<PAGE> 1
Part I
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
(1) 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 0-30067
PVC CONTAINER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-2616435
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 INDUSTRIAL WAY WEST, EATONTOWN, NEW JERSEY 07724
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (908) 542-0060
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 close of the period covered by this report.
CLASS OUTSTANDING AT MARCH 31, 1997
Common $.01 par value 7,004,750 shares
<PAGE> 2
Part I
CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets - March 31, 1997 and June 30, 1996 3
Consolidated Statements of Income - Three Months Ended March 31, 1997 and 1996 and
Nine Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows - Nine Months Ended March 31, 1997 and 1996
5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition and Results of Operations
8-9
PART II. OTHER INFORMATION 10
</TABLE>
<PAGE> 3
Part I
PVC Container Corporation
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
MARCH JUNE
31, 1997 30, 1996
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,211,332 $ 1,059,166
Accounts receivable, less allowance of $243,000 8,758,463 8,863,444
Inventories 9,061,786 8,363,522
Prepaid expenses, taxes and other current assets 441,367 292,210
Deferred tax asset 819,029 695,666
------------------------------
Total current assets 20,291,977 19,274,008
Unexpended proceeds from construction loan 2,307,657 5,239,425
Properties and equipment at cost - net of accumulated depreciation
20,670,410 19,377,239
Investment in jointly owned company 246,054 291,199
------------------------------
$43,516,098 $44,181,871
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 7,123,569 $ 6,864,889
Accrued expenses 2,991,850 2,801,882
Income taxes payable 551,853 831,950
Current portion of long-term debt 1,859,340 1,800,400
------------------------------
Total current liabilities 12,526,612 12,299,121
Long-term debt 14,113,595 16,165,229
Deferred income taxes 1,031,143 1,031,143
Stockholders' equity:
Preferred stock, par value $1.00, authorized 1,000,000 shares, none
issued
Common stock, par value $.01, authorized 10,000,000 shares, 7,004,705 and
6,964,705 shares issued and outstanding as of March 31, 1997 and June 30,
1996, respectively
70,047 69,647
Capital in excess of par value 3,646,747 3,527,147
Retained earnings 12,127,954 11,089,584
------------------------------
Total stockholders' equity 15,844,748 14,686,378
==============================
$43,516,098 $44,181,871
==============================
</TABLE>
See accompanying notes.
3
<PAGE> 4
Part I
PVC Container Corporation
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
------------------------------------------------------------------------
1997 1996 1997 1996
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 15,558,608 $ 15,904,534 $ 41,442,780 $ 41,047,851
Cost and expenses:
Cost of goods sold (exclusive of
depreciation and amortization
expense shown separately below)
12,138,508 11,985,734 32,718,007 32,015,071
Selling, general and administrative
expenses 1,332,976 1,195,997 3,824,669 3,305,967
Depreciation and amortization 764,326 710,475 2,165,775 2,086,355
Equity in loss of jointly owned company
19,343 56,056 45,145 83,637
------------------------------------------------------------------------
14,255,153 13,948,262 38,753,596 37,491,030
------------------------------------------------------------------------
Income from operations 1,303,455 1,956,272 2,689,184 3,556,821
Other income (expense):
Interest expense (200,783) (189,512) (629,169) (611,339)
Other income 90,166 54,699 242,748 100,393
------------------------------------------------------------------------
(110,617) (134,813) (386,421) (510,946)
------------------------------------------------------------------------
Income before provision for income taxes
1,192,838 1,821,459 2,302,763 3,045,875
Provision for income taxes (401,933) (748,079) (846,511) (1,213,235)
------------------------------------------------------------------------
Net income $ 790,905 $ 1,073,380 $ 1,456,252 $ 1,832,640
========================================================================
Earnings per share $ .11 $ .16 $ .21 $ .27
========================================================================
Cash dividends per share $ .06
========================================================================
Stock dividends per share $ .08 $ .08
========================================================================
</TABLE>
See accompanying notes.
