<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 10-K/A#1
WITH RESPECT TO ITEM 14(a)(1) and (2)
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
OR
[ ] 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 IRS Identification Number
Incorporation or Organization)
2 Industrial Way West, Eatontown,
New Jersey 07724-2202 07724
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (732) 542-0060
-------------------------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
None None
<PAGE> 2
PVC CONTAINER CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-K
JUNE 30, 2000
<PAGE> 3
CONSOLIDATED FINANCIAL STATEMENTS
PVC Container Corporation
June 30, 2000, 1999 and 1998
<PAGE> 4
PVC CONTAINER CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000, 1999 AND 1998
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors.......................................... 1
Consolidated Balance Sheets............................................. 2
Consolidated Statements of Operations................................... 3
Consolidated Statements of Stockholders' Equity......................... 4
Consolidated Statements of Cash Flows................................... 5
Notes to Consolidated Financial Statements.............................. 6
</TABLE>
<PAGE> 5
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
PVC Container Corporation
We have audited the accompanying consolidated balance sheets of PVC Container
Corporation as of June 30, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 2000. Our audit also included the
financial statement schedule listed in the index at Item 14(a) These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PVC
Container Corporation as of June 30, 2000 and 1999 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended June 30, 1999 in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the
information set forth therein.
As explained in Note 2 to the consolidated financial statements, the Company has
given retroactive effect to the change in accounting for inventories from
last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method.
MetroPark, New Jersey
September 22, 2000
<PAGE> 6
PVC CONTAINER CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
2000 1999
---- ----
(restated)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,088,540 $ 784,087
Accounts receivable, net 13,972,869 12,815,674
Inventories 11,672,233 13,158,060
Prepaid expenses and other current assets 1,010,494 1,146,070
Deferred income taxes 2,119,031 1,517,271
Net assets held for disposition 684,729 4,350,730
-----------------------------------
Total current assets 30,547,896 33,771,892
Other assets 78,835 235,784
Goodwill, net of accumulated amortization of
$576,000 and $225,000 at
June 30, 2000 and 1999, respectively 3,818,792 3,826,482
Unexpended proceeds from construction loan 97,368 4,724,914
Properties, plant and equipment at cost, net 36,312,702 40,565,496
-----------------------------------
$70,855,593 $83,124,568
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:
Accounts payable $ 8,327,066 $ 9,596,606
Accrued expenses 3,904,221 4,864,355
Income taxes payable 184,380 1,335,313
Current portion of long-term debt 3,771,027 4,561,844
-----------------------------------
-----------------------------------
Total current liabilities 16,186,694 20,358,118
Long-term debt 31,956,264 39,413,118
Deferred income taxes 3,543,782 3,012,344
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, 7,044,655 and
7,038,705 shares issued and outstanding as
of June 30, 2000 and 1999 70,446 70,387
Capital in excess of par value 3,810,981 3,786,497
Retained earnings 15,287,426 16,484,104
-----------------------------------
Total stockholders' equity 19,168,853 20,340,988
-----------------------------------
$70,855,593 $83,124,568
===================================
</TABLE>
See accompanying notes.
2
<PAGE> 7
PVC CONTAINER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30
2000 1999 1998
-----------------------------------------------------
(restated) (restated)
<S> <C> <C> <C>
Net sales $92,619,720 $85,155,047 $69,728,498
Cost and expenses:
Cost of goods sold (exclusive of depreciation and
amortization expense shown separately below) 73,911,809 63,899,366 53,893,548
Selling, general and administrative expense 10,458,510 9,186,743 6,521,759
Depreciation and amortization expense 6,798,802 7,141,249 4,008,785
Provision for restructuring 400,000 1,200,000
-----------------------------------------------------
91,569,121 80,227,358 65,624,092
-----------------------------------------------------
Income from operations 1,050,599 4,927,689 4,104,406
Other income (expenses):
Interest expense (2,811,973) (2,457,940) (1,205,477)
Interest income 47,095 68,590 13,451
Other income (98,870) 299,966 144,018
-----------------------------------------------------
(2,863,748) (2,089,384) (1,048,008)
-----------------------------------------------------
(Loss) income before (benefit) provision for income
taxes (1,813,149) 2,838,305 3,056,398
(Benefit) provision for income taxes (616,471) 1,135,322 1,199,507
-----------------------------------------------------
Net (loss) income $(1,196,678) $ 1,702,983 $ 1,856,891
=====================================================
(Loss) earnings per share:
Basic $ (.17) $.24 $.27
Diluted $ (.17) $.24 $.26
</TABLE>
See accompanying notes.
3
<PAGE> 8
PVC CONTAINER CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
ISSUED AND OUTSTANDING CAPITAL IN TOTAL
EXCESS OF RETAINED STOCKHOLDERS'
SHARES AMOUNT PAR VALUE EARNINGS EQUITY
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1997,
as originally reported 7,004,705 $70,047 $3,646,747 $12,922,230 $16,639,024
Effect on prior years of applying
retroactively the FIFO method of
accounting for inventories
- - - 2,000 2,000
Balance, June 30, 1997,
as restated 7,004,705 70,047 3,646,747 12,924,230 16,641,024
Net income 1,856,891 1,856,891
--------------------------------------------------------------------------------
Balance, June 30, 1998
(as restated) 7,004,705 70,047 3,646,747 14,781,121 18,497,915
Net income 1,702,983 1,702,983
Exercise of stock options 34,000 340 139,750 140,090
--------------------------------------------------------------------------------
Balance, June 30, 1999
(as restated) 7,038,705 70,387 3,786,497 16,484,104 20,340,988
Net income (1,196,678) (1,196,678)
Exercise of stock options 5,950 59 24,484 24,543
--------------------------------------------------------------------------------
Balance, June 30, 2000 7,044,655 $70,446 $3,810,981 $15,287,426 $19,168,853
================================================================================
</TABLE>
See accompanying notes.
