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 MAY 31, 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 NO. 33-95318
PORTOLA PACKAGING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-1582719
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
890 FAULSTICH COURT
SAN JOSE, CALIFORNIA 95112
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(408) 453-8840
(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.
--- ---
11,782,769 shares of Registrant's $.001 par value Common Stock, consisting of
2,134,992 shares of nonvoting Class A Common Stock and 9,647,777 shares in the
aggregate of voting Class B Common Stock, Series 1 and 2 combined, were
outstanding at June 30, 1998.
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
INDEX
Part I - Financial Information
- -------------------------------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of
May 31, 1998 and August 31, 1997
Consolidated Statements of Operations for
the Three and Nine Months Ended May 31, 1998 and 1997
Consolidated Statements of Cash Flows for
the Three and Nine Months Ended May 31, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II - Other Information
- ----------------------------
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
May 31, August 31,
1998 1997
------------ ----------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................... $3,215 $3,242
Investments..................................... -- 841
Accounts receivable, net........................ 22,707 23,339
Inventories..................................... 10,815 9,918
Other current assets............................ 1,804 1,783
Deferred income taxes........................... 971 1,032
------------ ----------
Total current assets........................ 39,512 40,155
Property, plant and equipment, net.............. 84,132 79,779
Goodwill, net................................... 13,990 15,044
Patents, net.................................... 1,866 2,024
Covenants not to compete, net................... 999 2,183
Debt financing costs, net....................... 3,084 3,433
Other assets.................................... 4,450 5,439
------------ ----------
Total assets.................................... $148,033 $148,057
============ ==========
LIABILITIES, REDEEMABLE WARRANTS, COMMON
STOCK AND OTHER STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt and
short-term borrowings........................ $2,494 $6,784
Accounts payable................................ 5,587 9,908
Accrued liabilities............................. 10,772 11,031
Accrued interest................................ 2,188 4,978
------------ ----------
Total current liabilities..................... 21,041 32,701
Long-term debt, less current portion............ 129,415 115,159
Other long term obligations..................... 1,132 1,543
Deferred income taxes........................... 4,914 6,028
------------ ----------
Total liabilities........................... 156,502 155,431
Contingencies (Note 4)
Redeemable warrants to purchase Class A
Common Stock.................................. 7,408 5,675
------------ ----------
Common stock and other stockholders' deficit:
Class A convertible common stock of $.001
par value:
Authorized: 5,203 shares; Issued and
outstanding 2,135 shares in 1998 and 1997... 2 2
Class B, Series 1, common stock of $.001
par value:
Authorized: 17,714 shares; Issued and
outstanding 8,470 shares in May 1998
and 8,481 shares in August 1997............. 8 8
Class B, Series 2, common stock of $.001
par value:
Authorized: 2,571 shares; Issued and
outstanding 1,171 shares in 1998 and 1997... 1 1
Additional paid-in capital...................... 8,588 8,661
Notes receivable from stockholders.............. (463) (440)
Cumulative foreign currency translation
adjustment.................................... (458) (173)
Unrealized holding losses on marketable
securities.................................... -- (92)
Accumulated deficit............................. (23,555) (21,016)
------------ ----------
Total common stock and other
stockholders' deficit................... (15,877) (13,049)
------------ ----------
Total liabilities, redeemable
warrants, common stock and other
stockholders' deficit................... $148,033 $148,057
============ ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
--------------------- ---------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales........................... $46,561 $45,037 $127,804 $125,008
Cost of sales................... 37,099 35,523 102,246 100,612
---------- ---------- ---------- ----------
Gross profit.................... 9,462 9,514 25,558 24,396
---------- ---------- ---------- ----------
Selling, general and
administrative................ 5,087 4,071 14,486 13,650
Research and development........ 673 740 1,829 1,907
Amortization of intangibles..... 838 857 2,503 2,491
Write-off of intangibles........ -- -- -- 1,720
Restructuring costs............. -- 1,301 -- 2,394
---------- ---------- ---------- ----------
6,598 6,969 18,818 22,162
---------- ---------- ---------- ----------
Income (loss) from operations... 2,864 2,545 6,740 2,234
---------- ---------- ---------- ----------
Other (income) expense:
Interest income............... (142) (115) (392) (404)
Interest expense.............. 3,566 3,426 10,270 9,965
