<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended: October 31, 1995
Commission File Number: 34-11686
PLASTIC SPECIALTIES AND TECHNOLOGIES, INC.
------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 22-2515864
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
65 Railroad Avenue, Ridgefield, New Jersey 07657
------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (201) 941-6550
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes X No _____
As of December 15, 1995, there were 8,319,833 shares of common stock
outstanding of which 1,441,500 of such shares were held by unaffiliated
persons. The Company is not aware of the market value of the unaffiliated
shares.
<PAGE>
PLASTIC SPECIALTIES AND TECHNOLOGIES, INC. AND SUBSIDIARIES
CONTENTS
Page
----
Part I FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Balance Sheets as of
October 31, 1995 and July 31, 1995 2-3
Consolidated Statements of Operations
for the three month periods ended
October 31, 1995 and 1994 4
Consolidated Statements of Cash Flows
for the three month periods ended
October 31, 1995 and 1994 5-6
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-13
Part II OTHER INFORMATION:
Item 1. to Item 6. 14
Signatures 15
**************
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
PLASTIC SPECIALTIES AND TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
October 31, July 31,
1995 1995
---- ----
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 5,776 $ 4,741
Accounts receivable, less allowance of
$2,354 and $2,550, respectively 27,016 40,561
Inventories 53,619 41,026
Prepaid expenses and other current assets 3,581 2,139
---------- ---------
TOTAL CURRENT ASSETS 89,992 88,467
EXCESS COST OF INVESTMENT OVER NET ASSETS
ACQUIRED 43,153 43,286
PROPERTY, PLANT AND EQUIPMENT, net 44,822 44,795
OTHER ASSETS, net 5,128 5,370
NOTES AND INTEREST RECEIVABLE FROM OFFICERS 464 374
---------- ---------
TOTAL ASSETS $183,559 $182,292
========== =========
(Continued)
2
<PAGE>
PLASTIC SPECIALTIES AND TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Continued)
October 31, July 31,
1995 1995
---- ----
(Unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Short-term borrowings $ 25,893 $ 26,494
Accounts payable 20,774 19,673
Other current liabilities 10,683 12,842
Accrued interest 6,093 2,620
Current portion of long-term debt 1,260 1,271
--------- ---------
TOTAL CURRENT LIABILITIES 64,703 62,900
OTHER LONG-TERM LIABILITIES 1,297 1,195
DEFERRED INCOME TAXES 1,191 1,200
LONG-TERM DEBT 125,735 125,741
--------- ---------
TOTAL LIABILITIES 192,926 191,036
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock, par value $.01; 10,000,000 shares
authorized; 8,319,833 shares issued and
outstanding at October 31, 1995 and
July 31, 1995, respectively 83 83
Additional paid-in capital 12,107 12,107
Accumulated deficit (17,589) (17,048)
Due from majority stockholder (3,853) (3,853)
Receivable from officer, including
accrued interest (717) (717)
Minimum pension liability (250) (250)
Cumulative foreign currency translation
adjustment 852 934
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (9,367) (8,744)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $183,559 $182,292
========= =========
(Concluded)
See notes to consolidated financial statements
3
<PAGE>
PLASTIC SPECIALTIES AND TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
Three Months Ended
October 31,
------------------
1995 1994
---- ----
(Unaudited)
Net sales $ 44,872 $ 37,498
Cost and expenses:
Cost of goods sold 35,292 28,087
Selling, general and administrative 5,673 7,185
---------- ----------
40,965 35,272
---------- ----------
Operating income 3,907 2,226
---------- ----------
Other income (expense):
Interest expense, net and amortization of
deferred financing costs (4,266) (3,792)
Foreign exchange (loss) gain (28) 26
Other, net 209 (83)
---------- ----------
(4,085) (3,849)
---------- ----------
Loss before income taxes (178) (1,623)
Income tax (provision) benefit (363) 378
---------- ----------
NET LOSS $ (541) $ (1,245)
========== ==========
NET LOSS PER COMMON SHARE: $ (.07) $ (.15)
========== ==========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 8,319,833 8,319,833
========== ==========
See notes to consolidated financial statements
4
<PAGE>
PLASTIC SPECIALTIES AND TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended
October 31,
------------------
1995 1994
