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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, 1998
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 11, 1998, there were 100 shares of the registrant's common stock
outstanding.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PLASTIC CONTAINERS, INC.
Condensed and Consolidated Balance Sheets as of March 31, 1998 and December 31,
1997 (unaudited).
Condensed and Consolidated Statements of Income for the three months ended March
31, 1998 and 1997 (unaudited).
Condensed and Consolidated Statements of Cash Flows for the three months ended
March 31, 1998 and 1997 (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, 1998 and December 31, 1997 (unaudited).
Condensed Statements of Income for the three months ended March 31, 1998 and
1997 (unaudited).
Condensed Statements of Cash Flows for the three months ended March 31, 1998 and
1997 (unaudited).
Notes to Condensed 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>
March 31, December 31,
1998 1997
---------- -----------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,481 2,479
Investment securities 21,685 20,385
Accounts receivable, net 22,569 20,258
Inventories 18,440 19,955
Other current assets 3,129 2,850
-------- --------
Total current assets 69,304 65,927
Property, plant and equipment, net 100,230 100,091
Goodwill and other intangible assets 25,128 25,591
Other assets 14,234 13,303
--------- --------
$ 208,896 204,912
========= ========
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable - trade $ 17,197 18,285
Current portion of long-term obligations 996 996
Other current liabilities 21,536 16,741
--------- --------
Total current liabilities 39,729 36,022
Long-term obligations 127,800 128,007
Other liabilities 20,043 20,764
Stockholders' equity:
Common stock, $1 par value. Authorized
1,000 shares; 100 shares issued and
outstanding -- --
Additional paid-in capital 80,388 79,833
Deficit (26,324) (27,529)
--------- ---------
54,064 52,304
Less note receivable from stockholder 32,740 32,185
--------- --------
Total stockholders' equity 21,324 20,119
--------- --------
$ 208,896 204,912
========= ========
</TABLE>
3
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PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1998 1997
--------- ---------
<S> <C> <C>
Net sales $ 64,907 65,387
Cost of goods sold 54,790 54,926
-------- ------
Gross profit 10,117 10,461
Selling, general and administrative expense 6,882 6,520
-------- ------
Operating income 3,235 3,941
Other income (expense):
Interest income 360 287
Interest expense (3,387) (3,389)
Gain on disposal of assets 3 2
-------- ------
Total other income (expense) (3,024) (3,100)
-------- ------
Income before income taxes 211 841
Income tax benefit 994 --
------- ------
Net income $ 1,205 841
======== ======
</TABLE>
4
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PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,205 841
Adjustments:
Depreciation and amortization 3,382 3,561
Gain on disposal of assets (3) (2)
Changes in assets and liabilities 2,184 7,367
------- -------
Net cash provided by operating activities 6,768 11,767
------- ------
Cash flows from investing activities:
Change in investment securities, net (1,300) (14,064)
Proceeds from disposal of assets 3 52
Purchases of property, plant and equipment (4,262) (1,841)
------ ------
Net cash used in investing activities (5,559) (15,853)
------ ------
Cash flows from financing activities -
Repayments of long-term obligations (207) (206)
------ ------
Net increase (decrease) in cash and cash equivalents 1,002 (4,292)
Cash and cash equivalents - beginning 2,479 12,178
------- ------
Cash and cash equivalents - ending $ 3,481 7,886
======== ======
</TABLE>
5
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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.
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, 1997.
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").
6
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PLASTIC CONTAINERS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(2) INVENTORIES
Major classes of inventories at March 31, 1998 and December 31, 1997
consist of the following:
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1998 1997
------- --------
<S> <C> <C>
Raw materials $ 7,702 9,566
Finished goods 12,476 12,223
------ ------
20,178 21,789
LIFO reserve (3,578) (3,578)
------- -------
16,600 18,211
Caribbean 490 554
Repair parts and supplies 1,350 1,190
------- -------
$ 18,440 19,955
======= ======
(3) PENDING SALE OF CONTINENTAL CAN
In January 1998, Suiza Foods Corporation signed a definitive agreement to
acquire Continental Can for stock and assumption of debt in a purchase
transaction. The transaction is expected to be completed during the second
quarter. The accompanying condensed and consolidated financial statements
of PCI do not include any adjustments that might result from this
transaction.