Income from sale of
securities and property
plant and equipment......... (710) -- (1,544) --
Amortization of debt
financing costs............. 129 115 386 428
Other (income) expense........ 145 (6) 269 5
---------- ---------- ---------- ----------
2,988 3,420 8,989 9,994
---------- ---------- ---------- ----------
Loss before income taxes........ (124) (875) (2,249) (7,760)
Benefit from income taxes....... (63) 1,650 (1,443) --
---------- ---------- ---------- ----------
Net loss........................ ($61) ($2,525) ($806) ($7,760)
========== ========== ========== ==========
Basic and diluted net loss
per common share............. ($0.01) ($0.22) ($0.07) ($0.66)
========== ========== ========== ==========
Number of shares used in
computing per share amount.... 11,776 11,718 11,777 11,776
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
May 31,
---------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................... ($806) ($7,760)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization........................ 12,425 11,783
Deferred income taxes................................ (1,114) --
Write-off of intangibles............................. -- 1,720
Loss (gain) on property and equipment dispositions... (794) 75
Provision for losses on accounts receivable.......... 238 602
Provision for excess and obsolete inventories........ 51 271
Provision for restructuring.......................... -- 514
Gain on sale of marketable securities................ (750) --
Changes in working capital:
Accounts receivable.................................. 395 (1,738)
Inventories.......................................... (948) 137
Other current assets................................. (21) (950)
Accounts payable..................................... (4,321) (1,912)
Accrued liabilities.................................. (259) 1,737
Accrued interest..................................... (2,790) (2,716)
---------- ----------
Net cash provided by operating activities............ 1,306 1,763
---------- ----------
Cash flows used for investing activities:
Additions to property and equipment.................... (14,025) (15,706)
Proceeds from sale of property, plant and equipment.... 926 275
Proceeds from sale of marketable securities............ 1,744 --
Payment for Rapid Plast acquisition, net of
cash acquired........................................ -- (2,134)
Decrease in other assets............................... 747 1,913
---------- ----------
Net cash used in investing activities................ (10,608) (15,652)
---------- ----------
Cash flows from financing activities:
Repayment of long-term debt obligations................ (2,093) (480)
Borrowings under debt arrangements..................... 68 328
Borrowings under revolving line of credit.............. 12,200 8,267
Repayment of notes receivable from shareholder......... -- 7
Increase in notes receivable from stockholders......... (24) --
Repurchase of common stock............................. (132) (500)
Issuance of common stock............................... 59 --
Payment under covenants................................ (620) (728)
---------- ----------
Net cash from financing activities................... 9,458 6,894
---------- ----------
Effect of exchange rate on cash.......................... (183) (132)
---------- ----------
Decrease in cash and cash equivalents................ (27) (7,127)
Cash and cash equivalents at beginning of period......... 3,242 7,797
---------- ----------
Cash and cash equivalents at end of period............... $3,215 $670
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
Portola Packaging, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(in thousands, except per share data)
(Unaudited)
1. BASIS OF PRESENTATION:
The consolidated financial statements included herein have been
prepared by Portola Packaging, Inc. and its subsidiaries (the "Company")
without audit and in the opinion of management include all adjustments
(consisting only of normal recurring adjustments) considered necessary
for a fair presentation. The accompanying financial statements should
be read in conjunction with the audited financial statements contained
in the Company's Form 10-K previously filed with the Securities and
Exchange Commission. Interim results are subject to significant
seasonal variations and the results of operations for the three and nine
months ended May 31, 1998 are not necessarily indicative of the results
to be expected for the full year ending August 31, 1998. The condensed
consolidated balance sheet as of August 31, 1997 is derived from audited
data, but does not contain all disclosures required by generally
accepted accounting principles.
2. COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE:
Effective for the quarter ended February 28, 1998, the Company
adopted Financial Accounting Standards Board No. 128 "Earnings Per
Share" (EPS) and accordingly has restated EPS for prior periods from
previously reported EPS. Basic EPS is computed as net income (loss)
divided by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could
occur from common shares issuable through stock options, warrants and
other convertible securities. Common equivalent shares are excluded
from the computation of net loss per share as their effect is
antidilutive.