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (541) $ (1,245)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 325 536
Depreciation 1,424 1,271
Deferred income taxes (9) (46)
Gain on sale of property (286) --
Provision for losses on accounts receivable (196) (40)
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 13,656 14,957
Inventories (12,615) (17,889)
Prepaid expenses and other current assets (1,445) 248
Other assets, net 49 161
Notes and interest receivable from officers (90) (3)
Increase (decrease) in liabilities:
Accounts payable, other current liabilities
and accrued interest 2,489 (1,157)
Other long-term liabilities 112 210
-------- --------
Net cash provided by (used in) operating
activities 2,873 (2,997)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,058) (1,480)
Proceeds from sale of property 830 --
-------- --------
Net cash used in investing activities $ (1,228) $ (1,480)
-------- --------
(Continued)
5
<PAGE>
PLASTIC SPECIALTIES AND TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Continued)
Three Months Ended
October 31,
----------------------
1995 1994
------ ------
(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments):
Revolving credit facility, net $ (601) $3,917
------ ------
Net cash (used in) provided by financing activities (601) 3,917
EFFECT OF EXCHANGE RATE CHANGES ON CASH (9) (208)
------ ------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,035 (768)
CASH AND CASH EQUIVALENTS,
beginning of period 4,741 4,297
------ ------
CASH AND CASH EQUIVALENTS,
end of the period $5,776 $3,529
====== ======
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the periood for:
Interest $ 739 $ 238
====== ======
Income taxes $ -- $ --
====== ======
(Concluded)
See notes to consolidated financial statements
6
<PAGE>
PLASTIC SPECIALTIES AND TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
A. ORGANIZATION
On July 6, 1994, Ozite Corporation ("Ozite") entered into an Agreement and Plan
of Merger with Pure Tech International, Inc. ("Pure Tech") for the combination
of the companies (the "Merger"). The Merger was approved by the Stockholders of
Pure Tech and Ozite at a joint meeting on July 26, 1995 and became effective as
of the close of business July 31, 1995.
As of October 31, 1995, Ozite owned approximately 83% of the outstanding common
stock of PST. Ozite is a wholly-owned subsidiary of Pure Tech as a result of
the Merger.
Plastic Specialties and Technologies, Inc. ("PST" or the "Company") was formed
in 1984 by its senior management to acquire the plastic specialty sector of
Dart & Kraft through a leveraged buyout. PST Holdings, Inc. ("Holdings") was
incorporated in March 1987 as a wholly-owned subsidiary of Sage Group, Inc.
("Sage") for the purpose of acquiring PST. On August 24, 1990, Sage was merged
with and into Ozite Corporation ("Ozite") with Ozite being the surviving
corporation.
On October 29, 1993, Holdings was merged with and into PST with PST surviving
the merger (the "PST Merger"). Pursuant to the PST Merger, each issued and
outstanding share of common stock of Holdings was automatically converted into
one issued and outstanding share of common stock of PST. All outstanding
warrants, which were exercisable for common stock of Holdings, upon the PST
Merger, became exercisable for common stock of PST. The PST Merger was
accounted for at historical cost in a manner similar to the
pooling-of-interests method of accounting as it was a merger of entities under
common control. Upon consummation of the PST Merger, the historical consolidated
financial statements of Holdings became the historical consolidated financial
statements of PST.
B. INTERIM FINANCIAL INFORMATION
The consolidated balance sheet of PST as of October 31, 1995, the consolidated
statements of operations for the three month periods ended October 31, 1995 and
1994 and the consolidated statements of cash flows for the three months ended
October 31, 1995 and 1994 are unaudited and have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the
opinion of management, all adjustments (which include only normal recurring
accruals) necessary to present fairly the financial position, results of
operations and cash flows have been included.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The July 31, 1995 balance sheet data is derived
from the audited consolidated financial statements. The attached financial
statements should be read in connection with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended July 31, 1995.
