<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 333-32041
---------------
PRECISE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 25-1205268
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
501 Mosside Boulevard
North Versailles, Pennsylvania 15137-2553
(Address of principal executive offices) (Zip Code)
(412) 823-2100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
As of August 1, 1998, one share of the Company's Common Stock was
outstanding.
1
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TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements 3
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 13
2
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PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PRECISE TECHNOLOGY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
PRECISE HOLDING CORPORATION)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 889,835 $ 560,059
Accounts receivable, net 14,932,045 12,944,644
Inventories 6,155,707 5,855,709
Prepaid expenses and other 375,076 589,156
Deferred income taxes 989,341 989,341
------------------ -------------------
Total current assets 23,342,004 20,938,909
Property, plant and equipment, net 44,795,934 44,830,561
Intangible and other assets, net 27,114,870 27,978,091
------------------ -------------------
Total assets $ 95,252,808 $ 93,747,561
================== ===================
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Current maturities of long-term debt $ 6,382,081 $ 5,882,842
Accounts payable 8,418,746 5,805,598
Accrued liabilities 3,070,659 2,568,161
Tooling deposits 2,558,083 1,552,200
------------------ -------------------
Total current liabilities 20,429,569 15,808,801
Long-term debt, less current maturities 84,923,419 86,868,663
Deferred income taxes 1,431,162 1,431,162
Commitments and contingencies -- --
Stockholder's deficit:
Common stock, no par value; 1,000 shares
authorized, and 1 share issued and
outstanding at June 30, 1998 and December
31, 1997, respectively. 1,000 1,000
Additional paid-in-capital 3,554,711 3,554,711
Minimum pension liability (204,172) (204,172)
Retained deficit (14,882,881) (13,712,604)
------------------ -------------------
Total stockholder's deficit (11,531,342) (10,361,065)
------------------ -------------------
Total liabilities and stockholder's deficit $95,252,808 $93,747,561
================== ===================
</TABLE>
See accompanying notes.
3
<PAGE>
PRECISE TECHNOLOGY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
PRECISE HOLDING CORPORATION)
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------- -------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $24,768,971 $25,470,151 $48,164,331 $51,794,814
Cost of sales 19,710,931 21,254,890 38,624,365 42,867,874
------------------ ------------------- ------------------ ------------------
Gross profit 5,058,040 4,215,261 9,539,966 8,926,940
Selling, general, and
administrative 2,622,893 2,133,774 5,125,772 4,272,119
Plant closure costs -- -- 30,648 --
Amortization of
intangible assets 313,506 319,875 627,186 608,255
------------------ ------------------- ------------------ ------------------
Operating income 2,121,641 1,761,612 3,756,360 4,046,566
Other expense (income):
Interest expense 2,574,006 2,039,572 5,199,504 3,874,518
Other (20,256) 895,709 (32,867) 891,870
------------------ ------------------- ------------------ ------------------
Loss before income
taxes (432,109) (1,173,669) (1,410,277) (719,822)
(Benefit) provision
for income taxes (52,479) 328,413 (240,000) 614,619
------------------ ------------------- ------------------ ------------------
Net loss before
extraordinary item (379,630) (1,502,082) (1,170,277) (1,334,441)
------------------ ------------------- ------------------ ------------------
Extraordinary item,
net of tax -- (4,840,500) -- (4,840,500)
------------------ ------------------- ------------------ ------------------
Net loss $ (379,630) $ (6,342,582) $ (1,170,277) $ (6,174,941)
================== =================== ================== ==================
</TABLE>
See accompanying notes.
