<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
------------------------------------------------
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 333-05885
---------------------------------------------------------
Packaging Resources Incorporated
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3321568
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Conway Park, 100 Field Drive, Suite 300, Lake Forest, Illinois 60045
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(847)295-6100
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the amount outstanding of each of the issuer's classes of common stock,
as of the latest practicable date.
As of August 31, 1996, the issuer had outstanding 1,000 shares of Common Stock,
$.01 par value per share.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PACKAGING RESOURCES INCORPORATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31 August 31
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $29,463 $34,984 $60,779 $71,319
Cost of goods sold 24,006 29,197 49,361 59,338
---------- ---------- ---------- ----------
Gross profit 5,457 5,787 11,418 11,981
Selling, general & administrative expenses 1,800 1,869 3,648 3,666
Amortization of intangibles and other assets 173 599 346 1,197
---------- ---------- ---------- ----------
Operating income 3,484 3,319 7,424 7,118
Interest expense 3,402 2,728 5,818 5,497
---------- ---------- ---------- ----------
Income before income taxes and 82 591 1,606 1,621
extraordinary item
Income tax expense 35 242 690 664
---------- ---------- ---------- ----------
Income before extraordinary item 47 349 916 957
Extraordinary item -- write-off of unamortized deferred
financing cost, net of tax 0 0 1,064 0
---------- ---------- ---------- ----------
Net income(loss) $47 $349 ($148) $957
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PACKAGING RESOURCES INCORPORATED
BALANCE SHEETS (UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
August 31 February 29
1996 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $7,830 $398
Account receivable, net 10,988 10,719
Inventories 20,257 21,394
Prepaid expenses 710 690
Deferred income taxes 922 922
------------ ------------
Total current assets 40,707 34,123
Property, plant, and equipment, net 52,491 52,352
Intangibles, net 20,099 20,454
Other assets 5,500 3,754
------------ ------------
$118,797 $110,683
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt $1,250 $10,350
Accounts payable 6,748 2,615
Accrued expenses 6,698 4,196
------------ ------------
Total current liabilities 14,696 17,161
Long-term debt, excluding current maturities 110,000 67,174
Deferred income taxes 7,741 8,083
------------ ------------
Total liabilities $132,437 $92,418
Stockholder's equity (deficit):
Common stock, $.01 par value. 1,000 shares authorized,
issued, and outstanding - -
Additional paid-in capital (11,483) 20,278
Retained earnings (accumulated deficit) (2,157) (2,013)
------------ ------------
Total stockholder's equity (deficit) ($13,640) $18,265
------------ ------------
$118,797 $110,683
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PACKAGING RESOURCES INCORPORATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
August 31
-------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($148) $957
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,604 5,758
Deferred income taxes (342) 1,607
Change in assets and liabilities:
Change in current assets 867 2,182
Change in current liabilities 6,629 (3,175)
Write-off of unamortized deferred financing costs 1,867 0
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 13,477 7,329
- ---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sale of property, plant, and equipment 0 26
Capital expenditures (3,860) (1,510)
(Increase) decrease in noncurrent assets 0 (1,536)
- ---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (3,860) (3,020)
- ---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments under credit agreement (2,250) (2,500)
Payments of promissory notes (550) (800)
Repayment of indebtedness under old credit agreement (73,474) 0
Proceeds from senior secured notes, net 105,850 0
Dividends paid (31,761) 0
- ---------------------------------------------------------------------------------------------------------
Net cash used in financing activities (2,185) (3,300)
- ---------------------------------------------------------------------------------------------------------
Net increase in cash 7,432 1,009
Cash at beginning of period 398 232
- ---------------------------------------------------------------------------------------------------------
Cash at end of period $7,830 $1,241
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information - cash paid for:
Interest $1,637 $4,694
Income taxes $245 $22
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PACKAGING RESOURCES INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
1) BASIS OF PRESENTATION
The balance sheet as of August 31, 1996 and the statements of
operations for the three and six month periods ended August 31, 1996
and the statement of cash flows for the six month periods ended August
31, 1996 and 1995 have been prepared by Packaging Resources
Incorporated (PRI or the Company). In the opinion of management, all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair statement of the financial statements for the
interim periods included herein have been made. The results of
operations for the three and six month periods ended August 31, 1996
are not necessarily indicative of the results to be expected for the
full year.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
The Company is a wholly owned subsidiary of Packaging Resources
Group, Inc (Group). Group is a wholly owned subsidiary of HPH
Industries, Ltd (HPH).
