<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 December 31, 1996
-----------------
( ) 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 (I.R.S. Employer
of 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.
<TABLE>
<CAPTION>
Class Outstanding at December 31, 1996
- --------------------- --------------------------------
<S> <C>
Common $.01 par value 7,004,705 shares
</TABLE>
<PAGE> 2
Part I
CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
-------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets-December 31, 1996 and June 30, 1996 3
Consolidated Statements of Income-Three Months Ended December
31, 1996 and 1995 and Six Months Ended December 31, 1996 and
1995 4
Consolidated Statements of Cash Flows-Six Months Ended
December 31, 1996 and 1995 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>
DECEMBER JUNE
31, 1996 30, 1996
------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 595,886 $ 1,059,166
Accounts receivable, less allowance of $243,000 6,558,547 8,863,444
Inventories 8,921,435 8,363,522
Prepaid expenses, taxes and other current assets 270,736 292,210
Deferred tax asset 777,908 695,666
------------------------
Total current assets 17,124,512 19,274,008
Unexpended proceeds from construction loan 3,245,550 5,239,425
Properties and equipment at cost-net of accumulated
depreciation 20,066,511 19,377,239
Investment in jointly owned company 265,397 291,199
------------------------
$40,701,970 $44,181,871
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,757,215 $ 6,864,889
Accrued expenses 2,247,799 2,801,882
Income taxes payable 391,816 831,950
Current portion of long-term debt 1,761,436 1,800,400
------------------------
Total current liabilities 10,158,266 12,299,121
Long-term debt 14,457,678 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 December 31, 1996 and June 30,
1996, respectively 70,047 69,647
Capital in excess of par value 3,646,747 3,527,147
Retained earnings 11,338,089 11,089,584
------------------------
Total stockholders' equity 15,054,883 14,686,378
------------------------
$40,701,970 $44,181,871
========================
</TABLE>
See accompanying notes.
<PAGE> 4
Part I
PVC Container Corporation
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
------------------------------------------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net sales $12,753,407 $12,360,960 $25,884,172 $25,143,317
Cost and expenses:
Cost of goods sold
(exclusive of depreciation
and amortization expense
shown separately below) 9,925,044 9,521,771 20,579,499 20,029,337
Selling, general and
administrative expenses 1,304,479 1,091,986 2,491,693 2,109,970
Depreciation and amortization 752,121 694,464 1,401,449 1,375,880
Equity in loss of jointly
owned company 12,908 27,581 25,802 27,581
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11,994,552 11,335,802 24,498,443 23,542,768
-----------------------------------------------------
Income from operations 758,855 1,025,158 1,385,729 1,600,549
Other income (expense):
Interest expense (235,099) (204,545) (428,386) (421,827)
Other income 47,481 22,500 153,622 45,694
-----------------------------------------------------
(187,618) (182,045) (274,764) (376,133)
-----------------------------------------------------
Income before provision for
income taxes 571,237 843,113 1,110,965 1,224,416
Provision for income taxes (223,290) (319,335) (444,578) (465,156)
-----------------------------------------------------
Net income $ 347,947 $ 523,778 $ 666,387 $ 759,260
======================================================
Earnings per share $ .05 $ .08 $ .10 $ .11
=====================================================
Dividends per share $ .06
===========
</TABLE>
See accompanying notes.
<PAGE> 5
Part I
PVC Container Corporation
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31
1996 1995
-------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 666,387 $ 759,260
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,401,449 1,375,880
Equity in loss of jointly owned company 25,802 27,581
Gain on sale of building (90,950)
Deferred income taxes (82,242) 10,000
Changes in assets and liabilities:
Accounts receivable-net of allowances 2,304,897 1,539,548
Inventories (557,913) (695,315)
Prepaid expenses and other current assets 21,474 (29,569)
Accounts payable and accrued expenses (1,541,757) (837,577)
Income taxes payable (440,134) 49,837
------------------------
Net cash provided by operating activities 1,707,013 2,199,645
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,688,763) (1,344,732)
Proceeds from sale of plant and equipment 2,682,867
Investment in jointly owned company (223,553)
------------------------
Net cash used in investing activities (5,896) (1,568,285)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt (3,846,515) (1,578,313)
Proceeds from long-term debt 2,100,000 545,000
Dividend paid (417,882)
------------------------
Net cash used in financing activities (2,164,397) (1,033,313)
------------------------
Net decrease in cash and cash equivalents (463,280) (401,953)
Cash and cash equivalents at beginning of period 1,059,166 1,171,137
------------------------
Cash and cash equivalents at end of period $ 595,886 $ 769,184
========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 428,386 $ 421,951
========================
Income taxes paid $ 1,049,000 $ 405,319
========================
</TABLE>
See accompanying notes.
<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
December 31, 1996, and the results of operations and cash flows for the
six month periods ended December 31, 1996 and 1995.
While the Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these
condensed financial statements be read in conjunction with the
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 7,004,705 and 6,761,913 in the second quarter
of 1996 and 1995, respectively, and 7,004,705 and 6,761,913 for the six
month periods ended December 31, 1996 and 1995.
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 six months ended
December 31, 1996 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 $1,994,000 for the six months
ended December 31, 1996.
Note 4 Inventories consist of:
<TABLE>
<CAPTION>
DECEMBER JUNE
31, 1996 30, 1996
----------------------
<S> <C> <C>
Raw materials $2,733,930 $3,299,353
Finished goods and supplies 5,615,528 4,656,053
---------- ----------
Total LIFO inventories 8,349,458 7,955,406
Molds for resale in production 188,996 109,465
Supplies 382,981 298,651
----------------------
$8,921,435 $8,363,522
======================
</TABLE>
6
<PAGE> 7
Part I
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
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.