4
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PRECISE TECHNOLOGY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
PRECISE HOLDING CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------------
1998 1997
---- ----
Operating activities (unaudited)
<S> <C> <C>
Net loss $ (1,170,277) $ (6,174,941)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Extraordinary item, net of tax -- 4,840,500
Depreciation and amortization 3,836,587 3,300,974
Amortization of original issue discount and financing fees 279,635 400,939
Loss on sale of fixed assets 55,768 42,119
Deferred income taxes -- (685,979)
Changes in assets and liabilities:
Accounts receivable (1,987,401) 1,458,874
Inventories (299,998) 1,751,147
Prepaid expenses and other 180,417 (106,386)
Accounts payable 2,613,148 (1,676,155)
Accrued liabilities 502,498 816,594
Tooling deposits 1,005,883 149,024
------------------- --------------------
Net cash provided by operating activities 5,016,260 4,116,710
Investing activities
Capital expenditures (1,864,608) (1,729,502)
Proceeds from sale of fixed assets 93,220 1,315,400
------------------- --------------------
Net cash used in investing activities (1,771,388) (414,102)
Financing activities
Borrowings on revolving line of credit 7,000,000 11,800,000
Payments on revolving line of credit (8,200,000) (5,100,000)
Proceeds from bond issuance -- 75,000,000
Repayment of long-term debt (1,715,096) (60,207,032)
Prepayment of debt premiums -- (2,398,940)
Payment of financing fees -- (4,087,700)
Redemption of common stock -- (3,314,617)
Redemption of preferred stock -- (8,250,000)
Dividends paid on common and preferred stock -- (6,814,317)
------------------- --------------------
Net cash used in financing activities (2,915,096) (3,372,606)
------------------- --------------------
Net increase in cash 329,776 330,002
Cash at beginning of period 560,059 1,310,564
------------------- --------------------
Cash at end of period $ 889,835 $ 1,640,566
=================== ====================
</TABLE>
See accompanying notes.
5
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $4,862,239 $3,244,632
=================== ====================
Income taxes $ (46,386) $ 339,323
=================== ====================
Supplemental schedule of noncash investing and financing
activities:
Capital lease agreements for equipment $1,469,091 $ 729,586
=================== ====================
</TABLE>
See accompanying notes.
6
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PRECISE TECHNOLOGY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
PRECISE HOLDING CORPORATION)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
1. Financial Statement Presentation
The consolidated balance sheet at June 30, 1998, and the consolidated
statements of income and consolidated statements of cash flows for the periods
ended June 30, 1998 and 1997, have been prepared by Precise Technology, Inc.
(the "Company"), without audit. In the opinion of management, all adjustments
necessary to present fairly the financial position, results of operations and
changes in cash flows at June 30, 1998 and for the periods presented have been
made.
The accompanying condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions for Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required for complete financial statements prepared
in accordance with generally accepted accounting principles. It is suggested
that these consolidated financial statements be read in conjunction with the
Company's annual report on Form 10-K for the year ended December 31, 1997,
which contains a summary of the Company's accounting principles and other
information.
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income. SFAS
No. 130 establishes new rules for the reporting and display of comprehensive
income and its components; however, the adoption of SFAS No. 130 had no impact
on the Company's net income or shareholders' equity. SFAS No. 130 requires the
adjustment to the minimum pension liability, which prior to adoption was
reported separately in shareholders' equity, to be included in other
comprehensive income. The Company had no comprehensive income for the periods
ended June 30, 1998 and 1997, respectively.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The results of operations for the period ended June 30, 1998 are not
necessarily indicative of the operating results to be expected for the full
year.
Certain reclassifications have been made to the 1997 financial
statements to conform to the 1998 presentation. These reclassifications had no
effect on net income or comprehensive income.
2. Inventories
The major components of inventories were as follows:
June 30, December 31,
1998 1997
(unaudited)
Finished products $1,653,058 $1,679,131
Raw materials 2,099,963 2,349,130
Tooling and dies 2,402,686 1,827,448
-------------------- --------------------
Total $6,155,707 $5,855,709
==================== ====================
7
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3. Long-Term Debt
On June 13, 1997, the Company issued $75,000,000 of 11-1/8% Senior
Subordinated Notes due 2007 (the "Notes"). The Company used the net proceeds
from the issuance of the Notes and approximately $8,200,000 of borrowings under
its New Credit Agreement ("NCA") to extinguish certain existing indebtedness,
redeem its redeemable preferred stock, repurchase certain shares of its common
stock, make a distribution to Precise Holding Corporation, parent of the
Company, and pay fees and expenses related to these refinancing transactions.
The Notes are subordinate in right of payment to all existing and
future senior indebtedness of the Company and are guaranteed on a senior
subordinated basis by all of the Company's subsidiaries.
On June 13, 1997, the Company entered into a $30,000,000 NCA with a
financial institution. Borrowings under the NCA may be used to fund the
Company's working capital requirements, finance certain permitted acquisitions
and general corporate requirements of the Company and pay fees and expenses
related to the foregoing.