7
<PAGE>
C. RELATED PARTIES
Investment in Bagcraft Corporation of America ("Bagcraft")
PST acquired from Bagcraft a $5,000 subordinated note bearing interest at a rate
of 13-1/2% per annum and 50,000 shares of 13-1/2% cumulative redeemable
preferred stock with a liquidation preference of $5,000 in Bagcraft with
$10,000 of the net proceeds of a public offering of senior secured notes,
senior subordinated notes and detachable warrants in 1987. Bagcraft is a
wholly-owned subsidiary of BCA Holdings, Inc. ("BCA"), and BCA is a wholly-owned
subsidiary of ARTRA Group Incorporated ("Artra"), an affiliated company. The
preferred stock is mandatorily redeemable on July 1, 1997. The Company has not
received or recorded cumulative preferred dividends due to cash payment
restrictions imposed by Bagcraft's secured lender. In March 1993, the Company
had received 675 shares of BCA Preferred Stock having a liquidation preference
equal to the amount of interest due for the period from December 1, 1991 to
November 30, 1992 ($675 in the aggregate) in lieu of receipt of payment of
interest from Bagcraft for such period. The BCA Preferred Stock provides a
$1,000 per share liquidation preference and annual cumulative dividends of
$60.00 per share when and if declared by BCA.
In July 1993, the Company recorded an impairment of its investment in Bagcraft
by establishing a valuation reserve to write-off the $10,000 carrying value of
such investment as the Company was unable to determine, with reasonable
certainty, whether or when it would realize its investment in Bagcraft. On
December 28, 1993, PST received from Bagcraft $5,000 in cash and 3,000 shares of
BCA Preferred Stock as payment in full for the $5,000 subordinated note and
unpaid interest due from Bagcraft totaling $3,094, respectively, and recorded a
$5,000 gain for the recovery of its investment in the Bagcraft Subordinated
Note. Additionally, the interest due from Bagcraft had been fully reserved and
interest income was not recorded for the receipt of the BCA Preferred Stock as
such stock is not freely transferable.
As of October 31, 1995 and July 31, 1995 the Company had not received or
recorded dividends of $6,118 and $5,894, respectively, related to the
investment in Bagcraft and BCA Preferred Stock. Under the terms of the Merger,
the Company intends to declare a dividend of the Bagcraft Investment to
Shareholders. There is currently no public market for the Bagcraft or BCA
Preferred Stock.
Investment in Artra
PST holds 772,000 shares of common stock of Artra (the "Artra Common Shares").
The investment in the Artra Common Shares, which represents approximately 11.5%
of the outstanding common stock of Artra at July 31, 1995, is accounted for
under the equity method of accounting as the Company, through certain principal
stockholders and officers of Ozite, exercises significant influence over the
policy decisions of Artra. Through the Company's recording of its share of the
net losses of Artra and other related items, the carrying value of the
investment in the Artra Common Shares has been reduced to zero.
In connection with the Merger (see Note A), on July 13, 1995 PST declared a
dividend of the 772,000 Artra Common Shares to all stockholders of record as of
July 31, 1995. Based on this declaration 638,444 and 133,556 shares are in the
process of being transferred to Ozite and the minority stockholders,
respectively. Such shares to be received by Ozite will be distributed in
connection with the settlement of Ozite's liabilities. The 772,000 Artra
Common Shares are unregistered.
8
<PAGE>
D. INCOME TAXES
In January 1993 and 1994, the Company's Belgian subsidiary received income tax
assessments of approximately $2,634 (75,247,000 Belgian francs) for the
disallowance of certain foreign tax credits claimed for the years ended July
31, 1990 and 1991. Additionally, in January 1995, the subsidiary received an
income tax assessment of approximately $1,123 (32,083,000 Belgian francs) for
the year ended July 31, 1992. Although the future outcome of these matters are
uncertain, the Company believes that its tax position was appropriate and that
the assessments are without merit. Therefore, the Company has appealed and has
not paid or accrued for the assessments. Based on the advice of legal counsel
in Belgium, the Company believes that the assessment appeals will be accepted by
the tax authorities in Belgium, although there can be no assurances whether or
when such appeals will be accepted.