4
<PAGE> 9
PVC CONTAINER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30
2000 1999 1998
----------------------------------------------------
(Restated) (Restated)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(1,196,678) $ 1,702,983 $ 1,856,891
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 6,798,802 7,141,249 4,008,785
Deferred income taxes (70,322) (95,565) (201,289)
Gain on sale of equipment (17,541) (201,662)
Loss on sale of building 173,818
Changes in assets and liabilities:
Accounts receivable (1,064,017) (401,268) 450,247
Inventories 1,485,827 (2,134,860) (2,327)
Prepaid expenses and other current assets 135,576 (366,744) (93,788)
Other assets 156,949 488,216 (426,000)
Accounts payable and accrued expenses (2,229,674) (718,378) 1,996,779
Income taxes payable (1,244,111) 1,098,966 (180,135)
----------------------------------------------------
Net cash provided by operating activities 2,928,629 6,512,937 7,409,163
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,382,677) (3,021,554) (5,535,987)
Proceeds from sale of equipment 23,000 234,000 1,011,382
Proceeds from sale of building 4,262,286
Purchase of business (12,000,000) (10,209,579)
----------------------------------------------------
Net cash provided by (used in) investing activities 1,902,609 (14,787,554) (14,734,184)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 24,543 140,090
Proceeds from long-term debt 3,924,841 14,400,000 12,459,720
Payments on indebtedness (8,476,169) (6,349,884) (4,488,691)
----------------------------------------------------
Net cash (used in) provided by financing activities (4,526,785) 8,190,206 7,971,029
----------------------------------------------------
Net increase (decrease) in cash and cash equivalents
304,453 (84,411) 646,008
Cash and cash equivalents, beginning of year 784,087 868,498 222,490
----------------------------------------------------
Cash and cash equivalents, end of year $ 1,088,540 $ 784,087 $ 868,498
====================================================
</TABLE>
See accompanying notes.
5
<PAGE> 10
PVC CONTAINER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
PVC Container Corporation (the "Company") was incorporated in Delaware on June
14, 1968. The Company's major business activity primarily consists of the
manufacture and sale of a line of plastic bottles made from polyvinyl chloride
compounds and high density polyethylene resins. These bottles are used primarily
for the packaging of cosmetics, toiletries, foods, household chemicals, lawn and
garden, and industrial chemical products.
CONSOLIDATION
The accompanying financial statements include the accounts of PVC Container
Corporation and its wholly-owned subsidiaries, Novatec Plastics Corporation,
Novapak Corporation, Airopak Corporation, Marpac Industries Inc., Marpac
Southwest Inc. 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.
CASH EQUIVALENTS
The Company considers investments with maturities of three months or less when
acquired to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is determined
under the FIFO method (see Note 2).
DEPRECIATION
Depreciation is provided for financial reporting purposes on a straight-line
method over the estimated useful lives of the related assets. Maintenance and
repairs are charged to operations as incurred. Major renewals and betterments
are capitalized.
NET ASSETS HELD FOR DISPOSITION
In connection with the Company's strategic planning, certain facilities have
been classified as "Net Assets Held for Disposition" reflecting management's
intention to sell such assets. The net assets held for disposition at June 30,
1999 were sold in fiscal 2000. The net assets held for disposition at June 30,
2000 are expected to be sold in fiscal 2001. 6
<PAGE> 11
PVC CONTAINER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
REVENUE RECOGNITION
In general, revenue is recognized upon shipment of the product.
RESEARCH AND DEVELOPMENT COSTS
All research and development costs are charged to expense as incurred and
amounted to $238,000, $222,000 and $257,000 in 2000, 1999 and 1998,
respectively.
INTEREST-RATE PROTECTION AGREEMENTS
The Company enters into monthly Interest-Rate Protection Agreements ("IRPAs") to
modify the interest characteristics of certain outstanding debt. Each IRPA is
designated for all or a portion of the principal balance and term of a specific
debt obligation. These agreements involve the exchange of amounts based on a
fixed interest rate for amounts based on variable interest rates over the life
of the agreement without an exchange of the notional amount upon which the
payments are based. The differential to be paid or received as interest rates
change is accrued and recognized as an adjustment of interest expense related to
the debt. The fair values of IRPAs are not recognized in the financial
statements. Gains and losses on terminations of IRPAs would be deferred as an
adjustment to the carrying amount of the outstanding debt and amortized as an
adjustment to interest expense related to the debt over the remaining term of
the original contract life of the IRPAs. In the event of the early
extinguishment of the designated debt obligation, any realized or unrealized
gain or loss from the IRPA would be recognized in income coincident with the
extinguishment. The Company does not enter into any IRPAs that are not
designated with outstanding debt or which have notional amounts (or durations)
in excess of the principal amounts (or maturities) of the underlying debt.
<PAGE> 12
PVC CONTAINER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets used in operations or
expected to be disposed when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amounts of those assets.
STOCK-BASED COMPENSATION
As permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation
(FASB 123), the Company has elected to follow Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock option plans. Under APB 25,
compensation expense is calculated at the time of option grant based upon the
difference between the exercise price of the option and the fair market value of
the Company's common stock at the date of grant, recognized over the vesting
period.
PER SHARE INFORMATION
Per share information is presented in accordance with SFAS No. 128, Earnings Per
Share. Basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share includes the
dilutive effect of all such securities.
