UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1998
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Alltrista Corporation
Indiana 0-21052 35-1828377
State of Incorporation Commission File Number IRS Identification Number
345 South High Street, Suite 200, P. O. Box 5004
Muncie, Indiana 47307-5004
Registrant's telephone number, including area code: (765) 281-5000
--------------------------------------------------------------------------
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 latest practicable date.
Class Outstanding at August 2, 1998
----------------- -----------------------------
Common Stock,
without par value 7,057,926 shares
This document contains 11 pages. The exhibit index in on page 11 of 11.
Page 1 of 11
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the period ended June 28, 1998
INDEX
Page Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Condensed Consolidated Statements of Income
for the three and six month periods ended
June 28, 1998 and June 29, 1997 3
Unaudited Condensed Consolidated Balance Sheets at
June 28, 1998 and December 31, 1997 4
Unaudited Condensed Consolidated Statements of Cash
Flows for the six month periods ended
June 28, 1998 and June 29, 1997 5
Notes to Unaudited Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION 10
Page 2 of 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(thousands except per share amounts)
Three month period ended Six month period ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $84,134 $78,950 $130,504 $124,592
Costs and expenses
Cost of sales 58,769 54,619 94,185 89,417
Selling, general and administrative expenses 14,098 12,664 21,980 20,602
------- -------- ------- --------
Operating earnings 11,267 11,667 14,339 14,573
Interest expense, net (652) (751) (1,053) (1,360)
------- -------- ------- -------
Income from operations before taxes 10,615 10,916 13,286 13,213
Provision for income taxes (4,034) (4,104) (5,049) (4,968)
------- -------- ------- -------
Net income $ 6,581 $ 6,812 $ 8,237 $ 8,245
======= ======= ======= =======
Net income per share of common stock:
Basic earnings per share $ .90 $ .93 $ 1.13 $ 1.11
======= ======= ======= =======
Diluted earnings per share $ .89 $ .91 $ 1.11 $ 1.09
======= ======= ======= =======
Weighted average shares outstanding:
Basic 7,274 7,364 7,316 7,417
======= ======= ======= =======
Diluted 7,399 7,506 7,449 7,559
======= ======= ======= =======
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
Page 3 of 11
<PAGE>
<TABLE>
<CAPTION>
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
June 28, December 31,
1998 1997
----------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 5,818 $ 26,641
Accounts receivable, net 42,911 23,646
Inventories
Raw materials and supplies 11,102 9,410
Work in process and finished goods 25,676 23,773
Deferred taxes on income 4,243 4,243
Prepaid expenses 1,252 1,511
----------- -------------
Total current assets 91,002 89,224
----------- -------------
Property, plant and equipment, at cost 151,741 149,904
Accumulated depreciation (105,745) (104,894)
----------- -------------
45,996 45,010
Goodwill, net 25,367 24,947
Other assets 7,966 7,396
----------- -------------
Total assets $170,331 $166,577
=========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 4,286 $ 4,286
Accounts payable 18,707 18,424
Other current liabilities 17,478 12,755
----------- ------------
Total current liabilities 40,471 35,465
----------- ------------
Noncurrent liabilities
Long-term debt 25,714 25,714
Other noncurrent liabilities 8,518 8,089
----------- ------------
Total noncurrent liabilities 34,232 33,803
----------- ------------
Shareholders' equity:
Common stock 40,575 40,779
Retained earnings 76,549 68,312
Cumulative translation adjustment (383) (303)
----------- ------------
116,741 108,788
Less treasury stock (21,113) (11,479)
----------- ------------
Total shareholders' equity 95,628 97,309
----------- ------------
Total liabilities and shareholders' equity $170,331 $166,577
=========== ============
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
Page 4 of 11
<PAGE>
<TABLE>
<CAPTION>
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
Six month period ended
June 28, June 29,
1998 1997
---------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $8,237 $8,245
Reconciliation of net income to net cash (used in) provided by
operating activities:
Depreciation and amortization 5,201 5,072
Loss on disposal of fixed assets 37 525
Deferred employee benefits 447 406
Other (366) (245)
Changes in working capital components (17,613) (8,231)
---------- ----------
Net cash (used in) provided by operating activities (4,057) 5,772
---------- ----------
Cash flows from financing activities
Proceeds from revolving credit borrowings 4,431 15,967
Payments on revolving credit borrowings (4,431) (11,160)