The primary business of PRI is the manufacture and sale of
plastic packaging for the food, dairy, and pharmaceutical industries
and promotional beverage cups. PRI has manufacturing facilities in
Coleman, Michigan; Fort Worth, Texas; Kansas City, Missouri; Mt.
Carmel, Pennsylvania; and New Vienna, Ohio.
(b) INVENTORIES
Inventories are stated at the lower of first-in, first-out cost
or net realizable value.
(c) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation
on plant and equipment is calculated on the straight-line method over
the following estimated useful lives of the assets:
Furniture and fixtures . . . . . . . . . 5 years
Molds. . . . . . . . . . . . . . . . . . 3-5 years
Machinery and equipment. . . . . . . . . 13 years
Buildings and improvements . . . . . . . 25 years
Land improvements. . . . . . . . . . . . 35 years
Leasehold improvements are amortized ratably over the shorter of
the lease term or estimated useful life of the assets.
(d) INTANGIBLES
Intangibles consists of patent costs and the excess of the cost
over the fair value of net assets purchased. The intangibles are
amortized on a straight-line basis over their useful lives of 14 to 40
years. Accumulated amortization was $3,865 and $4,220 at February 29,
1996 and August 31, 1996, respectively.
At each balance sheet date, PRI evaluates the realizable value of
intangibles on the basis of whether the intangibles are fully
recoverable from projected, undiscounted net cash flows. Based on its
most recent analysis, PRI believes no impairment of the carrying
values of intangibles exists.
(e) OTHER ASSETS
The debt issuance costs included in other assets are amortized
over their respective useful lives on the straight-line method.
<PAGE>
(f) RETIREMENT PLANS
PRI has two defined contribution retirement plans covering
substantially all of its employees. PRI's Money Purchase Retirement
Plan is funded entirely by employer contributions based upon a defined
percentage of participating employees compensation. PRI also has a
401(k) plan where participants elect to have a designated percentage
of their salary withheld and contributed to the plan.
(g) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
certain estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
3) INVENTORIES
Inventories consist of the following at February 29, 1996 and
August 31, 1996:
February 29, August 31,
1996 1996
---- ----
Finished goods. . . . . . . . . . . . . $13,065 $11,782
Raw materials . . . . . . . . . . . . . 4,407 4,708
Supplies and mold materials . . . . . . 3,922 3,767
------- -------
Total . . . . . . . . . . . . . . . . . $21,394 $20,257
4) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following at
February 29, 1996 and August 31, 1996:
February 29, August 31,
1996 1996
---- ----
Land. . . . . . . . . . . . . . . . . . $ 309 $ 309
Buildings . . . . . . . . . . . . . . . 10,156 10,156
Machinery, equipment, and fixtures. . . 80,271 80,366
Leasehold improvements. . . . . . . . . 157 1,578
Construction in progress. . . . . . . . 1,562 3,906
------- -------
92,455 96,315
Less allowance for depreciation
and amortization. . . . . . . . . . . (40,103) (43,824)
------- -------
Total. . . . . . . . . . . . . $52,352 $52,491
Construction in progress includes machinery and equipment which
have not yet been placed in service and molds which are in the process
of being manufactured. Depreciation expense for the three months
ending August 31, 1995 and August 31, 1996 was $3,731 and $3,739,
respectively.