4. Commitments and Contingencies
(a) Litigation
The Company is involved from time to time in lawsuits that arise in
the normal course of business. The Company actively and vigorously defends all
lawsuits. Management believes that there are no pending lawsuits that are
expected to have a material affect on the Company's financial position.
(b) Collective Bargaining Agreement
Approximately 5% of the Company's employees are covered under a
collective bargaining agreement, which expired on February 2, 1998. The
Company is currently in negotiations with the collective bargaining unit,
however, no assurances can be given as to the results of such negotiations or
the effect the negotiations will have on the Company's results of operations.
5. Financial Information for Subsidiary Guarantors
The Company's payment obligations under the Notes are fully and
unconditionally guaranteed on a joint and several basis (collectively, the
"Subsidiary Guarantees") by Precise Technology of Delaware, Inc., Precise
Technology of Illinois, Inc., Precise TMP, Inc., Precise Polestar, Inc., and
Massie Tool, Mold and Die, Inc. each a direct or indirect wholly-owned
subsidiary of the Company and each a "Guarantor." These subsidiaries represent
substantially all of the operations of the Company conducted in the United
States. In accordance with previous positions taken by the Securities and
Exchange Commission, the following summarized financial information illustrates
the composition of the combined Guarantors. Separate complete financial
statements of the respective Guarantors are not presented because management has
determined that they would not be material to investors. There are no
significant contractual restrictions on the ability of the Guarantors to
distribute or transfer funds to the Company. No single Guarantor has any
significant legal restrictions on the ability of investors or creditors to
obtain access to its assets in the event of a default on its Subsidiary
Guarantees other than its subordination to senior indebtedness described above
in Note 3. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
8
<PAGE>
Summarized Combined Financial Information
For the six months ended June 30, 1998
(unaudited)
<TABLE>
<CAPTION>
Guarantor Consolidated
Parent Subsidiaries Eliminations Total
------ ------------ ------------ -----
<S> <C> <C> <C> <C>
Current assets $ 5,377,711 $61,138,943 $(43,174,650) $23,342,004
Non-current assets 84,198,652 56,544,058 (68,831,906) 71,910,804
Current liabilities 35,108,784 28,495,435 (43,174,650) 20,429,569
Non-current liabilities 78,862,382 7,492,199 -- 86,354,581
Net sales 7,060,813 41,386,094 (282,576) 48,164,331
Gross profit 1,281,897 8,258,069 -- 9,539,966
Net (loss) income (3,898,712) 2,728,435 -- (1,170,277)
</TABLE>
<TABLE>
<CAPTION>
Summarized Combined Financial Information
For the six months ended June 30, 1997
(unaudited)
Guarantor Consolidated
Parent Subsidiaries Eliminations Total
<S> <C> <C> <C> <C>
Current assets $ 6,565,652 $49,841,880 $(33,195,776) $23,211,756
Non-current assets 83,704,917 55,672,299 (68,831,906) 70,545,310
Current liabilities 30,628,103 19,401,459 (33,195,776) 16,833,786
Non-current liabilities 80,960,295 5,313,993 -- 86,274,288
Net sales 10,519,612 41,581,696 (306,494) 51,794,814
Gross profit 2,120,734 6,806,206 -- 8,926,940
(Loss) income from continuing operations
before extraordinary item (6,247,146) 4,912,705 -- (1,334,441)
Net (loss) income (8,072,804) 1,897,863 -- (6,174,941)
</TABLE>
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's operating data for the three and six months ended June 30, 1998
and 1997 are set forth below as percentages of net sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 79.6 83.5 80.2 82.8
------------ ------------ ------------ -------------
Gross profit 20.4 16.5 19.8 17.2
Selling, general and administrative 10.5 8.4 10.6 8.2
Plant closure costs 0.0 0.0 0.1 0.0
Amortization of intangible assets 1.3 1.3 1.3 1.2
------------ ------------ ------------ -------------
Operating income 8.6 6.8 7.8 7.8
Other expense (income):
Interest expense 10.4 8.0 10.8 7.5
Other (0.1) 3.5 (0.1) 1.7
------------ ------------ ------------ -------------
Loss before income taxes and extraordinary
item (1.7) (4.7) (2.9) (1.4)
(Benefit) provision for income taxes (0.2) 1.3 (0.5) 1.2
------------ ------------ ------------ -------------
Net loss before extraordinary item (1.5) (6.0) (2.4) (2.6)
Extraordinary item, net of tax 0.0 (19.0) 0.0 (9.3)
------------ ------------ ------------ -------------
Net loss (1.5)% (25.0)% (2.4)% (11.9)%
============ ============ ============ =============
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended June 30, 1998 compared to Three Months Ended June 30, 1997
Net sales. The Company's net sales decreased to $24.8 million for the
three months ended June 30, 1998, a decrease of $0.7 million, or 2.8%, from the
comparable period in the prior year. The decrease in net sales was attributable
to: (i) customer insourcing, (ii) the loss of a customer to a competitor with a
closer "ship-to" point, (iii) lower than anticipated volume requirements of
certain customers' end product lines due to product line maturity (iv) two
customers being involved with business combinations that have reduced their
volume requirements from previous levels and (v) reduction in resin prices which
are passed through to the customer. These decreases were partially offset by
increased volumes to certain customers due to a higher demand for the customers'
end product line and the addition of a significant new product line for one of
the Company's largest customers.