E. COMMITMENTS AND CONTINGENCIES
On February 18, 1993, Ware Chemical Co. ("Ware Chemical"), a former PST
subsidiary, was served with a third party complaint in the matter of United
------
States v. Davis. In Davis, the United States has alleged that certain private
- - --------------- -----
entities are liable, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), for cleanup costs that have been
incurred, and will be incurred in the future, with respect to the remediation
of the Davis Landfill site in Rhode Island. The defendants/third party
plaintiffs have impleaded Ware Chemical (but not PST), alleging that Ware
Chemical and other third party defendants are also liable for cleanup costs at
this site, because, according to the allegation, Ware Chemical (then owned by
Dart & Kraft; now Kraft, Inc.) arranged for the disposal of hazardous
substances that were eventually disposed of at the Davis site. The alleged
disposal by Ware Chemical took place between 1975 and 1976. Ware Chemical is one
of over 100 parties that have been named as defendants or third party
defendants in this matter. The most recent estimate of the cost of the
remediation to the 100 third party defendants at the Davis site (according to
counsel for the defendants/third party plaintiffs) is upwards of $25,000. No
discovery has been permitted by the court and a trial is not expected before
1997.
Liability under CERCLA is, in most instances, strict, joint and several (meaning
that Ware Chemical could be liable for all response costs incurred at the Davis
site). However, Ware Chemical has no assets and has been dormant since 1988.
Furthermore, PST is not aware of any evidence at this time that directly
establishes that the materials transshipped to the Davis site were materials
sent by Ware Chemical. Finally, liability at CERCLA sites is typically shared
with other potentially responsible parties, and costs are commonly allocated
according to the relative volumes of waste deposited at a particular site. PST
does not currently have information as to Ware Chemical's relative share of the
waste allegedly deposited at the Davis site; however, based on documents
provided to PST, the absolute volume of waste allegedly sent to the site by
Ware Chemical is small. Ware Chemical, as well as many of the other third party
defendants, received and rejected an offer to settle this matter for $250 each.
For these reasons, and because Ware Chemical is a dormant subsidiary without
any assets, management believes that this litigation involving Ware Chemical
will not have a material adverse effect upon the financial position or results
of operations of the Company. In addition, even if Ware Chemical were to be
found responsible for a portion of such cleanup cost, PST believes that Kraft is
obligated to indemnify it for all costs and expenses incurred in connection
with the Davis claim under the terms of the 1984 Agreement of Purchase and Sale
between Dart & Kraft and PST. However, Kraft has denied that it is obligated to
indemnify Ware Chemical for this matter. At this time, the Company is unable to
assess with any reasonable certainty its ultimate liability, if any, for this
matter and, therefore, has not accrued any liability.
9
<PAGE>
The Company's Belgian subsidiary has received an income tax assessment and may
be subject to similar assessments in the future (See Note D).
Additionally, the Company is party to certain other litigation and environmental
proceedings in the ordinary course of business, none of which it believes are
likely to have a material adverse effect on its financial position or results
of operations.
10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the percentages of net sales of the Company
represented by the components of income and expense for the three month periods
ended October 31, 1995 and 1994:
1994 1993
------ ------
Net sales................................................. 100.0%100.0%
Cost of goods sold........................................ (78.7)(74.9)
------ ------
Gross profit........................................... 21.3 25.1
Selling, general and administrative expenses.............. (12.6)(l9.2)
------ ------
Operating income....................................... 8.7 5.9
Interest expenses, net and amortization of
deferred financing costs............................... (9.5) (10.1)
Foreign exchange (loss) gain.............................. 0.0 0.0
Other, net................................................ 0.4 0.1
------ ------
Loss before income taxes.................................. (0.4) (4.3)
Income tax (provision) benefit............................ (0.8) 1.0
------ ------
NET LOSS.................................................. (1.2)% (3.3)%
====== ======
Three months ended October 31, 1995 vs. three months ended October 31, 1994:
Net sales for the three months ended October 31, 1995 were $44,872,000, an
increase of $7,374,000 or 19.6%, compared to net sales of $37,498,000 for the
three months ended October 31, 1994. The increase was the result of increased
sales volume in garden hose, non-medical grade PVC compound, medical tubing, and
certain price increases. The increase was partially offset by decreased sales
volume in medical grade PVC compound, rubber gaskets, dip tubing and non-woven
textiles.