5) OTHER ASSETS
Other assets consist of the following at February 29, 1996 and
August 31, 1996:
February 29, August 31,
1996 1996
---- ----
Debt issuance cost, net . . . . . . $ 2,213 $ 3,977
Leased equipment, net . . . . . . . 1,479 1,460
Other . . . . . . . . . . . . . . . 62 63
------- -------
$ 3,754 $ 5,500
The debt issuance costs as of February 29, 1996 were incurred in
connection with the revolving credit loan, the 12.5% senior
subordinated notes issued by Group, and the term loan
<PAGE>
described in note 8. These costs were written-off in May 1996. The
debt issuance costs as of August 31, 1996 were incurred in connection
with the issue of the 11 5/8% Senior Secured Notes due 2003 and are
being amortized over the remaining life of the debt. Amortization of
the deferred financing costs was $830 and $519 for the three months
ended August 31, 1995 and August 31, 1996, respectively.
6) LEASES
PRI has several noncancelable operating leases for substantial
portions of the Company's plant and office facilities and machinery
and equipment. Leased plant and office facilities generally contain
renewal options. Rental expense for operating leases for the three
months ended August 31, 1995 and August 31, 1996 aggregated $560 and
$471, respectively. Additionally, PRI has several facilities which
are being subleased.
7) ACCRUED EXPENSES
Accrued expenses consist of the following at February 29, 1996
and August 31, 1996:
February 29, August 31,
1996 1996
---- ----
Interest. . . . . . . . . . . . . . $ 27 $ 3,653
Vacation. . . . . . . . . . . . . . 1,056 1,056
Pension . . . . . . . . . . . . . . 985 727
Other . . . . . . . . . . . . . . . 2,128 1,262
------- -------
$ 4,196 $6,698
8) LONG-TERM DEBT
On March 31, 1995, PRI restructured its credit facility and debt
covenants. In conjunction with this restructuring, PRI received a
waiver for noncompliance with certain debt covenants through March 31,
1995. Thereafter, PRI was in compliance with all restructured debt
covenants.
On May 17, 1996, PRI issued $110 million in 11 5/8% Senior
Secured Notes due 2003. The net proceeds from this issuance were used
to repay all outstanding borrowings under the existing senior secured
credit facility of $73.5 million and to fund a dividend to Group of
$31.7 million. At this time the Company also entered into a credit
agreement that provides for a $20.0 million revolving loan facility.
Long-term debt consist of the following at February 29, 1996 and
August 31, 1996:
February 29, August 31,
1996 1996
---- ----
Revolving credit loan, interest
at Base Rate during 1995, paid
off May 17, 1996. . . . . . . . . $15,000 $0
Term loan, interest at prime rate
plus 1.5%, payable in quarterly
installments, paid off
May 17, 1996. . . . . . . . . . . 60,724 0
Promissory note, interest at prime
plus 0.75% and effective
March 12, 1995, interest at
prime plus 2.0%, payable in
installments semiannually through
July, 1997. . . . . . . . . . . . 1,500 1,250
Promissory note, interest-bearing at
prime plus 1.5% beginning
January 1995; $800 payable in
April, 1995 and $300 payable in
March, 1996 . . . . . . . . . . . 300 0
Senior Secured Notes, interest at
11 5/8% paid semiannual on May 1
and November 1; notes due
May 1, 2003 . . . . . . . . . . . 0 110,000
-------- --------
77,524 111,250
Less current maturities of long-
term debt . . . . . . . . . . . . 10,350 1,250
-------- --------
$67,174 $110,000
<PAGE>
9) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, cash equivalents, receivables, accounts payable and accrued
expenses: The carrying amounts approximate fair value due to the
short maturity of these instruments.
Notes payable: The carrying amounts approximate fair value as a
majority of the obligations incur interest at a market rate. In
addition, the significant terms of fixed rate obligations do not
differ materially from those currently available to PRI.