Gross Profit. The Company's gross profit increased to $5.1 million
for the three months ended June 30, 1998, an increase of $0.8 million, or
20.0%, over the comparable period in the prior year. Gross profit margin
increased to 20.4% for the three months ended June 30, 1998, from 16.5% in the
comparable period in the prior year. The increase in gross profit and gross
profit margin was primarily due to: (i) lower raw material costs from
aggressive purchasing tactics, (ii) increased emphasis on employee utilization
and (iii) a favorable change in product mix.
Selling, general and administrative. Selling, general and
administrative expenses increased to $2.6 million for the three months ended
June 30, 1998, an increase of $0.5 million, or 22.9%, over the comparable
period in the prior year. The increase in selling, general and administrative
expenses was primarily due to: (i) costs associated with the implementation of
a new Enterprise Resource Planning system, (ii) increased salaries and wages
for additional corporate personnel and (iii) higher travel expenses.
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Amortization. The Company's amortization of intangible assets
remained constant at approximately $0.3 million for the three months ended
June 30, 1998 and 1997, respectively.
Operating income. Operating income increased to $2.1 million for the
three months ended June 30, 1998, an increase of $0.4 million, or 20.4%, over
the comparable period in the prior year. Operating income as a percentage of
net sales increased to 8.6% for the three months ended June 30, 1998 from 6.8%
in the comparable period in the prior year primarily due to: (i) higher gross
profit resulting from lower raw material costs from aggressive purchasing
tactics, (ii) increased emphasis on employee utilization and (iii) a favorable
change in product mix.
Interest expense. Interest expense increased to $2.6 million for the
three months ended June 30, 1997, an increase of $0.6 million, or 26.2%, over
the comparable period in the prior year. This increase is primarily a result
of interest due on an increased level of indebtedness outstanding as a result
of the change in the Company's capital structure which included the June 13,
1997 issuance of 11-1/8% Senior Subordinated Notes due 2007 (the "Notes").
Provision for income tax. The Company's effective tax rates differed
from the applicable statutory rates for the three months ended June 30, 1998
and 1997 primarily due to nondeductible goodwill amortization.
Six Months Ended June 30, 1998 compared to Six Months Ended June 30, 1997
Net sales. The Company's net sales decreased to $48.2 million for the
six months ended June 30, 1998, a decrease of $3.6 million, or 7.0%, from the
comparable period in the prior year. The decrease in net sales was attributable
to: (i) customer insourcing, (ii) the loss of two customers to competitors with
closer "ship-to" points, (iii) lower than anticipated volume requirements of
certain customers' end product lines due to product line maturity and (iv) two
customers' being involved with business combinations that have reduced the
volume requirements from previous levels and (v) reduction in resin prices which
are passed through to the customer. These decreases were partially offset by
increased volumes to certain customers due to a higher demand for the customers'
end product line and the addition of a significant new product line for one of
the Company's largest customers.
