<PAGE> 1
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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 March 25, 2000
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 333-13727
----------------
PRINTPACK, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-0673779
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4335 Wendell Drive, S.W., Atlanta, Georgia 30336
(Address of principal executive offices) (Zip Code)
(404) 691-5830
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date.
Total number of shares of outstanding stock (net of shares held in
treasury) as of May 3, 2000:
Common stock, no par value....................4,218,560
================================================================================
<PAGE> 2
PRINTPACK, INC.
INDEX
PART I. FINANCIAL INFORMATION
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Item 1. Financial Statements
Balance Sheets at
March 25, 2000 and June 26, 1999
Statements of Operations and Comprehensive Income for the 39
weeks ended March 25, 2000 and March 27, 1999
Statements of Operations and Comprehensive Income for the 13
weeks ended March 25, 2000 and March 27, 1999
Statements of Cash Flows for the 39 weeks ended March 25, 2000
and March 27, 1999
Statement of Changes in Shareholders' Equity (Deficit) for the
39 weeks ended March 25, 2000
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 27 Financial Data Schedule
1
<PAGE> 3
PART 1. FINANCIAL INFORMATION
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
From time to time, Printpack, Inc. ("Printpack" or the "Company") makes
oral and written statements that may constitute "forward-looking statements"
(rather than historical facts) as defined in the Private Securities Litigation
Reform Act of 1995 (the "Act") or by the SEC in its rules, regulations and
releases. The Company desires to take advantage of the "safe harbor" provisions
in the Act for forward-looking statements made from time to time, including, but
not limited to, the forward-looking statements made in this Report on Form 10-Q
(the "Report"), as well as those made in other filings with the SEC.
Forward-looking statements contained in this Report are based on management's
current plans and expectations and are subject to a number of risks and
uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements. In the preparation of this Report,
where such forward-looking statements appear, the Company has sought to
accompany such statements with meaningful cautionary statements identifying
important factors that could cause actual results to differ materially from
those described in the forward-looking statements. Such factors include, but are
not limited to: the level of consumer spending for consumer nondurable goods
that use packaging made by the Company; fluctuations in raw material prices;
possible environmental matters; competition; slowed growth in end user markets
and pricing pressures; changes in economic conditions generally, both domestic
and international; and possible implementation of future cost saving measures
which could require the Company to take charges against earnings, including cash
and non-cash charges. The preceding list of risks and uncertainties, however, is
not intended to be exhaustive, and should be read in conjunction with other
cautionary statements made herein and in the Company's other publicly filed
reports, including, but not limited to, the "Risk Factors" set forth in the
Company's Form 10K for the fiscal year ended June 26, 1999.
The Company does not have, and expressly disclaims, any obligation to
release publicly any updates or any changes in the Company's expectations or any
changes in events, conditions or circumstances on which any forward-looking
statement is based.
