<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 March 31, 1997
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.)
301 Merritt 7 Corporate Park
Norwalk, Connecticut 06856
(Address of principal executive offices)
Telephone number (203) 750-5900
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 May 12, 1997, there were 100 shares of the registrant's common stock
outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------------------------------
Plastic Containers, Inc.
Condensed and Consolidated Balance Sheets as of March 31, 1997 and December 31,
1996 (unaudited).
Condensed and Consolidated Statements of Operations for the three months ended
March 31, 1997 and 1996 (unaudited).
Condensed and Consolidated Statements of Cash Flows for the three months ended
March 31, 1997 and 1996 (unaudited).
Notes to Condensed and Consolidated Financial Statements.
Continental Plastic Containers, Inc. (a wholly-owned subsidiary of Plastic
Containers, Inc.)
Condensed Balance Sheets as of March 31, 1997 and December 31, 1996 (unaudited).
Condensed Statements of Operations for the three months ended March 31, 1997 and
1996 (unaudited).
Condensed Statements of Cash Flows for the three months ended March 31, 1997 and
1996 (unaudited).
Notes to Condensed Financial Statements.
2
<PAGE>
PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
Condensed and Consolidated Balance Sheets
(Unaudited)
(in thousands, except for share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 7,886 12,178
Investment securities 15,274 1,210
Accounts receivable, net 25,225 27,702
Inventories (note 3) 20,148 19,402
Other current assets 4,132 4,061
--------- ---------
Total current assets 72,665 64,553
Property, plant and equipment, net 99,766 102,245
Intangible assets, net 26,625 27,078
Other assets 11,012 11,774
--------- ---------
$ 210,068 205,650
========= =========
Liabilities & Stockholders' Equity
Current liabilities:
Notes payable to bank $ -- --
Accounts payable - trade 18,909 19,267
Current portion of long-term obligations 980 980
Other current liabilities 23,213 19,004
--------- ---------
Total current liabilities 43,102 39,251
Long-term obligations 128,796 129,002
Other liabilities 23,115 23,183
Stockholders' equity:
Common stock, $1 par value. Authorized 1,000
shares; 100 shares issued and outstanding -- --
Additional paid-in capital 78,240 77,722
Deficit (32,593) (33,434)
--------- ---------
45,647 44,288
Less note receivable from stockholder 30,592 30,074
--------- ---------
Total stockholders' equity 15,055 14,214
--------- ---------
$ 210,068 205,650
========= =========
</TABLE>
3
<PAGE>
PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
Condensed and Consolidated Statements of Operations
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1997 1996
-------- --------
<S> <C> <C>
Net sales $ 65,387 60,635
Cost of goods sold 54,926 52,388
-------- --------
Gross profit 10,461 8,247
Selling, general and administrative expense 6,520 7,175
-------- --------
Operating income 3,941 1,072
Other income (expense):
Interest income 287 27
Interest expense (3,389) (3,203)
Gain on disposal of assets 2 1
-------- --------
Total other income (expense) (3,100) (3,175)
-------- --------
Income (loss) before income taxes 841 (2,103)
Income tax benefit -- 639
-------- --------
Net income (loss) $ 841 (1,464)
======== ========
</TABLE>
4
<PAGE>
PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
Condensed and Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 841 (1,464)
Adjustments:
Depreciation and amortization 3,561 5,893
Gain on disposal of assets (2) (1)
Changes in assets and liabilities 7,367 4,904
-------- --------
Net cash provided by operating activities 11,767 9,332
-------- --------
Cash flows from investing activities:
Proceeds from maturity of investment securities 2 2
Purchase of investment securities (14,066) --
Proceeds from disposal of assets 52 36
Purchases of property, plant and equipment (1,841) (8,966)
-------- --------
Net cash used in investing activities (15,853) (8,928)
-------- --------
Cash flows from financing activities:
Net repayments on notes payable to bank -- (404)
Repayments of long-term obligations (206) --
-------- --------
Net cash used in financing activities (206) (404)
-------- --------
Net decrease in cash and cash equivalents (4,292) --
Cash and cash equivalents - beginning 12,178 1,428
-------- --------
Cash and cash equivalents - ending $ 7,886 1,428
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 275 271
Income taxes paid -- --
======== ========
</TABLE>
5
<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. and its wholly-owned subsidiaries, Continental
Plastic Containers, Inc. ("CPC") and Continental Caribbean Containers, Inc.
("Caribbean"), on a consolidated basis. All significant intercompany
transactions have been eliminated in the consolidated financial statements.
The consolidated entities are referred to as Plastic Containers, Inc.