4
<PAGE> 5
Part I
PVC Container Corporation
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31
1997 1996
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,456,252 $ 1,832,640
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,165,775 2,086,355
Equity in loss of jointly owned company 45,145 83,637
Gain on sale of building (90,950)
Deferred income taxes (123,363) (54,921)
Changes in assets and liabilities:
Accounts receivable - net of allowances 104,981 (1,003,896)
Inventories (698,264) (558,085)
Prepaid expenses and other current assets (149,257) (17,756)
Accounts payable and accrued expenses 448,648 344,163
Income taxes payable (280,097) 521,834
----------------------------
Net cash provided by operating activities 2,878,870 3,233,971
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,998,995) (2,491,725)
Proceeds from sale of plant and equipment 2,682,867
Investment in jointly owned company (384,925)
----------------------------
Net cash used in investing activities (316,128) (2,876,650)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt (4,692,694) (1,984,167)
Proceeds from long-term debt 2,700,000 1,075,000
Dividends paid (417,882) (196)
----------------------------
Net cash used in financing activities (2,410,576) (909,363)
----------------------------
Net increase (decrease) in cash and cash equivalents 152,166 (552,042)
Cash and cash equivalents at beginning of period 1,059,166 1,171,137
----------------------------
Cash and cash equivalents at end of period $ 1,211,332 $ 619,095
============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 638,500 $ 612,700
=============================
Income taxes paid $ 807,000 $ 691,401
=============================
</TABLE>
See accompanying notes.
5
<PAGE> 6
Part I
PVC Container Corporation
Notes to Consolidated Financial Statements
Note 1 In the opinion of the Company, the accompanying consolidated
financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the
financial position as of March 31, 1997, and the results of
operations and cash flows for the three month periods and the nine
month periods ended March 31, 1997 and 1996.
While the Company believes that the disclosures presented are
adequate to make the information not misleading, it is suggested that
these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes
included in the Company's latest annual report on Form 10-K.
Earnings per share are based on the average number of common shares
outstanding during each period, assuming exercise of all stock
options having exercise prices less than the average market price of
the common stock using the treasury stock method. Common stock and
common stock equivalents amounted to 7,004,750 and 6,839,909 in the
third quarter of 1997 and 1996, and 6,987,101 and 6,787,723 for the
nine month periods ended March 31, 1997 and 1996, respectively.
Note 2 The accompanying financial statements include the accounts of PVC
Container Corporation and its wholly-owned subsidiaries, Novatec
Plastics & Chemicals Co., Inc., Airopak Corporation ("Airopak") and
PVC Container International Sales Corporation, a foreign sales
company incorporated in the U.S. Virgin Islands on March 1, 1993. All
intercompany accounts have been eliminated.
Note 3 The consolidated statement of cash flows for the nine months ended
March 31, 1997 excludes the effect of certain noncash financing
activities related to the $5.5 million South Carolina EDA loan
obtained by the Company in April 1996. Capital expenditures in
connection with this agreement totaled approximately $2,932,000 for
the nine months ended March 31, 1997.
6
<PAGE> 7
Part I
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
Note 4 Inventories consist of:
<TABLE>
<CAPTION>
MARCH JUNE
31, 1997 30, 1996
-----------------------------
<S> <C> <C>
Raw materials $2,598,655 $3,299,353
Finished goods and supplies 5,835,837 4,656,053
-----------------------------
Total LIFO inventories 8,434,492 7,955,406
Molds for resale in production 244,910 109,465
Supplies 382,384 298,651
=============================
$9,061,786 $8,363,522
=============================
</TABLE>
Note 5 Pursuant to a stock purchase agreement dated December 3, 1996, and
executed on December 12, 1996, approximately 4.37 million shares of
the Company's common stock was purchased by Kirtland Capital Partners
II LP and an affiliate from Rimer Anstalt (former majority
shareholder) and certain other shareholders of the Company.
Note 6 The Company's Board of Directors approved and ratified on January
16, 1997, an incentive stock option plan pursuant to which options to
purchase an aggregate of 600,000 shares of the common stock of the
Company may be granted. Such plan conforms to the requirements of
Rule 16B-3 of the Securities Exchange Act of 1934.
