a gain from discontinued operations in 1994. Sales for the Company's manufacturing segment (which includes the operations of three subsidiary companies: Fenwal Electronics, Inc., Greenwald Industries, Inc. and Masterview Window Company, Inc.) for 1994 increased by approximately 13% to $52,578,000 compared to sales of $46,654,000 for 1993. Income from operations for this segment increased by approximately 3% to $2,887,000 for 1994 compared to $2,791,000 for 1993. The improvement in income from operations was lower than the sales improvement primarily due to reduced operating efficiencies and higher raw material costs at several of the Company's manufacturing businesses. The Company has experienced a lag in passing certain of its increased costs on to customers through higher prices. Sales for the Company's services segment (which consists of one subsidiary company: Orr-Schelen-Mayeron & Associates, Inc.) increased by 19% to $11,884,000 for 1994 compared to $9,972,000 for 1993. Income from operations for this segment increased by approximately 12% to $798,000 for 1994 compared to $710,000 for 1993. The increase in income from operations for this segment was primarily due to higher sales levels, offset in part by reduced efficiency and the effects of severe weather during the first quarter of 1994. Liquidity During the year ended December 31, 1995, cash, including short-term investments, decreased by $5,400,000. Operating activities consumed cash of $1,851,000, while investing activities consumed cash of $1,128,000 and financing activities consumed cash of $2,421,000. Operating activities principally consisted of an increase in operating assets and liabilities of $3,211,000 offset by depreciation and amortization of $1,508,000. The increase in operating assets was attributed to the $4,500,000 payment made to the EPA escrow account. Investing activities consisted of proceeds of $2,240,000 from the sale of Associated Testing Laboratories, Inc., offset by capital expenditures of $3,368,000. Financing activities primarily consisted of funds disbursed in connection with the repurchase of subordinated notes totaling $7,425,000, offset in part by net proceeds from revolving credit and term loan financing of $4,691,000 and proceeds from the issuance of common shares upon exercise of stock options of $313,000. On October 11, 1995, the Company entered into a three year $17,060,000 credit agreement ("Loan Agreement"). The Loan Agreement provides for a $13,161,000 revolving credit line, $2,149,000 of term promissory notes and $1,750,000 credit facility for future capital expenditure financing. Borrowings under the revolving credit line are based upon eligible accounts receivable and inventories, as defined. The Loan Agreement is secured by substantially all of the Company's assets and bears interest at a rate of one and one half percent (1-1/2%) in excess of the prime rate. The Loan Agreement and related documents contain certain covenants including, among others, maintenance of minimum working capital and adjusted net worth (as defined). The initial drawdown under the Loan Agreement of $7,449,000, together with existing cash, was used to extinguish a revolving credit facility at one of the Company's subsidiaries of $762,000 and to repurchase $7,500,000 face value of 13% Subordinated Notes for $7,425,000 plus accrued interest. The repurchase of the 13% Subordinated Notes satisfied the annual sinking fund payment due December 15, 1995. The $75,000 gain on the repurchase was recorded in the fourth quarter of 1995. As of December 31, 1995, borrowing availability under the revolving credit line amounted to $4,951,000. As discussed in Part I Item 3 - Legal Proceedings, the Company has reached a tentative agreement to settle the environmental litigation with the United States and the Commonwealth of Pennsylvania. On April 6, 1995, the Company funded a $4,500,000 court administered escrow account. Another payment totalling $4,850,000 will be made upon entry of the Consent Decree which is expected to occur within the next several months. Further payments totalling $5,000,000 will be made to the United States and the Commonwealth of Pennsylvania over a six year period following the entry of the Consent Decree with the court. In connection with its subordinated notes, the Company will be required to make a final sinking fund payment of $7,500,000 on December 15, 1996. The Company believes it has sufficient liquidity to comply with the anticipated settlement terms of its environmental litigation and to enable the Company to continue to meet its obligations to pay principal and interest in connection with its indebtedness as well as meet its operating cash requirements. The Company expects to fund its sinking fund payment and the payments required in connection with the settlement of the environmental litigation from the proceeds from the sale of Bright Star Industries, Incorporated as well as its available cash resources, availability under the Loan Agreement, cash provided by operations, refinancing or restructuring of existing subordinated notes or in connection with the issuance of new debt securities and the sale, if consummated, of one or more of its subsidiary companies, as discussed below. While the Company is considering each of the foregoing, there can be no assurance that these efforts will be successful. The Company's failure to generate positive cash flows from operations or its inability to arrange refinancing or restructuring of the subordinated notes could have a material adverse effect on the Company. The indenture under which the Company's subordinated notes were issued contains various restrictive covenants that include, among other things, restrictions on the payment of dividends or distributions to shareholders, limitations on the issuance of additional senior debt (as defined) and the maintenance of consolidated net worth (as defined) of at least $8,000,000. If the Company's consolidated net worth (as defined) at the end of any two consecutive fiscal quarters declines to less than $8,000,000, the Company would be required to make an offer to purchase, on the last day of the fiscal quarter next following such second fiscal quarter, 25% of the aggregate principal amount of the notes then outstanding at a purchase price equal to 100% of their principal amount plus accrued interest. The definition of consolidated net worth excludes costs incurred in connection with the settlement of the Company's environmental litigation. Accordingly, as of December 31, 1995, consolidated net worth (as defined) amounted to approximately $12,000,000. During 1995, the Company's capital expenditures totaled $3,368,000, of which $2,100,000 related to a facility purchase in Chester, Connecticut. The facility purchase was partially financed through a $1,600,000 seller note due 2005. The Company anticipates that its level of capital expenditures for 1996 will be approximately $2,500,000. The Company has not entered into any material commitments for acquisitions or capital expenditures and retains the ability to increase or decrease capital expenditure levels as required. The Company anticipates that it will be able to fund its capital expenditures during 1996 with its available cash resources and its other cash flows as well as through capital equipment financing. At December 31, 1995, approximately $105,000,000 of U.S. tax loss carryforwards (subject to review by the Internal Revenue Service), expiring from 1996 through 2010, were available to offset future taxable income. In addition, approximately $1,600,000 of unused investment tax credits were available to offset future federal income taxes payable through 2001. Outlook The Company's operating results in 1996 will be affected by several factors. The Company's Greenwald Industries, Inc. subsidiary will be moving its operations from Brooklyn, New York to a newly acquired facility in Chester, Connecticut. The move is expected to be completed in the second quarter of 1996. The costs associated with the move are estimated to be approximately $4,500,000 million of which $2,100,000 related to the purchase of the facility. Other costs include new machinery and equipment, building improvements, new employee training, severance for terminated employees in New York and relocation of equipment and certain employees. In addition to the $1,600,000 seller-provided financing, Greenwald has received commitments from two State of Connecticut agencies to provide $2,200,000 in low interest rate loans. The operating results for 1996 will be adversely affected by the training, severance and relocation expense which are expected to be less than $1,500,000 and the anticipated decline in productivity as a result of transitioning to a new workforce. Orr-Schelen-Mayeron & Associates, Inc. reported an operating loss in the fourth quarter of 1995 of $700,000 due to a high level of non-billable time and loss recognition on a number of contracts. In February 1996, OSM took action to improve financial performance including a 10% reduction in headcount and implementation of spending and other controls. OSM expects to report depressed operating results in the first quarter of 1996 due to the high level of non-billable time, reduced margins on contracts and severance associated with the headcount reduction. As of January 31, 1996, OSM failed to meet certain financial covenants under the Loan Agreement. The lender has waived these events of default and reset the covenants for the period subsequent to the default. The Board of Directors of the Company is currently considering the possible sale of certain operating subsidiaries and will be seeking shareholder approval to enable the sale of such operating subsidiaries on such terms and conditions as may be approved by the Board of Directors in its discretion at the Annual Meeting of Shareholders to be held on April 30, 1996. As previously mentioned, the Company completed the sale of substantially all of the assets of Bright Star Industries, Incorporated on February 16, 1996. The Company has also entered into a non-binding letter of intent to sell substantially all of the assets of Fenwal Electronics, Inc. and is exploring the sale of its Masterview Window Company, Inc. subsidiary. In making the decision to consider such sales, the Company considered the need to (i) improve liquidity to meet the environmental and sinking fund obligations, (ii) generate funds to finance the acquisition of one or more significant businesses and (iii) the favorable sellers market that exists today. While the Company is exploring one or more sale opportunities, there can be no assurance that any such sales can be completed on acceptable terms and conditions. Fourth Quarter Results - 1995 and 1994 Publicker's consolidated sales of $16,371,000 for the fourth quarter of 1995 increased by approximately 3% from $15,882,000 for the fourth quarter of 1994. The Company's income from operations for the fourth quarter of 1995 and 1994 were $73,000. The Company reported a net loss of $365,000 ($.02 per share) for the fourth quarter of 1995 compared to a net loss of $259,000 ($.02 per share) for the fourth quarter of 1994. The 1995 fourth quarter results included cost of pensions-nonoperating of $194,000, legal settlements and costs of $51,000, a gain from the repurchase of subordinated notes of $75,000 and income from discontinued operations of $179,000. The 1994 fourth quarter results included cost of pensions-nonoperating of $122,000, legal settlements and costs of $125,000, a gain from the repurchase of subordinated notes of $640,000 and a loss from discontinued operations of $104,000. Costs of sales and services for the fourth quarter of 1995 totaled $12,144,000 compared to $11,691,000 for the fourth quarter of 1994. Selling expenses totaled $1,083,000 for the fourth quarter of 1995 compared to $1,084,000 for the fourth quarter of 1994. General and administrative expenses totaled $3,071,000 compared to $3,034,000 for the fourth quarter of 1994. Interest expense decreased to $450,000 for the fourth quarter of 1995 compared to $707,000 for the same period in 1994 due to the repurchase and redemption of subordinated notes during the fourth quarter of 1994. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's consolidated financial statements, the report of independent public accountants thereon and related schedules appear beginning on page F-2. See Index to Consolidated Financial Statements and Schedules on page F-1. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Company currently has six directors, all of whom were elected at the Annual Meeting of Shareholders held on May 23, 1995. All directors serve until the next election of directors or until their successors are chosen and have qualified. Set forth below as to each director of the Company is information regarding age (as of February 15, 1996), position with the Company, principal occupation, business experience, period of service as a director of the Company and directorships currently held in public corporations. HARRY I. FREUND: Age 55; Director of the Company since April 12, 1985. Chairman of the Board since December 1985. Since 1975, Mr. Freund has been Chairman of Balfour Investors Inc. (formerly known as Balfour Securities Corporation), a merchant banking firm that had previously been engaged in a general brokerage business. Mr. Freund is also Vice Chairman of the Board of Directors of Glasstech, Inc. JAY S. GOLDSMITH: Age 52; Director of the Company since April 12, 1985. Vice Chairman of the Board since December 1985. Since 1975, Mr. Goldsmith has been President of Balfour Investors Inc. Mr. Goldsmith is also Chairman of the Board of Directors of Glasstech, Inc. DAVID L. HERMAN: Age 82; Director of the Company since April 12, 1985. Mr. Herman was President and Chief Executive Officer of the Company from March 31, 1986 until March 8, 1995. Prior to 1986, Mr. Herman was an independent consultant advising clients on the reorganization of businesses and potential acquisitions. Prior thereto, Mr. Herman was the sole owner of Darman Tool and Manufacturing Company, a private company engaged in the manufacture of appliances and photocopying machines. CLIFFORD B. COHN: Age 44; Director of the Company since July 31, 1980. Vice President of Government Affairs of the Company from April 1, 1982 to November 20, 1984. Since 1977, Mr. Cohn has been engaged in the private practice of law in Philadelphia, Pennsylvania. Mr. Cohn is a director of Glasstech, Inc. L. G. SCHAFRAN: Age 57; Director of the Company since December 3, 1986. Mr. Schafran is the Managing General Partner of L. G. Schafran & Associates, a real estate investment and advisory firm established in October 1984. For more than five years prior thereto, Mr. Schafran was a senior officer in The Palmieri Company, specializing in the acquisition, management and disposition of distressed properties. Mr. Schafran is a director of Glasstech, Inc., Capsure Holdings Corp., OXiGENE, Inc., Dart Group Corp. and its two publicly traded affiliates: Trak Auto Corp. and Crown Books Corp. Mr. Schafran is also a trustee of National Income Realty Trust, Chairman of the Board of Delta-Omega Technologies, Inc. and Chairman of the Executive Committee of Dart Group Corp. JAMES J. WEIS: Age 47; President, Chief Executive Officer and Director of the Company since March 8, 1995. Mr. Weis joined the Company in September 1984 as Assistant to the President and was elected Vice President in November 1984, Chief Financial Officer and Secretary in April 1986, Executive Vice President - Finance in August 1989 and President, Chief Executive Officer and Director in March 1995. The information with respect to the executive officers of the Company required by this item is set forth in Item 1A of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Compensation of Executive Officers The following tables set forth information concerning the cash compensation, stock options and retirement benefits provided to the Company's Chief Executive Officer, its other executive officer and one former Chief Executive Officer. The notes to these tables provide more specific information concerning compensation. The Company's compensation policies are discussed in the Compensation Committee Report on Executive Compensation. Summary Compensation Table Annual Compensation Long-Term Compensation Awards Payments Name and Principal Other Annual Restricted Stock Position Year Salary Bonus(1) Compensation Awards James J. Weis (1) 1995 315,727 130,000 $ - $ - President, Chief 1994 233,750 100,000 - - Executive Officer 1993 233,750 175,000 - - and Director Options/(#)(2) LTIP Payouts Compensation 100,000 $ - $9,641 (4) 60,000 - 8,728 (4) 60,000 - 7,081 (4) Antonio L. DeLise (1) Vice President, Chief Financial Officer and Secretary 1995 98,438 40,000 - - Options/(#)(2) LTIP Payouts Compensation 25,000 - 2,100 (5) David L. Herman (1)(3) Director and 1995 37,500 - - - former President 1994 127,500 75,000 - - and Chief 1993 127,575 75,000 - - Executive Officer Options/(#)(2) LTIP Payouts Compensation 30,000 - 90,409 (6) 60,000 - 553 (6) 60,000 - 964 (6) (1) Reflects bonus earned during the fiscal year. In some instances all or a portion of the bonus was paid during the next fiscal year. (2) Options to acquire shares of Common Stock. (3) Mr. Herman was the President and Chief Executive Officer of the Company prior to his retirement on March 8, 1995. (4) Consists of $4,620, $4,620 and $2,249 in contributions to the Company's 401(k) plan for 1995, 1994 and 1993, respectively, and $5,021, $4,108 and $4,832 for term life and disability insurance premiums paid on behalf of Mr. Weis for 1995, 1994 and 1993, respectively. (5) Consists of $2,100 for term life and disability insurance payments paid on behalf of Mr. DeLise for 1995. (6) Consists of Board of Directors fees of $30,000 and fees received pursuant to a Consulting Agreement of $60,000 for 1995 and $409, $553 and $964 for term life and disability insurance premiums paid on behalf of Mr. Herman for 1995, 1994 and 1993, respectively. Stock Options Granted During 1995 Individual Grants % of Options Exercise Price Expiration Date Options Granted to all Per Share Name Granted(3) Employees James J. Weis 100,000 17.6% $1.875 6/23/00 Antonio L. DeLise 12,500 2.2% 1.625 12/12/00 12,500 2.2% 1.875 6/23/00 David L. Herman 12,500 5.3% 1.875 7/1/00 All Shareholders(2) N/A N/A 1.625 N/A Named officers' gain N/A N/A N/A N/A as % of all shareholders' gain Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation For Five Year Option Term (1) 5% 10% James J. Weis $51,803 $114,471 Antonio L. DeLise 5,612 12,401 6,475 14,309 David L. Herman 15,541 34,341 Named officers' gain 7,698,366 17,011,377 as % of all shareholders' gain (1) The potential gain is calculated from the closing price of Common Stock on June 23, 1995 and December 12, 1995, the dates of grants to executive officers. These amounts represent certain assumed rates of appreciation only. Actual gains, if any, on stock option exercises and Common Stock holdings are dependent on the future performance of the Common Stock and overall market conditions. There can be no assurance that the amounts reflected in this table will be achieved. (2) Based on the number of shares outstanding at December 31, 1995. (3) Options granted under the Company's 1993 Long-Term Incentive Plan and the Non-employee Director Stock Option Plan expire five years from the date of grant. Aggregated Stock Options Exercised in 1995 and December 31, 1995 Option Values Exercised in 1994 Unexercised at December 31, 1995 Number of Options Shares Value Name of Executive Acquired Realized Exercisable Unexercisable James J. Weis - $ - 280,000 - Antonio L. DeLise - - 25,000 - David L. Herman - - 210,000 - Value of Options Exercisable Unexercisable James J. Weis $237,500 $ - Antonio L. DeLise 15,625 - David L. Herman 202,500 - (1) These values are based on the December 29, 1995 closing price for the Company's stock on the New York Stock Exchange of $2.375 per share. (2) This represents the aggregate value of "in-the-money" stock options as of December 29, 1995. Retirement Income Plan Effective December 31, 1993, benefits under the Publicker Retirement Plan (the "Plan") were frozen. Accordingly, Plan participants will accumulate no additional credited service and earnings subsequent to December 31, 1993 will no longer have an impact on accumulated benefits. The annual benefits payable upon retirement for Mr. Weis is $23,831. The foregoing amounts are based on a straight life annuity. Retirement benefits are payable at age 65 to married employees in the form of a 50% joint and survivor annuity with their spouses, at a reduced amount, unless they elect to receive a straight life annuity. Single employees receive a straight life annuity. The foregoing benefit amounts are not subject to any deduction for Federal Insurance Contributions Act or other offset amounts. Stock Option Plans Under stock option plans for directors, officers and key employees adopted by shareholders of the Company in 1988, 1989 and 1991, the Company has been authorized to grant nonqualified stock options to purchase up to 3,500,000 shares of Common Stock. Under the 1993 Long-Term Incentive Plan and the Non-employee Director Stock Option Plan adopted by shareholders of the Company in 1994, the Company may grant stock options, restricted stock options, stock appreciation rights, performance awards and other stock-based awards equivalent to up to 3,550,000 shares of Common Stock. The plans are administered by the Board of Directors of the Company. Subject to the express provisions of the plans, the Board of Directors has full and final authority to determine the terms of all options granted to key employees under the plans including (a) the purchase price of the shares covered by each option, (b) whether any payment will be required upon grant of the option, (c) the individuals to whom, and the time at which, options shall be granted, (d) the number of shares to be subject to each option, (e) when an option can be exercised and whether in whole or in installments, (f) whether the exercisability of the options is subject to risk of forfeiture or other condition and (g) whether the stock issued upon exercise of an option is subject to repurchase by the Company, and the terms of such repurchase. The term of options granted to directors shall be five years from the date of grant and shall be immediately exercisable. Under the 1988, 1989 and 1991 plans, the term of all other options shall be for such period as the Board of Directors shall determine, but shall not in any event exceed 12 years from the date of the option's grant. Under the 1993 Long-Term Incentive Plan, the term of options granted shall be prescribed by the Board of Directors provided, however, that no stock option may be exercised after five years from the date it is granted. During the year ended December 31, 1995, no stock options were granted to or exercised by any executive officers of the Company other than options granted under the 1993 Long-Term Incentive Plan and the Non-employee Director Stock Option Plan. During such year, the Company granted 100,000 options to Mr. Weis, 25,000 options to Mr. DeLise and 30,000 options to Mr. Herman. No directors or officers of the Company exercised options during 1995. Employment and Change in Control Agreements In August 1987, the Company entered into change in control agreements with each of Messrs. Freund, Goldsmith, Herman and Weis, which agreements provide for payments to them under certain circumstances following a change in control of the Company. These agreements were not adopted in response to any specific acquisition of shares of the Company or any other event threatening to bring about a change in control of the Company. For purposes of the agreements, a change in control is defined as any of the following: (i) the Company ceasing to be a publicly owned corporation having at least 2,000 