<PAGE> 1
Part I
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000
------------------------
( ) 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 incorporation or (I.R.S. Employer
organization) Identification No.)
2 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 March 31, 2000
- ------------------------------------- ---------------------------------------
Common $.01 par value 7,044,655 shares
<PAGE> 2
Part I
CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets-March 31, 2000 and June 30, 1999 3
Consolidated Statements of Operations-Three Months Ended
March 31, 2000 and 1999 and Nine Months Ended March 31,
2000 and 1999 4
Consolidated Statements of Cash Flows-Nine Months Ended
March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations 8-9
PART II. OTHER INFORMATION 10
</TABLE>
<PAGE> 3
Part I
PVC Container Corporation
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
MARCH JUNE
31, 2000 30, 1999
-----------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 316,807 $ 784,087
Accounts receivable, net 15,047,753 12,815,674
Inventories 14,500,613 13,386,060
Prepaid expenses and other current assets 1,480,282 1,146,070
Deferred income taxes 1,517,271 1,517,271
Net assets held for disposition 684,729 4,350,730
-----------------------------------------
Total current assets 33,547,455 33,999,892
Other assets 93,835 235,784
Goodwill, net of accumulated amortization 3,902,537 3,826,482
Unexpended proceeds from construction loan 96,180 4,724,914
Properties, plant and equipment at cost, net 37,306,104 40,565,496
========================================
$74,946,111 $83,352,568
========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,983,623 $ 9,596,606
Accrued expenses 4,633,649 4,864,355
Income taxes payable 228,584 1,337,291
Current portion of long-term debt 3,829,830 4,561,844
-----------------------------------------
Total current liabilities 18,675,686 20,360,096
Long-term debt 33,401,977 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,
7,044,655 and 7,038,705 shares issued and outstanding
as of March 31, 2000 and June 30, 1999, respectively 70,446 70,387
Capital in excess of par value 3,810,981 3,786,497
Retained earnings 15,883,477 16,618,926
-----------------------------------------
Total stockholders' equity 19,764,904 20,475,810
-----------------------------------------
$74,946,111 $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 NINE MONTHS ENDED
MARCH 31 MARCH 31
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Net sales $ 25,781,261 $ 23,458,934 $ 67,776,984 $ 60,773,682
Cost and expenses:
Cost of goods sold (exclusive of
depreciation and amortization
expense shown separately below) 20,317,826 16,763,637 53,905,624 46,411,793
Selling, general and administrative expenses 2,655,140 2,456,180 7,469,093 6,489,560
Depreciation and amortization 1,804,596 1,900,409 5,217,700 5,328,556
Provision for restructuring 400,000 400,000
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25,177,562 21,120,226 66,992,417 58,229,909
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Income from operations 603,699 2,338,708 784,567 2,543,773
Other income (expense):
Interest expense (643,514) (646,632) (1,978,928) (1,828,688)
Other income 34,173 44,220 (31,388) 287,783
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(609,341) (602,412) (2,010,316) (1,540,905)
---------------------------------------------------------------------------
(Loss) income before benefit
(provision) for income taxes (5,642) 1,736,296 (1,225,749) 1,002,868
Benefit (provision) for income taxes 2,256 (690,100) 490,300 (396,800)
---------------------------------------------------------------------------
Net (loss) income $ (3,386) $ 1,046,196 $ (735,449) $ 606,068
===========================================================================
Earnings per share (basic and diluted) $ - $ .15 $ (.10) $ .09
===========================================================================
</TABLE>
See accompanying notes.
4
<PAGE> 5
Part I
PVC Container Corporation
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31
2000 1999
-------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income (735,449) $ 606,068
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 5,217,700 5,328,556
Gain on sale of equipment (18,000) (107,000)
Loss on sale of building 173,818
Deferred income taxes (30,000)
Changes in assets and liabilities:
Accounts receivable-net of allowances (2,232,079) 138,361
Inventories (1,114,553) (1,388,544)
Prepaid expenses and other current assets (334,212) (287,432)
Other assets 141,949 295,641
Accounts payable and accrued expenses 131,611 (2,233,288)
Income taxes payable (1,108,707) 524,880
------------------------------------
Net cash provided by operating activities 122,078 2,847,242
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of business (12,000,000)
Capital expenditures (1,847,375) (2,951,903)
Proceeds from sale of building 4,262,286
Proceeds from sale of equipment 18,000 107,000
------------------------------------
Net cash provided by (used in) investing activities 2,432,911 (14,844,903)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 24,543
Payments of long-term debt (6,971,653) (3,042,467)
Proceeds from long-term debt 3,924,841 14,400,000
------------------------------------
Net cash (used in) provided by financing activities (3,022,269) 11,357,533
------------------------------------
Net decrease in cash and cash equivalents (467,280) (640,128)
Cash and cash equivalents at beginning of period 784,087 868,498
------------------------------------
Cash and cash equivalents at end of period $ 316,807 $ 228,370
====================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 1,981,500 $ 1,721,300
====================================
Income taxes paid $ 613,900 $ 111,000
====================================
</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 March 31, 2000, and the results of operations and cash
flows for the nine month periods ended March 31, 2000 and 1999.
