<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 33-45897
PLASTIC CONTAINERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3632393
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Aerial Way
Syosset, New York 11791
(Address of principal executive offices)
Telephone number (516) 822-4940
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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days:
Yes (X) No ( )
As of August 12, 1996, there were 100 shares of the registrant's common stock
outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------------------------------
Condensed and Consolidated Balance Sheets as of June 30, 1996 and December 31,
1995 (unaudited).
Condensed and Consolidated Statements of Operations for the three months ended
June 30, 1996 and 1995 (unaudited).
Condensed and Consolidated Statements of Operations for the six months ended
June 30, 1996 and 1995 (unaudited).
Condensed and Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 and 1995 (unaudited).
Notes to Condensed and Consolidated Financial Statements.
2
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PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
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<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 1,430 1,428
Accounts receivable, net 29,483 33,068
Inventories (note 3) 21,230 19,987
Other current assets 4,316 3,241
-------- --------
Total current assets 56,459 57,724
Property, plant and equipment, net 144,154 141,214
Intangible assets, net 7,759 9,976
Other assets 10,574 10,698
-------- --------
$218,946 219,612
======== ========
Liabilities & Stockholders' Equity
----------------------------------
Current liabilities:
Notes payable to bank $ 14,006 17,018
Accounts payable - trade 20,550 24,898
Current portion of
long-term obligations 17,667 141
Other current liabilities 19,197 15,423
-------- --------
Total current liabilities 71,420 57,480
Long-term obligations 92,570 105,212
Other liabilities 19,636 19,450
-------- --------
Total liabilities 183,626 182,142
Stockholders' equity:
Common stock, $1 par value. Authorized
1,000 shares; 100 shares issued and
outstanding -- -
Additional paid-in capital 60,000 60,000
Retained earnings (24,680) (22,530)
-------- --------
Total stockholders' 35,320 37,470
equity -------- --------
$218,946 219,612
======== ========
</TABLE>
3
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PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
June 30, June 30,
1996 1995
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<S> <C> <C>
Net sales $66,382 73,908
Cost of goods sold 55,796 63,371
------- -------
Gross profit 10,586 10,537
Selling, general and administrative
expense (note 4) 8,665 7,406
------- -------
Operating income 1,921 3,131
-------- -------
Other income (expense):
Interest income 27 51
Interest expense (3,260) (2,957)
Gain on disposal of assets -- 9
------- -------
Total other income (expense) (3,233) (2,897)
------- -------
Earnings (loss) before income taxes (1,312) 234
Income tax benefit 627 98
------- -------
Net earnings (loss) $ (685) 332
======= =======
</TABLE>
4
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PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, June 30,
1996 1995
--------- --------
<S> <C> <C>
Net sales $ 127,017 144,962
Cost of goods sold 108,184 124,270
--------- --------
Gross profit 18,833 20,692
Selling, general and administrative
expense (note 4) 15,841 14,760
-------- -------
Operating income 2,992 5,932
Other income (expense):
Interest income 54 114
Interest expense (6,463) (5,875)
Gain (loss) on disposal of assets 1 (40)
-------- -------
Total other income (expense) (6,408) (5,801)
-------- -------
Earnings (loss) before income taxes (3,416) 131
Income tax benefit 1,266 92
-------- -------
Net earnings (loss) $ (2,150) 223
======== =======
</TABLE>
5
<PAGE>
PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, June 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (2,150) 223
Adjustments:
Depreciation and amortization 11,749 12,194
(Gain) loss on disposal of assets (1) 40
Changes in assets and liabilities 3,358 (1,490)
-------- --------
Net cash provided by operating activities 12,956 10,967
-------- --------
Cash flows from investing activities:
Change in investments, net 31 3
Proceeds from disposal of assets 121 251
Purchases of property, plant and equipment (14,978) (14,850)
-------- --------
Net cash used in investing activities (14,826) (14,596)
-------- --------
Cash flows from financing activities:
Additions to (repayments of) notes payable (3,012) 3,000
Additions to long-term obligations 5,100 --
Repayments of long-term obligations (216) --
-------- --------
Net cash provided by (used in) financing
activities 1,872 3,000
-------- --------
Net increase (decrease) in cash and cash equivalents 2 (629)
Cash and cash equivalents - beginning 1,428 2,745
-------- --------
Cash and cash equivalents - ending $ 1,430 2,116
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 6,288 5,847
Income taxes paid 8 253
======== ========
</TABLE>
6
<PAGE>
PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(all dollars in thousands)
(1) BASIS OF PRESENTATION
The accompanying condensed and consolidated financial statements include
Plastic Containers, Inc. (PCI) and its wholly-owned subsidiaries,
Continental Plastic Containers, Inc. (CPC) and Continental Caribbean
Containers, Inc. (Caribbean). All significant intercompany transactions
have been eliminated in the consolidated financial statements.