shareholders, (ii) any person or group acquiring in excess of 30% of the voting power of the Company's securities, (iii) Continuing Directors (as defined below) ceasing for any reason to constitute at least a majority of the Board of Directors, (iv) the Company merging or consolidating with any entity, unless approved by a majority of the Continuing Directors or (v) the sale or transfer of a substantial portion of the Company's assets to another entity, unless approved by a majority of the Continuing Directors. A majority of the Continuing Directors have approved the sale of the Company's Masterview Window Company subsidiary or the property or assets thereof on such terms and conditions (including the consideration therefor) as may subsequently be determined by the Board of Directors, in its sole discretion. See "Proposal 2. --Sale of Masterview Window Company." For purposes of the agreements, "Continuing Director" means Messrs. Freund, Goldsmith, Herman, Cohn, Schafran and Weis, and any other director designated as such prior to his election as a director by a majority of the then remaining Continuing Directors. In the event the Company discontinues the services (as defined below) of one of the above-named individuals as a director or officer, as the case may be, following a change in control, the individual will be entitled to receive in a lump sum within 10 days of the date of discontinuance, a payment equal to 2.99 times the individual's average annual compensation for the shorter of (i) the five years preceding the change in control, or (ii) the period the individual received compensation from the Company for personal services. Assuming a change in control of the Company and the discontinuance of an individual's services were to occur at the present time, payments in the following amounts (assuming there are no excess parachute payments, as defined below) would be made pursuant to the change in control agreements: Mr. Freund -- $861,307; Mr. Goldsmith -- $861,307; Mr. Herman -- $615,011 and Mr. Weis -- $1,158,074. In the event any such payment, either alone or together with others made in connection with the individual's discontinuance, is considered to be an "excess parachute payment" (as defined in the Internal Revenue Code of 1986, as amended (the "Code")), the individual is entitled to receive an additional payment in an amount which, when added to the initial payment, results in a net benefit to the individual (after giving effect to excise taxes imposed by Section 4999 of the Code and income taxes on such additional payment) equal to the initial payment before such additional payment. The Company shall be deemed to have discontinued an individual's services if any of the following occurs: (i) he is terminated as an employee of the Company for any reason other than conviction of a felony or any act of fraud or embezzlement, his disability for six consecutive months or his death, (ii) failure to elect and maintain him in the office which he now occupies, (iii) failure of the Board of Directors to include him in the slate of directors recommended to stockholders, (iv) a reduction in his salary or fringe benefits, (v) a change in his place of employment or excessive travel or (vi) other substantial, material and adverse changes in conditions under which the individual's services are to be rendered. Since the change in control agreements would require large cash payments to be made by any person or group effecting a change in control of the Company absent the assent of a majority of the Continuing Directors, these agreements may discourage hostile takeover attempts of the Company. The change in control agreements would have expired on December 31, 1995 but have been and will continue to be automatically extended for a period of one year on each December 1, unless terminated by either party prior to any such December 1. In the event a change in control occurs during the term of any of the agreements, including any extension thereof, the term of such agreements shall automatically be extended to three years from the date of such change in control. The Company has entered into an agreement with Mr. Weis which provides that, in the event his employment is terminated without cause or is considered terminated by reason of a change in Mr. Weis' duties which would require him to relocate his principal residence, he will receive a continuation of salary payments and all other employee benefits then provided him until the earlier of one year from the date of notice of termination or the date upon which he begins full-time employment with a new employer. Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including the Proxy Statement in whole or in part, the following report and the Performance Graph shall not be incorporated by reference into any such filing. Compensation Committee Report on Executive Compensation The Compensation Committee of the Board of Directors, consisting entirely of outside directors, approves all of the policies under which compensation is paid or awarded to the Company's executive officers. The present members of the Compensation Committee are Jay S. Goldsmith, Clifford B. Cohn and L. G. Schafran. The Company's compensation program for executive officers currently consists of salary and bonuses and periodic grants of nonqualified stock options. The elements of this program have different purposes. Salary and bonus payments are primarily designed to reward current and past performance, while stock option grants are designed to provide strong incentives for long-term future performance, and are generally forfeited should the executive officer leave the Company before retirement. All stock option grants are made under the Company's stock option plans which have been approved by the Company's shareholders. The granting of stock options is directly linked to the shareholders' interests since the value of the grants will increase or decrease based upon the future price of the Company's stock. In determining the executive compensation to be paid or granted during 1995, the Committee considered several factors. These included the assessment of the future objectives and challenges facing the Company as well as the significant problems the Company has been dealing with during 1995, particularly its ongoing environmental litigation. In view of the Company's efforts to achieve profitability, the Committee's actions have been guided less on quantitative measures of operating results than on other goal-directed endeavors such as the Company's acquisitions and dispositions, elimination and rationalization of underperforming operations and the efforts of the executive personnel to bring about improvements in the operations and profitability of the Company's subsidiaries. The Committee's decisions concerning the compensation of individual executive officers during 1995 were made in the context of historical practices and the current competitive environment together with the need to attract and retain highly qualified executives who will be best able to achieve the successes needed by the Company. The Committee also considered the fact that the Company has had only two executive officers and the effect this has on their workload and diversity of responsibilities. Bases for Chief Executive Officer Compensation In 1995, Mr. Weis received total cash payments of $445,737 in salary and bonus (as shown in the Summary Compensation Table above). In addition, options to purchase 100,000 shares of Common Stock were granted to Mr. Weis during 1995 under the Company's 1993 Long-Term Incentive Plan. The Compensation Committee considered the 1995 compensation appropriate in light of the Company's significantly improved financial results, increased shareholder value, his leadership in the Company's settlement of certain environmental litigation and performance with respect to implementing strategic initiatives for the Company. The Committee noted Mr. Weis's considerable efforts to revitalize the Company, his direct involvement in the significant transactions of the Company during 1995 and his knowledge and historical perspective of the Company's problems and issues. This report is submitted by the members of the Compensation Committee of the Board of Directors. Compensation Committee Jay S. Goldsmith Clifford B. Cohn L. G. Schafran Five Year Performance Graph: 1990 - 1995 The annual changes for the five year period from 1990 through 1995 are based on the assumption that $100 had been invested in Publicker stock and each index on December 31, 1990 (as required by SEC rules), and that all quarterly dividends were reinvested at the average of the closing stock prices at the beginning and end of the quarters. The total cumulative dollar returns shown in the graphs represent the value that such investments would have had on December 31, 1995. The peer group index is based on all companies contained in the Multi-industry Group of Media General Financial Services with a market capitalization of under $100 million as of December 31, 1995. The returns of each component issuer of the peer group have been weighted according to the respective issuer's stock market capitalization at the beginning of each period for which a return is indicated. This group was selected since the diversity of the Company's operations does not place it within any more specific industry group. In addition, the market capitalization criteria was applied to eliminate from comparison those multi-industry companies that are extremely large, such as ITT Corporation. The resulting peer group consists of the following fourteen companies for 1995: American Pacific Corp., ARC International Corp., Autocam Corp., Drew Industries Inc., Met-Pro Corporation, Pacific Dunlop Ltd. ADR, Prime Equities International, Quixote Corp., SL Industries Inc., Somerset Group Inc., TCC Industries, Inc., Triton Group Ltd., Intelect Communications Ltd., and Tyler Corp. The companies shown in italics are new to this peer group during 1995. The following companies that were included in this peer group for 1994 were no longer included in the peer group for 1995: Challenger International Ltd., Katy Industries and Wellstead Industries Inc. Information Concerning the Board of Directors Directors who were not officers of the Company, other than Messrs. Freund and Goldsmith, are paid $2,500 per month for services as directors and, in addition, $750 per day for each meeting of the Board or of shareholders that they attended without regard to the number of meetings attended each day. Pursuant to informal arrangements with the Company, Messrs. Freund and Goldsmith each receive annual compensation at the rate of $325,000 per year as Chairman and Vice Chairman of the Board, respectively, and for providing certain services described below. The arrangements have indefinite terms and are terminable at any time by either party. The compensation received by them is approved from time to time by the Directors Compensation Committee of the Board of Directors, consisting of David L. Herman, Clifford B. Cohn and L.G. Schafran. Messrs. Freund and Goldsmith provide advice and counsel to the Company on a variety of strategic and financial matters, including business acquisitions and divestitures, raising capital and shareholder relations. Messrs. Freund and Goldsmith do not render any services in connection with the day-to-day operations of the Company. Services are provided on a less than full time basis, with the amount of time varying depending on the activities in which the Company is engaged from time to time. The arrangements with the Company do not provide for a minimum amount of time to be spent on Company matters. On March 8, 1995, following Mr. Herman's retirement as President of the Company, the Company and Mr. Herman entered into an informal Consulting Agreement pursuant to which Mr. Herman will render consulting services to the Board of Directors of the Company. The Consulting Agreement has an indefinite term and provides for a monthly consulting fee at a rate of $80,000 per year. The services to be rendered to the Company by Mr. Herman include consultation on acquisitions and divestitures, litigation, including the Company's environmental litigation, and other matters. The Consulting Agreement is terminable at any time by the Company or Mr. Herman. The Company and Balfour Investors Inc. ("Balfour"), are parties to a License Agreement, dated as of October 26, 1994, with respect to a portion of the office space leased by the Company in New York City. Harry I. Freund and Jay S. Goldsmith are Chairman and President, respectively, and the only shareholders of Balfour. The term of the License Agreement commenced on January 1, 1995 and will expire on June 30, 2004, unless sooner terminated pursuant to law or the terms of the License Agreement. The License Agreement provides for Balfour to pay the Company an amount equal to 30% of the rent paid by the Company under its lease, including base rent, electricity, water, real estate tax escalations and operation and maintenance escalations. In addition, Balfour has agreed to reimburse the Company for 30% of the cost of insurance which the Company is obligated to maintain under the terms of its lease with respect to the premises. The base rent payable by Balfour under the License Agreement is $5,618 per month through September 30, 1999 and $6,045 per month thereafter. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security Ownership of Beneficial Owners The following table sets forth, as of February 15, 1996, except as otherwise noted, the beneficial ownership of the Company's Common Stock by each person who owns of record or is known by the Company to own beneficially more than 5% of the Common Stock of the Company. Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership(1) Percent of Class Harry I. Freund c/o Balfour Investors, Inc. 620 Fifth Avenue Rockefeller Center New York, NY 10111 2,104,022(2) 12.6% Jay S. Goldsmith c/o Balfour Investors, Inc. 620 Fifth Avenue Rockefeller Center New York, NY 10111 2,105,522(3) 12.6% Base Assets Trust 11400 West Olympic Boulevard Los Angeles, CA 90064 979,353(4) 6.1% R. Weil & Associates, L.P., Appleton Associates L.P. and Ralph Weil c/o R. Weil & Associates 2 Crossfield Avenue West Nyack, NY 10994 1,731,900(5) 11.6% Foreign & Colonial Management Limited and Hypo Foreign & Colonial Management (Holdings) Limited Exchange House Primrose Street London EC2 ANY, England 1,233,750(6) 8.2% (1) Calculated in accordance with Rule 13d-3 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. (2) Includes shares of Common Stock which may be acquired by Mr. Freund within 60 days as follows: 500,000 shares through the exercise of stock options and l,064,960 shares through the exercise of stock purchase warrants. Also includes 314,125 shares that may be deemed to be owned beneficially by Mr. Freund which are held by Balfour Investors Inc. ("Balfour") for its clients in discretionary accounts, as to which Mr. Freund disclaims beneficial ownership. Messrs. Freund and Goldsmith are Chairman and President, respectively, and the only shareholders of Balfour. The discretionary clients of Balfour have the sole power to vote and direct the vote of the shares held in their account. Balfour and its discretionary clients have shared power to dispose of or direct the disposition of the shares held in such clients' accounts. At present, Balfour has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of the Company's Common Stock for all of its discretionary clients. Also includes options to purchase 200,000 shares of Common Stock held by Mr. Freund, the expiration of which has been extended by five years to April 12, 2000. (3) Includes shares of Common Stock which may be acquired by Mr. Goldsmith within 60 days as follows: 500,000 shares through the exercise of stock options and 1,034,240 shares through the exercise of stock purchase warrants. Also includes 1,500 shares of Common Stock and 30,720 shares which may be acquired through the exercise of stock purchase warrants over which Mr. Goldsmith has shared voting and investment power but as to which he disclaims any beneficial interest, and includes 314,125 shares that may be deemed to be owned beneficially by Mr. Goldsmith which are held by Balfour for its clients in discretionary accounts as to which Mr. Goldsmith disclaims beneficial ownership (see Note 2 above). Also includes options to purchase 200,000 shares of Common Stock held by Mr. Goldsmith, the expiration of which has been extended by five years to April 12, 2000. (4) Represents warrants to purchase 979,353 shares of Common Stock owned by the Base Assets Trust - Richard D. Baum, Trustee, Wilbert F. Schwartz, Trustee and Thomas Arnold, Trustee. This information is based on a statement on Schedule 13G filed with the Securities and Exchange Commission by Base on February 13, 1996. On April 15, 1996, the Company and Base amended the terms of the warrants to make them exercisable for 40,000 shares of Common Stock without consideration. On such date, Base exercised the warrants and purchased 40,000 shares of Common Stock. Base has shared power to vote and direct the vote and shared power to dispose or to direct the disposition of the shares. (5) Based on a statement on Schedule 13D filed with the Securities and Exchange Commission on August 31, 1995. Includes 1,673,700 shares owned by a group consisting of R. Weil & Associates L.P., Appleton Associates L.P. and Ralph Weil. These parties affirm that there is no formal arrangement among them or among any of the other persons or entities named in the Schedule 13D with respect to the Common Stock of the Company. Mr. Weil has the power to vote and direct the vote and the power to dispose or to direct the disposition of these shares. Also includes 58,200 shares as to which Mr. Weil has shared voting and disposition power but as to which he disclaims any beneficial interest. (6) Based on a statement on Schedule 13G filed with the Securities and Exchange Commission on February 3, 1995. Foreign & Colonial Management Limited and Hypo Foreign & Colonial Management (Holdings) Limited have shared power to vote and direct the vote and shared power to dispose or to direct the disposition of such shares. Security Ownership of Management The following information is furnished as of February 15, 1996 with respect to each class of equity securities of the Company beneficially owned by all directors and nominees, and by all directors, nominees and officers as a group. The information concerning the directors, nominees and officers and their security holdings has been furnished by them to the Company. Name Position Beneficial Ownership of Shares of Common Stock as of February 15, 1996(1) Percent of Class(1) Harry I. Freund Director and Chairman of the Board 2,104,022(2) 12.6% Jay S. Goldsmith Director and Vice Chairman of the Board 2,105,522(3) 12.6% James J. Weis President, Chief Executive Officer and Director 284,500(4) 1.9% Clifford B. Cohn Director 234,070(5) 1.5% David L. Herman Director 311,200(6) 2.0% L.G. Schafran Director 292,690(7) 1.9% Antonio L. DeLise Vice President, Chief Financial Officer and Secretary 25,000(8) Less than 1% All directors, nominees and officers as a group (7 persons) 5,357,004(9) 27.4% (1) Calculated in accordance with Rule 13d-3 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. (2) See Note 2 on page 2. (3) See Note 3 on page 2. (4) Includes 280,000 shares which may be acquired by Mr. Weis within 60 days through the exercise of stock options. (5) Includes 220,000 shares which may be acquired by Mr. Cohn within 60 days through the exercise of stock options. (6) Includes shares of Common Stock which may be acquired by Mr. Herman within 60 days as follows: 210,000 shares through the exercise of stock options and 51,200 shares through the exercise of stock purchase warrants. (7) Includes shares of Common Stock which may be acquired by Mr. Schafran within 60 days as follows: 220,000 shares through the exercise of stock options and 10,240 shares through the exercise of stock purchase warrants. Also includes 11,250 shares of Common Stock and 51,200 shares that may be acquired through the exercise of stock purchase warrants over which Mr. Schafran has shared voting and investment power but as to which he disclaims any beneficial interest. (8) Consists of shares which may be acquired by Mr. DeLise within 60 days through the exercise of stock options. (9) Includes shares of Common Stock which may be acquired by such persons within 60 days as follows: 1,955,000 shares through the exercise of stock options and 2,242,560 shares through the exercise of stock purchase warrants. Also includes options to purchase 400,000 shares of Common Stock held by Messrs. Freund and Goldsmith, the expiration of which has been extended by five years to April 12, 2000. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See Item 11 - Executive Compensation for information with respect to transactions required by this item. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements, Financial Statement Schedules and Exhibits. 1) Financial Statements - See accompanying Index to Consolidated Financial Statements and Schedules, Page F-1. 2) Financial Statement Schedules - See accompanying Index to Consolidated Financial Statements and Schedules, Page F-1. 3) Exhibits: 3.1 Amended and Restated Articles of Incorporation, dated March 27, 1984. ** 3.2 Amendment to the Amended and Restated Articles of Incorporation, dated December 26, 1986. ** 3.3 Amendment to the Amended and Restated Articles of Incorporation, dated December 22, 1988. ** 3.4 By-Laws as amended through July 17, 1990. Incorporated by reference from the Registrant's Form 10-K for the year ended December 31, 1990, dated March 28, 1991. 3.5 Certificate of Designation, Preferences and Rights of Class A Preferred Stock, First Series. Incorporated by reference from the Registrant's Registration Statement on Form 8-A, dated September 26, 1988. 4.1 Form of option to purchase common stock of the Registrant issued in connection with the Stock Purchase Agreement dated April 12, 1985, among the Registrant, Balfour Securities Corporation and the Purchasers. On March 8, 1995, the Registrant's Board of Directors extended the term of the options until April 12, 2000.****** 4.2 Form of Indenture, dated 1986 between the Registrant and J. Henry Schroder Bank & Trust Company, as Trustee. * 4.3 First supplemental indenture, dated as of January 27, 1988, between the Registrant and IBJ Schroder Bank & Trust Company, Trustee.****** 4.4 Second supplemental indenture, dated as of April 1, 1993, between the Registrant and IBJ Schroder Bank & Trust Company, as Trustee.****** 4.5 Third supplemental indenture, dated September 1, 1995, between the Registrant and IBJ Schroder Bank & Trust Company, as trustee. Filed herewith. 4.6 Form of Warrant Agreement, dated 1986 between the Registrant J. Henry Schroder Bank & Trust Company, as Warrant Agent. On September 3, 1991, the Company's Board of Directors extended the term of the outstanding warrants to December 15, 1996. * 4.7 Form of Warrant Agreement, dated 1986 between the Registrant and Drexel Burnham Lambert Incorporated. On September 3, 1991, the Company's Board of Directors extended the term of the outstanding warrants to December 15, 1996.* 4.8 Rights Agreement, dated as of August 9, 1988, between the Registrant and Mellon Financial Services Corporation #17, as Rights Agent. Incorporated by reference from the Registrant's Registration Statement on Form 8-A, dated September 26, 1988. 4.9 Loan and Security Agreement, dated October 11, 1995, by and between Congress Financial Corporation (New England) and the Company's subsidiaries as Borrowers.******* 4.10 Term Promissory Notes dated October 11, 1995, from the Company's subsidiaries as Debtors and Congress Financial Corporation (New England) in the aggregate amount of $2,149,000.