<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, 2000
------------------------
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from
------------------------
to
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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, 2000
----------------------- -----------------------------------
Common $.01 par value 7,044,655 shares
<PAGE> 2
Part I
CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets-September 30, 2000 and June 30, 2000 3
Consolidated Statements of Operations-Three Months Ended
September 30, 2000 and 1999
4
Consolidated Statements of Cash Flows-Three Months Ended
September 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Financial Condition and
Results of Operations
9-10
PART II. OTHER INFORMATION 11
</TABLE>
<PAGE> 3
Part I
PVC Container Corporation
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER JUNE
30, 2000 30, 2000
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 91,549 $ 1,088,540
Accounts receivable, net 12,715,818 13,972,869
Inventories 12,111,178 11,672,233
Prepaid expenses and other current assets 1,614,910 1,010,494
Deferred income taxes 2,119,031 2,119,031
Net assets held for disposition 684,729 684,729
-----------------------------
Total current assets 29,337,215 30,547,896
Other assets 63,835 78,835
Goodwill, net of accumulated amortization 3,735,047 3,818,792
Unexpended proceeds from construction loan 98,677 97,368
Properties, plant and equipment at cost, net 35,873,250 36,312,702
-----------------------------
$69,108,024 $70,855,593
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,335,831 $ 8,327,066
Accrued expenses 3,838,783 3,904,221
Income taxes payable 184,380
Current portion of long-term debt 3,312,197 3,771,027
-----------------------------
Total current liabilities 15,486,811 16,186,694
Long-term debt 31,828,083 31,956,264
Deferred income taxes 3,340,605 3,543,782
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 shares issued and outstanding as of
September 30, 2000 and June 30, 2000 70,446 70,446
Capital in excess of par value 3,810,981 3,810,981
Retained earnings 14,571,098 15,287,426
-----------------------------
Total stockholders' equity 18,452,525 19,168,853
-----------------------------
$69,108,024 $70,855,593
=============================
</TABLE>
See accompanying notes.
3
<PAGE> 4
Part I
PVC Container Corporation
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
2000 1999
--------------------------------
<S> <C> <C>
Net sales $ 20,734,946 $ 20,925,923
Cost and expenses:
Cost of goods sold (exclusive of depreciation and
amortization expense shown separately below) 16,997,571 16,546,524
Selling, general and administrative expenses 2,452,916 2,278,496
Depreciation and amortization 1,647,371 1,771,282
--------------------------------
21,097,858 20,596,302
--------------------------------
(Loss) income from operations (362,912) 329,621
Other income (expense):
Interest expense (750,526) (624,306)
Other income 28,092 13,700
--------------------------------
(722,434) (610,606)
--------------------------------
Loss before benefit for income taxes (1,085,346) (280,985)
Benefit for income taxes 369,018 112,400
--------------------------------
Net loss $ (716,328) $ (168,585)
================================
Net loss per share (basic and diluted) $ (.10) $ (.02)
================================
</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
2000 1999
---------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (716,328) $ (168,585)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,647,371 1,771,282
Deferred income taxes (203,177)
Changes in assets and liabilities:
Accounts receivable, net of allowances 1,257,051 1,267,174
Inventories (438,945) (1,067,541)
Prepaid expenses, taxes and other current assets (604,416) (185,811)
Other assets 15,000 105,949
Accounts payable and accrued expenses (56,673) (1,992,716)
Income taxes payable (184,380) (616,974)
---------------------------------
Net cash provided by (used in) operating activities 715,503 (887,222)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,125,483) (1,018,335)
---------------------------------
Net cash used in investing activities (1,125,483) (1,018,335)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 22,602,442 2,324,841
Payments on indebtedness (23,189,453) (1,108,618)
---------------------------------
Net cash (used in) provided by financing activities (587,011) 1,216,223
---------------------------------
Net decrease in cash and cash equivalents (996,991) (689,334)
Cash and cash equivalents at beginning of period 1,088,540 784,087
---------------------------------
Cash and cash equivalents at end of period $ 91,549 $ 94,753
================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 659,276 $ 625,633
================================
Income taxes paid $ 87,693 $ 504,575
================================
</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, 2000, and the consolidated results of
operations and cash flows for the three month periods ended September
30, 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 7,044,655 for the three month periods
ended September 30, 2000 and 1999.
Note 2 The accompanying financial statements include the accounts of PVC
Container Corporation and its wholly-owned subsidiaries, Novatec
Plastics Corporation, Novapak Corporation, Marpac Industries, Inc.,
Marpac Southwest 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 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 in the Company's latest Annual Report on Form 10-K,
this change is considered preferable by the Company because of the
increased emphasis which was placed on its financial position. The
accounting change decreased 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.
Note 4 Inventories consist of:
<TABLE>
<CAPTION>
SEPTEMBER JUNE
30, 2000 30, 2000
-----------------------------
<S> <C> <C>
Raw materials $ 4,025,421 $ 3,384,525
Finished goods 6,993,934 7,378,544
-----------------------------
Total inventories 11,019,355 10,763,069
Molds for resale, in production 669,313 527,120
Supplies 422,510 382,044
-----------------------------
Total $12,111,178 $11,672,233
=============================
</TABLE>
6
<PAGE> 7
Part I
PVC Container Corporation
Notes to Consolidated Financial Statements
Note 5 The Company entered a new long-term debt agreement ("New Agreement") in
August 2000. The New Agreement is a $43 million five year long-term debt
facility which replaced the existing long-term indebtedness. 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. Borrowings under the New
Agreement totaled approximately $22.2 million at September 30, 2000.