SEGMENTS
In fiscal 1999, the Company adopted Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information. Statement 131 superseded FASB
Statement No. 14, Financial Reporting for Segments of a Business Enterprise.
Statement 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports. Statement 131 also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The adoption of Statement 131 did not affect results of operations or
financial position, but did affect the disclosure of segment information (see
Note 16).
8
<PAGE> 13
PVC CONTAINER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PENSIONS
In February 1998, the FASB issued Statement No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits ("Statement 132"). Statement
132 established standards for the disclosure requirements for pensions and other
postretirement benefits, requires additional information on changes in the
benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures that are no longer useful
as they were when FASB Statements No. 87, Employers' Accounting for Pensions and
No. 88, Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits were issued. All pension
disclosures have been presented, and where appropriate, restated to conform to
the Statement 132 requirements.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is required
to be adopted in years beginning after June 15, 2000. Because of the Company's
minimal use of derivatives, management does not anticipate that the adoption of
the new statement will have a significant effect on earnings or the financial
position of the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. ACCOUNTING CHANGE
In fiscal 2000, the Company changed its method of valuing inventories from the
last-in, first-out (LIFO) to the first-in, first-out (FIFO) method. The change
from LIFO to FIFO has been applied retroactively. As more fully discussed below,
this change is considered preferable by the Company because of the increased
emphasis placed on its financial position. The accounting change decreases the
net loss in 2000 by $754,000 or $.11 per share, increased net income in 1999 by
$94,000 or $.01 per share and decreased 1998 net income by $230,000 or $.03 per
share.
9
<PAGE> 14
PVC CONTAINER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACCOUNTING CHANGE (CONTINUED)
At June 30, 2000 the Company was not in compliance with the covenants of its
Term Notes because of adjustments required to state inventories at LIFO value
(covenants subsequently amended, see Note 7).
In September 2000, management refinanced its indebtedness with a new loan
facility secured by accounts receivable, inventory and property, plant and
equipment ("New Agreement"). Discussions on the terms of the New Agreement with
the bank, which began in May 2000, did not anticipate the level of price
volatility that the Company experienced with resin prices in the fourth quarter
of 2000. The Company, based on its consultation with the lead bank in the New
Agreement, believes the accounting change described above is essential to the
successful syndication of the New Agreement on terms favorable to the Company.
In the event the New Agreement was not successfully syndicated, management
believed its financial position and working capital could be adversely impacted
in fiscal 2001 as a result of certain provisions in the New Agreement whereby:
(i) a modification could be made to the advance rates on the eligible inventory
and accounts receivable; (ii) an increase in the interest rate on the facility;
and (iii) a curtailment of future additional funding under the facility.
Given the emphasis on the Company's financial position placed by the Company's
lending institutions, management believes that a change in accounting method for
inventory valuation from LIFO to FIFO is appropriate. Based on the decreasing
resin prices in the first quarter of fiscal 2001, and the projected excess
capacity in PVC resin supply market, management believes that the rise in resin
prices in the latter half of fiscal 2000 will substantially reverse in fiscal
2001, and that LIFO inventories would again approximate, or exceed FIFO
inventories, as was the case in fiscal 1997 through 1999. Accordingly, the
Company believes that the FIFO method of valuing inventories is preferable
because it will provide a better measure of the current value of the inventories
and financial position of the Company.
10
<PAGE> 15
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
2000 1999
----------- -----------
(Restated)
<S> <C> <C>
Raw materials $ 3,384,525 $ 4,641,472
Finished goods 7,378,544 7,191,735
----------- -----------
Total LIFO inventories 10,763,069 11,833,207
Molds for resale, in production 527,120 853,433
Supplies 382,044 471,420
----------- -----------
Total $11,672,233 $13,158,060
=========== ===========
</TABLE>
4. ALLOWANCES
Allowance for doubtful accounts totaled approximately $1,010,000 and $956,000 at
June 30, 2000 and 1999, respectively.
5. PROPERTIES, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Estimated
Useful Life in
2000 1999 Years
---------------------------------------------
<S> <C> <C> <C>
Land $ 686,343 $ 730,343
Building and improvements 16,300,282 16,209,834 20-25
Machinery and equipment 45,543,523 45,891,605 7-10
Molds 4,057,823 5,364,215 3- 5
Office furniture and equipment 3,453,438 3,160,760 5-l0
Motor vehicles 165,749 137,632 3- 5
Leasehold improvements 13,521 13,521
----------- -----------
70,220,679 71,507,910
Less accumulated depreciation 33,907,977 30,942,414
----------- -----------
$36,312,702 $40,565,496
=========== ===========
</TABLE>
11
<PAGE> 16
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
6. ACCRUED EXPENSES
Accrued expenses at June 30 consists of:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Accrued payroll $ 792,574 $1,017,118
Accrued vacation 691,667 568,380
Accrued employee incentives 853,523 1,103,833
Accrued restructuring charge 405,659
Other accrued expenses 1,566,457 1,769,365
---------- ----------
$3,904,221 $4,864,355
========== ==========
</TABLE>
7. LONG-TERM DEBT
Long-term debt at June 30 consists of the following:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Notes payable:
South Carolina Economic Development Authority:
Loan $ 3,700,000 $ 3,700,000
New Jersey Economic Development Authority:
Series D Note 2,900,000
Pennsylvania Industrial Development Authority:
Loan 915,527 983,420
GE Capital Public Finance:
Equipment loans 2,995,508 7,012,428
Building loan 4,211,717 4,804,449
Fleet Bank of New Jersey:
Term notes 19,424,333 23,405,777
Revolving line of credit 3,400,000
Edgar County Bank Construction Loan 434,500 467,549
City of Paris:
Community Development Assistance Loan 286,205 318,527
Revolving Loan Fund 86,112 95,770
Illinois Small Business Development Loan 220,476 243,076
Obligations under capital leases 52,913 43,966
------------ ------------
35,727,291 43,974,962
Less current portion (3,771,027) (4,561,844)
------------ ------------
$ 31,956,264 $ 39,413,118
============ ============
</TABLE>
12
<PAGE> 17
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
7. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt are as follows: 2001-$3,771,027; 2002-$1,388,153;
2003-$729,538; 2004-$935,241 and 2005 to 2016-$31,170,925. Interest paid
amounted to $2,756,980, $2,413,246 and $1,174,899 in 2000, 1999 and 1998,
respectively.