7
<PAGE> 8
Part I
PVC Container Corporation
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Net sales for the three month period ended December 31, 1996 increased by 3.2%
to $12,753,000 compared to $12,361,000 for the three month period ended December
31, 1995, and decreased by 2.9% compared to $13,131,000 for the three month
period ended September 30, 1996. For the six months ended December 31, 1996,
sales increased by 2.9% to $25,885,000 compared to $25,143,000 for the six month
period ended December 31, 1995. Although revenues for the quarter and six month
period were ahead of last year, plastic bottle revenue reflected a greater than
normal seasonal decline which was offset by increased revenue of PVC compounds
and stronger Airopak sales.
Cost of goods sold for the three months ended December 31, 1996 were $9,925,000
or 77.8% of net sales as compared to $9,522,000 or 77.0% of net sales for the
three months ended December 31, 1995. The increased in cost of goods sold
reflects the increased expense associated with the start up costs at our new
plastic bottle manufacturing plant in Walterboro, South Carolina.
Selling, General and Administrative expenses ("SG&A") increased by $212,000 for
the three month period and by $382,000 for the six month period ended December
31, 1996 compared to the same periods a year ago. For the quarter ended
December 31, 1996, SG&A expenses were $1,304,000 or 10.2% of net sales as
compared to $1,092,000 or 8.8% of net sales for the quarter ended December 31,
1995. For the six months ended December 31, 1996, SG&A expenses were $2,492,000
or 9.6% of net sales as compared to $2,110,000 or 8.4% of net sales for the six
month period ended December 31, 1995. SG&A expenses have increased to support
the anticipated future growth in revenues that will result from the Company's
expansion in South Carolina and recent entry into PET containers.
Depreciation expense for the three months ended December 31, 1996 was $752,000
as compared to $694,000 for the three months ended December 31, 1995. For the
six month period ended December 31, 1996, depreciation expense was $1,401,000 as
compared to $1,376,000 for the six month period ended December 31, 1995. This
increase is directly attributed to new capital employed at the Company's newly
constructed Walterboro, South Carolina plastic bottle manufacturing facility and
the purchase of new equipment to manufacture PET plastic bottles.
Income from Operations decreased $266,000 during the three month period ended
December 31, 1996 as compared to the same period a year ago and increased
$132,000 as compared to the three month period ended September 30, 1996. For
the three months ended December 31, 1996, Income from Operations were $759,000
or 6.0% of net sales as compared to $1,025,000 or 8.3% of net sales for the
three months ended December 31, 1995 and $627,000 or 4.8% of net sales compared
to the three month period ended September 30, 1996. Income from Operations for
the six month period ended December 31, 1996 decreased by 13.4% to $1,386,000 or
5.4% of net sales as compared to $1,601,000 or 6.4% of net sales for the six
month period ended December 31, 1995. The decrease in operating income
reflects the impact of the start-up costs associated with the Company's new
Walterboro, South Carolina plastic bottle facility, as well as the 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 $30,000 for the quarter ended December 31, 1996 as
compared to the quarter ended December 31, 1995. This increase is primarily
attributed to our investment made in the new Walterboro, South Carolina plastic
manufacturing plant.
Net income for the quarter ended December 31, 1996 decreased 33.6% to $348,000
or $.05 per share as compared to $524,000 or $.08 per share for the three months
ended December 31, 1995. For the six months ended December 31, 1996, Net income
decreased 12.3% to $666,000 or $.10 per share as compared to $759,000 or $.11
per share for the six month period ended December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and working capital remained adequate for the six month
period ended December 31, 1996. Net working capital as of December 31, 1996 was
almost unchanged at $6,966,000 compared to $6,975,000 as of June 30, 1996. The
ratio of current assets to current liabilities was 1.69 as at December 31, 1996
as compared to 1.57 as at June 30, 1996.
During the six month period ended December 31, 1996, the Company generated cash
from operations of $1,707,000; 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 and proceeds from
long term debt in the amount of $2,100,000. These funds were used to acquire
$2,689,000 in capital assets, reduce long term debt by $3,847,000 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 December 31, 1996, the Company had unused sources
of liquidity consisting of cash and cash equivalents of $596,000 and the
availability of the unused credit under revolving credit facility of
$2,100,000. Unexpended proceeds from EDA construction loans total $3,200,000
at December 31, 1996, a majority of which the Company anticipates utilizing for
capital expenditures at its newly constructed manufacturing facility in
Walterboro, South Carolina in the latter half of fiscal 1997.
9
<PAGE> 10
Part II
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.
The Company adopted during 1996 an Employee Stock Option Plan
("ESOP") pursuant to which contributions by the Company are made
for the benefit of certain employees.
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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 595,886
<SECURITIES> 0
<RECEIVABLES> 6,801,239
<ALLOWANCES> 242,692
<INVENTORY> 6,558,547
<CURRENT-ASSETS> 17,124,512
<PP&E> 41,016,383
<DEPRECIATION> 20,949,872
<TOTAL-ASSETS> 40,701,970
<CURRENT-LIABILITIES> 10,158,266
<BONDS> 15,488,821
70,047
0
<COMMON> 0
<OTHER-SE> 14,984,836
<TOTAL-LIABILITY-AND-EQUITY> 40,701,970
<SALES> 0
<TOTAL-REVENUES> 26,037,794
<CGS> 20,574,499
<TOTAL-COSTS> 24,498,443
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 428,386
<INCOME-PRETAX> 1,110,965
<INCOME-TAX> 444,578
<INCOME-CONTINUING> 666,387
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 666,387
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
