<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, 1997
( ) 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 (732) 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 December 31, 1997
Common $.01 par value 7,004,705 shares
<PAGE> 2
Part I
CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets - December 31, 1997 and June 30, 1997 3
Consolidated Statements of Income - Three Months Ended December 31,
1997 and 1996 and Six Months Ended December 31, 1997 and 1996 4
Consolidated Statements of Cash Flows - Six Months Ended
December 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>
DECEMBER JUNE
31, 1997 30, 1997
------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 165,177 $ 222,490
Accounts receivable, less allowance of $244,692 8,177,372 9,272,018
Inventories 10,762,430 9,407,146
Prepaid expenses, taxes and other current assets 410,653 538,593
Deferred tax asset 946,517 946,517
------------------------------------
Total current assets 20,462,149 20,386,764
Unexpended proceeds from construction loan 2,538,225 4,244,334
Properties and equipment at cost - net of accumulated depreciation
23,930,781 21,410,268
------------------------------------
$46,931,155 $46,041,366
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 5,020,372 $ 6,443,880
Accrued expenses 3,829,039 3,147,719
Income taxes payable 502,411 418,460
Current portion of long-term debt 1,867,353 1,866,648
------------------------------------
Total current liabilities 11,219,175 11,876,707
Long-term debt 16,903,886 16,337,169
Deferred income taxes 1,173,466 1,188,466
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
shares issued and outstanding as of December 31, 1997
and June 30, 1997 70,047 70,047
Capital in excess of par value 3,646,747 3,646,747
Retained earnings 13,917,834 12,922,230
------------------------------------
Total stockholders' equity 17,634,628 16,639,024
------------------------------------
$46,931,155 $46,041,366
====================================
</TABLE>
See accompanying notes. 3
<PAGE> 4
Part I
PVC Container Corporation
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31 DECEMBER 31
-----------------------------------------------------------------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Net sales $14,711,015 $12,753,407 $30,024,099 $25,884,172
Cost and expenses:
Cost of goods sold (exclusive of
depreciation and amortization
expense shown separately below) 11,152,733 9,925,044 23,170,984 20,579,499
Selling, general and administrative expenses
1,593,961 1,304,479 3,067,307 2,491,693
Depreciation and amortization 882,522 752,121 1,681,142 1,401,449
Equity in loss of jointly owned
company 12,908 25,802
-----------------------------------------------------------------------------
13,629,216 11,994,552 27,919,433 24,498,443
-----------------------------------------------------------------------------
Income from operations 1,081,799 758,855 2,104,666 1,385,729
Other income (expense):
Interest expense (243,579) (235,099) (456,913) (428,386)
Other income 16,490 47,481 26,051 153,622
-----------------------------------------------------------------------------
(227,089) (187,618) (430,862) (274,764)
-----------------------------------------------------------------------------
Income before provision for income
taxes 854,710 571,237 1,673,804 1,110,965
Provision for income taxes (346,500) (223,290) (678,200) (444,578)
-----------------------------------------------------------------------------
Net income $ 508,210 $ 347,947 $ 995,604 $ 666,387
=============================================================================
Earnings per share (basic and diluted) $.07 $.05 $.14 $.10
=============================================================================
Dividends per share $ - $ - $ - $.06
=============================================================================
</TABLE>
See accompanying notes. 4
<PAGE> 5
Part I
PVC Container Corporation
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31
1997 1996
-----------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 995,604 $ 666,387
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,681,142 1,401,449
Equity in loss of jointly owned company 25,802
Gain on sale of building (90,950)
Deferred income taxes (15,000) (82,242)
Changes in assets and liabilities:
Accounts receivable - net of allowances 1,094,646 2,304,897
Inventories (1,355,284) (557,913)
Prepaid expenses, taxes and other current assets 127,940 21,474
Accounts payable and accrued expenses (742,188) (1,541,757)
Income taxes payable 83,951 (440,134)
-----------------------------------
Net cash provided by operating activities 1,870,811 1,707,013
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,495,546) (2,688,763)
Proceeds from sale of plant and equipment 2,682,867
-----------------------------------
Net cash used in investing activities (2,495,546) (5,896)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt (932,578) (3,846,515)
Proceeds from long-term debt 1,500,000 2,100,000
Dividend paid (417,882)
-----------------------------------
Net cash used in financing activities 567,422 (2,164,397)
-----------------------------------
Net decrease in cash and cash equivalents (57,313) (463,280)
Cash and cash equivalents at beginning of period 222,490 1,059,166
-----------------------------------
Cash and cash equivalents at end of period $ 165,177 $ 595,886
===================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 456,374 $ 428,386
===================================
Income taxes paid $ 608,750 $ 1,049,000
===================================
</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 December 31, 1997, and the results of operations and
cash flows for the six month periods ended December 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 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.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share. Statement
128 replaced the previously reported primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts for all
periods have been presented, and where necessary, restated to conform
to the Statement 128 requirements.
Diluted 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 7,013,413 and 6,982,927 in the
second quarter of 1997 and 1996, respectively, and 7,004,705 and
6,973,816 for the six month periods ended December 31, 1997 and 1996.
Note 2 The accompanying financial statements include the accounts of PVC
Container Corporation and its wholly-owned subsidiaries, Novatec
Plastics Corporation, 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 Excluded from the consolidated statements of cash flows for the six
months ended December 31, 1997 is the effect of certain noncash
financing activities related to the $3.5 million loan from GE Capital
obtained by the Company in April 1997 and the $5.5 million South
Carolina EDA loan obtained
6
<PAGE> 7
Part I
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
by the Company in April 1996. Capital expenditures in connection with
these agreements totaled approximately $1,706,000 and $1,994,000 for
the six months ended December 31, 1997 and 1996, respectively.