2
<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS
PRINTPACK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 25, JUNE 26,
2000 1999
--------- ---------
(UNAUDITED)
(IN THOUSANDS)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 1,191 $ 1,565
Trade accounts receivable, less allowance for doubtful accounts of $636 and $886 72,424 77,491
Inventories 85,926 84,000
Prepaid expenses and other current assets 11,308 18,199
Deferred income taxes 748 284
--------- ---------
Total current assets 171,597 181,539
Property, plant and equipment, net 311,967 335,455
Goodwill, less accumulated amortization of $24,428 and $21,559 43,641 46,510
Other assets 25,275 25,234
Deferred income taxes 2,041 2,625
--------- ---------
$ 554,521 $ 591,363
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses $ 59,971 $ 75,984
Accrued salaries, wages, benefits and bonuses 17,330 14,503
Current maturities of long-term debt 9,769 9,769
Short-term borrowings under line of credit 1,862 5,496
--------- ---------
Total current liabilities 88,932 105,752
Long-term debt 242,904 264,231
Subordinated long-term debt 210,305 210,305
Other long-term liabilities 21,807 19,854
--------- ---------
Total liabilities 563,948 600,142
--------- ---------
Shareholders' deficit
Common stock, no par value, 15,000,000 shares authorized, 4,218,560
shares issued and outstanding 1,011 1,011
Additional paid-in capital 6,687 6,687
Accumulated deficit (16,300) (16,023)
Receivable from parent (1,897) (949)
Accumulated other comprehensive income 1,072 495
--------- ---------
Total shareholders' deficit (9,427) (8,779)
--------- ---------
Commitments and contingencies -- --
--------- ---------
$ 554,521 $ 591,363
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
PRINTPACK, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
39 WEEKS 39 WEEKS
ENDED ENDED
MARCH 25, MARCH 27,
2000 1999
--------- ---------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Net sales $ 666,529 $ 617,206
Cost of goods sold 564,120 530,463
--------- ---------
Gross margin 102,409 86,743
Selling, administrative and research and development expenses 62,445 55,298
Amortization of goodwill 2,869 2,869
Asset impairment 656 --
--------- ---------
Income from operations 36,439 28,576
Other (income) expense
Interest expense 37,547 37,635
Other, net (342) (206)
--------- ---------
Loss before benefit for income taxes (766) (8,853)
Benefit for income taxes (489) (2,066)
--------- ---------
Net loss (277) (6,787)
Other comprehensive income
Foreign currency translation adjustment (net of income
tax expense of $225 and $158) 352 247
--------- ---------
Comprehensive income (loss) $ 75 ($ 6,540)
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
PRINTPACK, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
13 WEEKS 13 WEEKS
ENDED ENDED
MARCH 25, MARCH 27,
2000 1999
--------- ---------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Net sales $ 221,163 $ 212,639
Cost of goods sold 188,198 179,902
--------- ---------
Gross margin 32,965 32,737
Selling, administrative and research and development expenses 21,095 17,551
Amortization of goodwill 958 958
Asset impairment 656 --
--------- ---------
Income from operations 10,256 14,228
Other (income) expense
Interest expense 12,414 12,472
Other, net (425) (183)
--------- ---------
Income (loss) before provision (benefit) for income taxes (1,733) 1,939
Provision (benefit) for income taxes (274) 759
--------- ---------
Net income (loss) (1,459) 1,180
Other comprehensive income
Foreign currency translation adjustment (net of income
tax expense of $320 and $158) 500 247
--------- ---------
Comprehensive income (loss) $ (959) $ 1,427
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
PRINTPACK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
39 WEEKS 39 WEEKS
ENDED ENDED
MARCH 25, MARCH 27,
2000 1999
-------- --------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Operating activities
Net loss $ (277) $ (6,787)
Depreciation and amortization 42,074 41,431
Other (1,806) (29,932)
-------- --------
Net cash provided by operating activities 39,991 4,712
-------- --------
Investing activities
Purchases of property, plant and equipment (15,409) (25,198)
Proceeds from sale of property, plant and equipment 376 4,026
-------- --------
Net cash used in investing activities (15,033) (21,172)
-------- --------
Financing activities
Principal payments on long-term debt (7,327) (18,000)
Net borrowings under revolving credit facility -- 25,000
Net borrowings (repayments) under receivable securitization
facility (14,000) 8,000
Net borrowings (repayments) on line of credit (3,634) 1,830
Payment for receivable from parent (948) --
-------- --------
Net cash provided by (used in) financing activities (25,909) 16,830
-------- --------
Effect of exchange rate changes on cash and cash equivalents 577 405
-------- --------
Increase (decrease) in cash and cash equivalents (374) 775
Cash and cash equivalents, beginning of period 1,565 415
-------- --------
Cash and cash equivalents, end of period $ 1,191 $ 1,190
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 8
PRINTPACK, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY TOTAL
COMMON PAID-IN ACCUMULATED RECEIVABLE TRANSLATION EQUITY
STOCK CAPITAL DEFICIT FROM PARENT ADJUSTMENT (DEFICIT)
-------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance as of June 26, 1999 $1,011 $6,687 $(16,023) $ (949) $ 495 $(8,779)
Net loss -- -- (277) -- -- (277)
Receivable from parent -- -- -- (948) -- (948)
Foreign currency translation adjustment -- -- -- -- 577 577
------------------------------------------------------------------------
Balance as of March 25, 2000 $1,011 $6,687 $(16,300) $(1,897) $1,072 $(9,427)
========================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 9
PRINTPACK, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 25, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Printpack,
Inc. ("Printpack" or the "Company") have been prepared by Company management and
are presented on a basis in accordance with the accounting policies stated in
the June 26, 1999 and June 27, 1998 financial statements and should be read in
conjunction with the Notes to Financial Statements appearing therein. In the
opinion of Printpack management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such financial
statements have been included in the accompanying interim financial statements.