******* 4.11 Guarantee dated October 11, 1995, by Publicker Industries Inc. to Congress Financial Corporation (New England) of the obligations of the Company's subsidiaries under the Financing Agreements.******* 4.12 General Security Agreement dated by October 11, 1995 by Publicker Industries Inc. in favor of Congress Financial Corporation (New England).******* 10.1 Agreements dated as of August 1987 between the Registrant and Harry I. Freund, Jay S. Goldsmith, David L. Herman, and James J. Weis concerning a change in control of the Registrant. Incorporated by reference from the Registrant's Form 8 Amendment to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1987, dated December 7, 1987, filed on December 18, 1987. 10.2 Publicker Industries Inc. 1988 Stock Option Plan. *** 10.3 Publicker Industries Inc. 1989 Stock Option Plan. **** 10.4 Publicker Industries Inc. 1991 Stock Option Plan. **** 10.5 Employment Agreement between the Registrant and Mr. James J. Weis dated February 17, 1987. **** 10.6 Publicker Industries Inc. 1993 Long-Term Incentive Plan. ***** 10.7 Publicker Industries Inc. Non-employee Director Stock Option Plan. ***** 10.8 Asset Purchase Agreement between Associated Testing Laboratories, Inc., the Registrant and F.W. Bell, Inc. dated January 31, 1995, and exhibits thereto.****** 10.9 Asset Purchase Agreement among Bright Star Industries, Incorporated, Hanten Acquisition Co., Registrant, as sellers, and Bright Star Acquisition Corp., as buyer, dated February 16, 1996.******** 10.10 Consulting Arrangement between the Registrant and Harry I. Freund and Jay S. Goldsmith. Filed herewith. 21 Subsidiaries of Registrant. Filed herewith. 23 Consent letter from Independent Public Accountants. Filed herewith. (b) Reports on Form 8-K During the fourth quarter of 1995, the Company filed one report on Form 8-K dated October 23, 1995, relating to a credit agreement with Congress Financial Corporation (New England) which was entered into by the Company's subsidiaries on October 11, 1995. * Incorporated by reference from the Registrant's Registration Statement on Form S-1, dated October 8, 1986. ** Incorporated by reference from the Registrant's Form 10-K for the year ended December 31, 1988, dated March 30, 1989. *** Incorporated by reference from the Registrant's Registration Statement on Form S-8 (File No. 33-26386), dated January 16, 1989. **** Incorporated by reference from the Registrant's Form 8 Amendment to the Registrant's Form 10-K for the fiscal year ended December 31, 1991, filed on August 14, 1992. ***** Incorporated by reference from the Registrant's Form 10-K for the year ended December 31, 1993, dated March 29, 1994. ****** Incorporated by reference from the Registrant's Form 10-K for the year ended December 31, 1994, dated March 31, 1995. ******* Incorporated by reference from the Registrant's Form 8-K dated October 23, 1995. ******** Incorporated by reference from the Registrant's Form 8-K dated March 1, 1996. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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. PUBLICKER INDUSTRIES INC. (Registrant) Date March 14, 1996 By: /s/ JAMES J. WEIS James J. Weis, President, Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date March 14, 1996 By: /s/ JAMES J. WEIS James J. Weis, President, Chief Executive Officer and Director Date March 14, 1996 By: /s/ ANTONIO L. DELISE Antonio L. DeLise, Vice President, Chief Financial Officer, Secretary and Principal Financial and Accounting Officer Date March 14, 1996 By: /s/ CLIFFORD B. COHN Clifford B. Cohn, Director Date March 14, 1996 By: /s/ HARRY I. FREUND Harry I. Freund, Director Date March 14, 1996 By: /s/ JAY S. GOLDSMITH Jay S. Goldsmith, Director Date March 14, 1996 By: /s/ DAVID L. HERMAN David L. Herman, Director Date March 14, 1996 By: /s/ L. G. SCHAFRAN L. G. Schafran, Director PUBLICKER INDUSTRIES INC. AND SUBSIDIARY COMPANIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE Report of independent public accountants F-2 Consolidated balance sheets as of December 31, 1995 and 1994 F-3 Consolidated statements of income (loss) for the years ended December 31, 1995, 1994 and 1993 F-4 Consolidated statements of shareholders' equity for the years ended December 31, 1995, 1994 and 1993 F-5 Consolidated statements of cash flows for the years ended December 31, 1995, 1994 and 1993 F-6 Notes to consolidated financial statements F-7 through F-15 Schedule Report of independent public accountants on schedule F-16 Schedule II -Valuation and qualifying accounts F-17 All other schedules required by Regulation S-X have been omitted because they are not applicable or because the required information is included in the financial statements or notes thereto. PUBLICKER INDUSTRIES INC. AND SUBSIDIARY COMPANIES REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Publicker Industries Inc.: We have audited the accompanying consolidated balance sheets of Publicker Industries Inc. (a Pennsylvania corporation) and subsidiary companies as of December 31, 1995 and 1994, and the related consolidated statements of income (loss), shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Publicker Industries Inc. and subsidiary companies as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Arthur Andersen LLP Stamford, Connecticut February 26, 1996 PUBLICKER INDUSTRIES INC. AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1995 AND 1994 1995 1994* (in thousands of dollars) ASSETS Current assets: Cash, including short-term investments of $5,470 in 1994 (Note 1) $ 874 $ 6,274 Restricted cash (Note 11) 4,500 - Trade receivables, less allowance for doubtful accounts (1995 -$239; 1994 - $352) (Note 1) 8,931 9,638 Inventories (Note 1 and 3) 7,286 6,874 Net assets of discontinued operations (Note 2) 4,579 6,957 Other 895 798 Total current assets 27,065 30,541 Property, plant and equipment (Note 1): Land 731 398 Buildings and leasehold improvements 3,609 1,811 Machinery and equipment 6,962 5,848 Less - accumulated depreciation (3,595) (2,605) 7,707 5,452 Goodwill (Note 1) 7,861 7,790 Other assets (Note 7) 2,557 1,517 $ 45,190 $ 45,300 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt (Note 4) $ 11,235 $ 9,684 Trade accounts payable 6,240 5,603 Accrued liabilities (Notes 7 and 11) 15,378 8,338 Total current liabilities 32,853 23,625 Long-term debt (Note 4) 3,458 7,753 Other non-current liabilities (Notes 7 and 11) 11,473 16,538 Total liabilities 47,784 47,916 Shareholders' equity (Notes 5 and 8): Common shares, $0.10 par value, Authorized, 30,000,000 shares Issued - 15,405,937 shares in 1995 and 14,950,937 in 1994 1,541 1,495 Additional paid-in capital 42,488 41,942 Accumulated deficit (since January 1, 1984) (42,732) (42,441) Common shares held in treasury, at cost - 545,027 in 1995 and 418,837 shares in 1994 (3,891) (3,612) Total shareholders' equity (2,594) (2,616) $ 45,190 $ 45,300 *Restated for discontinued operations (Note 2). The accompanying notes to consolidated financial statements are an integral part of these balance sheets. These financial statements have been prepared from the Company's books and records, after making all necessary adjustments thereto, and they represent the final statements for the period under examination Antonio L. DeLise, Vice President & Chief Financial Officer PUBLICKER INDUSTRIES INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994* 1993* (in thousands except per share data) Sales and revenues: Sales of goods $56,014 $ 52,578 $ 46,654 Revenues from services 10,276 11,884 9,972 66,290 64,462 56,626 Costs and expenses: Cost of sales 41,271 42,273 37,473 Cost of services 7,238 7,619 6,291 Selling expenses 4,219 4,244 3,582 General and administrative expenses 11,319 10,201 9,653 64,047 64,337 56,99 Income (loss) from operations 2,243 125 (373) Other (income) expenses: Interest income (138) (309) (287) Interest expense 2,181 3,063 3,547 Cost of pensions - nonoperating (Note 7) 744 768 776 Legal settlements and costs (Note 11) 365 507 14,791 Gain from repurchase of notes (Note 4) (75) (640) (370) 3,077 3,389 18,457 Income (loss) from continuing operations (834) (3,264) (18,830) Discontinued operations (Note 2): Income (loss) from discontinued operations 543 975 1,076 Gain on sale or other disposition of discontinued operations - net - - 8,307 Net income (loss) $ (291) $ (2,289) $ (9,447) Earnings (loss) per common share (Note 1): ontinuing operations $ (.06) $ (.22) $ (1.30) Discontinued operations .04 .07 .65 $ (.02) $ (.15) $ (.65) * Restated for discontinued operations (Note 2). The accompanying notes to consolidated financial statements are an integral part of these statements. PUBLICKER INDUSTRIES INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (in thousands of dollars except share data) Common Shares Additional Accumulated Common Share- Shares Paid-in Deficit Treasury holders' Issued AmountCapital Since 1-1-84 Shares Equity Balance - December 31, 1992 14,909,937 $1,491 $41,908 $(30,705) $(3,612) $ 9,082 Issuance of Common Shares 27,000 3 22 - - 25 Net income (loss) - - - (9,447) - (9,447) Balance-December 31,1993 14,936,937 1,494 41,930 (40,152)(3,612) (340) Issuance of Common Shares 14,000 1 12 - - 13 Net income (loss - - - (2,289) - (2,289) Balance-December 31,1994 14,950,937 1,495 41,942 (42,441) (3,612) (2,616) Issuance of Common Shares 455,000 46 546 - - 592 Repurchase of Common Shares - - - - (279) (279) Net income (loss) - - - (291) - (291) Balance-December 31,1995 15,405,937 $1,541 $42,488 $(42,732) $(3,891) $(2,594) (1) Represents common shares held in treasury of 545,027 at December 31, 1995 and 418,837 at December 31, 1994, 1993 and 1992. The accompanying notes to consolidated financial statements are an integral part of these statements. PUBLICKER INDUSTRIES INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994* 1993* (in thousands) Cash flows from operating activities: Income (loss) from continuing operations $ (834) $(3,264) $ (18,830) Adjustments to reconcile income (loss) to net cash provided by (used in) continuing operations: Depreciation and amortization 1,508 1,382 1,202 Provision for doubtful accounts 80 483 183 Gain from repurchase of notes (75) (640) (370) Provision for settlement of environmental litigation - - 14,350 Changes in operating assets and liabilities: Decrease (increase) in restricted cash (4,500) - - Decrease (increase) in trade receivables 627 (1,666) (1,466) Decrease (increase) in inventories (412) 660 (148) Decrease (increase) in other current assets (97) 296 164 Decrease (increase) in other assets (1,441) 790 (963) Increase (decrease) in trade accounts payable 637 404 1,190 Increase (decrease) in accrued liabilities 7,040 3,961 182 Increase (decrease) in other non-current liabilities (5,065) (5,055) 691 Net cash provided by (used in) continuing operations (2,532) (2,649) (3,815) Income (loss) from discontinued operations 543 975 9,383 Adjustments to reconcile income to net cash provided by (used in) discontinued operations: Gain on sale or other disposition of discontinued operations - - (8,307) Decrease (increase) in net assets of discontinued operations (525) 26 (501) Net cash provided by (used in) discontinued operations 18 1,001 575 Net cash provided by (used in) operating activities (2,514) (1,648) (3,240) Cash flows from investing activities: Proceeds from sale or other disposition of discontinued operations 2,240 2,010 16,844 Capital expenditures (3,368 (1,570) (1,107) Net cash provided by (used in) investing activities (1,128) 440 15,737 Cash flows from financing activities: Repurchase or redemption of 13% Subordinated Notes(7,425)(6,774) (3,330) Borrowings under revolving credit lines 1,475 2,027 - Proceeds from issuance of term loans and notes payable 4,163 634 - Repayment of term loans and notes payable (284) (93) - Proceeds from the issuance of common shares 592 13 25 Purchase of treasury stock (279) - - Net cash provided by (used in) financing activities(1,758)(4,193) (3,305) Net increase (decrease) in cash (5,400) (5,401) 9,192 Cash - beginning of period 6,274 11,675 2,483 Cash - end of period $ 874 $ 6,274 $11,675 * Restated for discontinued operations (Note 2). The accompanying notes to consolidated financial statements are an integral part of these statements. Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The consolidated financial statements include the accounts of Publicker Industries Inc. ("the Company") and its wholly-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Certain prior year amounts have been reclassified to conform with the 1995 presentation. Short-term investments Short-term investments consist of certain liquid instruments with maturities less than three months including U.S. Treasury obligations, repurchase agreements and money market funds and are stated at cost which approximates market value. Inventories Inventories are recorded at cost, determined on a first-in, first-out, or FIFO, basis and do not exceed net realizable values. Depreciation and amortization Property, plant and equipment are stated at cost. Improvements and replacements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Maintenance and repairs totaled approximately $481,000, $603,000 and $576,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Depreciation and amortization is computed using the straight-line method over estimated useful lives of 3 to 10 years for machinery and equipment and 7 to 40 years for buildings and leasehold improvements. The costs of issuing the Company's 13% Subordinated Notes are amortized over the term of the notes. Goodwill is amortized on a straight-line basis over a forty-year period. Accumulated amortization was $759,000 and $535,000 as of December 31, 1995 and 1994, respectively. At each balance sheet date, the Company evaluates the realizability of goodwill based upon expectations of non-discounted cash flows and operating income for each subsidiary having a material goodwill balance. Based upon its most recent analysis, the Company believes that no material impairment of goodwill exists at December 31, 1995. Revenue Recognition Revenues are generally recorded when title passes to the customer. One of the Company's businesses performs services under long-term contracts. Revenues on long-term contracts are recognized under the percentage-of-completion method of accounting. The percentage-of-completion method of reporting income from contracts takes into account the cost, estimated earnings and revenue to date on contracts not yet completed. The amount of revenue recognized is the portion of the total contract price that the cost expended to date bears to the anticipated final total cost, based on current estimates of costs to complete. Contract cost includes all materials, labor, overhead and subcontract costs related to the projects. In the event a loss on a contract is anticipated, such losses are recorded in full as they are identified. As of December 31, 1995 and 1994, net costs and estimated earnings in excess of billings on uncompleted contracts, which have been reflected as trade receivables, totaled approximately $600,000 and $1,300,000, respectively, all of which are expected to be billed and collected within one year. Net costs and estimated earnings in excess of billings are billable based on the terms of the contract which may include shipment of the Company's product, achievement of contractual milestones or completion of the contract. Use of Estimates The preparation of these financial statements required the use of certain estimates by management in determining the entity's assets, liabilities, revenues and expenses. While all available information has been considered, actual amounts could differ from those reported. The most significant estimate with regard to these financial statements relates to the revenue recognition on long-term contracts. Cash Flow Information Cash paid for interest during 1995, 1994 and 1993 was approximately $2,100,000, $2,900,000 and $3,351,000, respectively. No income taxes were paid in 1995 and 1994. Cash paid for income taxes during 1993 was approximately $171,000, which amount was refunded in 1994. Earnings (loss) per common share Earnings (loss) per common share is computed using the weighted average number of shares outstanding during each year (14,760,586 in 1995, 14,523,485 in 1994 and 14,507,023 in 1993). The effect of stock options and warrants on the computations for 1995, 1994 and 1993 were not included as they were antidilutive. Note 2 - DISCONTINUED OPERATIONS On February 16, 1996, the Company sold substantially all of the assets of Bright Star Industries, Incorporated for $5,500,000 in cash, plus the assumption of certain liabilities. In January 1995, the Company sold substantially all of the assets of Associated Testing Laboratories, Inc. for $2,240,000 in cash, plus the assumption of certain liabilities. In April 1993, the Company sold substantially all the assets of American Cryogas Industries, Inc. for $14,000,000 in cash, plus the assumption of certain liabilities. This transaction resulted in a pretax gain of $9,397,000. In March 1994, the Company sold substantially all the assets of Douglas-Randall, Inc. and subsequently collected its accounts receivable for an aggregate proceeds of approximately $831,000. In October 1994, the Company sold Chatas Glass Company, Inc. and subsequently collected its accounts receivable for an aggregate proceeds of approximately $290,000. In connection with the Company's plans to sell or otherwise dispose of certain businesses, during 1993 the Company recorded a provision for disposition of $1,800,000 to reduce the net assets of discontinued operations to their estimated net realizable values and to accrue for anticipated phase-out period losses. As of December 31, 1995 and 1994, the Company's net investment in its discontinued operations was included in current assets. In connection with the 1988 disposition of the Company's U.K. Beverage Division, the Company received amounts totaling $889,000 during 1994 and $2,598,000 during 1993. As a result, the carrying value of other assets held for disposition was reduced to zero and $889,000 and $710,000 were recognized as gains from discontinued operations during 1994 and 1993, respectively. Net sales of discontinued operations for 1995, 1994 and 1993 were $11,196,000, $17,596,000 and $28,617,000, respectively. Note 3 - INVENTORIES Inventories at December 31, 1995 and 1994 consisted of the following: 1995 1994 (in thousands) Raw materials and supplies $ 3,864 $ 3,930 Work in process 1,384 1,488 Finished goods 2,038 1,456 $ 7,286 $ 6,874 Note 4 - DEBT Debt at December 31, 1995 and 1994 consisted of the following: 1995 1994 (in thousands) Subordinated notes - 13%1 $ 7,500 $ 15,000 Subordinated notes - unamortized discount2 (65) (131) Credit Agreements3: Revolving credit line 3,502 2,027 Term loans 2,076 - Note payable4 1,600 - Term loans5 744 541 $ 15,357 $ 17,437 Continuing operations: Current maturities, including revolving credit line $ 11,235 $ 9,684 Long-term debt 3,458 7,753 14,693 17,437 Discontinued operations 664 - $ 15,357 $ 17,437 (1)In December 1986, the Company issued $30 million of 13% Subordinated Notes. The notes may be redeemed at the option of the Company, in whole or in part, at 100% of face value. Interest is payable semiannually. Annual sinking fund payments of 25% of the principal amount of notes originally issued are required commencing December 15, 1993. Through December 31, 1995, the Company had repurchased or redeemed a total of $22,500,000 of the notes, leaving a remaining balance outstanding of $7,500,000. The notes are subordinated to all senior debt (as defined) of the Company. The Indenture, under which the notes were issued, containsvarious restrictive covenants which include, among other things, restrictions on the payment of dividends or distributions to its shareholders (no such cash payments or distributions may be made as of December 31, 1995) and the maintenance of minimum consolidated net worth (as defined) of at least $8 million. If the Company's consolidated net worth (as defined) at the end of any two consecutive fiscal quarters declines to less than $8 million, the Company would be required to make an offer to purchase, on the last day of the fiscal quarter next following such second fiscal quarter, 25% of the aggregate principal amount of the notes then outstanding at a purchase price equal to 100% of their principal amount plus accrued interest. The definition of consolidated net worth excludes costs incurred in connection with the settlement of the Company's environmental litigation. Accordingly, as of December 31, 1995, consolidated net worth (as defined) amounted to approximately $12 million. (2)The original issue discount in connection with the subordinated notes is being amortized on a level yield basis over the term of the notes. (3) On October 11, 1995, the Company's five operating subsidiaries entered into a three year $17,060,000 credit agreement ("Loan Agreement"). The Loan Agreement provides for a $13,161,000 revolving credit line ("Revolver"), $2,149,000 of term promissory notes ("Term Notes") and a $1,750,000 credit facility for future capital expenditure financing. The Loan Agreement is secured by substantially all of the Company's assets and bears interest at a rate of one and one-half percent (1-1/2%) in excess of the prime rate. The Revolver allows the Company to borrow up to $13,161,000, based upon eligible accounts receivable and inventories, as defined. Letters of credit of up to $1,000,000 may be issued under the Revolver ($400,000 outstanding at December 31, 1995). As of December 31, 1995, borrowing availability under the Revolver amounted to $4,951,000. A fee of one quarter of one percent (1/4%) is charged on the unused portion of the Revolver. The Term Notes amortize on a sixty month straight-line basis with a final payment due on the termination of the Loan Agreement. The Loan Agreement and related documents contain certain covenants including, among others, maintenance of minimum working capital and adjusted net worth (as defined). In the event the Loan Agreement is repaid before maturity, the Company must pay a prepayment penalty equal to 3% in year one, 2% in year two and 1% in year three of the total credit facility. The initial drawdown under the Loan Agreement of $7,449,000, together with existing cash, was used to extinguish a revolving credit facility at one of the Company's subsidiaries of $762,000 and to repurchase $7,500,000 face value of 13% Subordinated Notes for $7,425,000 plus accrued interest. The repurchase of the 13% Subordinated Notes satisfied the annual sinking fund payment due December 15, 1995. The $75,000 gain on the repurchase was recorded in the fourth quarter of 1995. (4)On December 21, 1995, the Company entered into a $1,600,000 seller provided note payable in connection with the purchase of a building and land in Chester, Connecticut. The note amortizes on a 120 month straight-line basis, is secured by the building and land and bears a 9% interest rate. (5) During 1995 and 1994, the Company entered into several term loans for the purpose of financing the acquisition of capital equipment. These loans mature serially through 1999 and are secured by the underlying machinery and equipment. At December 31, 1995, the average interest rate on these loans was 10.25%. The annual maturities of the Company's long-term debt are as follows (amounts in thousands): Year 1996 $ 11,899 1997 821 1998 1,365 1999 136 2000 147 Thereafter 989 $ 15,357 Note 5 - PREFERRED SHARES The Company has 1,000,000 shares of authorized and unissued Class A Preferred Stock, without par value. On August 9, 1988, the Company declared a dividend of one Right for each outstanding share of its common stock. Each Right entitles the holder to purchase one one-hundredth of a share of a new series of Class A Preferred Stock at an exercise price of $7.50, subject to adjustment to prevent dilution. The Rights become exercisable 10 days after a person or group acquires 20% or more of the Company's common stock or