<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 September 30, 1999
----------------------------
( ) 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
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PVC CONTAINER CORPORATION
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(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.)
2 Industrial Way West, Eatontown, New Jersey 07724
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(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 September 30, 1999
- ---------------------- ---------------------------------
Common $.01 par value 7,038,705 shares
<PAGE> 2
Part I
CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets-September 30, 1999 and June 30, 1999 3
Consolidated Statements of Operations-Three Months Ended
September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows-Three Months Ended
September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations 8-10
PART II. OTHER INFORMATION 11
</TABLE>
<PAGE> 3
Part I
PVC Container Corporation
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER JUNE
30, 1999 30, 1999
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 94,753 $ 784,087
Accounts receivable, net 11,548,500 12,815,674
Inventories 14,453,601 13,386,060
Prepaid expenses and other current assets 1,331,881 1,146,070
Deferred income taxes 1,517,271 1,517,271
Net assets held for disposition 4,350,730 4,350,730
----------------------------------
Total current assets 33,296,736 33,999,892
Other assets 129,835 235,784
Goodwill, net of accumulated amortization 4,069,401 3,826,482
Unexpended proceeds from construction loan 4,777,545 4,724,914
Properties, plant and equipment at cost, net 39,516,999 40,565,496
----------------------------------
$ 81,790,516 $ 83,352,568
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 8,014,279 $ 9,596,606
Accrued expenses 4,453,966 4,864,355
Income taxes payable 720,317 1,337,291
Current portion of long-term debt 4,368,275 4,561,844
----------------------------------
Total current liabilities 17,556,837 20,360,096
Long-term debt 40,822,910 39,413,118
Deferred income taxes 3,103,544 3,103,544
Stockholders' equity:
Preferred stock, par value $1.00, authorized 1,000,000
shares, none issued
Common stock, par value $.01, authorized 10,000,000
shares, 7,038,705 shares issued and outstanding as of
September 30, 1999 and June 30, 1999 70,387 70,387
Capital in excess of par value 3,786,497 3,786,497
Retained earnings 16,450,341 16,618,926
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Total stockholders' equity 20,307,225 20,475,810
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$ 81,790,516 $ 83,352,568
==================================
</TABLE>
See accompanying notes.
3
<PAGE> 4
Part I
PVC Container Corporation
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
1999 1998
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<S> <C> <C>
Net sales $ 20,925,923 $ 18,612,677
Cost and expenses:
Cost of goods sold (exclusive of depreciation and
amortization expense shown separately below) 16,546,524 15,429,896
Selling, general and administrative expenses 2,278,496 1,931,266
Depreciation and amortization 1,771,282 1,610,966
-----------------------------------
20,596,302 18,972,128
-----------------------------------
Income (loss) from operations 329,621 (359,451)
Other income (expense):
Interest expense (624,306) (484,223)
Other income 13,700 43,395
-----------------------------------
(610,606) (440,828)
-----------------------------------
Loss before benefit for income taxes (280,985) (800,279)
Benefit for income taxes 112,400 320,000
-----------------------------------
Net loss $ (168,585) $ (480,279)
===================================
Net loss per share (basic and diluted) $ (.02) $ (.07)
===================================
</TABLE>
See accompanying notes.
4
<PAGE> 5
Part I
PVC Container Corporation
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (168,585) $ (480,279)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 1,771,282 1,610,966
Deferred income taxes (113,125)
Changes in assets and liabilities:
Accounts receivable, net of allowances 1,267,174 1,192,271
Inventories (1,067,541) 540,840
Prepaid expenses, taxes and other current assets (185,811) (127,399)
Other assets 105,949 253,000
Accounts payable and accrued expenses (1,992,716) (2,473,703)
Income taxes payable (616,974) (238,325)
------------------------------------
Net cash (used in) provided by operating activities (887,222) 164,246
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,018,335) (1,457,494)
Purchase of business (12,000,000)
------------------------------------
Net cash used in investing activities (1,018,335) (13,457,494)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 2,324,841 13,300,000
Payments on indebtedness (1,108,618) (706,818)
------------------------------------
Net cash provided by financing activities 1,216,223 12,593,182
------------------------------------
Net decrease in cash and cash equivalents (689,334) (700,066)
Cash and cash equivalents at beginning of period 784,087 868,498
------------------------------------
Cash and cash equivalents at end of period $ 94,753 $ 168,432
====================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 625,633 $ 426,173
====================================
Income taxes paid $ 504,575 $ 34,000
====================================
</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 consolidated financial
position as of September 30, 1999, and the consolidated results of
operations and cash flows for the three month periods ended September
30, 1999 and 1998.
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.
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 7,038,705 for the three month periods
ended September 30, 1999 and 1998.
Note 2 The accompanying financial statements include the accounts of
PVC Container Corporation and its wholly-owned subsidiaries, Novatec
Plastics Corporation, Marpac Industries, 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 Excluded from the consolidated statements of cash flows for the
three months ended September 30, 1998 was the effect of certain noncash
financing activities related to the $2.5 million and $7.3 million loans
obtained by the Company from GE Capital in March 1998 and June 1998,
respectively, 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 by the Company in April 1996. Capital expenditures in
connection with these agreements totaled approximately $1,540,000 for
the three months ended September 30, 1998.