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 7,067,122 and 7,164,547 in the
third quarter of 2000 and 1999, respectively, and 7,114,708 and
7,166,873 for the nine month periods ended March 31, 2000 and 1999,
respectively.
Note 2 The accompanying consolidated financial statements include the
accounts of PVC Container Corporation and its wholly-owned
subsidiaries, Novatec Plastics Corporation, Marpac Industries, Inc.,
Airopak Corporation 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 nine
months ended March 31, 2000 and 1999 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 $728,000 and
$2,630,000 for the nine months ended March 31, 2000 and 1999,
respectively. In addition, during the three months ended March 31,
2000, the Company reduced its obligations under these loans by $3.7
million without affecting cash.
6
<PAGE> 7
Part I
PVC Container Corporation
Notes to Consolidated Financial Statements (continued)
Note 4 Inventories consist of:
<TABLE>
<CAPTION>
MARCH JUNE
31, 2000 30, 1999
--------------------------------
<S> <C> <C>
Raw materials $ 5,064,121 $ 4,641,472
Finished goods and supplies 7,994,884 7,419,735
-----------------------------
Total LIFO inventories 13,059,005 12,061,207
Molds for resale in production 989,196 853,433
Supplies 452,412 471,420
-----------------------------
$14,500,613 $13,386,060
=============================
</TABLE>
7
<PAGE> 8
PVC CONTAINER CORPORATION
Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Net sales for the three-month period ended March 31, 2000 increased by 9.9% to
$25,781,000 as compared to $23,459,000 for the three-month period ended March
31, 1999. For the nine months ended March 31, 2000 sales increased by 11.5% to
$67,777,000 compared to $60,774,000 for the nine month period ended March 31,
1999. Demand in the Novatec Plastics operation and bottle operations increased
by 14.1% and 8.9% respectively for the three months ended March 31, 2000.
Cost of goods sold for the three months ended March 31, 2000 was $20,318,000 or
78.8% of net sales compared to $16,764,000 or 71.5% of net sales for the three
months ended March 31, 1999. For the nine months ended March 31, 2000 cost of
goods sold was $53,906,000 or 79.5% of net sales as compared to $46,412,000 or
76.4% for the nine months ended March 31, 1999. Margins in the bottle operations
were adversely affected by the underabsorption of overhead expense and raw
material costs. Novatec Plastics margins were significantly affected by the
rapidly rising plastic resin prices.
Selling. General and Administrative expenses ("SG&A") increased by $199,000 for
the three month period ended March 31, 2000 and by $980,000 for the nine month
period ended March 31, 2000, as compared to the same period a year ago. For the
quarter ended March 31, 2000, SG&A expenses were $2,655,000 or 10.3% of net
sales, as compared to $2,456,000 or 10.5% of net sales for the quarter ended
March 31, 1999. For the nine months ended March 31, 2000, SG&A expenses were
$7,469,000 or 11.0% of net sales compared to $6,490,000 or 10.7% of net sales
for the nine month period ended March 31, 1999. This increase is mainly
attributable to the increase in personnel costs for the quarter and nine months
ended March 31, 2000 as compared to the same period last year reflecting the
Company's additional administrative and sales and marketing personnel necessary
to support the Company's desire to grow its business. Additionally, the Company
has incurred additional rental costs resulting from its relocation of the
executive and administrative functions resulting from the sale of its
manufacturing and office facility in Eatontown, New Jersey.