10) RETIREMENT PLAN
PRI has a defined contribution retirement plan covering
substantially all employees and contributions are based upon a defined
percentage of compensation. Provisions for the plan's
contributions amounted to $391 and $412 for the six months ended
August 31, 1995 and August 31, 1996, respectively. Provisions of the
plan include 20% vesting per year.
11) RELATED-PARTY TRANSACTIONS
PRI has various transactions with Group and HPH. These
transactions include management fees and reimbursements to HPH of $167
and $176 for the three months ended August 31, 1995 and August 31,
1996, respectively.
12) BUSINESS AND CREDIT CONCENTRATIONS
PRI's business is substantially dependent on a limited number of
large customers. In the three months ended August 31, 1995 and August
31, 1996, PRI's ten largest customers accounted for approximately 77%
and 76%, respectively, of its nets sales. PRI's largest customers are
General Mills (including Yoplait), Dannon, and Ross Labs, which
represented approximately 26.6%, 19.9%, and 16.4%, respectively, of
PRI's net sales for the three months ended August 31, 1996. No
customer other than General Mills, Dannon, or Ross Labs accounted for
more than 5% of PRI's net sales during the three months ended August
31, 1996. Accounts receivable from General Mills, Dannon, and Ross
Labs totaled $5,976 and $6,384 at February 29, 1996 and August 31,
1996, respectively.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS PERIOD ENDED AUGUST 31, 1996 COMPARED TO
THE THREE MONTHS PERIOD ENDED AUGUST 31, 1995
NET SALES: Net sales decreased $5.5 million, or 15.8%, from $35.0 million
in the second quarter of fiscal 1996 to $29.5 million in the second quarter of
fiscal 1997. Packaging sales decreased $1.1 million, or 4.0%, from $27.7
million in the second quarter of fiscal 1996 to $26.6 million in the second
quarter of fiscal 1997. Packaging sales were adversely impacted by the Company's
loss of certain lower margin accounts. Also, net sales of refrigerated yogurt
containers were down in the second quarter of fiscal 1997 compared to the second
quarter of fiscal 1996, primarily reflecting the pass through of lower resin
costs. Promotional sales decreased $4.4 million, or 60.3%, from $7.3 million in
the second quarter of fiscal 1996 to $2.9 million in the second quarter of
fiscal 1997. This decrease is primarily due to a lower level of plastic drink
cup promotions by the Company's principal customers during the second quarter of
fiscal 1997 when compared to the second quarter of fiscal 1996.
GROSS PROFIT: Gross profit decreased $.3 million, from $5.8 million in the
second quarter of fiscal 1996 to $5.5 million in the second quarter of fiscal
1997. Gross margins improved from 16.5% in the second quarter of fiscal 1996 to
18.5% in the second quarter of fiscal 1997. This increase in gross margin
reflects a favorable shift in product mix to higher margin products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses decreased $.1 million from $1.9 million in the second
quarter of fiscal year 1996 to $1.8 million in the second quarter 1997 but
increased as a percentage of net sales from 5.3% to 6.1% due to lower net sales.
AMORTIZATION EXPENSE: Amortization expense decreased $.4 million, from $.6
million in the second quarter of fiscal 1996 to $.2 million in the second
quarter of fiscal 1997. The decrease is primarily attributable to the non-
compete agreement related to the purchase of Miner Container being fully
amortized in fiscal 1996.
OPERATING INCOME: Operating income increased $.2 million, from $3.3
million, or 9.5% of net sales, in the second quarter of fiscal 1996 to $3.5
million, or 11.8% of net sales, in the second quarter of fiscal 1997, reflecting
the favorable change in product mix and decreased amortization expense noted
above.
INTEREST EXPENSE: Interest expense increased $.7 million, from $2.7
million in the second quarter of fiscal 1996 to $3.4 million in the second
quarter of fiscal 1997. The increase is primarily due to the issuance of the
Senior Secured Notes (as defined below).