Proceeds from issuance of common stock 553 1,293
Purchase of treasury stock (10,450) (4,042)
---------- ----------
Net cash (used in) provided by financing activities (9,897) 2,058
---------- ----------
Cash flows from investing activities
Additions to property, plant and equipment (5,449) (3,617)
Proceeds from sale of property, plant and equipment 23 46
Acquisition of businesses (1,000) (8,288)
Cash proceeds from the sale of product line 272 -
Investment in insurance contracts (685) -
Other (30) (414)
---------- ----------
Net cash used in investing activities (6,869) (12,273)
---------- ----------
Net decrease in cash (20,823) (4,443)
Cash and cash equivalents, beginning of period 26,641 7,611
---------- ----------
Cash and cash equivalents, end of period $5,818 $3,168
========== ==========
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
Page 5 of 11
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Presentation of Condensed Consolidated Financial Statements
Certain information and footnote disclosures, including significant
accounting policies normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been
condensed or omitted. In the opinion of management, the accompanying
condensed consolidated financial statements include all adjustments
necessary for a fair presentation of the results for the interim periods
presented. Results of operations for the periods shown are not necessarily
indicative of results for the year, particularly in view of some seasonality
in the Consumer Products business. The accompanying unaudited condensed
consolidated financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements of Alltrista Corporation and Subsidiaries included in the
Company's latest annual report.
2. Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding for the period. Diluted earnings
per share computations assume outstanding stock options with a dilutive
effect on earnings were exercised. These common stock equivalents are added
to the weighted average number of shares outstanding in the calculation of
diluted earnings per share.
A computation of earnings per share is as follows (in thousands except per
share data):
<TABLE>
<CAPTION>
Three month period ended Six month period ended
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
-------- --------- -------- -------
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
Net income $ 6,581 $ 6,812 $ 8,237 $ 8,245
======== ========= ======== ========
Weighted average number of common shares outstanding 7,274 7,364 7,316 7,417
======== ========= ======== ========
Basic earnings per share $ .90 $ .93 $ 1.13 $ 1.11
======== ========= ======== ========
Diluted Earnings Per Share:
Net income $ 6,581 $ 6,812 $ 8,237 $ 8,245
======== ========= ======== ========
Weighted average number of common shares outstanding 7,274 7,364 7,316 7,417
Additional shares assuming conversion of stock options 125 142 133 142
-------- --------- -------- --------
Weighted average number of common and equivalent shares 7,399 7,506 7,449 7,559
======== ========= ======== ========
Diluted earnings per share $ .89 $ .91 $ 1.11 $ 1.09
======== ========= ======== ========
</TABLE>
Page 6 of 11
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
During the first quarter of 1998, the Company, as part of a newly launched
vision and strategy, redefined its businesses into two new distinct segments:
plastic products and metal products. The plastic products segment includes the
Plastic Packaging (coextruded sheet and formed containers for processed human
and pet food), Unimark Plastics (injection molding for medical, consumer
products and packaging markets) and Industrial Plastics (heavy gauge sheet
extrusion and thermoforming for appliance, manufactured housing and recreational
vehicle markets) operations. The metal products segment includes the Consumer
Products (home canning supplies and related products), Zinc Products (zinc strip
and products fabricated from that strip) and LumenX (industrial inspection
systems for the automotive and automotive component industries) operations.
Previously reported segment information was reclassified to correspond with the
current presentation.
Results of Operations - Comparing Year to Date 1998 to Year to Date 1997
The Company reported net sales of $130.5 million for the first six months of
1998 an increase of 5% from sales of $124.6 million for the same period last
year. Operating earnings of $14.3 million for the six months of 1998 decreased
2% from $14.6 million in the first six months of 1997. The increase in sales was
primarily due to new consumer product offerings that the company began marketing
during the year and the May 1997 acquisition of Viking Plastics. Earnings
decreased however due to lower battery can production and intense competition in
the plastic packaging industry.