("PCI" or "the Company") in the notes to condensed and consolidated
financial statements. References to the "Continental Plastic Container
Companies" refer jointly to the Company's subsidiaries.
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, 1996.
Separate financial statements of CPC accompany these consolidated financial
statements, since the issued and outstanding stock of CPC, which is pledged
as security for the Company's 10% Senior Secured Notes due 2006 (the "10%
Notes"), constitutes a substantial portion of the collateral for the 10%
Notes. Separate financial statements for Caribbean are not included
herewith because (i) the issued and outstanding stock of Caribbean, which
is also pledged as security for the Company's 10% Notes, does not
constitute a substantial portion of the collateral for the 10% Notes, and
(ii) management has determined that separate financial statements of
Caribbean are not material to investors. CPC and Caribbean constitute all
of PCI's direct and indirect subsidiaries and have fully and
unconditionally guaranteed the 10% Notes on a joint and several basis. PCI
is a holding company with no assets, operations or cash flows separate from
its investments in CPC and Caribbean.
The Company develops, manufactures and markets a wide range of custom
extrusion blow-molded plastic containers for food and juice, household
chemicals, automotive products and motor oil, industrial and agricultural
chemicals, and hair care products.
PCI is a subsidiary of Continental Can Company, Inc. ("Continental Can").
(2) Inventories
Major classes of inventories at March 31, 1997 and December 31, 1996
consist of the following:
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1997 1996
-------- --------
<S> <C> <C>
Raw materials $ 10,139 10,774
Finished goods 12,667 11,539
-------- --------
22,806 22,313
LIFO reserve (4,247) (4,247)
-------- --------
18,559 18,066
Repair parts and supplies 1,589 1,336
-------- --------
$ 20,148 19,402
======== ========
</TABLE>
6
<PAGE>
PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
Notes to Condensed and Consolidated Financial Statements
(3) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed
principally on a straight-line basis over the estimated useful lives of the
assets which range from three to thirty-five years. Plant and equipment
held under capital leases and leasehold improvements are amortized
straight-line over the shorter of the lease term or estimated useful life
of the asset.
Effective January 1, 1997, the Company revised its estimates of the useful
lives of certain machinery and equipment. These changes were made to better
reflect the estimated periods during which these assets will remain in
service. For the three months ended March 31, 1997, the change had the
effect of decreasing depreciation expense by $424 and, after adjusting for
an assumed tax rate of 35%, increasing net income by $276.
7
<PAGE>
CONTINENTAL PLASTIC CONTAINERS, INC.
(a wholly-owned subsidiary of Plastic Containers, Inc.)
Condensed Balance Sheets
(Unaudited)
(in thousands, except for share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 6,027 10,522
Investment securities 15,066 1,000
Accounts receivable, net 24,850 27,029
Inventories (note 3) 19,429 18,727
Other current assets 4,132 4,147
--------- ---------
Total current assets 69,504 61,425
Property, plant and equipment, net 96,382 98,778
Intangible assets, net 26,625 27,078
Other assets 10,963 11,774
--------- ---------
$ 203,474 199,055
========= =========
Liabilities & Stockholder's Equity
Current liabilities:
Notes payable to bank $ -- --
Accounts payable - trade 18,728 19,045
Current portion of long-term obligations 980 980
Other current liabilities 22,949 18,813
--------- ---------
Total current liabilities 42,657 38,838
Long-term obligations 128,796 129,002
Other liabilities 23,089 23,155
Stockholder's equity:
Common stock, $1 par value. Authorized 25,000
shares; 10,000 shares issued and outstanding 10 10
Additional paid-in capital 71,633 71,114
Deficit (32,119) (32,990)
--------- ---------
39,524 38,134
Less note receivable from stockholder of parent 30,592 30,074
--------- ---------
Total stockholder's equity 8,932 8,060
--------- ---------
$ 203,474 199,055
========= =========
</TABLE>
8
<PAGE>
CONTINENTAL PLASTIC CONTAINERS, INC.
(a wholly-owned subsidiary of Plastic Containers, Inc.)
Condensed Statements of Operations
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1997 1996
-------- --------
<S> <C> <C>
Net sales $ 64,276 59,525
Cost of goods sold 53,774 51,211
-------- --------
Gross profit 10,502 8,314
Selling, general and administrative expense 6,509 7,169
-------- --------
Operating income 3,993 1,145
Other income (expense):
Interest income 265 5
Interest expense (3,389) (3,203)
Gain on disposal of assets 2 1
-------- --------
Total other income (expense) (3,122) (3,197)
-------- --------
Income (loss) before income taxes 871 (2,052)
Income tax benefit -- 639
-------- --------
Net income (loss) $ 871 (1,412)
======== ========
</TABLE>
9
<PAGE>
CONTINENTAL PLASTIC CONTAINERS, INC.