The maturities in 2000 exclude $22.8 million of debt which was refinanced with a
new long-term debt agreement ("New Agreement") which the Company entered into in
August 2000. The New Agreement is a $43 million five year long-term debt
facility which replaced the Fleet Term Notes and Revolving Credit Facility. The
New Agreement is asset-based financing with predetermined borrowing rates based
on accounts receivable, inventory and property, plant and equipment and is
collateralized by such assets. Initial borrowings under the New Agreement
totaled approximately $22.6 million and were used, in part, to repay the
outstanding borrowings under the Fleet Agreement.
Note Payable - South Carolina Economic Development Authority "S.C. EDA"
This note was obtained to finance the construction of the Company's South
Carolina manufacturing facility and is due April 1, 2016. Prepayments may be
made without penalty. This note is subject to prior mortgages in favor of the
Fleet Bank of New Jersey. The effective interest rate on this obligation was
3.9% and 3.8% in 2000 and 1999, respectively.
The agreement contains certain provisions which require the funds to be held in
trust (the "Trust") by a third-party financial institution until such time that
equipment purchases are made. The funds are invested at rates of return
comparable to the interest rate paid by the Company on the obligation. Equipment
purchases in connection with this agreement are paid directly from the Trust.
S.C. EDA has issued tax exempt bonds to fund the debt. Should the tax exempt
status of this bond issue be negated, the rate of interest of this note would be
retroactively adjusted.
The Company has unused letters of credit amounting to approximately $3.7 million
in conjunction with this note.
13
<PAGE> 18
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
7. LONG-TERM DEBT (CONTINUED)
NOTE PAYABLE - NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY "N.J. EDA"
SERIES D NOTE
This note was paid in full in December 1999. This note was subject to prior
mortgages in favor of the Fleet Bank of New Jersey. The effective interest rate
on this obligation was 3.5% in 2000 and 1999.
NOTE PAYABLE - PENNSYLVANIA INDUSTRIAL DEVELOPMENT AUTHORITY-"PIDA"
During fiscal year 1999, the Company obtained a $1.0 million loan from the
Pennsylvania Industrial Development Authority ("PIDA") to assist in financing
the construction of its Hazleton, Pennsylvania manufacturing facility. The loan
is payable in 145 equal monthly installments of $8,634 at an interest rate of
3.75% with a maturity date of March 1, 2011. The loan may be prepaid in whole or
in part subject to certain requirements stated in the loan agreement. The loan
is collateralized by the property.
GE CAPITAL PUBLIC FINANCE BUILDING AND EQUIPMENT LOANS
During fiscal year 1998, the Hazleton Area Industrial Development Authority
approved $7,250,000 tax-exempt Industrial Development Bonds. The Bonds were
purchased and are held by GE Capital Public Finance, Inc., who is financing a
loan to the Company in conjunction with the Company's Hazleton, Pennsylvania
manufacturing facility. The loan is payable in 144 decreasing monthly
installments at an interest rate of 5.15% with a final lump sum payment of
$1,860,530 on June 15, 2010. The loan may be prepaid in whole or in part subject
to certain requirements stated in the loan agreement. The loan is collateralized
by the property. The Company has unused letters of credit amounting to
approximately $340,000 in conjunction with this note.
During fiscal year 1998, the City of Paris, Illinois approved $2,500,000 Series
1997C Industrial Development Revenue bonds. The Bonds were purchased and are
held by GE Capital Public Finance, Inc., who is financing a loan to the Company
in conjunction with the Company's expansion of its Paris, Illinois manufacturing
facility. The loan is payable in 120 decreasing monthly installments at an
interest rate of 5.45% through March 16, 2008. The loan may be prepaid in whole
or in part subject to certain requirements stated in the loan agreement. The
loan is collateralized by the property and the equipment.
14
<PAGE> 19
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
7. LONG-TERM DEBT (CONTINUED)
During fiscal year 1997, the City of Paris, Illinois approved $1,200,000 Series
1997A and $2,300,000 Series 1997B Industrial Development Revenue Bonds. The
Bonds were purchased and are held by GE Capital Public Finance, Inc., who is
financing a loan to the Company in conjunction with the Company's expansion of
its Paris, Illinois manufacturing facility. The loan is payable in 120
decreasing monthly installments at an interest rate of 5.90% with a final lump
sum payment of $602,952 on April 1, 2007. The loan may be prepaid in whole or in
part subject to certain requirements stated in the loan agreement. The loan is
collateralized by the property and the equipment. The Company has unused letters
of credit amounting to approximately $1.2 million in conjunction with this loan.
The agreements contain provisions which require the funds to be held in trust
(the "Trust") by a third-party financial institution until such time that
building, construction or equipment purchases are made. The funds are invested
at rates of return comparable to the interest rate paid by the Company on the
obligation. Purchases in connection with this agreement are paid directly from
the Trust.