Gross Profit. The Company's gross profit increased to $9.5 million
for the six months ended June 30, 1998, an increase of $0.6 million, or 6.9%,
from the comparable period in the prior year. Gross profit margin increased to
19.8% for the six months ended June 30, 1998 from 17.2% in the comparable
period in the prior year. The increase in gross profit and gross profit margin
was primarily due to: (i) lower raw material costs from aggressive purchasing
tactics, (ii) increased emphasis on employee utilization and (iii) a favorable
change in product mix.
Selling, general and administrative. Selling, general and
administrative expenses increased to $5.1 million for the six months ended
June 30, 1998, an increase of $0.9 million, or 20.0%, over the comparable
period in the prior year. The increase in selling, general and administrative
expenses was primarily due to: (i) costs associated with the implementation of
a new Enterprise Resource Planning system, (ii) higher salaries and wages due
to additional corporate personnel and (iii) lower insurance expense in the
first six months of 1997 due to a favorable worker's compensation insurance
adjustment.
Amortization. The Company's amortization of intangible assets
remained constant at approximately $0.6 million for the six months ended June
30, 1998 and 1997, respectively.
Operating income. Operating income decreased to $3.8 million for the
six months ended June 30, 1998, a decrease of $0.3 million, or 7.2%, from the
comparable period in the prior year. The decrease in operating income is
primarily due to the increase in selling, general and administrative expenses.
Operating income as a percentage of net sales remained constant.
Interest expense. Interest expense increased to $5.2 million for the
six months ended June 30, 1998, an increase of $1.3 million, or 34.2%, over
the comparable period in the prior year. This increase is primarily a result of
interest due on an increased level of indebtedness
11
<PAGE>
outstanding as a result of the change in the Company's capital structure which
included the issuance of the Notes.
Provision for income tax. The Company's effective tax rates differed
from the applicable statutory rates for the six months ended June 30, 1998 and
1997 primarily due to nondeductible goodwill amortization.
Liquidity and Capital Resources
The Company generated cash flows from operations totaling $5.0
million and $4.1 million in the six months ended June 30, 1998 and 1997,
respectively. The increase in cash flows from operations is primarily
attributable to the increase in accounts payable, depreciation and tooling
deposits.
The Company's cash flows used in investing activities totaled $1.8
million and $0.4 million, excluding capital lease agreements for equipment
totaling $1.5 million and $0.7 million, in the six months ended June 30, 1998
and 1997, respectively. During the first six months of 1998, the Company
expended approximately $0.4 million in cash capital expenditures primarily for
its new Enterprise Resource Planning system, $0.4 million in cash capital
expenditures on plant refurbishments and $0.5 million in cash capital
expenditures on machinery and ancillary equipment for a new project for one of
the Company's larger customers. The Company expects to incur approximately $2.4
million of which $1.2 million will be in the form of cash capital expenditures
primarily on machinery and equipment and plant refurbishment over the remaining
six months of 1998.
The Company's cash flows used in financing activities totaled $2.9
million and $3.4 million for the six months ended June 30, 1998 and 1997,
respectively. During the six months ended June 30, 1998, regularly scheduled
principal payments on the Company's capital lease obligations of $1.7 million
and repayments of revolving loans under the NCA of $1.2 million contributed to
the cash used in financing activities. During the six months ended June 30,
1997, the Refinancing Transactions contributed to the cash used in financing
activities.
Management believes that the Company's cash flow from operations,
together with borrowing availability under the NCA, of which $22.7 million
existed at June 30, 1998, will provide it with sufficient liquidity necessary
to fund capital improvements, service indebtedness and meet working capital
requirements for the Company's existing operations. However, the Company is
highly leveraged and, as a result, funds available for working capital,
capital expenditures, and other purposes may be limited or unavailable in the
event the Company does not generate cash flow at or above expected levels,
which could have a material adverse effect on the Company's business,
financial condition and results of operations. See"-Cautionary Statement on
Forward-Looking Statements."
Year 2000
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar business activities.