Gross profit for the three months ended October 31, 1995 was $9,580,000, an
increase of $169,000 (1.8%) compared to gross profit of $9,411,000 for the
three months ended October 31, 1994. Gross profit as a percentage of net sales
decreased to 21.3% from 25.1% for the same periods. This decrease is primarily
attributable to product mix, increased overhead and direct labor costs partially
offset by decreasing raw material costs, particularly resin and plasticizer.
Selling, general and administrative expenses for the three months ended October
31, 1995 were $5,673,000, a $1,512,000 (21.0%) decrease compared to the three
months ended October 31, 1994. As a percentage of net sales, these expenses
decreased to 12.6% compared to 19.2% for the same periods. The decrease in
selling, general and administrative expenses was primarily attributable to a
reduction in professional fees, insurance expense, promotional expense and
corporate expenses. The reduction in professional fees was mainly due to the
completion of the implementation of a fully integrated management software
system in fiscal 1995 at the Colorite division. As a result of higher safety
oriented procedures and an improved claim history, the Company reduced first
quarter insurance expenses. Promotional expenses and other selling expenses
normally associated with higher sales volume were negligible as the company had
strong orders at the fiscal 1995 year end which resulted in early fiscal 1996
sales. Included in the decrease in corporate expenses were aggregate decreases
in management compensation.
11
<PAGE>
Operating income for the three months ended October 31, 1995 and 1994 was
$3,907,000 (8.7% of net sales) and $2,226,000 (5.9% of net sales),
respectively. The $1,681,000 (75.5%) increase was primarily attributable to
higher sales volume and a decrease in selling and administration expenses
partially offset by an increase in cost of sales.
Interest expense, net and amortization of deferred financing costs for the three
month periods ended October 31, 1995 and 1994 were $4,266,000 and $3,792,000,
respectively. This $474,000 or 12.5% increase is primarily attributable to
higher short-term borrowing.
During the first quarter of fiscal 1996, the Company recorded a gain of
approximately $286,000 from the sale of its Schiller Park, Illinois facility.
The gasket manufacturing operation which had occupied the facility moved to a
leased facility in Schaumburg, Illinois.
The income tax benefit/(provision) related to continuing operations for the
three months ended October 31, 1995 and 1994 included foreign, federal and
state income taxes. The income tax provision for the three months ended October
31, 1995 comprised of a foreign income tax provision of $563,000 partially
offset by a domestic federal and state benefit of $200,000 which is based on
expected results for the full year. The income tax benefit for the three months
ended October 31, 1994 is comprised of a domestic federal and state income tax
benefit of $965,000 partially offset by a foreign income tax provision of
$587,000. The income tax benefit/provision differs from the income tax
benefit/provision calculated at the statutory rate due to the difference between
the U.S. statutory rate and foreign income tax rates, state income taxes,
amortization of goodwill and other non-deductible benefits.
The Company had a net loss of $541,000 for the three months ended October 31,
1995 compared to a net loss of $1,245,000 for three months ended October 31,
1994.
FINANCIAL POSITION, LIQUIDITY, AND CAPITAL RESOURCES
General
The Company's primary capital requirements are for working capital (principally
inventory and accounts receivable) and to a lesser extent, capital expenditures
and the Company's sources of liquidity and capital resources historically have
been net cash provided by operating activities, funds available from banks or
other institutional lenders and public offerings of debt securities. The
Company believes that, based on current levels of operations and anticipated
growth, its cash flow from operations, together with other available sources of
liquidity, including borrowings under the Revolving Credit Facility, will be
adequate over the next several years to make required payments of principal and
interest on its debt, to permit anticipated capital expenditures and to fund
working capital requirements.
The market for the Company's garden hose is seasonal, with sales to the consumer
peaking in the spring and summer seasons. The Company's seasonal buildup of
garden hose inventory, peaks in the second quarter. As in prior years,
production levels remained high throughout the fourth quarter of fiscal 1995 to
meet strong fourth quarter demand.
Cash and cash equivalents for the three months ended October 31, 1995 increased
$1,035,000 compared to a decrease of $768,000 for the three months ended
October 31, 1994. The changes for these periods were attributable to the
factors discussed below.