On a segment basis, sales increased in plastic and metal products 10% and 2%,
respectively, while operating earnings within these segments were essentially
unchanged compared to a year ago. Within the metal products segment, Consumer
Products sales and operating earnings for the first six months of 1998 increased
28% and 11% respectively compared to the same period last year. The increase in
sales and operating earnings was primarily due to (i) the Company marketing and
distributing new consumer products in 1998, (ii) good home garden growing
conditions, especially in the northern two thirds of the United States and
Canada and (iii) the increased usage of palletized home canning product displays
in mass merchandiser stores. Despite the drought conditions in the southern
third of the United States and assuming favorable growing conditions continue in
the remainder of the United States and Canada, the Company anticipates another
good year in the home canning business. Zinc Products recorded a decrease in
sales and earnings primarily due to a customer's decision to move production of
its zinc/carbon batteries to Mexico City and to no longer purchase battery cans
from the Company. The decrease in sales was also attributed to the average price
of zinc raw material dropping 15% in the first six months of 1998 compared to
the same period last year. Penny blank shipments to the U.S. Mint increased 4%
for the first six months of 1998 compared to the same period last year. The
Company anticipates U.S Mint penny blank shipments to increase over 50% in the
second half of the year compared to the first half of 1998. LumenX recorded a
decrease in sales for the six months due to the September 1997 divestiture of
the machine vision inspection product line. The remaining x-ray inspection
equipment product line operated at a slight loss for the six months. Management
continues to assess its plans for the remaining business. If a determination to
exit this business is made, there can be no assurance that the entire value of
its net assets ($4.0 million as of June 28, 1998) would be recovered. However,
no impairment of the long-lived assets, under the provisions of FAS 121 is
currently indicated.
Within the plastic products segment, Industrial Plastics had an increase in
sales primarily due to the May 1997 acquisition and subsequent integration of
Viking Plastics. Industrial Plastics also recorded increased sales and operating
earnings from the appliance components product line. Unimark Plastics recorded
an increase in sales and operating earnings, which is the result of new business
including the transfer of a customer's in-house production to the Company's
Springfield, Missouri facility. Cost reduction programs at Unimark Plastics also
contributed to the improved earnings. Plastic Packaging had a decrease in sales
and operating earnings due to lower volume and a more intense competitive
environment.
Page 7 of 11
<PAGE>
Overall, gross margin percentages decreased slightly in the first six months of
1998 compared to the same period last year. The decline in gross margin
percentages was primarily due to the industry wide margin erosion in plastic
packaging and increased employee benefit costs and a less favorable product mix
at Consumer Products. This decline was offset in part by increased plant
utilization at Unimark Plastics, a decrease in zinc raw material prices and an
increase in coinage and industrial volume produced at Zinc Products.
Selling, general and administrative expenses as a percentage of sales increased
in the first six months of 1998 compared to the same period last year due to
lower sales volume and a more intense competitive environment in the plastic
packaging industry and lower battery can production at Zinc Products.
Interest expense, net for the first six months of 1998 was $1.1 million compared
to $1.4 million in the first six months of 1997. Lower net interest expense was
primarily the result of earnings on higher levels of short-term investment
balances.
The effective income tax rate increased slightly from 37.6% to 38.0% in the
first six months of 1998 versus 1997.
Results of Operations - Comparing Second Quarter 1998 to Second Quarter 1997
The Company reported net sales of $84.1 million for the second quarter of 1998
an increase of 7% from sales of $79.0 million for the same period of 1997.
Operating earnings of $11.3 million for the quarter decreased 3% from $11.7
million in the second quarter of 1997. The increase in sales was primarily due
to new consumer product offerings that the company began marketing during the
year and the May 1997 acquisition of Viking Plastics. Operating earnings
decreased however due to lower battery can production and more intense
competition in the plastic packaging industry.