The following is a reconciliation of the numerator (net loss) and
the denominator (number of shares) used in the basic and diluted EPS
calculations:
Three Months Ended Nine Months Ended
May 31, May 31,
--------------------- ---------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net loss........................ ($61) ($2,525) ($806) ($7,760)
Shares used in per share
calculation................... 11,776 11,718 11,777 11,776
========== ========== ========== ==========
Basic and diluted EPS........... ($0.01) ($0.22) ($0.07) ($0.66)
========== ========== ========== ==========
3. INVENTORIES:
Inventory balances as of May 31, 1998 and August 31, 1997 were as
follows:
May 31, Aug 31,
1998 1997
---- ----
(unaudited)
Raw materials $5,999 $5,251
Work in process 261 442
Finished goods 4,555 4,225
------- -------
$10,815 $ 9,918
4. CONTINGENCIES:
The Company is engaged in patent litigation with various parties
who are seeking to have certain patents owned by the Company declared
invalid in various jurisdictions. In some of these cases the Company
has a claim against it for alleged violations of the antitrust laws.
The Company believes its patents are valid, and intends to vigorously
contest these actions. However, there can be no assurance that the
Company will be successful in its defense of these matters.
The Company is also party to a number of other lawsuits and claims
arising out of the normal course of business. Although the ultimate
outcome of these matters is not presently determinable, management does
not believe the final disposition of these matters will have a material
adverse effect on the financial position, results of operations or cash
flows of the Company.
5. RESTRUCTURING COSTS:
The Company took measures to improve productivity and quality in
its core business, and in fiscal 1997 implemented a restructuring plan
which consolidated its separate Closure, Packaging and Manufacturing
divisions. This restructuring plan included a reduction in staff
positions and the closure of its Portland, Oregon plant in February 1997
and its Bettendorf, Iowa plant in July 1997. The Portland facility was
sold in the first fiscal quarter of 1998 and the Bettendorf plant has
been listed for sale. The Company recorded a restructuring charge of
approximately $2.4 million primarily for payroll related charges in
connection with this restructuring plan in fiscal 1997.
6. WRITE-OFF OF INTANGIBLES:
In connection with the Portland, Oregon plant closing discussed
above, the Company wrote off $1.7 million of goodwill associated with
this plant in fiscal 1997.
7. SALE OF SECURITIES AND PROPERTY, PLANT AND EQUIPMENT:
The Company recorded a gain of $750,000 on the sale of marketable
securities related to its investment in Suncoast for the three months
ended May 31, 1998 and a gain of $1,023,000 on the sale of its Portland,
Oregon facilities for the nine months ended May 31, 1998.
8. RECENT ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board issued SFAS
130, "Reporting Comprehensive Income". SFAS 130 establishes standards
for reporting and display of comprehensive income and its components in
a full set of general-purpose financial statements. It is effective for
the Company's fiscal year 1999.
In June 1997, the Financial Accounting Standards Board issued SFAS
131, "Disclosure About Segments of an Enterprise and Related
Information". SFAS 131 changes current practice under SFAS 14 by
establishing a new framework on which to base segment reporting
(referred to as the "management" approach) and also requires interim
reporting of segment information. It is effective for the Company's
fiscal year 1999.
In February 1998 the Financial Accounting Standards Board issued
Statement No. 132 (SFAS 132), "Employers' Disclosure About Pension and
Other Benefits." SFAS 132 revises employers' disclosures about pension
and other postretirement benefit plans. It does not change the
measurement or recognition of those plans. It is effective for the
Company in fiscal year 1999.
The Company is currently studying the implications of these
statements and has not yet determined the impact of their adoption.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Disclosures Regarding Forward-Looking Statements
This report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts included in this
Form 10-Q, including, without limitation, statements contained in this
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" regarding the Company's financing alternatives, financial
position, business strategy, plans and objectives of management of the
Company for future operations and industry conditions, are forward-
looking statements. Although the Company believes that the expectations
reflected in any such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been
correct. Any forward-looking statements herein are subject to certain
risks and uncertainties in the Company's business, including but not
limited to, competition in its markets and reliance on key customers,
all of which may be beyond the control of the Company. Any one or more
of these factors could cause actual results to differ materially from
those expressed in any forward-looking statement. All subsequent
written and oral forward-looking statements attributable to the Company
or any person acting on its behalf are expressly qualified in their
entirety by the cautionary statements disclosed in this paragraph and
elsewhere in this report.