INCOME TAXES: Income taxes decreased $.2 million, from $.2 million in the
second quarter of fiscal 1996 to $.04 million in the second quarter of fiscal
1997, due to lower earnings. The Company's effective state and Federal tax rate
was 41% in the second quarter of fiscal 1996 and 43% in the second quarter of
fiscal 1997.
INCOME BEFORE EXTRAORDINARY ITEM: For the reasons noted above, income
before extraordinary item decreased $.25 million, from $.3 million in the second
quarter of fiscal 1996 to $.05 million in the second quarter of fiscal 1997.
<PAGE>
RESULTS OF OPERATIONS - SIX MONTHS PERIOD ENDED AUGUST 31, 1996 COMPARED TO THE
SIX MONTHS PERIOD ENDED AUGUST 31, 1995
NET SALES: Net sales decreased $10.5 million, or 14.7%, from $71.3 million
in the first six months of fiscal 1996 to $60.8 million in the first six months
of fiscal 1997. Packaging sales decreased $1.6 million, or 2.9%, from $55.7
million in the first six months of fiscal 1996 to $54.1 million in the first six
months of fiscal 1997. Packaging sales were adversely impacted by the Company's
loss of certain lower margin accounts. Promotional sales decreased $9.1
million, or 57.9%, from $15.7 million in the first six months of fiscal 1996 to
$6.6 million in the first six months of fiscal 1997. This decrease is primarily
due to a lower level of plastic drink cup promotions by the Company's principal
customers during the first six months of fiscal 1997 when compared to the first
six months of fiscal 1996.
GROSS PROFIT: Gross profit decreased $.6 million, from $12.0 million in
the first six months of fiscal 1996 to $11.4 million in the first six months of
fiscal 1997. Gross margins improved from 16.8% in the second quarter of fiscal
1996 to 18.8% in the second quarter of fiscal 1997. This increase in gross
margin reflects a favorable shift in product mix to higher margin products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses remained flat at $3.6 million during the first six
months of fiscal 1996 and the first six months of fiscal 1997 but increased as a
percentage of net sales from 5.1% to 6.0% due to lower net sales.
AMORTIZATION EXPENSE: Amortization expense decreased $.9 million, from
$1.1 million in the first six months of fiscal 1996 to $.3 million in the first
six months of fiscal 1997. The decrease is primarily attributable to the non-
compete agreement related to the purchase of Miner Container being fully
amortized in fiscal 1996.
OPERATING INCOME: Operating income increased $.3 million, from $7.1
million, or 10.0% of net sales, in the first six months of fiscal 1996 to $7.4
million, or 12.2% of net sales, in the first six months of fiscal 1997,
reflecting the favorable change in product mix and decreased amortization
expense noted above.
INTEREST EXPENSE: Interest expense increased $.3 million, from $5.5
million in the first six months of fiscal 1996 to $5.8 million in the first six
months of fiscal 1997. The increase is primarily due to the issuance of the
Senior Secured Notes (as defined below).
INCOME TAXES: Income taxes remained flat at $.7 million. The Company's
effective state and Federal tax rate was 41% in the first six months of fiscal
1996 and 43% in the first six months of fiscal 1997.
INCOME BEFORE EXTRAORDINARY ITEM: For the reasons noted above, income
before extraordinary item remained flat at $.9 million in the first six months
of fiscal 1996 and the first six months of fiscal 1997.
EXTRAORDINARY ITEM, NET OF TAX: In the first six months of fiscal 1997,
the Company recorded an extraordinary write-off net of taxes of $1.1 million for
unamortized deferred financing costs related to bank debt which was repaid in
May 1996.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
PRI issued $110.0 million in Senior Secured Notes due 2003 (the "Senior Secured
Notes") in May 1996. The net proceeds from this issuance were used to repay all
outstanding borrowings of the then existing senior secured credit facility (the
"Old Credit Agreement") of $73.5 million and to fund a dividend of $31.7 million
to the sole stockholder of the Company. In conjunction with this transaction,
the Company also entered into a credit agreement (the "Credit Agreement") that,
subject to certain borrowing conditions and limitation, provides for borrowings
of up to $20.0 million. As of August 31, 1996, there were no outstanding
borrowings under the Credit Agreement.