Note 4 Inventories consist of:
<TABLE>
<CAPTION>
DECEMBER JUNE
31, 1997 30, 1997
--------------------------------
<S> <C> <C>
Raw materials $ 3,660,727 $3,227,543
Finished goods and supplies 6,132,668 5,546,262
--------------------------------
Total LIFO inventories 9,793,395 8,773,805
Molds for resale in production 602,549 278,800
Supplies 366,486 354,541
--------------------------------
$10,762,430 $9,407,146
================================
</TABLE>
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 December 31, 1997 increased by 15.3%
to $14,711,000 as compared to $12,753,000 for the three month period ended
December 31, 1996. For the six months ended December 31, 1997, sales increased
by 16.0% to $30,024,000 compared to $25,884,000 for the six month period ended
December 31, 1996. Growth in the company's PET product lines as well as a
general improvement in the demand for plastic bottles and compounds resulted in
the higher revenues for the current period.
Cost of goods sold for the three months ended December 31, 1997 was $11,153,000
or 75.8% of net sales as compared to $9,925,000 or 77.8% of net sales for the
three months ended December 31, 1996. For the six months ended December 31, 1997
cost of goods sold was $23,171,000 or 77.2% of net sales as compared to
$20,579,000 or 79.5% for the six months ended December 31, 1996. Increased
manufacturing efficiencies and lower plastic resin prices resulted in higher
operating margins.
Selling, General and Administrative expenses (SG&A") increased by $289,000 for
the three month period and by $576,000 for the six month period ended December
31, 1997 compared to the same period a year ago. For the quarter ended December
31, 1997, SG&A expenses were $1,594,000 or 10.8% of net sales, as compared to
$1,304,000 or 10.2% of net sales for the quarter ended December 31, 1996. For
the six months ended December 31, 1997, SG&A expenses were $3,067,000 or 10.2%
of net sales as compared to $2,492,000 or 9.6% of net sales for the six month
period ended December 31, 1996. SG&A expenses have increased to support the
additional marketing expenses to further develop the Company's entry into the
PET market as well as an increase in staffing in fiscal 1998 to support the
Company's business growth.
Depreciation expense increased to a level of $883,000 for the three months ended
December 31, 1997 as compared to $752,000 for the three months ended December
31, 1996. For the six month period ended December 31, 1997, depreciation
expenses was $1,681,000 as compared to $1,401,000 for the six month period ended
December 31, 1996. This increase is attributed to additional capital employed at
the Company's newly constructed Walterboro, South Carolina plastic bottle
manufacturing facility, expansion at our Paris, Illinois facility and the
purchase of new equipment to manufacture PET plastic bottles.
Income from Operations increased $323,000 during the three month period ended
December 31, 1997 as compared to the same period a year ago. For the three month
period ended December 31, 1997, Income from Operations was $1,082,000 or 7.4% of
net sales, as compared to $759,000 or 6.0% of net sales for the three months
ended December 31, 1996. Income from Operations for the six month period ended
December 31, 1997 increased by 51.9% to $2,105,000 or 7.0% of net sales as
compared to $1,386,000 or 5.4% of net sales for the six month period ended
December 31, 1996.
Higher operating income was primarily the result of improved operating margins
and higher capacity utilization during the six month period ended December 31,
1997 as compared to the six month period ended December 31, 1996.
8
<PAGE> 9
Net income for the quarter ended December 31, 1997 increased 46.0% to $508,000
or $.07 on a diluted earnings per share basis as compared to $348,000 or $.05 on
a diluted earnings per share basis for the same period a year ago. For the six
months ended December 31, 1997, net income increased 49.5% to $996,000 or $.14
on a diluted earnings per share basis as compared to $666,000 or $.10 on a
diluted earnings per share basis for the six month period ended December 31,
1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity position and working capital improved during the six
month period ended December 31, 1997. Net working capital as at December 31,
1997 was $9,243,000 compared to $8,510,000 as of June 30, 1997. The current
ratio of assets to liabilities increased from 1.72 to 1.82 as at December 31,
1997, primarily attributed to the reduction in accounts payable.
During the three month period ended December 31, 1997, the Company generated
cash from operations of $1,871,000 and received proceeds from long term debt in
the amount of $1,500,000. These funds were used to acquire $2,496,000 in capital
assets and reduce long term debt by $933,000.
The Company's short term liquidity and short term capital resources are adequate
for timely payment to trade and other creditors. The Company's sources of credit
are sufficient to meet its working capital and capital needs in the foreseeable
future. At December 31, 1997, the Company had unused sources of liquidity
consisting of cash and cash equivalents of $165,000 and the availability of the
unused credit under a revolving credit facility of $3,500,000.
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 - There were no reports on Form 8-K filed
for the three months ended December 31, 1997.
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-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 165,177
<SECURITIES> 0
<RECEIVABLES> 8,422,064
<ALLOWANCES> 244,692
<INVENTORY> 10,762,430
<CURRENT-ASSETS> 20,462,149
<PP&E> 47,929,144
<DEPRECIATION> 23,998,363
<TOTAL-ASSETS> 46,931,155
<CURRENT-LIABILITIES> 11,219,175
<BONDS> 18,077,352
0
0
<COMMON> 70,047
<OTHER-SE> 17,564,581
<TOTAL-LIABILITY-AND-EQUITY> 46,931,155
<SALES> 30,024,099
<TOTAL-REVENUES> 30,050,150
<CGS> 23,170,984
<TOTAL-COSTS> 27,919,433
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 456,913
<INCOME-PRETAX> 1,678,804
<INCOME-TAX> 678,200
<INCOME-CONTINUING> 995,604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 995,604
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