The results of operations for the 13 week and 39 week periods ended March 25,
2000 are not necessarily indicative of the results to be expected for the full
fiscal year.
2. INCOME TAXES
Printpack's effective income tax rate for the 39 weeks ended March 25,
2000 and March 27, 1999 was 64% and 23%, respectively. The difference in the
effective tax rates is primarily due to the reversal of a valuation allowance
for a portion of the deferred tax assets related to taxable loss carryforwards
in various state and foreign jurisdictions.
As described above, the Company has a valuation allowance for a portion
of the deferred tax assets related to taxable loss carryforwards in various
state and foreign jurisdictions. These deferred tax assets are reviewed
periodically to assess the likelihood that they will be realized by the Company.
The corresponding valuation allowance is adjusted based on this assessment.
3. INVENTORIES
Inventories are stated at the lower of cost or current market value.
Cost is determined using the last-in, first-out (LIFO) method.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
MARCH 25, JUNE 26,
2000 1999
---- ----
UNAUDITED
(IN THOUSANDS)
<S> <C> <C>
Raw materials ........................................................... $32,779 $ 30,264
Work-in-process ......................................................... 9,459 10,360
Finished goods .......................................................... 62,033 59,323
-------- --------
104,271 99,947
Reduction to state inventories at last-in, first-out cost (LIFO) ........ 18,345 15,947
-------- --------
$ 85,926 $ 84,000
======== ========
</TABLE>
4. CONTINGENCIES
Printpack is subject to legal proceedings and other claims which arise
in the ordinary course of business. In the opinion of management, the outcome of
these actions will not materially affect the financial position, results of
operations or cash flows of the Company.
8
<PAGE> 10
PRINTPACK, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
5. DEBT
On August 22, 1996, the Company created a wholly owned, bankruptcy
remote, special purpose subsidiary, Flexible Funding Corp. ("Flexible Funding"),
for the sole purpose of facilitating financing transactions for the Company. The
Company contributed approximately $100,000 of trade receivables in exchange for
the equity in Flexible Funding. Subsequently, Flexible Funding entered into a
revolving line of credit facility with a bank (the "Facility"). The Facility
allows Flexible Funding to draw a maximum of $50 million on the established line
of credit through December 2003, on a revolving basis, through note agreements
bearing interest at a negotiated rate. The line of credit is collateralized by
100% of the trade receivables of Flexible Funding. At March 25, 2000 and June
26, 1999, the Company had $32 million and $46 million, respectively, of notes
outstanding under the Facility, collateralized by approximately $64 million and
$76 million, respectively, in trade receivables.
9
<PAGE> 11
PRINTPACK, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the results of operations of
Printpack for the 39 weeks and for the 13 weeks ended March 25, 2000 is compared
to the same time periods in fiscal 1999. The discussion and analysis of
Printpack's financial condition compares its condition at March 25, 2000 to June
26, 1999.