The bonds issued by the City of Paris to fund the debt are tax-exempt bonds.
Should the tax-exempt status of these bonds be negated, the rate of interest of
this note would be retroactively adjusted.
TERM NOTES
During fiscal year 1999, the Company obtained a $12.0 million loan from Fleet
Bank to finance the September 3, 1998 acquisition of Marpac Industries, Inc.
This loan was repaid in August 2000 with the proceeds of the New Agreement. The
loan principal was payable in 83 monthly installments of $100,000 beginning on
October 1, 1998 with a final lump sum payment of $3,700,000 on August 1, 2005.
The Company participates in an interest rate protection agreement ("SWAP"),
whereby the Company has assumed a fixed rate of interest on $6.0 million of the
principal at 7.79% and Fleet has assumed the variable rate assigned to the loan
(LIBOR plus 185 basis points). Pursuant to the SWAP agreement, the Company
agrees to exchange with Fleet, on a monthly basis, the difference between the
fixed rate in the SWAP agreement and the LIBOR floating rate applied to the
notional principal amount. Interest on the remaining $6 million of principal is
payable monthly beginning on October 1, 1998 at LIBOR plus 185 basis points
through the loan's maturity on August 1, 2005. The loan is collateralized by the
property and equipment purchased.
15
<PAGE> 20
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
7. LONG-TERM DEBT (CONTINUED)
During fiscal year 1998, the Company obtained a $10.0 million loan from Fleet
Bank ("Fleet") to finance the March 30, 1998 acquisition of Charter Supply Co.,
Inc. The loan principal is payable in 72 monthly installments of $83,333
beginning on April 1, 1999 with a final lump sum payment of $4.0 million on
March 1, 2005. The Company participates in an interest rate protection agreement
("SWAP") whereby the Company has assumed a fixed rate of interest on $5.0
million of the principal at 7.35% and Fleet has assumed the variable rate
assigned to the loan (LIBOR plus 125 basis points). Pursuant to the SWAP
agreement, the Company agrees to exchange with Fleet, on a monthly basis, the
difference between the fixed rate in the SWAP agreement and the LIBOR floating
rate applied to the notional principal amount. Interest on the remaining $5.0
million of principal is payable monthly beginning on April 1, 1998 at LIBOR plus
125 basis points through the loan's maturity on March 1, 2005. The loan is
collateralized by the property and equipment purchased.
During fiscal year 1997, the Company consolidated various equipment and term
notes through a $2,530,000 term loan with Fleet Bank. The loan provides for
monthly payments of $70,278, including principal and interest, matures on April
1, 2000 and is collateralized by the equipment. The Company participates in an
interest rate protection agreement ("SWAP"), whereby the Company has assumed a
fixed rate of interest on the remaining principal at 7.72% and Fleet has assumed
the variable rate assigned to the loan (LIBOR plus 125 basis points). Pursuant
to the SWAP agreement, the Company agrees to exchange with Fleet, on a monthly
basis, the difference between the fixed rate in the SWAP agreement and the LIBOR
floating rate applied to the notional principal amount. The Company may prepay
this note in whole or in part subject to certain requirements stated in the loan
agreement.
During fiscal year 1997, the Company obtained a $1.2 million loan from Fleet
Bank to finance the expansion of its New Jersey manufacturing facility. The loan
is payable in 180 monthly payments of $6,667 including principal and interest,
through the note's maturity in November 2011. The Company participates in an
interest rate protection agreement ("SWAP") whereby the Company has assumed a
fixed rate of interest on the remaining principal at 9.35% and Fleet has assumed
the variable rate assigned to the loan (LIBOR plus 225 basis points). Pursuant
to the SWAP agreement, the Company agrees to exchange with Fleet, on a monthly
basis, the difference between the fixed rate in the SWAP agreement and the LIBOR
floating rate applied to the notional principal amount. The note is
collateralized by the building.
16
<PAGE> 21
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
7. LONG-TERM DEBT (CONTINUED)
During fiscal year 1994, the Company purchased $1,200,000 of property and
equipment which was financed through a term note with Fleet Bank. The note
provides for principal payments of $5,000 and interest due monthly through the
note's maturity, July 1, 1999. The note was amended as of June 30, 1999 for
$866,333 and is payable in 75 monthly principal installments of $7,667 and a
final lump sum payment of $291,308 on November 1, 2005 plus interest at LIBOR
plus 185 basis points. The note is collateralized by the property and equipment
purchased.
REVOLVING LINE OF CREDIT
On April 1, 1997, the Company entered into a new $5,000,000 line of credit
agreement with Fleet Bank. This credit agreement was repaid in full in August
2000 with the proceeds of the New Agreement. Borrowings under this line bear
interest payable monthly at the prime rate (9.5% at June 30, 2000), and
principal borrowings are due in full on October 31, 2000. The Company was in
compliance with all covenants (as amended) of this loan agreement at June 30,
2000. The Company had $3,400,000 outstanding under this line of credit at June
30, 2000.
EDGAR COUNTY BANK CONSTRUCTION LOAN
During fiscal year 1998, the Company refinanced $495,000 of their loan obtained
for real estate improvements for a manufacturing plant in Paris, Illinois. The
loan is payable in fifty-nine monthly principal payments of $2,750 and a final
lump sum payment of $332,750 on August 30, 2003 plus interest at 7.75%. The loan
is collateralized by a shared first lien interest for the land and building in
Paris, Illinois in conjunction with an inter creditor agreement between the bank
and the City of Paris.
