PSC Inc. stock mired in fuzzy future.
Local investors of financially struggling PSC Inc., who were feeling queasy about the stock's slide before the company released second-quarter financial figures on Monday, are likely feeling even worse now with the company's disclosure that a rescue plan in the works could leave the scanner-maker's stock worthless.
Portland-based PSC employs about 600 workers in west Eugene, and over the years, many PSC employees have bought the company's stock under the firm's stock purchase program.
The statement that is confounding investors and industry experts alike is buried in the company's latest quarterly financial filing with the federal Securities & Exchange Commission.
The statement refers to PSC's ongoing effort to attract capital in order to reduce its debt and boost its cash supply. The statement suggests that if PSC succeeds in attracting new capital, the company's shares, which have plunged from a high of $13.50 a share in 1998 to 15 cents a share at Wednesday's close, could become worthless.
"In all presently contemplated recapitalization transactions, the company anticipates that the equity interests of all existing shareholders will be extinguished," the SEC filing states. "However, the precise outcome of existing equity shareholder interests will be dependent upon further negotiations and discussions with prospective private equity investors and cannot be predicted with assurance at this time."
The statement says that if PSC is unable to attract new capital, the firm's creditors - who are owed about $122 million - would be "entitled to exercise their respective rights and remedies under the credit facilities and applicable law, in which case the company would not have sufficient funds to repay its outstanding debt and no assurance can be given that alternative sources of sufficient financing would be available on acceptable terms, or on any terms at all."
Something big appears to be in the works. Possibilities include turning the publicly traded company into a privately held one, or filing for bankruptcy reorganization.
PSC officials on Wednesday declined to elaborate on the convoluted, vague statements.
"This is all we can say at this time," said Rebecca Green, PSC spokeswoman in New York City.
PSC's troubles have been brewing for years. In July 1996, PSC bought for $140 million Swedish-owned Spectra-Physics Scanning Systems Inc., which had a 535-employee facility in west Eugene. PSC borrowed $130 million to finance the deal.
About a year later, Romano Volta, who controls Hydra Investissements S.p. A., a Luxembourg corporation, invested $11 million in private capital in PSC.
Volta and Hydra continue to be PSC's largest shareholders. Hydra owns 10.7 percent of outstanding shares; Whelan & Gratny Capital Management of Menlo Park, Calif. owns 8.6 percent; Volta owns 3.3 percent, according to Bloomberg News.
In January 2000, PSC bought Eugene-based scanner maker Percon Inc. and took on another $58 million. PSC has been burdened with heavy debt ever since. As of June 28, the company had $122.5 million in debt, all of it due on Sept. 1, when the agreements with creditors expire. The company in the past has stitched together agreements with creditors under which they postponed calling in the debt.
The company's income statement also is shaky. Earlier this week, PSC reported a $1 million loss on sales of $42 million in the quarter ended June 30, in large part because of big interest payments it must make on its debt.
In the past two years, PSC has restructured its business to cut costs and reduce debt. It moved its headquarters from upstate New York to Portland, sold off divisions, and has carried out several rounds of layoffs - including last week's announcement that it would cut 25 jobs in Eugene by the end of September.
Those moves have hammered the confidence of many workers at PSC's west Eugene plant, who are worried about the company's future.
Trading in PSC's stock this week has been frenzied - and the frenzy began a full seven hours before PSC formally made its announcement that the stock might become worthless.
Since the start of the year, the stock has traded in the 40 cents to 50 cents per share range on the NASDAQ Small-Cap Market. Daily trading volume has averaged 57,000 shares, according to Bloomberg News.
Trading last week followed that lackluster pattern.
But on Monday, the trading volume went through the roof, to 976,506 shares, and the price began to sag, averaging 35 cents, according to Bloomberg. No news was formally announced during trading hours, but just before the close of trading, PSC issued a press release stating its quarterly results and disclosing that the recapitalization efforts could wipe out all shareholder value.
With the start of trading on Tuesday, PSC's share price plunged to an average of 19 cents, with 2.91 million shares changing hands, according to Bloomberg.
On Wednesday, the dive continued, with 768,300 shares trading hands. The stock closed at 15 cents.
Business editor Christian Wihtol contributed to this report.
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|Title Annotation:||Investing: Scanner-maker's rescue plan might make the company's stock worthless.; Business|
|Publication:||The Register-Guard (Eugene, OR)|
|Date:||Aug 22, 2002|
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