<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the thirteen week period ended April 4, 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 0-8514
------
LIQUI-BOX CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-0628033
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
6950 Worthington-Galena Road, Worthington, Ohio 43085
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 888-9280
---------------
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
------ --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 5, 1998
-------------------------- ----------------------------
Common Stock, no par value 4,728,986 shares
Exhibit Index at Page 10
<PAGE>
LIQUI-BOX CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I - Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
April 4, 1998 and January 3, 1998 3-4
Condensed Consolidated Statements of Income
For the thirteen week periods ended
April 4, 1998 and March 29, 1997 5
Condensed Consolidated Statements of Cash Flows
For the thirteen week periods ended
April 4, 1998 and March 29, 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Part II - Other Information - Items 1-6 10
Exhibit 11 - Statement Re Computation of Earnings Per Share 11
Exhibit 27 - Financial Data Schedule 12
Signatures 13
</TABLE>
-2-
<PAGE>
LIQUI-BOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
--------------------------------------------
April 4, 1998 January 3, 1998
-------------- -----------------
<S> <C> <C>
ASSETS
- --------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 7,706,000 $ 17,425,000
Accounts receivable:
Trade, net of allowance for doubtful accounts
of $1,073,000 and $933,000, respectively 16,621,000 14,155,000
Other 551,000 657,000
------------ ------------
Total receivables 17,172,000 14,812,000
Inventories:
Raw materials and supplies 9,417,000 7,165,000
Work in process 4,010,000 3,027,000
Finished goods 5,340,000 3,563,000
------------ ------------
Total Inventories 18,767,000 13,755,000
Other current assets 1,317,000 1,388,000
------------ ------------
TOTAL CURRENT ASSETS 44,962,000 47,380,000
- --------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT - AT COST
- --------------------------------------------------------------------------------------------------------------
Land, buildings and leasehold improvements 14,842,000 14,784,000
Equipment and vehicles 68,609,000 68,375,000
Equipment leased to customers 18,527,000 18,331,000
Construction in process 1,955,000 2,359,000
------------ ------------
TOTAL 103,933,000 103,849,000
Less accumulated depreciation and amortization (67,880,000) (66,295,000)
------------ ------------
Property, plant and equipment - net 36,053,000 37,554,000
- --------------------------------------------------------------------------------------------------------------
OTHER ASSETS
- --------------------------------------------------------------------------------------------------------------
Goodwill, net of amortization 8,930,000 9,137,000
Deferred charges and other assets, net 3,355,000 3,371,000
------------ ------------
Total other assets 12,285,000 12,508,000
TOTAL ASSETS $ 93,300,000 $ 97,442,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
LIQUI-BOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
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April 4, 1998 January 3, 1998
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LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
- -----------------------------------------------------------------------------------------------------
Accounts payable $ 13,174,000 $ 6,962,000
Short-term borrowings 10,000,000 10,000,000
Dividends payable 710,000 624,000
Salaries, wages and related liabilities 2,388,000 1,962,000
Federal, state and local taxes 2,451,000 684,000
Other accrued liabilities 4,805,000 3,627,000
------------ ------------
TOTAL CURRENT LIABILITIES 33,528,000 23,859,000
- -----------------------------------------------------------------------------------------------------
OTHER NONCURRENT LIABILITIES
- -----------------------------------------------------------------------------------------------------
Deferred income taxes 1,098,000 1,069,000
Commitments and Contingencies - -
- -----------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------
Preferred stock, without par value,
2,000,000 shares authorized; none issued - -
Common stock, $.1667 stated value,
20,000,000 shares authorized,
7,262,598 shares issued 1,210,000 1,210,000
Additional paid-in capital 7,773,000 7,234,000
Cumulative translation adjustment 1,052,000 1,242,000
Unrealized gain on marketable securities 915,000 872,000
Retained earnings 124,925,000 121,979,000
Less:
Treasury stock, at cost - 2,532,495
and 2,105,553 shares, respectively (77,201,000) (60,023,000)
- -----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 58,674,000 72,514,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 93,300,000 $ 97,442,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
LIQUI-BOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
UNAUDITED
--------------------------------
Thirteen Weeks Ended
--------------------------------
April 4, March 29,
1998 1997
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<S> <C> <C>
NET SALES $35,993,000 $33,958,000
Cost of Sales 24,314,000 23,336,000
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Gross Margin 11,679,000 10,622,000
Selling, administrative and
development expenses 5,462,000 5,616,000
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Operating Income 6,217,000 5,006,000