This Item contains certain forward-looking statements that reflect the
Company's assessment of a number of risks and uncertainties. The Company's
actual results could differ materially from the results anticipated in such
forward-looking statements as a result of certain factors set forth in this
Report. Where such forward-looking statements appear, the Company has sought to
accompany such statements with meaningful cautionary statements identifying
important factors that could cause actual results to differ materially from
those described in the forward-looking statements. An additional statement made
pursuant to the Private Securities Litigation Reform Act of 1995 and summarizing
certain of the principal risks and uncertainties inherent in the Company's
business is included in Part I of this Report under the caption "'Safe Harbor'
Statement Under the Private Securities Litigation Reform Act of 1995."
RESULTS OF OPERATIONS
Thirty-nine weeks ended March 25, 2000 compared to March 27, 1999
Net Sales. Net sales increased $49.3 million or 8.0% to $666.5 million
in the fiscal 2000 period from $617.2 million in the fiscal 1999 period,
primarily due to higher sales volumes.
Gross Margin. Cost of goods sold increased $33.6 million or 6.3% to
$564.1 million in the fiscal 2000 period from $530.5 million in the fiscal 1999
period. Cost of goods sold decreased to 84.6% of net sales in the fiscal 2000
period from 86.0% in the fiscal 1999 period, primarily due to the higher sales
volumes noted above and a reduction of waste at certain facilities. Gross
margin, consequently, increased $15.7 million or 18.1% to $102.4 million in the
fiscal 2000 period from $86.7 million in the fiscal 1999 period.
Operating Expenses. Selling, administrative and research and
development expenses increased $7.1 million or 12.8% to $62.4 million in the
fiscal 2000 period from $55.3 million in the fiscal 1999 period. Selling,
administrative and research and development expenses as a percentage of net
sales increased slightly to 9.4% in the fiscal 2000 period from 9.0% in the
fiscal 1999 period. The increase is primarily due to increases in personnel
costs related to the Company's Incentive Compensation Plan. The Company also
recorded an impairment charge to write-down the carrying value of certain fixed
assets.
Operating Income. Income from operations increased $7.8 million or
27.3% to $36.4 million in the fiscal 2000 period compared to $28.6 million in
the fiscal 1999 period. The increase was due to higher gross margins, partially
offset by higher selling, administrative and research and development expenses
as described above.
Other Income and Expense. Interest expense decreased $0.1 million or
0.3% to $37.5 million in the fiscal 2000 period from $37.6 million in the fiscal
1999 period primarily due to decreased borrowings resulting from scheduled debt
amortization payments, partially offset by higher interest rates.
Employees. At March 25, 2000, the Company had approximately 3,800 employees, of
which approximately 1,000 at five manufacturing facilities are covered by
collective bargaining agreements. The Company considers relations with its
employees to be generally good.
10
<PAGE> 12
Thirteen weeks ended March 25, 2000 compared to March 27, 1999
Net Sales. Net sales increased $8.6 million or 4.0% to $221.2 million
in the third quarter of fiscal 2000 from $212.6 million in the third quarter of
fiscal 1999, primarily due to price changes to customers.
Gross Margin. Cost of goods sold increased $8.3 million or 4.6% to
$188.2 million in the third quarter of fiscal 2000 from $179.9 million in the
third quarter of fiscal 1999. Cost of goods sold as a percentage of net sales
increased slightly to 85.1% of net sales in the third quarter of fiscal 2000
from 84.6% in the third quarter of fiscal 1999, of which 0.3% of this increase
is the result of expenses recorded in conjunction with the Company's use of the
LIFO method for valuing inventories. Gross margin also increased slightly ($0.3
million or 0.9%) to $33.0 million in the third quarter of fiscal 2000 from $32.7
million in the third quarter of fiscal 1999.