The Company contributed 40,000 shares of common stock to its Employee
Stock Option Plan ("ESOP") on November 21, 1996. The value of the
shares at the date of grant in fiscal 1996 was $120,000 which was
included in selling general and administrative expenses in the fourth
quarter of fiscal 1996.
Note 7 In February 1997, the Financial Accounting Standards Board issued
FASB Statement No. 128 Earnings Per Share, effective for periods
ending after December 15, 1997. The Company will adopt the Statement
in its quarterly report for the quarter ended December 31, 1997.
7
<PAGE> 8
Part I
PVC CONTAINER CORPORATION
Management's Discussion and Analysis of Financial Condition and Results of
Operations
RESULTS OF OPERATIONS
Net sales for the three month period ended March 31, 1997 decreased by 2.2% to
$15,559,000 compared to $15,905,000 for the three month period ended March 31,
1996 and increased by 22.0% compared to $12,753,000 for the three month period
ended December 31, 1996. For the nine month period ended March 31, 1997, sales
increased slightly to $41,443,000 compared to $41,048,000 for the nine month
period ended March 31, 1996. The decrease in revenues compared to the prior year
was due to weaker than expected demand for the Company's general line of plastic
bottles. Although revenues for the nine month period was essentially flat
compared to the prior year, increased revenues from the Company's Airopak
specialty container division and its Novatec Plastics PVC compound division
offset some of the weakness in sales of the Company's general line of plastic
bottles.
Cost of goods sold for the three months ended March 31, 1997 was $12,139,000 or
78.0% of net sales as compared to $11,986,000 or 75.4% of net sales for the
three months ended March 31, 1996. The increase in cost of goods sold reflects
the increased expense associated with the start up costs of the new plastic
bottle manufacturing plant in Walterboro, SC and the Company's PET operations.
Selling, General and Administrative expenses ("SG&A") increased by $137,000 for
the three month period and by $519,000 for the nine month period ended March 31,
1997 compared to the same period a year ago. For the quarter ended March 31,
1997, SG&A expenses were $1,333,000 or 8.6% of net sales as compared to
$1,196,000 or 7.5% of net sales for the quarter ended March 31, 1996. For the
nine months ended March 31, 1997, SG&A expenses were $3,825,000 or 9.2% of net
sales as compared to $3,306,000 or 8.1% of net sales for the nine month period
ended March 31, 1996. SG&A expenses have increased to support the anticipated
future growth in revenue that is expected from the Company's expansion in SC
and recent entry into the PET market.
Depreciation expense for the three months ended March 31, 1997 was $764,000 as
compared to $710,000 for the three months ended March 31, 1996. For the nine
month period ended March 31, 1997, depreciation expense was $2,166,000 as
compared to $2,086,000 for the nine month period ended March 31, 1996. This
increase in directly attributed to new equipment employed at the Company's newly
constructed Walterboro, SC plastic bottle manufacturing facility and the
purchase of new equipment to manufacture PET plastic bottles.
Income from Operations decreased $653,000 during the three month period ended
March 31, 1997 as compared to the same period a year ago and increased $544,000
as compared to the three month period ended December 31, 1996. For the three
months ended March 31, 1997, income from operations were $1,303,000 or 8.4% of
net sales as compared to $1,956,000 or 12.2% of net sales for the three months
ended March 31, 1996 and $759,000 or 6.0% of net sales for the three months
ended December 31, 1996. Income from Operations for the nine month period ended
March 31, 1997 decreased 24.4% to $2,689,000 or 6.5% of net sales as compared to
$3,557,000 or 8.7% of net sales for the nine month period ended March 31, 1996.
The decrease in operating income reflects the impact of under-utilization of
some of the Company's plastic bottle capacity as well as the start-up costs
associated with the Company's new Walterboro, SC plastic bottle facility and
costs associated with initiating a new major PET product line.
8
<PAGE> 9
Part I
PVC CONTAINER CORPORATION
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Interest Expense increased $11,000 for the quarter ended March 31, 1997 as
compared to the quarter ended March 31, 1996. This minimal increase is the net
result of retirement of previous debt offset by the investment made in the new
Walterboro, SC manufacturing plant as the new PET production line.