The Company's management has begun a program to prepare the Company's
computer systems and related applications for the year 2000. The Company
believes that a majority of its year 2000 issues will be addressed by the
installation of an Enterprise Resource Planning system software package by
BaaN. The BaaN system, which is year 2000 compliant and will be used for the
Company's primary business application at its headquarters and manufacturing
facilities, currently is being installed. The total cost of the BaaN project
currently is estimated at $2.0 million, with the majority of this cost to be
capitalized and charged to expense over the estimated useful life of the BaaN
software and related hardware. The Company has developed a comprehensive plan
to assist all departments and manufacturing facilities in working towards
compliance with year 2000 issues for all other systems beyond those being
addressed by the BaaN system. If the Company's systems or the systems of other
companies on whose services the Company
12
<PAGE>
depends or with whom the Company's systems interface are not year 2000
compliant, it could have a material adverse effect on the Company's business,
financial condition and results of operations. Estimated incremental costs to
address other year 2000 issues for the remainder of calendar year 1998 and
calendar year 1999 are approximately $250,000.
Recent Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 131,
Disclosure about Segments of an Enterprise and Related Information, which
changes the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about reportable segments in interim
financial reports issued to shareholders. In accordance with SFAS No. 131, the
Company will be required to make expanded disclosures relating to its products
and markets. The standard will be effective for the Company for the year ended
December 31, 1998, and for interim periods in the year ended December 31,
1999.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosure
about Pensions and Other Postretirement Benefits, which standardizes the
disclosure requirements for pensions and other postretirement benefits. The
implementation of SFAS No. 132 is not expected to have a significant impact on
the Company's financial statements. The standard will be effective for the
Company for the year ended December 31, 1998.
Cautionary Statement on Forward-Looking Statements
This Report contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that any forward-looking statements, including statements regarding the intent,
belief, or current expectations of the Company or its management, are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those in the forward-looking
statements as a result of various factors including, but not limited to
(i) general economic conditions in the markets in which the Company operates,
(ii) reliance on key customers and supply contracts, (iii) volatility of
customer demand, (iv) exposure to fluctuations in resin cost and supply,
(v) customer outsourcing decisions, (vi) reliance on key manufacturing
facilities, (vii) the impact of significant competition from companies of
varying sizes including divisions or subsidiaries of larger companies and
(viii) other risks detailed from time to time in the Company's Securities and
Exchange Commission filings. The Company does not intend to update these
forward-looking statements.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(i) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
Undersigned, thereunto duly authorized.
PRECISE TECHNOLOGY, INC.
(Registrant)
Date August 14, 1998 /s/ John R. Weeks
----------------------- -------------------------------------------
John R. Weeks
President and Chief Executive Officer
Date August 14, 1998 /s/ Gregory R. Conley
----------------------- --------------------------------------------
Gregory R. Conley
Vice President and Chief Financial Officer
(Principal financial and accounting officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (1) THE
CONSOLIDATED UNAUDITED INTERIM FINANCIAL STATEMENTS OF PRECISE TECHNOLOGY, INC.
AS OF JUNE 30, 1998 AND FOR THE SIX MONTHS THEN ENDED AND (2) THE CONSOLIDATED
FINANCIAL STATEMENTS OF PRECISE TECHNOLOGY, INC. AS OF DECEMBER 31, 1997 AND FOR
THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 1042317
<NAME> PRECISE TECHNOLOGY, INC.
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> JUN-30-1998 DEC-31-1997
<CASH> 890 560
<SECURITIES> 0 0
<RECEIVABLES> 15,017 13,030
<ALLOWANCES> 85 85
<INVENTORY> 6,156 5,856
<CURRENT-ASSETS> 23,342 20,939
<PP&E> 60,033 57,026
<DEPRECIATION> 15,237 12,195
<TOTAL-ASSETS> 95,253 93,748
<CURRENT-LIABILITIES> 20,430 15,809
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> (11,532) (10,361)
<TOTAL-LIABILITY-AND-EQUITY> 95,253 93,748
<SALES> 48,164 100,737
<TOTAL-REVENUES> 48,164 100,737
<CGS> 38,624 82,732
<TOTAL-COSTS> 44,408 93,005
<OTHER-EXPENSES> (32) 874
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,200 8,771
<INCOME-PRETAX> (1,410) (1,912)
<INCOME-TAX> (240) 228
<INCOME-CONTINUING> (1,170) (2,140)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (4,841)
<CHANGES> 0 0
<NET-INCOME> (1,170) (6,981)
<EPS-PRIMARY> 0.0 0.0
<EPS-DILUTED> 0.0 0.0
</TABLE>