announces a tender or exchange offer for 30% or more of the Company's common stock. If, after the Rights become exercisable, the Company is party to a merger or similar business combination transaction, each Right not held by a party to such transaction may be used to purchase common stock having a market value of two times the exercise price. The Rights, which have no voting power, may be redeemed by the Company at $.01 per Right and expire on August 8, 1998. Note 6 - INCOME TAXES As of December 31, 1995, approximately $105,000,000 of U.S. tax loss carryforwards (subject to review by the Internal Revenue Service), expiring from 1996 through 2010, were available to offset future taxable income. The carryforwards expire as follows (amounts in thousands): Year 1996 $ 10,700 1997 9,400 1998 8,400 1999 8,600 2000 11,700 2001-2010 56,200 $ 105,000 In addition, approximately $1,600,000 of unused investment tax credits were available to offset future federal income taxes payable through 2001. As a result of a corporate revaluation during 1984, tax benefits resulting from the utilization in subsequent years of net operating losses and other investment tax credit carryforwards existing as of the date of the corporate revaluation will be excluded from the results of operations and directly credited to additional paid-in capital when realized. As of December 31, 1995, approximately $28,000,000 of the Company's U.S. tax loss carryforwards and approximately $1,600,000 of unused investment tax credits predated the corporate revaluation. As of December 31, 1995, deferred tax assets of approximately $38,000,000 relating to the tax benefit of the Company's U.S. tax loss carryforwards and unused investment tax credits were offset by a full valuation allowance. As of December 31, 1995, approximately $12,000,000 of deferred tax assets predated the corporate revaluation. Subsequent adjustments to the valuation allowance with respect to such deferred tax assets would be directly credited to additional paid-in capital. The income tax provision and effective tax rate were zero in 1995, 1994 and 1993 because the tax benefit associated with the Company's operating losses were offset in full by an increase in the valuation allowance. Note 7 - PENSIONS The Company and its subsidiaries maintain 401(k) plans for substantially all of the Company's domestic non-union employees. The Company also contributes to multi-employer pension plans for certain union employees. The Company sponsors several defined benefit pension plans which have been terminated or frozen over the past several years. These actions did not have any material effect on the Company's financial statements. The assets of the Company's 401(k) plans are held by outside fund managers and are invested in accordance with the instructions of the individual plan participants. The assets of the defined benefit pension plans are managed by outside trustees and consist primarily of guaranteed investment contracts, group annuity contracts with insurance companies and pooled investment funds. The Company's contributions to 401(k) plans totaled $341,000, $203,000 and $175,000 in 1995, 1994 and 1993, respectively. Total consolidated pension expense associated with defined benefit pension plans and multi-employer pension plans was $843,000, $1,045,000 and $1,022,000 in 1995, 1994 and 1993, respectively. Consolidated pension expense includes amounts related to discontinued product lines and related plant closings in prior years totaling $744,000, $768,000 and $776,000 in 1995, 1994 and 1993, respectively. Net periodic pension cost for Company sponsored plans for 1995, 1994 and 1993 included the following components: 1995 1994 1993 (in thousands) Service cost - benefits earned during the year$ - $ 194 $ 284 Interest cost on projected benefit obligation 815 983 1,438 Actual return on plan assets (305) (559) (1,090) Net amortization and deferral 221 302 249 Net periodic pension cost $ 731 $ 920 $ 881 The following table sets forth the plans' estimated funded status at December 31, 1995 and 1994. 1995 1994 (in thousands) Accumulated vested benefit obligation $ 17,128 $ 18,989 Projected benefit obligation $ 17,128 $ 20,218 Plan assets at fair value 9,924 13,065 Projected benefit obligation (in excess of) less than plan assets (7,204) (7,153) Unrecognized net (gain) loss (1,011) (1,641) Unrecognized net obligation at January 1, 1986, net of amortization 2,388 2,689 Adjustment to recognize minimum pension liability (1,376) (823) Recorded pension asset (liability) $ (7,203) $ (6,928) Assumptions used in the accounting for pension plans in 1995, 1994 and 1993 were as follows: 1995 1994 1993 Discount rate 7.25% 8.0% 7.0% Rate of increase in compensation levelsN/A 4.0% 4.0% Expected long-term rate of return on assets 8.0% 8.0% 8.0% As of December 31, 1995, the Company had accrued pension liabilities of $7,203,000, of which $1,268,000 was included in accrued liabilities and $5,935,000 was included in other noncurrent liabilities. As of December 31, 1994, accrued pension liabilities were $7,074,000, of which $741,000 was included in accounts payable and accrued liabilities and $6,333,000 was included in other noncurrent liabilities. The Company also had included in accrued liabilities, accrued payroll and other employment related accruals of approximately $3,486,000 and $1,836,000 as of December 31, 1995 and 1994, respectively. Note 8 - STOCK OPTIONS AND WARRANTS Under the stock option plans for directors, officers and key employees adopted by shareholders of the Company, the Company was authorized to grant nonqualified stock options to purchase shares of common stock. The plans are administered by the Board of Directors of the Company. Subject to the express provisions of the plans, the Board has full and final authority to determine the terms of options granted to key employees under the plans including (a) the purchase price of the shares covered by each option, (b) whether any payment will be required upon grant of the option, (c) the individuals to whom, and the time at which, options shall be granted, (d) the number of shares to be subject to each option, (e) when an option can be exercised and whether in whole or in installments, (f) whether the options are immediately transferable, (g) whether the exercisability of the options is subject to risk of forfeiture or other condition and (h) whether the stock issued upon exercise of an option is subject to repurchase by the Company, and the terms of such repurchase. During 1993, the Company adopted and the shareholders subsequently approved the 1993 Long-Term Incentive Plan and the Non-employee Director Stock Option Plan under which the Company may grant stock options, restricted stock options, stock appreciation rights, performance awards and other stock-based awards equivalent to up to 3,550,000 shares of common stock. The term of the options granted during 1995, 1994 and 1993 was five years from the date of grant and such options were immediately exercisable. The exercise price of each option granted was equal to the market price of the Company's common stock on the date of grant. Additional grants may be made under the 1993 Long-Term Incentive Plan within 10 years from June 1993. Under the Non-employee Director Stock Option Plan, on July 1 of each year commencing July 1994, the Chairman of the Board and the Vice Chairman of the Board shall each automatically receive an option to purchase for five years 125,000 shares of Common Stock and each other non-employee director shall automatically receive an option to purchase for five years 30,000 shares of Common Stock. Transactions for 1995, 1994 and 1993 were as follows: 1995 1994 1993 Options outstanding at January 1 1,760,000 1,751,000 1,799,583 Granted 569,500 490,000 574,000 Exercised (255,000) (14,000) (27,000) Canceled (6,000) (467,000) (595,583) Options outstanding at December 31 2,068,500 1,760,000 1,751,000 Option price range at December 31 $.875 to $1.875 $.875 to $1.625 $.875 to $2.81 Options exercisable at December 31 2,068,500 1,760,000 1,751,000 Options available for grant at December 31 1,997,500 2,570,000 3,060,000 In December 1990, pursuant to an employment agreement with an officer, the Company issued options to buy 200,000 shares of the Company's common stock at a price of $1.375 per share for five years. These options were exercised in 1995. In April 1985, the Company issued 1.6 million shares of common stock at $2.50 per share in a private placement. Under the terms of this agreement, the agent for the purchasers received options to buy 400,000 shares of the Company's common stock held in treasury at a price of $2.50 per share for five years, which period was subsequently extended by ten years. In December 1986, the Company issued $30 million of 13% Subordinated Notes (see Note 4) together with detachable warrants to purchase 3,600,000 shares of the Company's common stock at $3.50 per share for five years, which period was subsequently extended by five years. In addition, the Company issued 1,200,000 Underwriter's Warrants to purchase the Company's common stock at $3.50 for five years, which period was subsequently extended by five years. The estimated fair market value of the warrants at the date of issue of $2,208,000 was recorded as an increase to additional paid-in capital, as debt discount to the 13% Subordinated Notes and as debt issuance costs. As a result of the issuance of certain stock options during 1987, effective September 22, 1987, the warrant price was reduced to $3.42 and the number of shares purchasable with each warrant was increased to 1.024 in accordance with the terms of the warrant agreement. On December 15, 1987, in accordance with the automatic reset provisions of the warrant agreement, the warrant price was reduced to $1.95 per share. During 1989, 1,586,550 warrants were exercised primarily through the surrender of 13% Subordinated Notes. As of December 31, 1995, a total of 3,213,450 warrants were outstanding entitling the warrant holders to purchase an aggregate of 3,290,575 shares of common stock at an exercise price of $1.95 per common share. Note 9 - LEASES The Company leases certain property and equipment including manufacturing and office space, vehicles, manufacturing equipment and office equipment under operating leases that expire over the next eleven years. Certain of these operating leases provide the Company with the option, after the initial lease term, to either purchase the property or renew the lease. Minimum payments for operating leases having initial or remaining noncancelable terms in excess of one year are as follows (amounts in thousands): Year 1996 $ 1,727 1997 1,578 1998 1,510 1999 1,423 2000 1,416 Remainder 5,355 Total minimum lease payments $ 13,009 Total rent expense for all operating leases amounted to approximately $2,005,000 in 1995, $1,907,000 for 1994, and $1,794,000 for 1993. Note 10 - BUSINESS SEGMENT INFORMATION Reference is made to Item 1 - Description of Business and Segment Information included elsewhere in this Annual Report on Form 10-K. Note 11 - LITIGATION As more fully discussed under Item 3 - Legal Proceedings (and environmental matters included therein) included elsewhere in this Annual Report on Form 10-K, the Company is involved with various legal proceedings, including an action brought by the United States in 1990 against the Company and two other parties seeking recovery of costs incurred by the Environmental Protection Agency ("EPA") and other federal agencies in responding to releases or threatened releases of hazardous substances at a facility owned and operated by the Company until early 1986. The Commonwealth of Pennsylvania intervened as a second plaintiff in 1993, seeking recovery of costs allegedly incurred by the Pennsylvania Department of Environmental Protection ("PADEP") in responding to such releases or threatened releases at the facility. On December 20, 1994, counsel for the Company and litigation counsel for the United States