Depreciation and amortization expense decreased to a level of $1,805,000 for the
three months ended March 31, 2000 as compared to $1,900,000 for the three months
ended March 31, 1999. For the nine month period ended March 31, 2000,
depreciation and amortization expense were $5,218,000 as compared to $5,329,000
for the nine month period ended March 31, 1999. The primary cause for the
reduction during the quarter and nine month period ended March 31, 2000 is the
effect of certain manufacturing assets becoming fully depreciated in the current
fiscal year.
The Company recorded a $400,000 pre-tax charge to income for restructuring
related to the closure and expected loss on the sale of its Ardmore, Oklahoma
manufacturing facility as well as severance and other exit costs relating to
this facility.
Income from operations decreased $1,735,000 during the three-month period ended
March 31, 2000 as compared to the same period a year ago. For the three-month
period ended March 31, 2000, Income from operations was $604,000 or 2.3% of net
sales, as compared to $2,339,000 or 10.0% of net sales for the three months
ended March 31, 1999. Income from operations for the nine-month period ended
March 31, 2000 decreased to $785,000 or 1.2% of net sales as compared to
$2,544,000 or 4.2% of net sales for the nine month period ended March 31, 1999.
The decrease in operating income is primarily the result of lower operating
margins, lower plant utilization, higher unabsorbed factory overhead increases
in raw material costs and restructuring charge during the nine month period
ended March 31, 2000.
8
<PAGE> 9
Net income (loss) for the quarter ended March 31, 2000 decreased to $(3,000) or
$(.00) on a diluted earnings per share basis as compared to $1,046,000 or $.15
on a diluted earnings per share basis for the same period a year ago. For the
nine months ended March 31, 2000 net income (loss) increased to $(735,000) or
$(.10) on a diluted earnings per share basis as compared to $606,000 or $.09 on
a diluted earnings per share basis for the nine month period ended March 31,
1999.
LIQUIDITY AND CAPITAL RESOURCE
The Company's liquidity position and working capital remained adequate for the
nine-month period ended March 31, 2000. Net working capital as at March 31, 2000
increased $1,222,000 to $14,872,000 compared to $13,650,000 as at June 30, 1999.
The current ratio of assets to liabilities increased from 1.7 to 1.8 at March
31, 2000 primarily attributable to the recognition of an income tax benefit
associated with the Company's net loss for the nine months ended March 31, 2000.
During the nine month period ended March 31, 2000, the Company generated
$122,000 from operating activities, $4,263,000 from the sale of our facility
located in Eatontown, NJ, and $3,925,000 from proceeds from additional long term
debt. These funds were primarily used to acquire capital assets of $1,847,000
and reduce long term debt by $6,972,000.
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 working capital and capital needs in the foreseeable
future. At March 31, 2000, the Company had unused sources of liquidity
consisting of cash and cash equivalents of $317,000 and the availability of the
unused credit under a revolving credit facility of $1,100,000.
The Company's building located at 401 Industrial Way West, Eatontown, New
Jersey, which was previously classified as Asset Held for Sale, was sold in
December 1999 at approximately $173,000 less than book value of the property.
This loss on the sale is reflected in Other Income (Expense) in the March 31,
2000 Consolidated Statement of Operations.
YEAR 2000 COMPLIANCE
Although the date is now past January 1, 2000, we have not experienced an
immediate adverse impact from the transition to the Year 2000. However, we
cannot provide assurance that we or our suppliers and customers have not been
affected in a manner that is not yet apparent. As a result, we will continue to
monitor the Year 2000 compliance of our suppliers and customers.
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 March 31, 2000.
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: May 15, 2000
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-1-1999
<PERIOD-END> MAR-31-2000
<CASH> 316,807
<SECURITIES> 0
<RECEIVABLES> 15,920,306
<ALLOWANCES> 872,553
<INVENTORY> 14,500,613
<CURRENT-ASSETS> 33,547,455
<PP&E> 60,702,973
<DEPRECIATION> 32,396,869
<TOTAL-ASSETS> 74,946,111
<CURRENT-LIABILITIES> 18,675,686
<BONDS> 36,505,521
0
0
<COMMON> 70,446
<OTHER-SE> 19,694,458
<TOTAL-LIABILITY-AND-EQUITY> 74,946,111
<SALES> 67,776,984
<TOTAL-REVENUES> 67,745,596
<CGS> 53,905,624
<TOTAL-COSTS> 66,992,417
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,978,928
<INCOME-PRETAX> (1,225,749)
<INCOME-TAX> 490,300
<INCOME-CONTINUING> (735,449)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (735,449)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