OTHER INCOME (EXPENSE):
Interest and dividend income 103,000 155,000
Interest expense (154,000) (8,000)
Other, net 20,000 247,000
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INCOME BEFORE INCOME TAXES 6,186,000 5,400,000
TAXES ON INCOME 2,530,000 2,209,000
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NET INCOME $ 3,656,000 $ 3,191,000
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----------- -----------
- ----------------------------------------------------------------------------------------
EARNINGS PER SHARE
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Basic $ 0.77 $ 0.55
Diluted $ 0.74 $ 0.54
Cash dividends per common share $ 0.15 $ 0.13
- ----------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTING EARNINGS PER SHARE:
- ----------------------------------------------------------------------------------------
Basic 4,755,645 5,819,257
Diluted 4,934,124 5,911,593
</TABLE>
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
LIQUI-BOX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED
-------------------------------
Thirteen Weeks Ended
-------------------------------
April 4, March 29,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,656,000 $ 3,191,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,926,000 2,040,000
Provision for loss on accounts receivable 222,000 114,000
Amortization of other noncurrent assets 226,000 140,000
(Gain) on disposal of property, plant and equipment (1,000) (258,000)
Deferred compensation 111,000 109,000
Changes in deferred income tax accounts 29,000 175,000
Changes in operating assets and liabilities:
Accounts receivable (2,579,000) 1,221,000
Inventories (5,005,000) (1,409,000)
Other current assets 74,000 (113,000)
Accounts payable 6,205,000 2,512,000
Salaries, wages and related liabilities 426,000 1,497,000
Other accrued liabilities 2,941,000 7,000
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,231,000 9,226,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchase of property, plant and equipment (1,558,000) (4,317,000)
Proceeds from sale of property, plant and equipment 1,136,000 593,000
Other changes, net 41,000 317,000
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NET CASH USED IN INVESTING ACTIVITIES (381,000) (3,407,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
- ---------------------------------------------------------------------------------------------------------------
Acquisition of treasury shares (17,940,000) (1,406,000)
Exercise of stock options, including tax benefit 1,189,000 46,000
Cash dividends (624,000) (750,000)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (17,375,000) (2,110,000)
- ---------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (194,000) (730,000)
- ---------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (9,719,000) 2,979,000
CASH AND CASH EQUIVALENTS, Beginning of year 17,425,000 15,248,000
------------ ------------
CASH AND CASH EQUIVALENTS, End of first quarter $ 7,706,000 $ 18,227,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-6-
<PAGE>
LIQUI-BOX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. The accompanying financial statements include the accounts of Liqui-Box
Corporation (the "Company") and its subsidiaries.
The information furnished reflects all adjustments (all of which were of a
normal recurring nature) which are, in the opinion of management, necessary
to fairly present the consolidated financial position, results of
operations and changes in cash flows on a consistent basis.
Certain amounts in the prior year's financial statements have been
reclassified to conform to the 1998 presentation.
2. As of January 4, 1998, Liqui-Box adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), "Reporting Comprehensive Income," issued in
June 1997. SFAS 130 requires the reporting and display of comprehensive
income, which is composed of net income and other comprehensive income
items, in a full set of general purpose financial statements. Other
comprehensive income items are revenues, expenses, gains and losses that
under generally accepted accounting principles are excluded from net income
and reflected as a component of equity; such as currency translation and
gain or loss on securities adjustments. Comprehensive income, net of tax,
was $3,509,000 and $2,454,000 in First Quarter 1998 and First Quarter 1997.
Other comprehensive income is composed of the change in foreign currency
translation and the change in the value of marketable securities held for
investment.
3. In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". The
statement is effective for periods beginning after December 15, 1997. The
Company has not completed the process of evaluating the impact that will
result on its financial statements when such statement is adopted.
4. The accompanying unaudited consolidated financial statements are presented
in accordance with the requirements for Form 10-Q for interim reporting
purposes. Reference should be made to the Company's aforementioned Form
10-K for additional disclosures including a summary of the Company's
accounting policies, which have not significantly changed.
-7-
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the First Quarter 1998, Liqui-Box Corporation and its subsidiaries (the
"Company") experienced a 6% increase in sales dollars and a 4% increase in unit
sales compared to the First Quarter 1997. The increase in sales dollars for the
quarter was the result of the increase in unit sales combined with an increase
in machine sales revenue for the Company's Inpaco subsidiary.
