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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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Form 10-Q
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(Mark One)
( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended June 29, 1997
Or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _______________ to _______________
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Commission file number 0-15214
Plasti-Line, Inc.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of incorporation or organization)
62-1218546
(I.R.S. Employer Identification Number)
623 E. Emory Road, P.O. Box 59043, Knoxville, Tennessee 37950-9043
(Address of principal executive offices)
(423) 938-1511
(Registrant's phone number including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
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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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X
No
As of August 8, 1997, there were 3,813,797 shares of common stock outstanding.
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<PAGE>
<TABLE>
PART I
ITEM 1
FINANCIAL STATEMENTS
PLASTI-LINE, INC.
Consolidated Condensed Balance Sheets
June 29, 1997 and December 29, 1996
(in thousands)
<CAPTION>
Assets June 29, 1997 Dec. 29, 1996
------ ---- ----
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10 $ 10
Receivables, net 17,744 22,870
Inventories 24,504 27,331
Prepaid expenses 1,147 754
Deferred income taxes 1,337 1,337
------ ------
Total current assets 44,742 52,302
Net property and equipment 13,818 13,260
Goodwill 1,352 1,403
Other assets $ 290 $ 279
------ ------
Total Assets $ 60,202 $ 67,244
====== ======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity June 29, 1997 Dec. 29, 1996
------------------------------------ ---- ----
(Unaudited) (Audited)
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 745 $ 745
Accounts payable 6,113 8,096
Accrued liabilities 4,655 6,116
Income taxes payable 578 83
Customer deposits and deferred revenue 16,050 11,509
------ ------
Total current liabilities 28,141 26,549
Long-term debt, excluding current installments 3,771 12,220
Deferred income taxes 1,196 1,196
Deferred liabilities 94 77
Stockholders' equity:
Preferred stock, $.001 par value. Authorized
5,000,000 shares; issued none - -
Common stock, $.001 par value. Authorized
20,000,000 shares, issued 3,813,797 shares 4 4
Additional paid-in-capital 2,907 2,859
Notes receivable, common stock (126) (136)
Retained earnings 24,215 24,475
------ ------
Total Stockholders' Equity 27,000 27,202
------ ------
Total Liabilities and
Stockholders' Equity $ 60,202 $ 67,244
====== ======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
PLASTI-LINE, INC.
Consolidated Condensed Statements of Operations
For the three months and six months ended June 29, 1997 and June 30, 1996
(in thousands, except per share data)
(Unaudited)
<CAPTION>
|----- Three months -----| |------ Six months ------|
June 29, 1997 June 30, 1996 June 29,1997 June 30,1996
---- ---- ----- -----
<S> <C> <C> <C> <C>
Net sales $ 33,566 $ 32,310 $ 62,098 $ 62,452
Cost of sales 27,461 26,973 50,956 52,132
------ ------ ------ ------
Gross profit 6,105 5,337 11,142 10,320
Selling, general, and
administrative expenses 4,284 3,799 8,031 7,592
------ ------ ------ ------
Operating income 1,821 1,538 3,111 2,728
Interest income 1 - 3 -
Interest expense 187 446 372 897
------ ------ ----- -----
Income before income taxes 1,635 1,092 2,742 1,831
Income taxes 654 415 1,097 696
------ ------ ----- -----
Net income $ 981 $ 677 $ 1,645 $ 1,135
====== ====== ====== =======
Net income per share $ 0.26 $ 0.17 $ 0.43 $ 0.30
====== ====== ====== =======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
PLASTI-LINE, INC.
Consolidated Condensed Statements of Cash Flows
Six months ended June 29, 1997 and June 30, 1996
(in thousands)
(Unaudited)
<CAPTION>
June 29,1997 June 30,1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,645 $ 1,135
Adjustments to reconcile net income to net
cash provided
by operating activities:
Depreciation and amortization 1,165 1,061
Loss on disposal of fixed assets 3 -
Provision for losses on accounts receivable 22 114
Decrease in net receivables 5,104 4,587
Decrease (increase) in inventories 2,827 1,395
Increase in prepaid expenses ( 393) ( 50)
Increase in other assets ( 11) ( 40)
Decrease in accounts payable (1,983) (3,940)
Decrease in accrued liabilities (1,444) ( 55)
Increase in income taxes payable 495 169
Increase in customer deposits
and deferred revenue 4,541 539
------ ------
Net cash provided by operating activities 11,971 4,915
------ ------
Cash flows from investing activities:
Purchases of property and equipment (1,675) (580)
------ ------
Net cash used by investing activities (1,675) (580)
------ ------
Cash flows from financing activities:
Net payments on line of credit (8,428) (4,377)
Principal payments on long-term debt ( 22) ( 34)
Payment of dividends (1,906) -
Proceeds from sales of common stock 50 76
Payments of notes receivable - common stock 10 -
------ ------
Net cash used by financing activities (10,296) (4,335)
------ ------
Net increase in cash and cash equivalents - -
Cash and cash equivalents at beginning of year 10 10
------ ------
Cash and cash equivalents at end of period $ 10 $ 10
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 315 $ 904
Income taxes 602 588
====== ======
Noncash transactions:
Amortization of compensation from
restricted stock $ 1 $ 7
====== ======
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
PLASTI-LINE, INC.