Results of Operations
Sales increased $1.6 million, or 3.4%, from $45.0 million for the
three months ended May 31, 1997 to $46.6 million for the three months
ended May 31, 1998, and increased $2.8 million, or 2.2%, from $125.0
million for the nine months ended May 31, 1997 to $127.8 million for the
nine months ended May 31, 1998. The increase in sales for the three
months and nine months ended May 31, 1998 compared to the same periods
in the prior fiscal year was due to continued growth in sales volumes
in newer subsidiaries in the United Kingdom and Canada which were
partially offset by decreases in equipment sales over the same periods.
Sales from domestic closures operations remained stable for the three
months and nine months periods ended May 31, 1998 as compared to the
same periods of fiscal year 1997.
Gross profit was unchanged at $9.5 million for the three months
ended May 31, 1998 as compared to the three months ended May 31, 1997,
and increased $1.2 million, or 4.8%, to $25.6 million for the nine
months ended May 31, 1998 from $24.4 million for the same period in
fiscal 1997. Gross profit as a percentage of sales also remained stable,
decreasing slightly from 21.1% for the three months ended May 31, 1997
to 20.3% for the same quarter in fiscal year 1998 and increasing from
19.5% for the nine months ended May 31, 1997 to 20% for the same period
in fiscal year 1998. The margin increase was due primarily to improving
margins in the United Kingdom and equipment operations offset by lower
margins in Canada for the nine months ended May 31, 1998 as compared to
the same period of fiscal year 1997. Margins for domestic closures
remained stable for the nine months ended May 31, 1998 as compared to
the same period in fiscal 1997.
Selling, general and administrative expenses increased $1.0
million, or 25.0%, to $5.1 million for the three months ended May 31,
1998, as compared to $4.1 million for the same period in fiscal year
1997, and increased as a percentage of sales from 9.0% for the three
months ended May 31, 1997 to 10.9% for the three months ended May 31,
1998. For the nine months ended May 31, 1998, selling, general and
administrative expenses increased $0.8 million, or 6.1%, to $14.5
million from $13.7 million for the same period in fiscal year 1997. As
a percentage of sales for the nine months ended May 31, 1998, selling,
general and administrative expenses were 11.3% as compared to 10.9 % for
the same period in fiscal 1997. The increases are primarily due to
consulting fees and increased patent and other legal fees combined with
an increase in relocation expenses. These increases were partially
offset by a decrease in bonus costs in fiscal 1998 as compared to fiscal
1997 as a result of operating results.
Research and development expense decreased $67,000, or 9.1%, to
$673,000 for the three months ended May 31, 1998, as compared to
$740,000 for the three months ended May 31, 1997, and decreased as a
percentage of sales from 1.6% in the three months ended May 31, 1997 to
1.5% in the three months ended May 31, 1998. For the nine months ended
May 31, 1998, research and development expense decreased $78,000, or
4.1%, to $1.8 million from $1.9 million for the same period in fiscal
year 1997. As a percentage of sales, research and development expense
was 1.4% for the nine months ended May 31, 1998, as compared to 1.5% for
the same period in fiscal year 1997. The decreases were primarily due to
fewer expenditures for prototype costs offset by increased expenditures
for patent consulting and increased personnel costs related to increased
staffing to address new product development in the three and nine
months periods ended May 31, 1998 as compared to the same periods of
fiscal year 1997.
Amortization of intangibles (consisting of amortization of
patents, goodwill and covenants not to compete) decreased $19,000, or
2.2 %, to $838,000 for the three months ended May 31, 1998, as compared
to $857,000 for the three months ended May 31, 1997, and remained
constant at $2.5 million for the nine months ended May 31, 1998 as
compared to the same period in fiscal year 1997.
The Company implemented a restructuring plan in December 1996
which consolidated its separate Closure, Packaging and Manufacturing
divisions. This restructuring plan included a reduction in staff
positions and the closure of its Portland, Oregon plant in February 1997
for which the Company wrote off $1.7 million in goodwill and recorded a
restructuring charge of $1.1 million in the second quarter of fiscal
year 1997. In March 1997 the Company announced further restructuring
plans which included the closure of its Bettendorf, Iowa plant in July
1997 for which the Company recorded a restructuring charge of $1.3
million for the three months ended May 31, 1997 related to employee
severance payments and facilities related charges.