(a wholly-owned subsidiary of Plastic Containers, Inc.)
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 871 (1,412)
Adjustments:
Depreciation and amortization 3,464 5,801
Gain on disposal of assets (2) (1)
Changes in assets and liabilities 7,202 4,949
-------- --------
Net cash provided by operating activities 11,535 9,337
-------- --------
Cash flows from investing activities:
Purchase of investment securities (14,066) --
Proceeds from disposal of assets 52 36
Purchases of property, plant and equipment (1,810) (8,866)
-------- --------
Net cash used in investing activities (15,824) (8,830)
-------- --------
Cash flows from financing activities:
Net repayments on notes payable to bank -- (404)
Repayments of long-term obligations (206) --
-------- --------
Net cash used in financing activities (206) (404)
-------- --------
Net increase (decrease) in cash and cash equivalents (4,495) 103
Cash and cash equivalents - beginning 10,522 --
-------- --------
Cash and cash equivalents - ending $ 6,027 103
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 275 271
Income taxes paid -- --
======== ========
</TABLE>
10
<PAGE>
CONTINENTAL PLASTIC CONTAINERS, INC.
(a wholly-owned subsidiary of Plastic Containers, Inc.)
Notes to Condensed Financial Statements
(unaudited)
(all dollars in thousands)
(1) Basis of Presentation
Continental Plastic Containers, Inc. ("CPC") develops, manufactures and
markets a wide range of custom extrusion blow-molded plastic containers for
food and juice, household chemicals, automotive products and motor oil,
industrial and agricultural chemicals, and hair care products.
CPC is a wholly-owned subsidiary of Plastic Containers, Inc. ("PCI"). PCI
was organized in October 1991 for the purpose of acquiring CPC and
Continental Caribbean Containers, Inc. ("Caribbean") (collectively, "the
Continental Plastic Container Companies"). PCI is a holding company with no
assets, operations and cash flows separate from its investment in the
Continental Plastic Container Companies and is dependent upon funding
provided by CPC to service its debt. Accordingly, the accompanying
financial statements of CPC reflect various "push down" accounting
adjustments to reflect debt and other purchase adjustments recorded by PCI
in connection with the acquisition.
The condensed 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 financial statements should be read in
conjunction with the financial statements and notes thereto contained in
PCI's Form 10-K for the year ended December 31, 1996.
PCI is a subsidiary of Continental Can Company, Inc. ("Continental Can").
(2) Inventories
Major classes of inventories at March 31, 1997 and December 31, 1996
consist of the following:
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1997 1996
-------- --------
<S> <C> <C>
Raw materials $ 9,690 10,307
Finished goods 12,397 11,331
-------- --------
22,087 21,638
LIFO reserve (4,247) (4,247)
-------- --------
17,840 17,391
Repair parts and supplies 1,589 1,336
-------- --------
$ 19,429 18,727
======== ========
</TABLE>
11
<PAGE>
CONTINENTAL PLASTIC CONTAINERS, INC.
Notes to Condensed Financial Statements
(3) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed
principally on a straight-line basis over the estimated useful lives of the
assets which range from three to thirty-five years. Plant and equipment
held under capital leases and leasehold improvements are amortized
straight-line over the shorter of the lease term or estimated useful life
of the asset.
Effective January 1, 1997, the CPC revised its estimates of the useful
lives of certain machinery and equipment. These changes were made to better
reflect the estimated periods during which these assets will remain in
service. For the three months ended March 31, 1997, the change had the
effect of decreasing depreciation expense by $424 and, after adjusting for
an assumed tax rate of 35%, increasing net income by $276.
12
<PAGE>
PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(All Dollars in Thousands).
Results of Operations
Net Sales. Net sales for the first quarter of 1997 increased $4,752
(7.8%) to $65,387, compared to $60,635 for the first quarter of 1996. The
increase in sales was the result of an increase in raw material costs that
were passed on to customers in the form of higher prices. Higher resin
prices accounted for higher sales of approximately $5,300 in the first
quarter of 1997 compared to the first quarter of 1996. Part of the increase
in sales resulting from higher resin prices was offset by changes in
product mix. Total unit volume for the first quarter of 1997 increased 2.7%
compared to the first quarter of 1996; however, this increase in total unit
volume was comprised of an increase in unit volume of smaller, lower-priced
containers while a decline in unit volume was experienced in larger,
higher-priced bottles.