The condensed and consolidated financial statements are unaudited and
reflect all adjustments which are, in the opinion of management, necessary
for a fair presentation of the financial position and operating results for
the interim periods. The condensed and consolidated financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto contained in the Company's Form 10-K for the year ended
December 31, 1995.
Separate financial statements of CPC and Caribbean are not included because
both such companies are fully and unconditionally liable as well as jointly
and severally liable with respect to the senior secured notes issued by
PCI, and because aggregate assets, liabilities, earnings and equity of CPC
and Caribbean are substantially equivalent to the assets, liabilities,
earnings and equity of PCI on a consolidated basis.
(2) RECLASSIFICATIONS
Certain 1995 balances have been reclassified to conform to the 1996
presentation.
(3) INVENTORIES
Major classes of inventories at June 30, 1996 and December 31, 1995 consist
of the following:
June 30, Dec. 31,
1996 1995
--------- -------
Raw materials $10,097 9,339
Finished goods 11,790 10,882
------- ------
21,887 20,221
LIFO reserve (2,025) (2,025)
------- ------
19,862 18,196
------- ------
Repair parts and supplies 1,368 1,791
------- ------
$21,230 19,987
======= ======
(4) PLANT RATIONALIZATION AND REALIGNMENT
During the second quarter of 1996, the Company recorded a charge of $1,100
in connection with a plan to consolidate certain manufacturing operations,
reduce operating costs and better position itself to achieve its corporate
objectives. The charge is included in selling, general and administration
expense and reflects primarily severance costs from workforce reductions,
write-down of excess equipment and employee relocation costs. As of June
30, 1996, no amounts have yet been paid in connection with the plan. The
plan is expected to be completed by the end of the first quarter of 1997.
7
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PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
---------------------
(All Dollars in Thousands)
RESULTS OF OPERATIONS
Net sales for the second quarter and the first six months of 1996 decreased
$7,526 (10.2%) and $17,945 (12.4%), respectively, compared to the second
quarter and the first six months of 1995. The decline in sales is due in
part to decreases in raw material costs that are passed on to customers in
the form of lower prices. Lower resin prices accounted for approximately
$6,400 and $11,400 of the decline in sales in the second quarter and the
first six months of 1996, respectively. The additional decline in sales is
the result of changes in product mix. Total unit volume for the second
quarter and first six months of 1996 increased 8.3% and 0.6%, respectively,
compared to the same periods in 1995. However, the increase in unit volume
was comprised of an increase in unit volume of smaller, lower-priced
containers for the automotive and motor oil market while a decline in unit
volume was experienced in larger, higher-priced bottles in the food and
beverage market.
Gross profit percentages were 15.9% and 14.8% for the second quarter and the
first six months of 1996, respectively, compared to 14.3% for both
corresponding periods of 1995. The increase in gross profit percentage is
primarily the result of the decreased sales associated with lower resin
prices. As discussed above, the decrease in sales attributed to decreases in
resin prices are a direct pass through of raw material cost decreases and do
not result in a corresponding decrease in gross profit dollars.
Gross profit dollars for the second quarter of 1996 increased $49 (0.5%)
compared to the second quarter of 1995, reflecting a slight increase in the
resin-adjusted gross profit percentage which is partially offset by lower
sales dollars. For the first six months of 1996, gross profit dollars
decreased $1,859 (9.0%) over the first six months of 1995, due primarily to
lower sales dollars discussed above.
Selling, general and administrative (SG&A) expense for the second quarter and
first six months of 1996 increased $1,259 (17.0%) and $1,081 (7.3%),
respectively, compared to the second quarter and first six months of 1995.
Included in SG&A expense in the second quarter of 1996 is a charge of $1,100
for plant rationalization and realignment in connection with a plan to
consolidate certain manufacturing operations and reduce future operating
costs. The charge primarily reflects severance costs from workforce
reductions, write-down of excess equipment and employee relocation costs.
Excluding the one-time charge, SG&A expense levels in 1996 are comparable to
1995.
SG&A expense as a percentage of net sales for the second quarter and the
first six months of 1996 was 13.1% and 12.5%, respectively, compared to 10.0%
and 10.2% for the corresponding periods in 1995. The increase in the
percentage is the result of the decrease in sales and increase in expenses
resulting from the plant rationalization and realignment charge discussed
above.