Operating Expenses. Selling, administrative and research and
development expenses increased $3.5 million or 19.9% to $21.1 million in the
third quarter of fiscal 2000 from $17.6 million in the third quarter of fiscal
1999. Selling, administrative and research and development expenses as a
percentage of net sales increased to 9.5% in the third quarter of fiscal 2000
from 8.3% in the third quarter of fiscal 1999, primarily due to increases in
personnel costs related to the Company's Incentive Compensation Plan. The
Company also recorded an impairment charge to write-down the carrying value of
certain fixed assets.
Operating Income. Income from operations decreased $3.9 million or
27.5% to $10.3 million in the third quarter of fiscal 2000 compared to $14.2
million in the third quarter of fiscal 1999. The decrease was primarily due to
higher selling, administrative and research and development expenses as
described above.
Other Income and Expense. Interest expense decreased $0.1 million or
0.8% to $12.4 million in the third quarter of fiscal 2000 from $12.5 million in
the third quarter of fiscal 1999. The decrease in interest expense for the
third quarter of fiscal 2000 as compared to the third quarter of fiscal 1999 is
primarily due to reductions in outstanding debt, partially offset by higher
interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $40.0 million in the
first 39 weeks of fiscal 2000 compared to $4.7 million in the corresponding
period of fiscal 1999. After adding back depreciation and amortization to the
net loss, the Company's operations provided $41.8 million in cash in the first
39 weeks of fiscal 2000 compared to $34.6 million in the corresponding period of
fiscal 1999. An additional $1.8 million was used in the first 39 weeks of fiscal
2000 as compared to $29.9 million used, primarily for working capital increases,
in the corresponding period of fiscal 1999. Depreciation and amortization for
the first 39 weeks of fiscal 2000 were $42.1 million compared to $41.4 million
for the corresponding period of fiscal 1999.
Capital expenditures of $15.4 million in the first 39 weeks of fiscal
2000 and $25.2 million in the corresponding period of fiscal 1999 continued to
be principally for new property, plant and equipment. At the same time, proceeds
from the disposition of property and equipment were $4.0 million in the first 39
weeks of fiscal 1999 and were negligible in the first 39 weeks of fiscal 2000.
The decline in proceeds from the disposition of property and equipment was
primarily the result of the sale in the first quarter of fiscal 1999 of the San
Leandro, California facility, which was acquired in connection with the
Company's acquisition of the Flexible Packaging Group of James River Corporation
of Virginia and subsequently closed.
Cash used in financing activities in the first 39 weeks of fiscal 2000
was $25.9 million as compared to cash provided by financing activities of $16.8
million in the corresponding period of fiscal 1999. The cash used in financing
activities during the fiscal 2000 period is primarily a result of reducing debt
from increases in cash flows from operations. The Company also advanced
approximately $948,000 to its parent, Printpack
11
<PAGE> 13
Holdings, Inc. during the first 39 weeks of fiscal 2000. Cash provided by
financing activities during the first 39 weeks of fiscal 1999 was used primarily
for working capital increases. Total outstanding debt at March 25, 2000 of
approximately $464.8 million included $154.5 million of floating rate and $310.3
million of fixed rate obligations. The indentures and credit agreement entered
into in fiscal 1997 restrict future contributions to Printpack Holdings, Inc.'s
and Printpack Enterprises, Inc.'s European operations.
The Company's primary sources of liquidity have been cash flows from
operations and borrowings under bank credit facilities. The Company has used
borrowings under the bank credit facilities to meet seasonal fluctuations in
working capital requirements, which generally peak during January through March
when sales volumes generally are lowest. The credit facilities consist of a term
loan in the amount of $120.7 million, a $60.0 million revolving credit facility,
a $10.0 million line of credit and a $50.0 million receivables securitization
facility. At March 25, 2000 the Company had approximately $84.5 million
available for borrowings under its credit agreements.
The Company believes that its future primary liquidity needs will
consist of capital expenditures, debt service and working capital. Estimated
annual capital expenditures for the Company are expected to be approximately
$35.0 to $40.0 million for fiscal 2000. Approximately $15.0 million is expected
to be used for replacements and other capital expenditures, with the balance
expected to be used for productivity improvements and to meet the specific needs
of the Company's customers.