Cash provided by operating activities increased to $13.5 million in the first
six months of fiscal 1997 from $7.3 million in the comparable period of fiscal
1996. The increase primarily reflects a $6.6 million increase in current
liabilities that was primarily due to the timing of trade payables and the fact
that interest on the Senior Secured Notes is payable semi-annually commencing
November 1, 1996, whereas the interest under the Old Credit Agreement was
payable monthly. Other assets increased $1.9 million primarily due to the
deferral of $4.1 million of financing costs related to the issuance of the
Senior Secured Notes. This was partially offset by the write-off of $1.9
million of deferred financing cost related to certain bank debt that was paid
off in May, 1996. The deferred financing costs will be amortized over the life
of the notes. Stockholder's equity decreased $31.7 million due to the dividend
payment to the sole stockholder of the Company.
Capital expenditures were $1.5 million and $3.9 million for the first six months
of fiscal 1996 and 1997, respectively. PRI's estimated capital expenditures for
the balance of fiscal 1997 are expected to range from $4.0 million to $5.0
million. These expenditures, which are intended to further expand production
capacity and reduce costs, include (i) the engineering and manufacture of new
production molds, (ii) the installation of automated packaging and handling
systems, and (iii) the expansion of the Company's warehouse space.
Although there can be no assurances, the Company anticipates that its operating
cash flow along with the borrowings available under the Credit Agreement, will
be sufficient to meet its operating expenses, projected capital expenditures and
debt service requirements as they become due.
Instruments relating to the Company's indebtedness, including the Credit
Agreement and the indenture governing the Senior Secured Notes, contain
financial and other covenants that restrict, among other things, the Company's
ability to incur additional indebtedness, incur liens, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, merge or consolidate with any other person
or sell, assign, transfer, lease, convey or otherwise dispose of substantially
all of the assets of the Company. Such limitations, together with the highly
leveraged nature of the Company, could limit corporate and operating activities,
including the Company's ability to respond to market conditions to provide for
unanticipated capital investments or to take advantage of business
opportunities.
<PAGE>
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
N/A
ITEM 2. CHANGES IN SECURITIES
N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
ITEM 5. OTHER INFORMATION
N/A
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS: The following exhibit is included in this Report on
Form 10-Q:
27.1 Financial Statement Schedule
(b) REPORTS ON FORM 8-K: The Company did not file any reports on
Form 8-K during the three months ended
August 31, 1996.
<PAGE>
SIGNATURES
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.
PACKAGING RESOURCES INCORPORATED
--------------------------------
Registrant
Date: September 25, 1996 /s/ Jerry J. Corirossi
--------------------------------
Jerry J. Corirossi
Vice President, Finance and Administration
and Chief Financial Officer and duly
authorized officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> AUG-31-1996
<CASH> 7,830
<SECURITIES> 0
<RECEIVABLES> 11,108
<ALLOWANCES> (120)
<INVENTORY> 20,257
<CURRENT-ASSETS> 40,707
<PP&E> 96,315
<DEPRECIATION> (43,823)
<TOTAL-ASSETS> 118,797
<CURRENT-LIABILITIES> 14,696
<BONDS> 110,000
0
0
<COMMON> 0
<OTHER-SE> (13,640)
<TOTAL-LIABILITY-AND-EQUITY> 118,797
<SALES> 60,779
<TOTAL-REVENUES> 60,779
<CGS> 49,361
<TOTAL-COSTS> 49,361
<OTHER-EXPENSES> 346
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,818
<INCOME-PRETAX> 1,606
<INCOME-TAX> 690
<INCOME-CONTINUING> 916
<DISCONTINUED> 0
<EXTRAORDINARY> 1,064
<CHANGES> 0
<NET-INCOME> (148)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