Gross profit, as a percentage of net sales, was 32.5% in the First Quarter 1998
and 31.3% in the First Quarter 1997. The increase in gross profit as a percent
of net sales is primarily the result of improvements in plant operating
efficiencies and to a lesser extent, improved margins from the Company's Inpaco
subsidiary.
For the First Quarter of 1998, selling, administrative, and development expenses
were 15.2% of sales as compared to 16.5% in the First Quarter of 1997. The
decrease is primarily the result of the Company's continuing efforts to control
costs.
Income before taxes as a percentage of net sales was 17.2% in the First Quarter
1998 and 15.9% in the First Quarter 1997.
The provision for income taxes was 40.9% of before tax income for the First
Quarter of 1998 and 40.9% for the First Quarter 1997. The effective tax rate
for the First Quarter 1998 is based on the Company's anticipated tax rate for
the 1998 fiscal year.
At the end of the First Quarter of 1998 and 1997, the Company had no significant
backlog of orders, which is industry typical.
LIQUIDITY AND CAPITAL RESOURCES
Total working capital at April 4, 1998, was $11,434,000 compared to $23,521,000
at January 3, 1998. This decrease is the result of the acquisition of treasury
shares by the Company in the First Quarter of 1998 combined with the seasonal
needs of the Company. The ratio of current assets to current liabilities was
1.3 to 1 at the end of the First Quarter 1998 and 2.0 to 1 at year-end 1997.
Net cash provided from operations was $8,231,000 for the three months ended
April 4, 1998 compared to $9,226,000 for the three months ended March 29, 1997.
Net cash used in investing activities was $381,000 for the three months ended
April 4, 1998 compared to $3,407,000 for the three months ended March 29, 1997.
The cash was used primarily for purchases of new plant equipment and
improvements to existing property and plant equipment. Cash used in financing
activities was $17,375,000 for the three months ended April 4, 1998, compared to
cash provided of $2,110,000 for the three months ended March 29, 1997. The cash
used in financing activities was primarily for the acquisition of treasury stock
and payment of cash dividends.
The Company's major commitments for capital expenditures as of April 4, 1998
were, as they have been in the past, primarily for increased capacity at
existing locations, building filler machines for lease and tooling for new
projects. Funds required to fulfill these commitments will be provided
principally from operations with any additional funding needed coming from
credit facilities that aggregate $30,000,000 with The Huntington National Bank.
There was $10,000,000 outstanding under these commitments as of April 4, 1998.
-8-
<PAGE>
Longer-term cash requirements, other than normal operating expenses, are needed
for financing anticipated growth; increasing capacity at existing plants;
development of new products and enhancement of existing products; dividend
payments and possible continued repurchases of the Company's common shares. The
Company believes that its existing cash and cash equivalents, available credit
facilities and anticipated cash generated from operations will be sufficient to
satisfy its currently anticipated cash requirements for the fiscal year 1998.
There have been no significant changes in capitalization during the first three
months of 1998, except for the repurchase of treasury shares in the aggregate
amount of $17,940,000 which were acquired throughout the First Quarter 1998.
The common shares were bought at a price considered fair by management and there
was cash available for these purchases. The Company felt the purchases
represented a good investment and would secure common shares for issuance under
the Company's employee benefit plans. The Company has not entered into any
significant financing arrangements not reflected in the financial statements.
COMPREHENSIVE INCOME
Comprehensive income items are revenues, expenses, gains and losses that
under generally accepted accounting principles are excluded from net income
and reflected as a component of equity; such as currency translation and gain
or loss on securities adjustments. Comprehensive income, net of tax, was
$3,509,000 and $2,454,000 in First Quarter 1998 and First Quarter 1997.
Comprehensive income differs from net income per the Consolidated Statements
of Income due to foreign currency translation losses in 1998 and 1997, and
gain on marketable securities in 1998 and loss in 1997. Other comprehensive
income is composed of the change in foreign currency translation and the
change in the value of marketable securities held for investment.
YEAR 2000
In prior years, certain computer programs were written using two digits, rather
than four, to define the applicable year. These programs were written without
considering the impact of the upcoming century and may experience problems
handling dates beyond the year 1999. This could cause computer applications to
fail or to create erroneous results unless corrective measures are taken.
Incomplete or untimely resolution of the Year 2000 issue could have a material
impact on the Company's business, operations or financial condition in the
future.