Note 6 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. Intersegment sales and transfers are recorded at
market prices. Information on segments and a reconciliation to
consolidated total are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
2000 1999
--------------------------------
<S> <C> <C>
Net revenues:
Compound total $ 5,733,760 $ 6,729,994
Intersegment revenue - Compound (1,722,819) (1,975,765)
--------------------------------
Revenues from external customers -
Compound 4,010,941 4,754,229
Plastic Containers 16,724,005 16,171,694
--------------------------------
Total consolidated net revenues $ 20,734,946 $ 20,925,923
================================
</TABLE>
7
<PAGE> 8
Part I
PVC Container Corporation
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
2000 1999
--------------------------------
<S> <C> <C>
Depreciation and amortization expense:
Compound $ 93,570 $ 89,576
Plastic Containers 1,553,801 1,681,706
--------------------------------
Total consolidated depreciation and
amortization expense $ 1,647,371 $ 1,771,282
================================
Interest income:
Compound $ 10,450 $ 6,270
Plastic Containers 10,942
--------------------------------
Total consolidated interest income $ 21,392 $ 6,270
================================
Interest expense:
Compound $ 37,402 $ 16,588
Plastic Containers 713,124 607,718
--------------------------------
Total consolidated interest expense $ 750,526 $ 624,306
================================
Restructuring charge:
Compound $ - $ -
Plastic Containers - -
--------------------------------
Total consolidated restructuring charge $ - $ -
================================
Income tax (benefit) expense:
Compound $ 38,338 $ 333,136
Plastic Containers (407,356) (445,536)
--------------------------------
Total consolidated income tax benefit $ (369,018) $ (112,400)
================================
Net income (loss):
Compound $ 74,422 $ 499,706
Plastic Containers (790,750) (668,291)
--------------------------------
Total consolidated net loss $ (716,328) $ (168,585)
================================
Total assets:
Compound $ 7,786,292 $ 8,371,259
Plastic Containers 61,321,732 73,419,257
--------------------------------
Total consolidated assets $ 69,108,024 $ 81,790,516
================================
Capital expenditures:
Compound $ 449,642 $ 112,636
Plastic Containers 675,840 905,699
--------------------------------
Total consolidated capital expenditures $ 1,125,482 $ 1,018,335
================================
</TABLE>
8
<PAGE> 9
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, 2000 were $20,735,000
as compared to $20,926,000 for the three month period ended September 30, 1999,
representing a decrease of approximately .9%. The decrease in revenue compared
to the prior year was due to weaker than expected demand in the Company's
Novatec Plastic segment.
Cost of goods sold for the three months ended September 30, 2000 was $16,998,000
or 82% of net sales as compared to $16,547,000 or 79% of net sales for the three
months ended September 30, 1999. The increase is mainly attributed to lower
plant utilization, factory inefficiencies, along with the increased pricing of
plastic compounds and resins.
Selling, General and Administrative expenses ("SG&A") increased by $174,000 in
the first quarter of fiscal 2001 compared to the same period in the prior year.
For the quarter ended September 30, 2000, SG&A expenses were $2,453,000 or 11.8%
of net sales, as compared to $2,278,000 or 10.9% of net sales for the quarter
ended September 30, 1999. SG&A expenses increased due to a more focused
marketing strategy which includes the incremental costs associated with the
Company's new sales management team and increased distribution costs. These
occurred as part of the Company's continuing effort to grow it's business.
Depreciation and Amortization expense decreased to a level of $1,647,000 for the
three months ended September 30, 2000 as compared to $1,771,000 for the three
month period ended September 30, 1999. The primary cause for the reduction
during the quarter ended September 30, 2000 is the effect of certain
manufacturing assets becoming fully depreciated in the current fiscal year.
Income from Operations decreased $693,000 during the three month period ended
September 30, 2000 as compared to the same period a year ago. For the three
month period ended September 30, 2000, Income (Loss) from Operations was
($363,000) or (1.8%) of net sales, as compared to income of $330,000 or 1.6% of
net sales for the three month period ended September 30, 1999. The decrease in
operating income (loss) is principally the result of lower operating margins,
lower plant utilization and some increased competition in the bottle segment.
Net interest expense increased $126,000 for the quarter ended September 30, 2000
as compared to the same quarter last year. The increase is attributable to
higher interest rates and additional borrowings for working capital needs.
9
<PAGE> 10
Net income (loss) for the quarter ended September 30, 2000 increased to
($716,000) or ($.10) on a diluted earnings per share basis as compared to
($169,000) or ($.02) on a diluted earnings per share basis for the same period a
year ago.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity position and working capital remain adequate for the
three month period ended September 30, 2000. Working capital at September 30,
2000 decreased $511,000 to $13,850,000 compared to $14,361,000 as of June 30,
2000. The current ratio of assets to liabilities remained the same at 1.9 as of
September 30, 2000 and June 30, 2000.
For the three month period ended September 30, 2000, the Company generated
$716,000 from operating activities and $22,600,000 from proceeds from additional
long term debt. These funds were primarily used to acquire capital assets of
$1,125,000, and reduce long term debt by $23,189,000.
On September 1, 2000, the Company entered into a new banking relationship with
PNC Business Credit. The Company now has a $43,375,000 senior secured credit
facility. The credit facilities are structured as a five year $25,000,000 senior
revolving credit facility, a five year $12,183,000 amortizing senior term loan,
a five year $4,192,000 standby letter of credit and a $2,000,000 capital
expenditure line.
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, 2000, the Company had unused sources of liquidity
consisting of cash and cash equivalents of $91,000 and the availability of the
unused credit under a revolving credit facility of $4,213,000.
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, 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: November 14, 2000
12