Notes to Consolidated Condensed Financial Statements
1. Condensed Consolidated Financial Statements
The consolidated condensed balance sheet as of June 29, 1997, and the
consolidated condensed statements of operations and cash flows for the six
months ended June 29, 1997 and June 30, 1996, have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and changes in cash flows at June 29, 1997, and
for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's 1996 Annual Report to
Stockholders. The results of operations for the period ended June 29, 1997, are
not necessarily indicative of the operating results for the full year.
2. Principles of Consolidation
The financial statements include the accounts of the Company and its wholly
owned subsidiaries, American Sign & Marketing Services, Inc., and Plasti-Line
Columbia, Inc. All significant intercompany accounts and transactions have been
eliminated.
3. Inventories
Inventories consist of the following: June 29, 1997 December 29, 1996
-------------- -----------------
(in thousands)
Finished goods $ 19,818 $ 20,006
Work-in-process 2,734 4,397
Raw materials 5,338 6,314
------ ------
27,890 30,717
Less: LIFO inventory reserve (3,386) (3,386)
------ ------
Total net inventory $ 24,504 $ 27,331
====== ======
Inventories are stated at the lower-of-cost or market. Cost is determined by the
last-in, first-out method (LIFO).
4. Earnings Per Share
Net income per common share is based on the weighted average number of common
and common equivalent shares outstanding in each period. For purposes of
computing common equivalent shares outstanding, shares relating to options have
been calculated using the treasury stock method for the portion of each period
for which the options were outstanding and using the fair value of the Company's
stock for each of the respective periods.
The weighted average number of common and common stock equivalent shares
outstanding for the three and six months period ended June 29, 1997 were
3,833,000 and 3,835,000, respectively.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
A. Consolidated results of operations for the three months ended June 29, 1997
(1997 Quarter) compared to the consolidated results of operations for the three
months ended June 30, 1996 (1996 Quarter):
The Company's sales in the second quarter of 1997 increased 3.9% to $33,566,000
from $32,310,000 for the same period last year. The principal reason for the
increase was increased volume in the financial services market.
The Company's gross profit margin during the 1997 Quarter (18.2%) was higher
than the gross profit margin during the 1996 Quarter (16.5%). The margin
improvement is due to manufacturing cost reductions as well as an improved sales
mix.
Selling, general, and administrative expenses were $4,284,000 for the 1997
Quarter versus $3,799,000 for the 1996 Quarter, an increase of $485,000. This
increase is due to an increase in new business development spending and
completion of system conversions at our Columbia and Fontana locations. Selling,
general, and administrative expenses as a percent of sales only increased a
percentage point to 12.8% versus the 1996 quarter.
Operating income was $1,821,000 and $1,538,000 for the 1997 and 1996 Quarters,
respectively. The 18.4% increase is due to the increased margins as well as a
decrease in long-term debt which resulted in a corresponding $259,000 (58.1%)
decrease in interest expense for the second quarter of 1997.
As a result of the improved margins and decreased interest expense, the
Company's pre-tax income for the quarter improved to $1,635,000 from $1,092,000,
a 49.7% increase over the comparable period of the preceding year. Income taxes
are based on an estimated annual rate of 40.
B. Consolidated results of operations for the six months ended June 29, 1997, as
compared to the consolidated results of operations for the six months ended June
30, 1996:
Net sales were down slightly at $62,098,000 for the first six months of 1997 as
compared to $62,452,000 for the first six months of 1996.
Cumulative gross profit as a percentage of sales at the end of the second
quarter of 1997 (17.9%) is higher than the margin for the same period in 1996
(16.5%). The margin improvement is due to manufacturing cost reductions as well
as an improved sales mix.
Selling, general, and administrative expenses for the first six months of 1997
were $8,031,000 as compared to $7,592,000 for the same period in 1996, an
increase of $439,000. This increase is due to an increase in new business
development spending and completion of system conversions at our Columbia and
Fontana locations. Selling, general, and administrative expenses as a percentage
of sales for the first six months of 1997 was 12.9% as compared to 12.2% during
the same period for 1996.
Operating income for the first six months of 1997 was $3,111,000 as compared to
$2,728,000 during the same period in 1996, a 14% increase.
Net interest expense was $369,000 for the first six months of 1997 as compared
to $897,000 for the same period in 1996. The decrease is primarily attributable
to lower average net borrowings on the Company's line of credit.
As a result of the improved margins and decreased interest expense, the
Company's pre-tax income for the first six months of 1997 improved to $2,742,000
from $1,831,000, a 49.8% increase over the comparable period of the preceding
year. Income taxes are based on an estimated annual rate of 40.
Net income for the first six months of 1997 was $1,645,000 as compared to
$1,135,000 for the first six months of 1996, a 44.9% increase. Net income per
share was $0.43 for the first six months of 1997 versus $0.30 for the comparable
period of the preceding year.