6
<PAGE> 7
Part I
PVC Container Corporation
Notes to Consolidated Financial Statements
Note 4 Inventories consist of:
<TABLE>
<CAPTION>
SEPTEMBER JUNE
30, 1999 30, 1999
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<S> <C> <C>
Raw materials $ 5,153,733 $ 4,641,472
Finished goods and supplies 7,792,721 7,419,735
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Total LIFO inventories 12,946,454 12,061,207
Molds for resale in production 969,753 853,433
Supplies 537,394 471,420
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$ 14,453,601 $ 13,386,060
==================================
</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 September 30, 1999 were $20,926,000
as compared to $18,613,000 for the three month period ended September 30, 1998,
representing approximately a 12.4% increase. The increase was due primarily to
higher sales in the Company's Novatec Plastics segment, as well as the inclusion
of three full months of sales activity in fiscal 2000 for Marpac Industries,
Inc., ("Marpac") as compared to only one month in fiscal 1999. Marpac
Industries, Inc. was acquired in September 1998.
Cost of goods sold for the three months ended September 30, 1999 was $16,547,000
or 79.1% of net sales as compared to $15,430,000 or 82.9% of net sales for the
three months ended September 30, 1998. The dollar increase is reflective of the
higher sales activity while the percentage decrease is attributable to improved
utilization and overhead absorption primarily at the Company's Hazleton,
Pennsylvania plant. During the quarter ended September 30, 1998, the Company
incurred significant transition costs related to the start-up of that plant.
Selling, General and Administrative expenses ("SG&A") increased by $347,000 in
the first quarter of fiscal 2000 compared to the same period in the prior year.
For the quarter ended September 30, 1999, SG&A expenses were $2,278,000 or 10.9%
of net sales, as compared to $1,931,000 or 10.4% of net sales for the quarter
ended September 30, 1998. SG&A expenses increased due to the recent acquisition
and increased personnel necessary to support the Company's desire to grow its
business.
Depreciation and Amortization expense increased to a level of $1,771,000 for the
three months ended September 30, 1999 as compared to $1,611,000 for the three
month period ended September 30, 1998. This increase is primarily attributed to
the acquisition of Marpac.
Income from Operations increased $689,000 during the three month period ended
September 30, 1999 as compared to the same period a year ago. For the three
month period ended September 30, 1999, Income from Operations was $330,000 or
1.6% of net sales, as compared to a loss of $359,000 or 1.9% of net sales for
the three month period ended September 30, 1998. The increase in operating
income is principally the result of improved operating margins as compared to
the same period last year when the Company incurred higher than anticipated
start-up expenses at its new manufacturing facility in Hazleton, Pennsylvania.
8
<PAGE> 9
Interest expense increased $140,000 for the quarter ended September 30, 1999 as
compared to the same quarter last year. The increase is attributable to the
additional debt in conjunction with the financing of the Company's acquisition
of Marpac.
Net loss for the quarter ended September 30, 1999 was $169,000 or $.02 per share
as compared to a loss of $480,000 or $.07 per share for the quarter ended
September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and working capital increased and remained adequate for
the three month period ended September 30, 1999. Working capital at September
30, 1999 increased $2,100,000 to $15,740,000 compared to $13,640,000 as of June
30, 1999. The current ratio of assets to liabilities increased slightly from 1.7
to 1.9. A decrease in amounts owed to suppliers was the primary reason for the
change in working capital.
For the three month period ended September 30, 1999, the Company generated
$2,325,000 in proceeds from long term debt. These funds were primarily used to
acquire capital assets of $1,018,000, finance working capital and operations for
$887,000 and reduce long term debt by $1,109,000.
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 September 30, 1999, the Company had unused sources of liquidity
consisting of cash and cash equivalents of $95,000 and the availability of the
unused credit under a revolving credit facility of $2,700,000.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer-controlled systems using two
digits rather than four to define the applicable year. For example, computer
programs that have time sensitive software may recognize a date ending in "00"
as the year 1900 rather than the year 2000. This could result in system failure
or miscalculations causing disruptions of operations including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
During fiscal 1998, the Company began a program to upgrade its computer software
and hardware which is expected to be completed in calendar 1999, prior to any
anticipated impact on its operating systems. A significant portion of the costs
related to this program are included in the June 30, 1998 audited financial
statements. The Company believes that with these upgrades for its computer
systems, the Year 2000 issue will not pose significant operational problems.
However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 issue could have a material impact on the
operations of the Company.
9
<PAGE> 10
The Company is continuing to contact all of its significant suppliers and large
customers to determine the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
issues. There can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted and will not have a material
adverse effect on the Company's systems.
10
<PAGE> 11
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 September 30, 1999.
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: November 15, 1999
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 94,753
<SECURITIES> 0
<RECEIVABLES> 12,459,599
<ALLOWANCES> 911,099
<INVENTORY> 14,453,601
<CURRENT-ASSETS> 33,296,736
<PP&E> 77,435,742
<DEPRECIATION> 37,918,743
<TOTAL-ASSETS> 81,790,516
<CURRENT-LIABILITIES> 17,556,837
<BONDS> 43,926,454
0
0
<COMMON> 70,387
<OTHER-SE> 20,236,838
<TOTAL-LIABILITY-AND-EQUITY> 81,790,516
<SALES> 20,925,923
<TOTAL-REVENUES> 20,939,623
<CGS> 16,546,524
<TOTAL-COSTS> 20,596,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 624,306
<INCOME-PRETAX> (280,985)
<INCOME-TAX> 112,400
<INCOME-CONTINUING> (168,585)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (168,585)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