Interest income increased $27,000 to $142,000 for the three months
ended May 31, 1998 from $115,000 for the same period in fiscal year
1997, and decreased $12,000 to $392,000 for the nine months ended May
31, 1998 as compared to $404,000 for the same period in fiscal year
1997. These increases and decreases are due to fluctuations in the
levels of invested cash for the three and nine months periods ended May
31, 1998 as compared to the same periods in fiscal year 1997.
Interest expense increased $140,000 to $3.6 million for the three
months ended May 31, 1998, as compared to $3.4 million for the three
months ended May 31, 1997, and increased $305,000 to $10.3 million for
the nine months ended May 31, 1998 as compared to $10.0 million for the
same period in fiscal year 1997. These increases were due to increased
borrowings under the Company's line of credit partially offset by a
decrease in interest expense related to the reduced principal balance on
the Company's long-term debt obligations.
The Company recorded a gain of $750,000 on the sale of marketable
securities related to its investment in Suncoast for the three months
ended May 31, 1998 and a gain of $1,023,000 on the sale of its Portland,
Oregon facilities for the nine months ended May 31, 1998.
Amortization of debt financing costs was $129,000 for the three
months May 31, 1998 compared to $115,000 for the three months ended May
31, 1997, and decreased $42,000 to $386,000 for the nine months ended
May 31, 1998 as compared to $428,000 for the same period in fiscal 1997.
Debt financing costs are attributable to the $110 million senior notes
issued in October 1995 and to a lesser extent, debt financing incurred
by the Company's western Canadian subsidiary.
The Company recorded a benefit from income taxes of $1.4 million
for the nine months ended May 31, 1998 based on its pre-tax loss using
an effective tax rate of 64% in anticipation of the expected tax rate
for the entire fiscal year. The actual effective tax rate for the
entire fiscal year could vary substantially depending on actual results
achieved. The Company did not record any tax expense for the first nine
months of fiscal 1997 in anticipation of its expected 0% tax rate for
the entire fiscal year. The Company recorded a benefit from income
taxes at an effective tax rate of 7.9% for fiscal year 1997. Income tax
benefit does not bear a normal relationship to income before income
taxes primarily due to nondeductible goodwill and other intangibles
arising from the Company's acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Company has relied primarily upon cash from operations,
borrowings from financial institutions and sales of common stock to
finance its operations, repay long-term indebtedness and fund capital
expenditures and acquisitions. At May 31, 1998, the Company had cash
and cash equivalents of $3.2 million, which was unchanged from August
31, 1997.
Cash provided by operations totaled $1,306,000 for the nine months
ended May 31, 1998, a decrease of $457,000 from the $1.8 million
provided by operations for the nine months ended May 31, 1997. The
decrease in the net loss to $0.8 million for the nine months ended May
31, 1998 from a loss of $7.8 million for the same period in fiscal year
1997 did not provide additional cash from operations due partially to
the exclusion of non-operating gains for the nine months period ended
May 31, 1998 of $1.5 million from the sales of fixed assets and
marketable securities and $2.1 million related to tax benefits. The net
loss for the nine months ended May 31, 1997 also included the $1.7
million write -off of intangibles which would be excluded from the
calculation of cash from operations. In addition, accounts payable used
cash of $4.3 million in the nine months ended May 31, 1998 as compared
to using funds of $1.9 million in the same period in fiscal year 1997.
Accrued liabilities used cash of $.3 million in the nine months ended
May 31, 1998 as compared to providing cash of $1.7 million for the same
period in fiscal year 1997 offset by accounts receivable which provided
cash of $.4 million in the nine months ended May 31, 1998 compared to
using cash of $1.7 million for the same period in fiscal year 1997.
Cash used in investing activities was $10.6 million for the nine
months ended May 31, 1998, as compared to $15.7 million for the nine
months ended May 31, 1997. This consisted primarily of additions to
property and equipment and for fiscal year 1997, also included the
acquisition of the Company's eastern Canadian subsidiary (formerly Rapid
Plast and now named Portola Packaging Ltd.) for approximately $2.1
million. Cash used in investing activities included $1.2 million in
proceeds from the sale of property, plant and equipment related to the
disposition of the Portland, Oregon facilities in the first fiscal
quarter ended November 30, 1997 and $1.7 million in proceeds from the
sale of marketable securities related to the Company's investment in
Suncoast in the third quarter ended May 31, 1998.
Cash provided by financing activities was $9.5 million for the
first nine months of fiscal 1998 compared to $6.9 million for the first
nine months of fiscal year 1997. As of May 31, 1998, the Company had
borrowed $16.6 million under its $35 million revolving line of credit.