7
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CONTINENTAL PLASTIC CONTAINERS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF PLASTIC CONTAINERS, INC.)
CONDENSED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- -----------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,394 1,164
Investment securities 21,515 20,214
Accounts receivable, net 22,286 20,080
Inventories 17,950 19,401
Other current assets 3,129 2,850
---------- --------
Total current assets 67,274 63,709
Property, plant and equipment, net 96,108 95,894
Goodwill and other intangible assets 25,128 25,591
Other assets 14,223 13,303
---------- --------
$ 202,733 198,497
========== ========
Liabilities & Stockholder's Equity
Current liabilities:
Accounts payable - trade $ 17,095 17,852
Current portion of long-term obligations 996 996
Other current liabilities 21,275 16,484
---------- --------
Total current liabilities 39,366 35,332
Long-term obligations 127,800 128,007
Other liabilities 20,021 20,741
Stockholder's equity:
Common stock, $1 par value. Authorized 25,000
shares; 10,000 shares issued and outstanding 10 10
Additional paid-in capital 74,730 74,175
Deficit (26,454) (27,583)
--------- --------
48,286 46,602
Less note receivable from stockholder of parent 32,740 32,185
--------- --------
Total stockholder's equity 15,546 14,417
--------- --------
$ 202,733 198,497
========= ========
</TABLE>
8
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CONTINENTAL PLASTIC CONTAINERS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF PLASTIC CONTAINERS, INC.)
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31, March 31,
1998 1997
--------- ---------
<S> <C> <C>
Net sales $ 63,051 64,276
Cost of goods sold 53,027 53,774
-------- ------
Gross profit 10,024 10,502
Selling, general and administrative expense 6,860 6,509
-------- -------
Operating income 3,164 3,993
Other income (expense):
Interest income 349 265
Interest expense (3,387) (3,389)
Gain on disposal of assets 3 2
-------- -------
Total other income (expense) (3,035) (3,122)
-------- -------
Income before income taxes 129 871
Income tax benefit 1,000 --
-------- -------
Net income $ 1,129 871
======== =======
</TABLE>
9
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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,
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,129 871
Adjustments:
Depreciation and amortization 3,269 3,464
Gain on disposal of assets (3) (2)
Changes in assets and liabilities 2,552 7,202
------- -------
Net cash provided by operating activities 6,947 11,535
------- -------
Cash flows from investing activities:
Change in investment securities, net (1,301) (14,066)
Proceeds from disposal of assets 3 52
Purchases of property, plant and equipment (4,212) (1,810)
------- -------
Net cash used in investing activities (5,510) (15,824)
------- -------
Cash flows from financing activities -
Repayments of long-term obligations (207) (206)
------- -------
Net increase (decrease) in cash and cash equivalents 1,230 (4,495)
Cash and cash equivalents - beginning 1,164 10,522
------- -------
Cash and cash equivalents - ending $ 2,394 6,027
======= =======
</TABLE>
10
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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, 1997.
PCI is a subsidiary of Continental Can Company, Inc. ("Continental Can").
(2) INVENTORIES
Major classes of inventories at March 31, 1998 and December 31, 1997
consist of the following:
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1998 1997
-------- --------
<S> <C> <C>
Raw materials $ 7,702 9,566
Finished goods 12,476 12,223
------ ------
20,178 27,789
LIFO reserve (3,578) (3,578)
------- -------
16,600 18,211
Repair parts and supplies 1,350 1,190
------- -------
$ 17,950 19,401
======= =======
</TABLE>
(3) PENDING SALE OF CONTINENTAL CAN
In January 1998, Suiza Foods Corporation signed a definitive agreement to
acquire Continental Can for stock and assumption of debt in a purchase
transaction. The transaction is expected to be completed during the second
quarter. The accompanying condensed financial statements of CPC do not
include any adjustments that might result from this transaction.