On a segment basis, metal products recorded an 8% and 2% increase in sales and
operating earnings, respectively. Consumer Products recorded a 29% and 12%
increase in sales and operating earnings, respectively, for the quarter. The
increase in sales and earnings was primarily due to (i) the Company marketing
and distributing new consumer products in 1998, (ii) good growing conditions,
especially in northern two thirds of the United States and Canada and (iii) the
increased usage of palletized home canning product displays in mass merchandiser
stores. Zinc Products recorded a 16% and 7% decrease in sales and operating
earnings, respectively, primarily due to a customer's decision to move
production of its zinc/carbon batteries to Mexico City and to no longer purchase
battery cans from the Company. LumenX recorded a decrease in sales for the
quarter primarily due to the September 1997 divestiture of the machine vision
inspection product line. With a decrease in sales within the remaining x-ray
inspection equipment product line, LumenX operated at a loss for the quarter.
Sales increased 4% and operating earnings decreased 11% in the plastic products
segment. Industrial Plastics had an increase in sales and operating earnings
primarily due to the May 1997 acquisition and subsequent integration of Viking
Plastics. Industrial Plastics also recorded increased sales and operating
earnings from the appliance components product line. Unimark Plastics recorded
an increase in sales and operating earnings, which is the result of new business
including the transfer of a customer's in-house production to the Company's
Springfield, Missouri facility. Cost reduction programs at Unimark Plastics also
contributed to the improved operating earnings. Plastic Packaging had a decrease
in sales and operating earnings due to lower volume and a more intense
competitive environment.
Overall, gross margin percentages decreased in the second quarter of 1998
compared to the same period last year. The decline in gross margin percentages
was primarily due to the industry wide margin erosion in plastic packaging and a
less favorable product mix and increased employee benefit costs at Consumer
Products. This decline was offset in part by increased plant utilization at
Unimark Plastics, a decrease in zinc raw material prices and an increase in
coinage and industrial volume produced at Zinc Products.
Selling, general and administrative expenses as a percentage of sales increased
in the second quarter of 1998 compared to the same period last year due to lower
sales volume and a more intense competitive environment in the plastic packaging
industry and lower battery can production at Zinc Products.
Page 8 of 11
<PAGE>
Financial Condition, Liquidity and Capital Resources
Working capital (excluding the current portion of long-term debt) as of June 28,
1998 decreased $3.2 million to $54.8 million from the 1997 year-end level.
During the first six months of 1998, the company purchased $10.5 million
(402,000 shares) of its common stock. It is the Company's policy to annually
repurchase shares to offset the dilutive effect of shares issued under employee
benefit plans. In May 1997, the Company's board of directors approved a 600,000
share repurchase program. As of June 28, 1998, the Company may purchase up to
314,250 additional shares under this program. The increase in accounts
receivable, inventories and other current liabilities is reflective of customary
seasonal activity, particularly in the consumer products business.
The Company has $30 million outstanding under a long-term financing agreement
with a fixed interest rate of 7.8%. Maturities are $4.3 million per year for
seven years beginning in December 1998. The Company has a revolving credit
agreement with a group of banks whereby the Company can borrow up to $50 million
through March 31, 2000 when all borrowings mature. There were no borrowings
outstanding under this agreement at June 28, 1998 or at December 31, 1997. The
Company also has available from various banks $74 million in committed and
uncommitted short-term credit lines. There were no borrowings outstanding under
these credit lines at June 28, 1998 or at December 31, 1997. After reducing debt
by the cash balance, the debt-to-total capital ratio was 20.2% at the end of the
second quarter of 1998. This is higher than the 3.3% at December 31, 1997,
primarily as a result of funding normal seasonal operating activities.
Capital expenditures for property, plant and equipment were $5.4 million for the
first six months ended June 28, 1998 compared to $3.6 million for the same
period last year. Capital expenditures are largely related to maintaining
manufacturing facilities. The increase in 1998 capital spending is primarily due
to investments in new injection molding machines for Unimark Plastics and new
integrated information systems and other capital improvements for Industrial
Plastics. Overall, capital expenditures are expected to be at slightly higher
levels for the full year 1998 compared to 1997. The Company believes that
existing funds, cash generated from operations and existing sources of debt
financing are adequate to satisfy its working capital and capital expenditure
requirements for the foreseeable future. However, the Company may raise
additional capital from time to time to take advantage of favorable conditions
in the capital markets or in connection with the Company's corporate development
activities.