For the three months ended October 31, 1995 net cash provided by operating
activities was $2,873,000 comprised primarily of a decrease in accounts
receivable of $13,656,000, an increase in other long-term liabilities of
$112,000 and a net loss of $541,000 adjusted for non-cash charges for a gain on
the sale of property
12
<PAGE>
of $286,000, depreciation of $1,424,000 and amortization of $325,000, partially
offset by an increase in inventories of $12,615,000 and an increase in prepaid
expenses and other current assets of $1,445,000. The Company funded these
operations and incurred $2,058,000 for capital expenditures by borrowing an
additional $601,000 under its Revolving Credit Facility.
For the three months ended October 31, 1994, net cash used in operating
activities was $2,997,000, comprised primarily of an increase in inventories of
$17,889,000 and a decrease in accounts payable, other current liabilities and
accrued interest of $1,157,000 partially offset by a net loss of $1,245,000
adjusted for non-cash charges of depreciation of $1,271,000 and amortization of
$536,000 and a decrease in accounts receivable of $14,957,000. The Company
funded these operations, incurred $1,480,000 for capital expenditures by using
$768,000 in cash and cash equivalents and by borrowing an additional $3,917,000
under its Revolving Credit Facility.
Working capital was $25,289,000 as of October 31, 1995 as compared to
$25,567,000 as of July 31, 1995. This $278,000 decrease is primarily
attributable to a decrease in accounts receivable ($27,016,000 compared to
$40,561,000) and an increase in accrued interest ($6,093,000 compared to
$2,620,000) partially offset by an increase in inventories ($53,619,000
compared to $41,026,000) and a decrease in other current liabilities
($9,131,000 compared to $12,842,000).
The Company's businesses are relatively stable and mature and do not generally
require significant additions to plant and equipment. Capital expenditures for
the three month period ended October 31, 1995 and 1994 were $2,058,000 and
$1,480,000, respectively.
The Company is party to certain litigation and environmental proceedings in the
ordinary course of business, none of which it believes are likely to have a
material adverse effect on its financial position or results of operations. See
Note E to the consolidated financial statements included in Part I, Item 1 to
this Form 10-Q. In addition, in January 1993 and 1994, the Company's Belgian
subsidiary received income tax assessment of approximately $2,634,000
(75,247,000 Belgian francs) for the disallowance of certain foreign tax credits
and investment losses claimed for the year ended July 31, 1990 and 1991.
Additionally, in January 1994, the subsidiary received an income tax assessment
of approximately $1,123,000 (32,083,000 Belgian francs) for the year ended July
31, 1992. Although the future outcome of these matters are uncertain, the
Company believes that its tax position was appropriate and that the assessments
are without merit. Therefore, the Company has appealed and has not paid or
accrued for the assessments. Based on the advice of legal counsel in Belgium,
the Company believes that the assessment appeals will be accepted by the tax
authorities in Belgium although there can be no assurance whether or when such
appeals will be accepted.
13
<PAGE>
Part II: OTHER INFORMATION
Item 1. Legal Proceedings: No reportable events
Item 2. Changes in Securities: None
Item 3. Default upon Senior Securities: None
Item 4. Submission of Matters to a Vote
of Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K: None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLASTIC SPECIALTIES AND TECHNOLOGIES, INC.
-------------------------------------------
Registrant
Date: December 19, 1995 By: Terence K. Brennan
----------------- ------------------
Terence K. Brennan
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 5,776
<SECURITIES> 0
<RECEIVABLES> 29,370
<ALLOWANCES> 2,354
<INVENTORY> 53,619
<CURRENT-ASSETS> 89,992
<PP&E> 99,711
<DEPRECIATION> 54,889
<TOTAL-ASSETS> 183,559
<CURRENT-LIABILITIES> 64,903
<BONDS> 125,000
0
0
<COMMON> 83
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 183,559
<SALES> 44,872
<TOTAL-REVENUES> 44,872
<CGS> 35,292
<TOTAL-COSTS> 40,965
<OTHER-EXPENSES> (181)
<LOSS-PROVISION> 363
<INTEREST-EXPENSE> 4,266
<INCOME-PRETAX> (178)
<INCOME-TAX> (363)
<INCOME-CONTINUING> (541)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (541)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