11
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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 1998 decreased $480 (0.7%) to
$64,907, compared to $65,387 for the first quarter of 1997. The decrease in
sales was primarily the result of a decrease in raw material costs that were
passed on to customers in the form of lower prices. Lower resin prices accounted
for lower sales of approximately $700 in the first quarter of 1998 compared to
the first quarter of 1997. Total unit volume growth for the first quarter of
1998 was relatively flat compared to the first quarter of 1997.
Gross Profit. Gross profit for the first quarter of 1998 was $10,117, a
decrease of $344 (3.3%) over gross profit of $10,461 for the first quarter of
1997. This decrease resulted primarily from additional manufacturing overhead
costs incurred in the first quarter of 1998 related to specific customer
projects that are expected to be nonrecurring. Gross profit percentage for the
first quarter of 1998 was 15.6%, compared to 16.0% for the first quarter of
1997.
SG&A. Selling, general and administrative (SG&A) expense for the first
quarter of 1998 increased $362 (5.6%) to $6,882, compared to $6,520 for the
first quarter of 1997. The increase in SG&A expense results primarily from an
increase in engineering and development activity related to new product
introductions. SG&A expense as a percentage of net sales for the first quarter
of 1998 was 10.6% compared to 10.0% for the first quarter of 1997.
Other Expense. Other expense for the first quarter of 1998 was $3,024, a
decrease of $76 (2.5%) compared to $3,100 for the first quarter of 1997. This
decrease results primarily from an increase in interest income from additional
invested funds in 1998.
Income Taxes. The income tax benefit for the first quarter of 1998 of $994
resulted from a decrease in the valuation reserve for deferred tax assets.
Net Income. Net income for the first quarter of 1998 was $1,205, compared
to $841 for the first quarter of 1997. The increase in first quarter income of
$364 is the result of lower operating income offset by the increased income tax
benefit.
CAPITAL REQUIREMENTS
PCI acquired $4,262 in capital assets in the first quarter of 1998,
compared to $1,841 in the first quarter of 1997. Substantially all of the assets
acquired were packaging equipment for the manufacture of plastic containers or
related support equipment. Capital expenditure levels in 1998 were higher due to
the installation of new production lines that will service new business. The
capital requirements in the first quarter of 1998 were met with cash generated
by operations and from existing funds.
12
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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, 1998,
the Company had no borrowings outstanding under the revolving credit facility
and had invested cash and cash equivalents of approximately $25,000.
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, 1998, the Company had undrawn availability under the
revolving credit facility of approximately $29,200.
Working capital was $29,575 at March 31, 1998, compared to $29,905 at
December 31, 1997. Cash flows from operating activities were $6,768 in the first
quarter of 1998, compared to $11,767 in the first quarter of 1997. The decrease
of $4,999 is due primarily to a difference in cash collected on receivables.
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.
YEAR 2000
PCI has a plan in place to address the impact of Year 2000 issues on its
computer systems and applications and is in the process of converting its
computer systems to be Year 2000 compliant. The plan provides for the conversion
efforts to be completed by the end of 1998. The Year 2000 issues are the result
of computer programs being written using two digits rather than four to define
the applicable year. Expenditures in 1998 related to the completion of the
conversion are not expected to be significant. PCI is also dependent upon
customers and suppliers to have their computer systems Year 2000 compliant.
13
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1998.
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 11th day of May, 1998.
14
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,481
<SECURITIES> 21,685
<RECEIVABLES> 24,130
<ALLOWANCES> 1,561
<INVENTORY> 18,569
<CURRENT-ASSETS> 69,304
<PP&E> 175,553
<DEPRECIATION> 75,333
<TOTAL-ASSETS> 208,896
<CURRENT-LIABILITIES> 39,729
<BONDS> 127,800
<COMMON> 0
0
0
<OTHER-SE> 21,324
<TOTAL-LIABILITY-AND-EQUITY> 208,896
<SALES> 64,907
<TOTAL-REVENUES> 64,907
<CGS> 54,790
<TOTAL-COSTS> 61,672
<OTHER-EXPENSES> 3,024
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,387
<INCOME-PRETAX> 211
<INCOME-TAX> 994
<INCOME-CONTINUING> 1,205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,205
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