Based upon continued improvements in operations and continued cost
saving measures, the Company believes that cash flow from operations, sales of
accounts receivable under its receivables securitization facility, borrowings
under its other credit facilities and other sources of liquidity, will be
adequate to meet the Company's anticipated requirements for working capital,
capital expenditures, interest payments and scheduled principal payments for at
least the next 12 months. There can be no assurance, however, that the Company's
business will continue to generate cash flows from operations at or above
current levels or that anticipated improvements in operations and cost savings
will be realized.
YEAR 2000
Over the past few years, the Company has paid close attention to Year
2000 related issues and developed and implemented a program which allowed it to
successfully transition to the Year 2000. Internally, the Company depends upon
its information technology ("IT") and non-IT systems (collectively the "Internal
Systems") to conduct and manage the Company's business. The Company depends on
its IT systems for administrative functions such as accounting, e-mail and
telephone systems as well as in the day to day management of business functions
such as production scheduling and order handling. Non-IT systems would include
computer systems used to run manufacturing equipment, as well as technology
embedded in the manufacturing equipment itself. The Company's operations also
depend upon the operations and financial performance of certain third parties.
Other than utilities, the third parties on which the Company relies most heavily
are its suppliers of raw materials, equipment and services and its customers
("External Relationships").
The Company completed all phases of its Year 2000 Program and its
material Internal Systems were ready for the Year 2000. As of the date of this
Report, the Company has not experienced any material Year 2000 issues with
respect to its Internal Systems or its External Relationships.
The Company designates the information contained herein regarding the
Company's Year 2000 program as "Year 2000 Readiness Disclosures" made pursuant
to the Year 2000 Information and Readiness Disclosure Act.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion should be read in conjunction with the Notes
to Unaudited Financial Statements contained herein, as well as the Notes to
Financial Statements contained in the Company's Form
12
<PAGE> 14
10-K for the fiscal year ended June 26, 1999.
This Item contains certain forward-looking statements that reflect the
Company's assessment of a number of risks and uncertainties. The Company's
actual results could differ materially from the results anticipated in such
forward-looking statements as a result of certain factors set forth in this
Report. Where such forward-looking statements appear, the Company has sought to
accompany such statements with meaningful cautionary statements identifying
important factors that could cause actual results to differ materially from
those described in the forward-looking statements. An additional statement made
pursuant to the Private Securities Litigation Reform Act of 1995 and summarizing
certain of the principal risks and uncertainties inherent in the Company's
business is included in Part I of this Report under the caption "'Safe Harbor'
Statement Under the Private Securities Litigation Reform Act of 1995."
INTEREST RATE RISK
With respect to its credit facilities entered into for other than
trading purposes, the Company is subject to market risk exposure related to
changes in interest rates. The Company is the obligor on the following variable
interest rate long-term debt instruments: (i) $120,673,000 (at March 25, 2000)
secured term loan to banks payable in quarterly installments of $2,442,000 each
through the second quarter of fiscal 2004 and a final payment of $84,040,000
during the third quarter of fiscal 2004 (final installment due March 2004), with
an interest rate tied to LIBOR and payable quarterly; (ii) a $60,000,000 secured
revolving credit facility with banks due in December 2003 with an interest rate
tied to LIBOR and payable quarterly (at March 25, 2000, no amounts were
outstanding under this facility); (iii) a $10,000,000 line of credit with an
interest rate tied to the Federal Funds rate (approximately $1,862,000
outstanding at March 25, 2000); and (iv) $32,000,000 (at March 25, 2000)
outstanding under a $50,000,000 accounts receivable securitization facility with
a bank due in December 2003, with an interest rate tied to LIBOR and payable
quarterly. The Company has also guaranteed the debt of Orflex Ltd., a joint
venture with the OR Group, which totaled approximately $1,930,000 at March 25,
2000. This debt is subject to repayment requirements through a final maturity
date of January 2005. The interest rate on such debt is tied to LIBOR. While
changes in LIBOR and the Federal Funds rate would affect the cost of these funds
in the future, the Company does not consider its current exposure to changes in
such rates to be material, and the Company believes that the effect, if any, of
reasonably possible near-term changes in interest rates on the Company's
financial position, results of operations or cash flows would not be material.