Gross Profit. Gross profit for the first quarter of 1997 was $10,461,
an increase of $2,214 (26.8%) over gross profit of $8,247 for the first
quarter of 1996. This increase resulted primarily from a reduction in
manufacturing and overhead costs. Net cost savings of approximately $1,100
were realized through the consolidation of production facilities whereby
one facility was closed in October 1996 and another facility was closed in
March 1997. There was no material loss in unit volume or net sales from
these closings, as substantially all related production volume was
transferred to other Company facilities. Additionally, a revision in the
estimated useful lives of certain machinery and equipment resulted in a
reduction in depreciation expense of $424. The remainder of the reduction
in manufacturing costs was accomplished primarily through increased
operating efficiencies at all production facilities.
Gross profit percentage for the first quarter of 1997 was 16.0%,
compared to 13.6% for the first quarter of 1996. The increase in gross
profit percentage was the result of the increase in gross profit dollars
discussed above, net of the impact of higher raw material costs on sales.
As discussed above, the increase in sales attributed to increases in resin
prices are a direct pass through of raw material cost increases and do not
result in a corresponding increase in gross profit dollars. Excluding the
impact on sales of higher resin prices, gross profit percentage for the
first quarter of 1997 would be 17.4%
SG&A. Selling, general and administrative (SG&A) expense for the first
quarter of 1997 decreased $655 (9.1%) to $6,520, compared to $7,175 for the
first quarter of 1996. The decrease in SG&A expense results primarily from
a reduction in amortization expense related to noncompete agreements which
became fully amortized in the fourth quarter of 1996. SG&A expense as a
percentage of net sales for the first quarter of 1997 was 10.0% compared to
11.8% for the first quarter of 1996. The decrease in the percentage was the
result of the reduction in expense which was partially offset by the impact
on sales of the higher material costs. Excluding the impact on sales of
higher material costs, SG&A as a percentage of net sales for the first
quarter of 1997 would have been 10.9%.
Other Expense. Other expense for the first quarter of 1997 was $3,100,
a decrease of $75 (2.4%) compared to $3,175 for the first quarter of 1996.
This decrease results primarily from an increase in interest income from
additional invested funds in 1997.
13
<PAGE>
Income Taxes. Income taxes on 1997 earnings are offset by a benefit
from previously unrecognized tax net operating loss carryforwards. An
income tax benefit for the first quarter of 1996 of $625 resulted primarily
from a decrease in the valuation reserve for deferred tax assets.
Net Earnings. Net earnings for the first quarter of 1997 were $841,
compared to a net loss of $1,464 for the first quarter of 1996. The
increase in first quarter earnings of $2,305 is the result of the
improvement in gross profit dollars and the decrease in SG&A expense,
offset by the decrease in income tax benefit.
Capital Requirements
PCI acquired $1,841 in capital assets in the first quarter of 1997,
compared to $8,966 in the first quarter of 1996. Substantially all of the
assets acquired were packaging equipment for the manufacture of plastic
containers or related support equipment. Capital expenditure levels in 1996
were higher due to the addition of a new production facility. The capital
requirements in the first quarter of 1997 were met with cash generated by
operations and from existing funds.
Liquidity
The Company's primary sources of liquidity are provided through a
revolving credit facility of $50,000 and cash flows from operations. At
March 31, 1997, the Company had no borrowings outstanding under the
revolving credit facility and had invested cash and cash equivalents of
approximately $23,200.
The 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 March 31, 1997, the Company had undrawn
availability under the revolving credit facility of approximately $30,300.
Working capital was $29,563 at March 31, 1997, an increase of $4,261,
from $25,302 at December 31, 1996. This increase in working capital is the
result of improved cash flows from operations and a reduction in capital
spending levels.
Management believes that existing funds and the funds 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
foreseeable future.
14
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule p. 16
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
1997.
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 May, 1997.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,886
<SECURITIES> 15,274
<RECEIVABLES> 26,759
<ALLOWANCES> 1,530
<INVENTORY> 20,148
<CURRENT-ASSETS> 72,665
<PP&E> 170,733
<DEPRECIATION> 70,967
<TOTAL-ASSETS> 210,068
<CURRENT-LIABILITIES> 43,102
<BONDS> 128,796
0
0
<COMMON> 0
<OTHER-SE> 15,055
<TOTAL-LIABILITY-AND-EQUITY> 210,068
<SALES> 65,387
<TOTAL-REVENUES> 65,387
<CGS> 54,926
<TOTAL-COSTS> 61,446
<OTHER-EXPENSES> 3,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,389
<INCOME-PRETAX> 841
<INCOME-TAX> 0
<INCOME-CONTINUING> 841
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 841
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