The Company is subject to and involved in claims arising out of the conduct of
its business including those relating to product liability, environmental and
safety and health matters. The Company's information at this time does not
indicate that the resolution of the aforementioned claims will have a material,
adverse effect upon financial condition, results of operations, capital
expenditures or competitive position of the Company.
The Company is currently assessing its exposure to potential Year 2000
computer-related issues within its businesses. At this time, management does not
believe the Company will incur significant problems or costs associated with its
own financial or operational systems. Each division is either undertaking or
will be undertaking a study of vendors and customers to determine whether their
potential Year 2000 problems will have a material effect on the Company. The
Company's information at this time does not indicate that Year 2000 issues will
have a material, adverse effect upon the financial condition, results of
operations, cash flows or competitive position of the Company.
This Quarterly Report on Form 10-Q includes certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Those statements include, but may not be
limited to, discussions regarding expectations of future sales and
profitability, anticipated demand for the Company's products and expectations
regarding operating and other expenses. Reliance on forward-looking statements
involves risks and uncertainties. Although the Company believes that the
assumptions upon which the forward-looking statements contained herein are
reasonable, any of those assumptions could prove to be inaccurate. As a result,
the forward-looking statements based on those assumptions could also be
inaccurate. Please see the Company's Report on Form 8-K, dated June 10, 1997,
for a list of factors which could cause the Company's actual results to differ
materially from those projected in the Company's forward-looking statements.
Page 9 of 11
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of security holders
The Company held its Annual Meeting of Shareholders on May 13, 1998. Matters
voted upon by proxy were the election of two directors for three-year terms
expiring in 2001, to act upon a proposal to approve the Alltrista Corporation
1998 Long-Term Equity Incentive Plan and the ratification of the appointment of
Ernst & Young LLP as independent accountants for 1998. The results of the vote
are as follows:
<TABLE>
<CAPTION>
Voted For Voted Against Withheld/Abstained
------------- --------------- --------------------
<S> <C> <C> <C>
Election of directors for terms expiring in 2001:
Richard L. Molen 6,261,669 106,946
Lynda Watkins Popwell 6,260,125 108,490
Approval of the Alltrista Corporation 1998 Long- 4,100,243 1,638,666 71,408
Term Equity Incentive Plan
Appointment of Ernst & Young LLP as
independent accountants for 1998 6,360,815 4,459 3,341
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
27 Financial Data Schedule
b. Reports on Form 8-K
There were no events required to be reported under Form 8-K for the quarter
ending June 28, 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 duly authorized.
Alltrista Corporation
(Registrant)
Date: August 11, 1998 By: /s/ Kevin D. Bower
-------------------- -------------------
Kevin D. Bower
Senior Vice President and
Chief Financial Officer
Page 10 of 11
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
June 28, 1998
EXHIBIT INDEX
Exhibit Description Page
27 Financial Data Schedule [EDGAR filing only]
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM
THE UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
AND STATEMENTS OF INCOME FOUND IN THE
COMPANY'S FORM 10-Q FOR THE
YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-28-1998
<CASH> 5818
<SECURITIES> 0
<RECEIVABLES> 42911
<ALLOWANCES> 0
<INVENTORY> 36778
<CURRENT-ASSETS> 91002
<PP&E> 151741
<DEPRECIATION> 105745
<TOTAL-ASSETS> 170331
<CURRENT-LIABILITIES> 40471
<BONDS> 25714
0
0
<COMMON> 40575
<OTHER-SE> 55053
<TOTAL-LIABILITY-AND-EQUITY> 170331
<SALES> 130504
<TOTAL-REVENUES> 130504
<CGS> 94185
<TOTAL-COSTS> 116165
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1053
<INCOME-PRETAX> 13286
<INCOME-TAX> 5049
<INCOME-CONTINUING> 8237
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8237
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.11
</TABLE>