Net income for the quarter ended March 31, 1997 decreased 26.3% to $791,000 or
$.11 per share as compared to $1,074,000 or $.16 per share for the three months
ended March 31, 1996. For the nine months ended March 31, 1997, Net Income
decreased 20.6% to $1,457,000 or $.21 per share as compared to $1,833,000 or
$.27 per share for the nine month period ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and working capital remained adequate for the nine month
period ended March 31, 1997. Net working capital as at March 31, 1997 increased
$790,000 to $7,765,000 compared to $6,975,000 as at June 30, 1996. The current
ratio of assets to liabilities increased from 1.57 to 1.62 at March 31, 1997,
primarily due to the increase in cash and inventory levels to support the
increased growth in the Company's Airopak and PET sales.
During the nine month period ended March 31, 1997, the Company generated cash
from operations of $2,879,000; it also received $1,183,000 from its sale on July
16, 1996 of its warehouse located at 435 Industrial Way West, as well as
$1,470,000 from its sale and leaseback of various equipment, $30,000 from sale
of various miscellaneous fixed assets. Proceeds from long term debt totaled
$2,700,000 for the nine months ended March 31, 1997. Cash from operations and
the aforementioned proceeds were used to acquire $2,999,000 in capital assets,
reduce long term debt by $4,693,000 and on September 20, 1996, the Company paid
a $.06 cash dividend in the amount of $418,000 to all shareholders of record of
September 13, 1996.
The Company's short term liquidity and short term capital resources are adequate
for timely payment of trade and other creditors. The Company's sources of credit
are sufficient to meet working capital and capital needs in the foreseeable
future . At March 31, 1997, the Company had unused sources of liquidity
consisting of cash and cash equivalents of 1$1,211,000 and the availability of
the unused credit under revolving credit facility of $1,975,000. Unexpended
proceeds from EDA construction loans total $2,308,000 at March 31, 1997, a
majority of which the Company anticipates utilizing for capital expenditures at
its newly constructed manufacturing facility in Walterboro, South Carolina in
the remaining quarter of fiscal 1997 and fiscal year ending June 30, 1998.
9
<PAGE> 10
Part I
PVC Container Corporation
Other Information
Item 6 - Exhibits and Reports on Form 8-K:
(b) Reports on Form 8-K - A report on Form 8-K was filed with the
Securities and Exchange Commission on January 8, 1997,
reporting the acquisition of 4,367,415 shares of the common
stock of the Registrant by Kirtland Capital Partners II LP and
an affiliate, from the Registrant and Rimer Anstalt pursuant to
a stock purchase agreement dated December 3, 1996, executed on
December 12, 1996.
The securityholders of the Company approved and ratified on
January 16, 1997, an incentive stock option plan pursuant to
which options to purchase an aggregate of 600,000 shares of the
common stock of the Company may be granted. Such plan conforms
to the requirements of Rule 16B-3 of the Securities Exchange
Act of 1934.
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.
PVC CONTAINER CORPORATION
By /s/ Phillip Friedman
------------------------------------
Phillip Friedman, President and
Principal Financial Officer
Date:
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,211,332
<SECURITIES> 0
<RECEIVABLES> 9,001,155
<ALLOWANCES> 242,692
<INVENTORY> 9,066,786
<CURRENT-ASSETS> 20,291,977
<PP&E> 42,173,662
<DEPRECIATION> 21,503,252
<TOTAL-ASSETS> 43,516,098
<CURRENT-LIABILITIES> 12,526,612
<BONDS> 15,144,738
0
0
<COMMON> 70,047
<OTHER-SE> 15,774,701
<TOTAL-LIABILITY-AND-EQUITY> 43,516,098
<SALES> 41,442,780
<TOTAL-REVENUES> 41,685,528
<CGS> 32,718,007
<TOTAL-COSTS> 38,753,596
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 629,169
<INCOME-PRETAX> 2,302,763
<INCOME-TAX> 846,511
<INCOME-CONTINUING> 1,456,252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,456,252
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