COMMUNITY DEVELOPMENT ASSISTANCE LOAN
In fiscal year 1993, the Illinois Department of Commerce and Community Affairs
approved a loan with the City of Paris for development of a manufacturing plant
in Illinois for $500,000 which will be payable in 180 monthly installments of
$3,453 including interest at 3% through April 1, 2008. The loan is
collateralized by a shared first lien interest for the land and building in
Paris, Illinois in conjunction with an inter creditor agreement between the City
of Paris and Edgar County Bank.
17
<PAGE> 22
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
7. LONG-TERM DEBT (CONTINUED)
REVOLVING LOAN FUND
The Illinois Department of Commerce and Community Affairs also approved a
revolving loan fund from the City of Paris to assist in the development of the
manufacturing plant in Illinois for $150,000 in fiscal year 1993. The loan is
payable in 180 monthly installments of $1,033 including interest at 3% through
April 1, 2008. The loan is collateralized by a subordinate lien interest for the
land and building in Paris, Illinois in conjunction with an inter creditor
agreement between the City of Paris and Edgar County Bank.
ILLINOIS SMALL BUSINESS DEVELOPMENT LOAN
In fiscal year 1994, the Illinois Department of Commerce and Community Affairs
approved a loan with the City of Paris for the expansion of the Company's
manufacturing plant in Illinois for $350,000 which is payable in 180 monthly
installments of $2,767 including interest at 5% and a final payment to satisfy
the conditions of the loan in August 2008. The loan can be prepaid in whole or
in part without penalty. The loan is collateralized by the property and
improvements thereafter as well as the rent issues and profits of the premises.
The carrying amounts of the aforementioned debt agreements approximate fair
value.
8. OPERATING LEASES
Minimum rental commitments under non-cancellable operating leases are payable as
follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
------------------------------
<S> <C>
2001 $1,137,353
2002 1,115,403
2003 1,084,376
2004 870,917
2005 756,544
Thereafter 3,790,402
</TABLE>
Rental expense for operating leases amounted to $1,179,929, $1,148,549 and
$810,824 in 2000, 1999 and 1998, respectively.
18
<PAGE> 23
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
9. PENSION PLAN
On September 1, 1990, the Company instituted a non-contributory defined benefit
pension plan (the Plan) for all eligible full-time union employees. Benefits are
based on years of service. The Company contributes to the Plan amounts,
actuarially determined by the Unit Credit Actuarial Cost Method, which provides
the Plan with sufficient assets to meet future benefit payment requirements. The
assets of the Plan are invested principally in short-term investments. The
following table sets forth the Plan's funded status and the amount recognized in
the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
2000 1999
--------------------------------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 1,005,365 $ 947,389
Service cost 6,811 9,536
Interest cost 62,983 70,237
Actuarial gain (151,992)
Benefits paid (27,200) (21,797)
--------------------------------------
Benefit obligation at end of year $ 895,967 $ 1,005,365
======================================
Change in plan assets:
Fair value of plan assets at beginning of year $ 782,144 $ 651,518
Actual return on plan assets 52,752 48,938
Employer contribution 83,475 122,723
Benefits paid, including expenses (48,005) (41,035)
--------------------------------------
Fair value of plan assets at end of year $ 870,366 $ 782,144
======================================
Funded status $ (25,601) $ (223,221)
Unrecognized net actuarial loss 233,238 356,229
Unrecognized prior service cost 16,754 18,430
Unrecognized transition obligation 21,123 24,141
Adjustment to recognize minimum liability (271,115) (398,800)
--------------------------------------
Pension liability $ (25,601) $ (223,221)
======================================
Weighted-average assumptions at year-end:
Discount rate 7.50% 7.50%
Expected return on plan assets 8.50 8.50
Rate of compensation increase 0.00 0.00
Components of net periodic benefit cost:
Service cost $ 6,811 $ 9,536
Interest cost 62,983 70,237
Expected return on plan assets (68,874) (61,951)
Amortization of transition obligation 3,018 3,018
Amortization of prior service cost 1,675 1,675
Recognized net actuarial loss 7,927 17,634
--------------------------------------
Net periodic benefit cost $ 13,540 $ 40,149
======================================
</TABLE>
19
<PAGE> 24
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
9. PENSION PLAN (CONTINUED)
The Company maintains a voluntary salary reduction 40l(k) plan covering all
non-union employees with more than one year of service. Eligible employees may
elect to contribute up to 6% of their salaries up to ERISA's maximum annual
level. The Company contributes an amount equal to 25% of the employee's
contribution and, at its discretion, may make additional contributions to the
plan based on earnings. The Company contributed $158,926, $127,956 and $391,081
in 2000, 1999 and 1998, respectively.
10. COMMON STOCK
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 options granted are exercisable to the extent of 20-25% per year on a
cumulative basis through their expiration on January 16, 2007.
FASB 123 requires pro forma information regarding net income and earnings per
share as if the Company had accounted for its employee stock options and
warrants ("equity awards") under the fair value method of FASB 123. The fair
value of these equity awards was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 2000 and 1999, respectively: risk-free interest rates of
approximately 5.5%; expected volatility of 0.3%; expected option life equal to
the vesting period, and an expected dividend yield of 0.0%.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing model does not necessarily provide a reliable single measure of the
fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the equity
awards is amortized to expense over the options vesting period. The Company's
pro forma information is as follows:
20
<PAGE> 25
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
10. COMMON STOCK (CONTINUED)
<TABLE>
<CAPTION>
2000 1999
------------ ----------
(Restated)
<S> <C> <C>
Pro forma net income $(1,297,041) $1,654,321
Pro forma net income per share of common stock (.18) .23
</TABLE>
A summary of stock option activity follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
------------------------
<S> <C> <C>
Outstanding at June 30, 1997 374,000 $4.29
Granted -- --
Forfeited -- --
Exercised -- --
------------------------
Outstanding at June 30, 1998 374,000 4.29
Granted 118,000 6.38
Forfeited (51,000) (4.13)
Exercised (34,000) (4.13)
------------------------
Outstanding at June 30, 1999 407,000 4.92
Granted -- --
Forfeited (32,250) 5.73
Exercised (5,950) 4.13
------------------------
Outstanding at June 30, 2000 368,800 4.87
========================
Exercisable at June 30, 1998 158,500 $4.28
========================
Exercisable at June 30, 1999 216,250 $4.60
========================
Exercisable at June 30, 2000 281,300 $4.68
========================
</TABLE>
Exercise prices for options outstanding as of June 30, 2000 ranged from $4.13 to
$6.38 per share. The weighted average remaining contractual life of these
options is 7.41 years.