At May 31, 1998, the Company had $3.2 million in cash and cash
equivalents as well as borrowing capacity under the revolving credit
line (of which $18.4 million was available for draw as of May 31, 1998).
Management believes that these resources, together with anticipated cash
flow from operations, will be adequate to fund the Company's operations,
debt service requirements and capital expenditures through fiscal year
1998. However, there can be no assurance that additional capital beyond
the amounts currently forecasted by the Company will not be required or
that any such required additional capital will be available on
reasonable terms, if at all, at such time or times as required by the
Company.
RECENT ACCOUNTING PRONOUCEMENTS
In June 1997, the Financial Accounting Standards Board issued
Statement No. 130 (SFAS 130), "Reporting Comprehensive Income". SFAS
130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements. It will become effective for the Company's fiscal year
1999.
In June 1997 the Financial Accounting Standards Board also
issued Statement No. 131 (SFAS 131), "Disclosure About Segments of an
Enterprise and Related Information". SFAS No. 131 changes current
practice under SFAS No. 14 by establishing a new framework on which to
base segment reporting (referred to as the "management" approach) and
also requires interim reporting of segment information. It is effective
for the Company's fiscal year 1999.
In February 1998 the Financial Accounting Standards Board
issued Statement No. 132 (SFAS 132), "Employers' Disclosure About
Pension and Other Benefits." SFAS 132 revises employers' disclosures
about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. It is effective
for the Company in fiscal year 1999.
The Company is currently studying the implications of these
statements and has not yet determined the impact of adopting such
statements on the Company's financial statements.
Other
The Company has begun to conduct a review of its internal
computer systems to identify the systems that could be affected by the
"Year 2000" issue and is developing an implementation plan to resolve
any such problems. The Year 2000 problem is the result of computer
programs being written using two digits (rather than four) to define the
applicable year. Software programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a major system failure or miscalculations.
The Company presently believes that, with modifications to or
replacement of existing software, the Year 2000 problems will not pose
significant operational problems for the Company's domestic computer
systems and expects to have its foreign computer systems fully
integrated with domestic computer operations by the end of calendar year
1999. The Company believes that the costs associated with any such
upgrade or replacement of software will not be material, and that all
such changes will be implemented by the end of calendar year 1999.
However, if such modifications are not made in a timely manner, or are
not made properly, the Company may be unable to implement appropriate
Year 2000 solutions, which could have a material adverse effect on the
Company's business, financial condition or results of operations.
The Company has not yet initiated communications with third-party
vendors or customers of the Company to determine the nature and extent
of any Year 2000 problems. As a result, the Company is currently unable
to determine whether there are any Year 2000 problems associated with
the operations of such third-party vendors or customers. If Year 2000
problems exist and solutions are required, there can be no assurances
that such third-party vendors or customers will be able to timely
complete the resolution of their Year 2000 problems or, even if timely
completed, that their solutions will be acceptable solutions.
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith or incorporated by
reference herein.
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ -------------
27.01 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Company during the period
ended May 31, 1998.
<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.
PORTOLA PACKAGING, INC.
(Registrant)
Date: July 14, 1998 /s/ Joseph T. Mayernick
-----------------------------
Joseph T. Mayernick
Vice President and
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ -------------
27.01 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> MAY-31-1998
<CASH> 3,215
<SECURITIES> 0
<RECEIVABLES> 22,707 <F1>
<ALLOWANCES> 0
<INVENTORY> 10,815
<CURRENT-ASSETS> 39,512
<PP&E> 84,132 <F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 148,033
<CURRENT-LIABILITIES> 21,041
<BONDS> 0
0
0
<COMMON> 11
<OTHER-SE> (15,888)
<TOTAL-LIABILITY-AND-EQUITY> 148,033
<SALES> 127,804
<TOTAL-REVENUES> 127,804
<CGS> 102,246
<TOTAL-COSTS> 102,246
<OTHER-EXPENSES> 18,818
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,270
<INCOME-PRETAX> (2,249)
<INCOME-TAX> (1,443)
<INCOME-CONTINUING> (806)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (806)
<EPS-PRIMARY> ($0.07)
<EPS-DILUTED> ($0.07)
<FN>
<F1> Shown net of allowance
<F2> Shown net of depreciation
</FN>
</TABLE>