The carrying amounts of the Company's variable rate long-term debt approximate
their fair values.
At March 25, 2000, the Company's fixed interest rate long-term debt
instruments included: (i) $200,000,000 in 10.625% unsecured senior subordinated
notes payable in August 2006 with interest payable semi-annually; (ii)
$100,000,000 in 9.875% unsecured senior notes payable in August 2004 with
interest payable semi-annually; and (iii) $10,305,000 in 11% unsecured
subordinated notes to shareholders payable in an installment of $3,422,000 in
May 2005 and the remaining principal payable in May 2014 with interest payable
annually. There is no material market risk related to the Company's fixed
interest rate long-term debt.
FOREIGN CURRENCY RISK
The Company's revenue derived from international operations is not
material and, therefore, the risk related to foreign currency exchange rates is
not material.
INVESTMENT PORTFOLIO
The Company does not use financial instruments for trading purposes.
The Company invests its excess cash in short-term, highly liquid investments
consisting primarily of overnight repurchase agreements. The market risk on such
investments is minimal.
Pursuant to a note arrangement which became effective in fiscal 1996,
the Company has extended certain working capital loans to Orflex Ltd., a joint
venture formed during fiscal 1995 between the Company and the OR Group. Such
loans, which bear interest at the rate of LIBOR plus 2.75%, are payable upon
13
<PAGE> 15
demand by the Company. Advances related to such loans, including accrued
interest, totaled approximately $5,400,000 at March 25, 2000. While changes in
LIBOR would affect the funds received by the Company from such loans in the
future, the Company believes that the effect, if any, of reasonably possible
near-term changes in such interest rate on the Company's financial position,
results of operations or cash flows would not be material.
14
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule (Filed Electronically)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
15
<PAGE> 17
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.
PRINTPACK, INC.
Dated: May 3, 2000 By: /s/ R. Michael Hembree
------------------------------------------
R. Michael Hembree
Vice President-Finance
(Principal Financial Officer and a duly
authorized officer)
16
<PAGE> 18
EXHIBIT INDEX
EXHIBIT NO.
- -----------
27
DESCRIPTION
-----------
Financial Data Schedule (Filed Electronically)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PRINTPACK, INC. FOR THE THIRTY-NINE WEEKS ENDED MARCH
25, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-24-2000
<PERIOD-START> JUN-27-1999
<PERIOD-END> MAR-25-2000
<CASH> 1,191,000
<SECURITIES> 0
<RECEIVABLES> 73,060,000
<ALLOWANCES> 636,000
<INVENTORY> 85,926,000
<CURRENT-ASSETS> 171,597,000
<PP&E> 638,336,000
<DEPRECIATION> 326,369,000
<TOTAL-ASSETS> 554,521,000
<CURRENT-LIABILITIES> 88,932,000
<BONDS> 430,978,000
0
0
<COMMON> 1,011,000
<OTHER-SE> (10,438,000)
<TOTAL-LIABILITY-AND-EQUITY> 554,521,000
<SALES> 666,529,000
<TOTAL-REVENUES> 666,529,000
<CGS> 564,120,000
<TOTAL-COSTS> 564,120,000
<OTHER-EXPENSES> 65,593,000
<LOSS-PROVISION> 35,000
<INTEREST-EXPENSE> 37,547,000
<INCOME-PRETAX> (766,000)
<INCOME-TAX> (489,000)
<INCOME-CONTINUING> (277,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (277,000)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