21
<PAGE> 26
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
11. INCOME TAXES
The (benefit) provision for income taxes consists of:
<TABLE>
<CAPTION>
2000 1999 1998
------------------------------------------
(Restated) (Restated)
<S> <C> <C> <C>
Current:
Federal $(604,149) $1,035,565 $1,065,700
State 58,000 243,322 335,096
------------------------------------------
(546,149) 1,278,887 1,400,796
Deferred:
Federal 82,423 (111,506) (154,178)
State (152,745) (32,059) (47,111)
------------------------------------------
(70,322) (143,565) (201,289)
------------------------------------------
Total (benefit) provision $(616,471) $1,135,322 $1,199,507
==========================================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of June 30 are as follows:
<TABLE>
<CAPTION>
2000 1999
----------------------------
<S> <C> <C>
Deferred tax liabilities:
Long-lived assets and other $3,543,782 $3,012,344
----------------------------
Total deferred tax liabilities 3,543,782 3,012,344
Deferred tax assets:
Bad debt reserves 447,077 410,000
Inventory reserves 498,584 388,000
Accrued liabilities and other 1,173,370 719,271
----------------------------
Total deferred tax assets 2,119,031 1,517,271
----------------------------
Net deferred tax liabilities $1,424,751 $1,495,073
============================
</TABLE>
A reconciliation of the income tax provision and the amount computed by applying
the statutory federal income tax rate to earnings before income taxes is as
follows:
<TABLE>
<CAPTION>
2000 1999 1998
--------------------
<S> <C> <C> <C>
Federal tax at statutory rate 34% 34% 34%
Effect of:
State income taxes, net of federal income tax benefit 4 4 6
Goodwill amortization (5) 3
Foreign operations 2 (1) (1)
Other (1)
--------------------
Effective income tax rate 34% 40% 39%
====================
</TABLE>
22
<PAGE> 27
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
11. INCOME TAXES (CONTINUED)
Income taxes paid amounted to $153,000, $322,000 and $1,571,000 in 2000, 1999
and 1998, respectively.
12. ACQUISITION
On September 3, 1998 the Company acquired, in consideration for the payment of a
purchase price of $12,000,000, all of the issued and outstanding shares of
Marpac Industries, Inc. together with certain real property owned by the
sellers. Marpac Industries, Inc. is a technical blow molding operation that
produces bottles, containers, cartridges and various dispensers for domestic and
international customers including office equipment, food and industrial
products. Marpac Industries, Inc. has its principal operation in Kingston, New
York and also has a facility located in Ardmore, Oklahoma.
The acquisition has been accounted for as a purchase. Accordingly, the results
of the operations have been included in the Company's results of operations from
the acquisition date. The purchase price has been allocated to the assets
acquired and liabilities assumed based on their estimated fair values at the
acquisition date. The excess of purchase price over net assets of the business
acquired is amortized on a straight-line basis over fifteen years. Amortization
expense totaled approximately $287,000 and $225,000 for the years ended June 30,
2000 and 1999, respectively.
The unaudited pro forma results as if the above acquisition had occurred on July
1, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998
(AS RESTATED) (AS RESTATED)
------------------------------
<S> <C> <C>
Net sales $86,916,000 $93,099,000
Net income 1,780,200 2,289,200
Net income per diluted share .25 .32
</TABLE>
The pro forma results are not necessarily indicative of the results of
operations that would have occurred had the acquisitions taken place at the
beginning of the periods presented nor are they intended to be indicative of
results that may occur in the future.
23
<PAGE> 28
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
13. EARNINGS PER SHARE
The following table sets forth the computation of weighted-average shares
outstanding for calculating basic and diluted earnings per share for the years
ended June 30, 2000, 1999 and 1998. Income available to common stockholders for
both basic and diluted earnings per share is the same as net income presented in
the statements of income for the years ended June 30, 2000, 1999 and 1998.
<TABLE>
2000 1999 1998
---------------------------------
<S> <C> <C> <C>
Weighted-average shares for basic
earnings per share 7,042,254 7,008,955 7,004,705
Effect of dilutive securities:
Employee stock options 149,786 59,966
---------------------------------
Adjusted weighted-average shares for
diluted earnings per share 7,042,254 7,158,741 7,064,671
=================================
</TABLE>
14. PROVISION FOR RESTRUCTURING
During the third quarter of 2000, the Company recorded a $400,000 pre-tax charge
to income for restructuring related to closure and expected loss on the sale of
its Ardmore, Oklahoma manufacturing facility.
During the fourth quarter of 1998, the Company recorded a $1.2 million charge
for restructuring relating to the relocation of its Eatontown, New Jersey
manufacturing facility to Hazleton, Pennsylvania. Principal items included in
the charge are severance for workforce reductions of approximately 114 union
employees totaling approximately $500,000, with the remainder of the charge
relating to pension costs and other exit costs.
15. STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURES
Excluded from the consolidated statements of cash flows in 2000 and 1999 was the
effect of certain noncash financing activities related to the $2.5 million loan
and the $7.3 million loan 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 $728,000 and $3.9 million in 2000 and 1999,
respectively. In addition, during 2000 the Company reduced its obligations under
these loans by $3.7 million.
24
<PAGE> 29
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
16. SEGMENTS
The Company identifies its segments based upon differences in the types of
products it sells. The Company currently has two reportable segments: Plastic
Containers and Compound. The Plastic Containers segment manufactures custom
designed PET, HDPE and PVC containers mainly for cosmetics, toiletries, foods,
household chemicals, lawn and garden and industrial chemical products. The
Compound segment manufactures PVC compound for use by the Company as well as
external customers. The external use of the PVC compound is for extruded
profiles and accessories, furniture, molding and other indoor fixtures, and
molded electrical and electronic housings.
The reportable segments are each managed separately due to the different
manufacturing processes used and the different strategic markets in which each
segment operates. The Company evaluates each segment's performance based on
profit or loss from operations before income taxes. The accounting policies for
the reportable segments are the same as those for the Company (described in Note
1). Intersegment sales and transfers are recorded at market prices. Information
on segments and a reconciliation to consolidated total are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-----------------------------------------------
Net revenues:
<S> <C> <C> <C>
Compound total $26,411,741 $25,366,232 $25,801,387
Intersegment revenue - Compound (7,492,056) (8,157,436) (8,030,027)
-----------------------------------------------
Revenues from external customers - Compound
18,919,685 17,208,796 17,771,360
Plastic Containers 73,700,035 67,946,251 51,957,138
-----------------------------------------------
Total consolidated net revenues $92,619,720 $85,155,047 $69,728,498
===============================================
Depreciation and amortization expense:
Compound $ 374,963 $ 376,011 $ 382,282
Plastic Containers 6,423,839 6,765,238 3,626,503
-----------------------------------------------
Total consolidated depreciation and
amortization expense $ 6,798,802 $ 7,141,249 $ 4,008,785
===============================================
</TABLE>
25
<PAGE> 30
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
16. SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
2000 1999 1998
------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Compound $ 20,900 $ -- $ --
Plastic Containers 26,195 68,590 13,451
------------------------------------------------------------
Total consolidated interest income $ 47,095 $ 68,590 $ 13,451
============================================================
Interest expense:
Compound $ 138,417 $ 98,369 $ 92,960
Plastic Containers 2,673,556 2,359,571 1,112,517
------------------------------------------------------------
Total consolidated interest expense $ 2,811,973 $ 2,457,940 $ 1,205,477
============================================================
Restructuring charge:
Compound $ -- $ -- $ --
Plastic Containers 400,000 -- 1,200,000
------------------------------------------------------------
Total consolidated restructuring charge $ 400,000 $ -- $ 1,200,000
============================================================
Income tax expense (benefit):
Compound $ 125,498 $ 1,274,707 $ 1,032,244
Plastic Containers (741,969) (202,207) 321,263
------------------------------------------------------------
Total consolidated income tax
(benefit) expense $ (616,471) $ 1,072,500 $ 1,353,507
============================================================
Net income (loss):
Compound $ 243,613 $ 1,968,821 $ 1,548,366
Plastic Containers (1,440,291) (360,016) 539,525
------------------------------------------------------------
Total consolidated net income $ (1,196,678) $ 1,608,805 $ 2,087,891
============================================================
Total assets:
Compound $ 7,554,229 $ 8,737,834 $ 8,275,506
Plastic Containers 62,741,426 74,614,734 62,095,612
------------------------------------------------------------
Total consolidated assets $ 70,295,655 $ 83,352,568 $ 70,371,118
============================================================
Capital expenditures:
Compound $ 337,954 $ 278,943 $ 327,338
Plastic Containers 2,044,723 2,742,611 5,208,649
------------------------------------------------------------
Total consolidated capital expenditures $ 2,382,677 $ 3,021,554 $ 5,535,987
============================================================
</TABLE>
In addition to the above, the Company made certain non-cash capital expenditures
relating to the Plastic Containers segment as discussed in Note 14.
26
<PAGE> 31
PVC Container Corporation
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
---------------------------------------------------------------------------------------------------------------
ADDITIONS
--------------------------- AMOUNT
CHARGED TO WRITTEN
BALANCE CHARGED TO OTHER OFF BALANCE
BEGINNING COSTS AND ACCOUNTS AGAINST END OF
DESCRIPTION OF YEAR EXPENSES (DESCRIBED) RESERVE YEAR
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Valuation accounts
deducted from assets to
which they apply:
June 30, 2000
Accounts receivable $956,174 $860,093 $806,075 $1,010,192
Inventory 442,000 585,000 440,000 587,000
June 30, 1999
Accounts receivable 411,725 584,449 40,000 956,174
Inventory 552,000 74,000 184,000 442,000
June 30, 1998:
Accounts receivable 242,692 2,000 $167,033 (A) 411,725
Inventory 222,000 180,000 150,000 (A) 552,000
</TABLE>
(A) Acquired in conjunction with acquisition of Charter Supply Co., Inc.
27
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment #1 to be
signed on its behalf by the undersigned, thereunto duly authorized.
PVC CONTAINER CORPORATION
(Registrant)
By:/s/Phillip L. Friedman
-----------------------
Phillip L. Friedman
President and Chief
Executive Officer
Date: October 24, 2000
--------------------