The Company has been assessing the impact that the Year 2000 issue will have on
its computer systems since 1995. In response to these assessments, which are
ongoing, the Company developed a plan to replace all critical systems. Project
plans call for the implementation of an integrated application software package
purchased from a software vendor. This application software has received
ITAA*2000 certification from the Information Technology Association of America
as Year 2000 compliant. In addition, the Company is in the process of replacing
all critical computer hardware and PC software with Year 2000 compliant
products. The current project plan calls for the implementation to be completed
in the second quarter of 1998 at an approximate cost of $1,000,000. The Company
is also in the process of surveying critical suppliers and customers to
determine the status of their Year 2000 compliance programs.
Based on the work to date, and assuming the Company's project plans can be
implemented as planned, the Company believes future costs relating to the Year
2000 issue will not have a material impact on the Company's consolidated
financial position, results of operations or cash flows.
-9-
<PAGE>
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe-harbor for
forward-looking statements made by or on behalf of the Company. The Company and
its representatives may from time to time make written or verbal forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission and in its reports to shareholders. All
statements which are not historical fact are forward-looking statements based
upon the Company's current plans and strategies, and reflect the Company's
current assessment of the risks and uncertainties related to its business,
including such things as product demand and market acceptance; the economic and
business environment and the impact of governmental regulations, both in the
United States and abroad; the effects of competitive products and pricing
pressures; the impact of fluctuations in foreign currency exchange rates;
capacity; efficiency and supply constraints; weather conditions; and other risks
detailed in the Company's press releases, shareholder communications and
Security and Exchange Commission filings. Actual events affecting the Company
and the impact of such events on the Company's operations may vary from those
currently anticipated.
PART II. OTHER INFORMATION
Item 1-5. Inapplicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit 11. Statement Re Computation of Earnings Per Share
(page 11)
Exhibit 27. Financial Data Schedule (page 12)
(b) No reports on Form 8-K were filed during the quarter ended
April 4, 1998.
-10-
<PAGE>
EXHIBIT (11)
LIQUI-BOX CORPORATION
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------
April 4, March 29,
1998 1997
---------- ----------
<S> <C> <C>
BASIC:
Weighted average number of common
shares outstanding 4,755,645 5,819,257
---------- ----------
---------- ----------
Net Income $3,656,000 $3,191,000
BASIC EARNINGS PER SHARE $ 0.77 $ 0.55
---------- ----------
---------- ----------
DILUTED:
Weighted average number of common
shares outstanding 4,755,645 5,819,257
Net effect of dilutive stock options -
based on treasury stock method
using the quarter-end market price
if higher than average market price 178,479 92,336
---------- ----------
Weighted average common and common
equivalent shares 4,934,124 5,911,593
---------- ----------
---------- ----------
Net Income $3,656,000 $3,191,000
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARES $ 0.74 $ 0.54
---------- ----------
---------- ----------
</TABLE>
-11-
<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.
LIQUI-BOX CORPORATION
-----------------------
(Registrant)
Date May 15, 1998 By /s/ C. William McBee
---------------- ------------------------
C. William McBee
President and Chief Operating
Officer
(Duly Authorized Officer)
Date May 15, 1998 By /s/ James B. Holloway
---------------- ------------------------
James B. Holloway
Controller
(Principal Accounting Officer)
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> APR-04-1998
<CASH> 7,706
<SECURITIES> 0
<RECEIVABLES> 17,694
<ALLOWANCES> 1,073
<INVENTORY> 18,767
<CURRENT-ASSETS> 44,962
<PP&E> 103,933
<DEPRECIATION> 67,880
<TOTAL-ASSETS> 93,300
<CURRENT-LIABILITIES> 33,528
<BONDS> 0
0
0
<COMMON> 1,210
<OTHER-SE> 57,464
<TOTAL-LIABILITY-AND-EQUITY> 93,300
<SALES> 35,993
<TOTAL-REVENUES> 35,993
<CGS> 24,314
<TOTAL-COSTS> 29,776
<OTHER-EXPENSES> 31
<LOSS-PROVISION> 222
<INTEREST-EXPENSE> 154
<INCOME-PRETAX> 6,186
<INCOME-TAX> 2,530
<INCOME-CONTINUING> 3,656
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,656
<EPS-PRIMARY> .77
<EPS-DILUTED> .74
</TABLE>