Liquidity and Capital Resources
The Company has continued its focus on asset management especially in the areas
of inventories and receivables. The reductions in these areas along with
increased customer deposits enabled the Company to reduce long-term debt by $8.4
million from the end of 1996 and pay a $1.9 million special one-time dividend.
Cash flow provided from operations was $11,971,000 primarily from reductions in
inventories and receivbles. Investing activities used $1,675,000 as a result of
capital expenditures. Financing activities used $10,296,000 primarily as a
result of payments on the Company's line of credit.
The Company intends to finance a new manfacturing facility in Columbia, South
Carolina, through the issuance of approximately $5.0 million in Industrial
Revenue Bonds (Revenue Bonds) in 1997.
The Company's other future capital expenditures will relate to the acquisistion
of new machinery and equipment and furniture and fixtures designed to increase
productivity and factory efficiency. The Company believes its cash generated
from operations and funds available under the existing line of credit and
Revenue Bonds are sufficent for these operating and capital requirements.
Seasonality
The Company's sales reflect limited seasonality, with sales in the first quarter
generally being the lowest and fourth quarter sales the highest. First quarter
sales tend to be relatively lower because of weather constraints which slow down
customer's construction schedules and their pattern of sign purchases. Sales
have normally accelerated in the second, third, and fourth quarters,
corresponding with accelerating construction schedules.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Default Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
a) Plasti-Line, Inc.'s 1997 Annual Meeting of Stockholders was held on April 8,
1997.
b) Proxies were solicited by the Board of Directors pursuant to Regulation
14 under the Securities Exchange Act of 1934. There was no solicitation in
opposition to teh Board's nominees for election to the Board of Directors listed
in the proxy. The following nominees were elected to one-year terms on the Board
of Directors:
Howard L. Clark, Jr.
James G. Hanes, III
James A. Haslam, III
Donald F.Johnstone
James R. Martin
J. Hoyle Rymer
James F. Smith, Jr.
H. Mitchell Watson, Jr.
c) The vote on the election of the above was at least:
For 2,987,222 shares
Against - shares
Withheld 261,175 shares
d) A proposal was made to amend the 1991 Stock Incentive Program (1991 Program)
to increase the number of shares of the Company's Common Stock that are annually
issued to non-employee directors under the 1991 Program from 500 to 1,000.
The vote on the proposal was:
For 2,949,511 shares
Against 294,486 shares
Withheld 4,400 shares
The total number of shares of Plasti-Line Inc. Common Stock, $.001 par value,
outstanding as of March 10, 1997, the record date for the Annual Meeting was
3,806,797 shares.
Item 5. Other Information
The Company announced on July 30, 1997 that its Board of Directors received a
merger proposal from James R. Martin, Chairman of the Board and Chief Executive
Officer of Plasti-Line. Under the terms of this proposal, Mr. Martin intends to
form a new corporation, which may include as shareholders certain key management
personnel of Plasti-Line, which intends to acquire all of the outstanding common
stock of Plasti-Line not owned by such corporation at a price of $13.50 per
share in cash.
The Board of Directors of Plasti-Line has authorized a special committee of
independent directors to negotiate with the proposed acquiring corporation and
to determinge whether to approve any such acquisition on behalf of the Board.
There can be no assurance as to whether or not any transaction will occur or as
to the timing or terms of any transaction.
Mr. Martin, who currently beneficially owns 46.4% of Plasti-Line's outstanding
common stock, including shares issuable upon the exercise of certain stock
options, has stated to the Board that he has no current intent to sell his
shares of Plasti-Line common stock to a third party.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None.
(b) No reports on Form 8-K were filed during the quarter ended
June 29, 1997.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLASTI-LINE, INC.
By: /s/ Mark J. Deuschle
______________________________________
Name: Mark J. Deuschle
Title: Vice-President of Finance
Dated: August 11, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-04-1997 JAN-04-1997
<PERIOD-START> MAR-31-1997 DEC-30-1996
<PERIOD-END> JUN-29-1997 JUN-29-1997
<CASH> 10 10
<SECURITIES> 0 0
<RECEIVABLES> 17869 17869
<ALLOWANCES> 125 125
<INVENTORY> 24504 24504
<CURRENT-ASSETS> 44742 44742
<PP&E> 33855 33855
<DEPRECIATION> 20037 20037
<TOTAL-ASSETS> 60202 60202
<CURRENT-LIABILITIES> 28141 28141
<BONDS> 0 0
0 0
0 0
<COMMON> 4 4
<OTHER-SE> 26996 26996
<TOTAL-LIABILITY-AND-EQUITY> 60202 60202
<SALES> 33566 62098
<TOTAL-REVENUES> 33566 62098
<CGS> 27461 50956
<TOTAL-COSTS> 27461 50956
<OTHER-EXPENSES> 4284 8031
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 186 369
<INCOME-PRETAX> 1635 2742
<INCOME-TAX> 654 1097
<INCOME-CONTINUING> 981 1645
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 981 1645
<EPS-PRIMARY> 0.26 0.43
<EPS-DILUTED> 0.26 0.43
</TABLE>