entered into an Agreement in Principle to settle the United States' claims against the Company and the Company's counterclaim. On October 6, 1995, counsel for the Company, litigation counsel for the United States and counsel for the Commonwealth of Pennsylvania subsequently agreed on the final text of a proposed Consent Decree. The agreed Consent Decree has been executed by the EPA, the U.S. Department of Justice, PADEP and the Company and was lodged with the Court on December 28, 1995. The Company anticipates that the United States will move for entry of the Consent Decree within the next several months. The Company believes that the agreed Consent Decree will be subsequently entered by the Court, although there can be no assurance of this. Pursuant to the Agreement in Principle, on April 6, 1995, the Company deposited with the clerk of the Court, $4,500,000 which will be turned over to EPA when a Consent Decree embodying the terms of the settlement is entered by the Court. Upon entry of the Consent Decree, the Company will make another payment to the United States of $4,500,000, plus interest. Further payments to the United States totaling $4,350,000, plus interest, will be made over a six year period following the entry of the Consent Decree. The Company will pay the Commonwealth of Pennsylvania a total of $1,000,000. An initial payment of $350,000 will be made to the Commonwealth upon entry of the Consent Decree. Further payments to the Commonwealth totalling $650,000, plus interest, will be made over a four year period following the entry of the Consent Decree. In the fourth quarter of 1993, the Company recorded a liability of $14,350,000 to cover the estimated costs of settlement. The Company believes that it has sufficient liquidity to comply with the anticipated settlement terms of this environmental litigation and to enable the Company to continue to meet its obligations to pay principal and interest in connection with its indebtedness as well as meet its operating cash requirements. The Company expects to fund its sinking fund payment and the payments required in connection with the settlement of the environmental litigation from the proceeds from the sale of Bright Star Industries, Incorporated as well as its available cash resources, availability under the Loan Agreement, cash provided by operations, refinancing or restructuring of existing subordinated notes or in conjunction with the issuance of new debt securities and the sale, if consummated, of one or more of its subsidiary companies. While the Company is considering each of the foregoing, there can be no assurance that these efforts will be successful. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE To Publicker Industries Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Publicker Industries Inc. and subsidiary companies included in this Form 10-K and have issued our report thereon dated February 26, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index to consolidated financial statements and schedule are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. Arthur Andersen LLP Stamford, Connecticut February 26, 1996 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993(in thousands of dollars) Additions Charged to Balance Costs and Balance January 1 Expenses Other Deductions December 31 Year ended December 31, 1995: Allowance for Doubtful Accounts $ 352 $ 80 $ (1) $ (192) $ 239 Year ended December 31, 1994: Allowance for Doubtful Accounts $ 325 $ 483 $(271) $ (185) $352 Year ended December 31, 1993: Allowance for Doubtful Accounts $ 351 $ 183 $(75) $(134) $ 325 Exhibit 4.5 _______________________________________________________ PUBLICKER INDUSTRIES INC. AND IBJ SCHRODER BANK & TRUST COMPANY, TRUSTEE (formerly J. Henry Schroder Bank & Trust Company) THIRD SUPPLEMENTAL INDENTURE Dated as of September 1, 1995 13% Subordinated Notes Due December 15, 1996 _______________________________________________________ E-1 THIRD SUPPLEMENTAL INDENTURE, dated as of September 1, 1995, between PUBLICKER INDUSTRIES INC., a Pennsylvania corporation (the "Company"), having its executive offices at 1445 East Putnam Avenue, Old Greenwich, Connecticut 06870, and IBJ SCHRODER BANK & TRUST COMPANY (formerly J. Henry Schroder Bank & Trust Company) a New York banking corporation, having its principal corporate trust office at One State Street, New York, New York 10004 (the "Trustee"). WHEREAS, the Company and the Trustee have executed and delivered an indenture, dated as of December 15, 1986 as supplemented by the First Supplemental Indenture, dated as of January 27, 1988, and as supplemented by the Second Supplemental Indenture, dated as of April 1, 1993 (the "Indenture"), providing for, among other things, the issuance thereunder by the Company, and the authentication and delivery by the Trustee, of an aggregate principal amount of up to $34,500,000 of the Company's 13% Subordinated Notes due December 15, 1996 (the "Notes"), of which $30,000,000 aggregate principal amount were issued; WHEREAS, the Company has determined that it is in its best interests to delete Section 5.03(a) of the Indenture to remove the restrictions on the incurrence of Debt set forth therein; WHEREAS, Article Ten and Section 10.02 of the Indenture, permit the Company and the Trustee to enter into a supplemental indenture with the consent of the Holders of a majority in principal amount of the outstanding Notes for the purpose of, among other things, supplementing the Indenture; WHEREAS, the Company by appropriate corporate action has determined to amend the provisions of said Indenture; WHEREAS, the holders of a majority in principal amount of the Notes have approved the proposed amendment to the provisions of said Indenture; and WHEREAS, all acts and proceedings required by law, by the Indenture and by the charter and by-laws of the Company necessary to constitute this Third Supplemental Indenture a valid and binding agreement for the uses and purposes herein set forth, in accordance with its terms, have been done and taken; and the execution and delivery of this Third Supplemental Indenture by the Company have been in all respects duly authorized; and WHEREAS, the foregoing recitals are made as representations or statements of fact by the Company and not the Trustee; NOW, THEREFORE in consideration of the premises hereinafter set forth and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company hereby covenants and agrees to and with the Trustee as follows: SECTION 1. Paragraph (a) of Section 5.03 of the Indenture is hereby deleted in its entirety. E-2 SECTION 2. This Third Supplemental Indenture is a supplemental indenture within the meaning of the Indenture, and the Indenture and this Third Supplemental Indenture shall henceforth be read together and shall have effect so far as practicable as though all the provisions thereof and hereof were contained in one instrument. All references in this Third Supplemental Indenture to Sections of the Indenture shall be deemed to be, unless the context shall otherwise require, references to the corresponding Sections of the Indenture, as from time to time supplemented, modified or amended. SECTION 3. All terms contained in this Third Supplemental Indenture which are defined in the Indenture shall for all purposes hereof have the meanings given to such terms in the Indenture as from time to time supplemented, modified or amended, unless the context otherwise specifies or requires. SECTION 4. The Trustee hereby accepts a trust declared and provided by this Third Supplemental Indenture, and agrees to perform the same upon the terms and conditions contained in the Indenture, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee, which terms and provisions shall in like manner define and limit its liabilities in the performance of the trust created by the Indenture as hereby amended, and, without limiting the generality of the foregoing, the Trustee has no responsibility for the correctness of the recitals of fact herein contained which shall be taken as the statements of the Company, and makes no representations as to the validity or sufficiency of this Third Supplemental Indenture and shall incur no liability or responsibility in respect of the validity thereof. SECTION 5. The Indenture, as supplemented and amended by this Third Supplemental Indenture, is in all respects confirmed and preserved. The Company further covenants, warrants and confirms the Indenture, as supplemented and amended by this Third Supplemental Indenture, and all the terms, covenants and conditions thereof, in all respects and agrees to perform all of the covenants, terms and conditions to be performed as set forth in the Indenture and the Notes which it secures. SECTION 6. This Third Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. SECTION 7. This Third Supplemental Indenture shall be construed in accordance with and governed by the laws of the State of New York. IN WITNESS WHEREOF, PUBLICKER INDUSTRIES INC. has caused this Third Supplemental Indenture to be signed and acknowledged by its President, and its corporate seal to be affixed hereunto, and the same to be attested by its Secretary; and IBJ SCHRODER BANK & TRUST COMPANY has caused this E-3 Third Supplemental Indenture to be signed and acknowledged by one of its Assistant Vice Presidents and its corporate seal to be affixed hereunto, and the same to be attested by one of its Assistant Secretaries, all as of the day and year first written above. PUBLICKER INDUSTRIES INC. By James J. Weis President and Chief Executive Officer (CORPORATE SEAL) Attest: Antonio L. DeLise, Vice President, Chief Financial Officer and Secretary IBJ SCHRODER BANK & TRUST COMPANY By [name] [title] (CORPORATE SEAL) Attest: [name] Assistant Secretary Exhibit 10.10 Consulting Arrangements between Publicker Industries Inc. and Messrs. Harry I. Freund and Jay S. Goldsmith Pursuant to informal arrangements with the Company, Mr. Freund and Goldsmith each receive annual compensation of $325,000 per year for serving as Chairman and Vice Chairman of the Board, respectively, and for providing certain services below. The arrangements have indefinite terms and are terminable at any time by either party. Messrs. Freund and Goldsmith provide advice and counsel to the Company on a variety of strategic and financial matters, including business acquisitions and divestitures, raising capital and shareholder relations. Messrs. Freund and Goldsmith do not render any services in connection with the day-to-day operations of the Company. Services are provided on a less than full time basis, with the amount of time varying depending on the activities in which the Company is engaged from time to time. The arrangements with the Company do not provide for a minimum amount of time to be spent on Company matters. Exhibit 21 PUBLICKER INDUSTRIES INC. LIST OF SIGNIFICANT SUBSIDIARIES State of Jurisdiction Subsidiary of Incorporation Bright Star Industries, Incorporated Delaware Continental Distilling Corporation Delaware Fenwal Electronics, Inc. Delaware Greenwald Industries, Inc. Delaware Hanten Acquisition Co. Delaware Kidde Systems, Inc. Delaware LTA Disposition Corporation Delaware Masterview Window Company, Inc. Delaware Nevco Housewares, Inc. Delaware Orr-Schelen-Mayeron & Associates, Inc. Minnesota Publicker Chemical Corporation Louisiana Publicker Gasohol, Inc. Delaware Publicker, Inc. Delaware Publicker Industries Inc. Pennsylvania Rouglas-Dandall, Inc. Delaware Sagrocry, Inc. Pennsylvania E-5 Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports included in this Form 10-K into the Company's previously filed Registration Statement on Form S-1 File No. 33-9344, Registration Statement on Form S-3 File No. 33-9344, Registration Statement on Form S-8 File No. 33-26386, Registration Statement on Form S-8 File No. 33-56838 and Registration Statement on Form S-8 File No. 33-88876. Arthur Andersen LLP Stamford, Connecticut May 13, 1996 E-6 -----END PRIVACY-ENHANCED MESSAGE-----