Other expense for the second quarter and the first six months of 1996
increased $336 and $607, respectively, compared to the corresponding periods
in 1995. This increase results primarily from an increase in interest
expense due to additional short-term borrowings outstanding during 1996.
An income tax benefit for the second quarter and the first six months of 1996
of $627 and $1,266, respectively, results primarily from a decrease in the
valuation reserve for deferred tax assets.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
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OPERATIONS (CONTINUED)
----------
Net loss for the second quarter of 1996 was $685, compared to net earnings of
$332 for the second quarter of 1995. The loss is primarily the result of the
plant rationalization and realignment charge and increased interest expense
offset by the income tax benefit recognized. Net loss for the first six
months of 1996 was $2,150, compared to net earnings of $223 for the first six
months of 1995. The loss is due to the lower gross profit dollars in
addition to the factors discussed above.
FINANCIAL CONDITION
CAPITAL REQUIREMENTS
PCI acquired $14,978 in capital assets in the first six months of 1996,
compared to $14,850 in the first six months of 1995. Substantially all of
the assets acquired were packaging equipment for the manufacture of plastic
containers or related support equipment. The capital requirements in the
first six months of 1996 were met with cash generated by operations, from
existing funds and from borrowings under existing credit facilities.
LIQUIDITY
The Company's primary sources of credit and liquidity are provided through a
revolving credit facility of $50,000 and senior secured notes of $104,700.
The $50,000 revolving credit facility has a term of seven years expiring
October 31, 2002. Interest is based on the bank's prime rate or LIBOR, at
the Company's option. At June 30, 1996, there were $14,006 in borrowings
outstanding under the revolving credit facility, substantially all of which
were at LIBOR-based rates of 6.94%. Prime based rates were 8.5%.
With regard to the senior secured notes, the Company is required to make four
annual sinking fund payments of $22,000 each, commencing April 1, 1997 and
continuing through April 1, 2000, and a final principal payment of $22,000 is
due April 1, 2001. The first sinking fund payment may be reduced by an
amount equal to any early repurchases made before the payment date ($5,300 at
June 30, 1996). Interest on these notes is fixed at 10.75% and is payable
semiannually on April 1 and October 1.
During the second quarter of 1996, tax-exempt industrial development revenue
bonds of $5,100 were issued on behalf of the Company to finance equipment
purchases in conjunction with the opening of a new manufacturing facility.
Under a capital lease arrangement, principal and interest at 5.80% is payable
monthly through April 2002.
Working capital decreased $15,205 during the first six months of 1996, from
$244 at December 31, 1995 to a negative $14,961 at June 30, 1996. The
decrease is due to the classification of the first sinking fund payment of
$16,700 on April 1, 1997 as a current liability. Excluding the effect of the
sinking fund payment classification, working capital increased $1,495 during
the first six months of 1996. This increase is due primarily to a reduction
in the level of short-term borrowings by $3,012, offset by the accrual for
the plant rationalization and realignment charge and other accrued expenses.
The Company expects its working capital position to improve in the third
quarter and balance of 1996.
The Company believes the funding expected to be generated from operations and
provided by existing credit facilities will be sufficient to meet working
capital and capital investment needs for the balance of 1996.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
(a) Exhibits
(27) Financial Data Schedule.............................. Page 11
All other items for which provision is made in the applicable
regulations of the Securities and Exchange omission have been omitted as
they are not required under the related instructions or they are
inapplicable.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
1996.
SIGNATURE
---------
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 authorized.
PLASTIC CONTAINERS, INC.
By: /s/ Abdo Yazgi
--------------------------------
Abdo Yazgi
Principal Financial and
Accounting Officer on behalf
of the registrant
Dated this 12th day of August, 1996.
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,430
<SECURITIES> 1,771
<RECEIVABLES> 31,254
<ALLOWANCES> 1,771
<INVENTORY> 21,230
<CURRENT-ASSETS> 56,459
<PP&E> 237,683
<DEPRECIATION> 93,529
<TOTAL-ASSETS> 218,946
<CURRENT-LIABILITIES> 71,420
<BONDS> 92,570
<COMMON> 0
0
0
<OTHER-SE> 35,320
<TOTAL-LIABILITY-AND-EQUITY> 218,946
<SALES> 127,017
<TOTAL-REVENUES> 127,017
<CGS> 108,184
<TOTAL-COSTS> 124,025
<OTHER-EXPENSES> 6,408
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,463
<INCOME-PRETAX> (3,416)
<INCOME-TAX> (1,266)
<INCOME-CONTINUING> (2,150)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,150)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
