UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
AMENDMENT TO APPLICATION or REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 12, 1999
Alltrista Corporation
Indiana 0-21052 35-1828377
State of Incorporation Commission File Number IRS Identification Number
5875 Castle Creek Parkway, North Drive, Suite 440
Indianapolis, Indiana 46250-4330
Registrant's telephone number, including area code: (317) 577-5000
1
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective April 25, 1999 Alltrista Corporation (the "Company") acquired the net
assets of Triangle Plastics, Inc. and its TriEnda subsidiary ("Triangle
Plastics") for $148.0 million in cash.
Effective May 24, 1999, Alltrista Plastics Corporation ("Alltrista Plastics"), a
wholly owned subsidiary of the Company, sold the assets of its plastic packaging
operation to Spartech Plastics, Inc. ("Spartech Plastics"), a subsidiary of
Spartech Corporation, for $28.7 million cash plus assumption by Spartech
Plastics of certain liabilities of Alltrista Plastics. The sale to Spartech
Plastics is reflected in the Company's unaudited pro forma financial statements
filed as part of this report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of business acquired.
The audited consolidated balance sheets of Triangle Plastics as of December 31,
1998 and 1997 and consolidated statements of income, changes in stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1998 and Reports of Independent Accountants thereon, and unaudited condensed
consolidated balance sheet as of March 31, 1999 and condensed consolidated
statements of income and cash flows for the three months ended March 31, 1999
and 1998 are attached hereto as Exhibit 99.1
(b) Pro Forma Financial Information.
The following unaudited pro forma financial information has been prepared to
reflect the adjustments to the Company's historical results of operations and
financial positions and to give effect to the acquisition of Triangle Plastics
using the purchase method of accounting and the disposal of the Company's
plastic packaging operation.
Effective April 25, 1999 the Company acquired the net assets of Triangle
Plastics for $148.0 million in cash. The purchase price is subject to
post-closing adjustments based upon actual working capital as of the closing
date. The excess of the purchase price plus acquisition costs over the
estimated fair values of the net assets acquired will be amortized on a
straight-line basis over a twenty-year period. The Company financed the
acquisition with a new $250 million credit facility consisting of a six year
$150 million term loan and a revolving credit facility whereby the Company can
borrow up to $100 million through March 31, 2005, when all borrowings mature.
The term loan requires quarterly payments of principal escalating from an annual
aggregate amount of $15.0 million in the first year to $30.0 million in the
fifth and sixth year. Interest on the borrowings is based upon fixed increments
over the adjusted London Interbank Offered Rate or the agent bank's alternate
borrowing rate as defined in the agreement.
Effective May 24, 1999, Alltrista Plastics sold the assets of its plastic
packaging operation to Spartech Plastics for $28.7 million cash plus the
assumption by Spartech Plastics of certain liabilities of Alltrista Plastics.
The purchase price is subject to post-closing adjustments based upon actual net
working capital as of the closing date. The proceeds from the sale were used to
pay down short-term debt.
2
<PAGE>
The unaudited pro forma combined statements of income for the year ended
December 31, 1998 and for the three months ended March 28, 1999 are based on the
combined historical results of operations adjusted to give effect to the noted
transactions as if they had occurred on January 1, 1998. The unaudited pro
forma combined statements of income do not reflect any benefits from
operational synergies that may result from the acquisition of Triangle Plastics.
The unaudited pro forma combined balance sheet gives effect to the transactions
as if they had occurred on March 28, 1999. The unaudited pro forma combined
balance sheet includes the adjustments necessary to reflect the allocation of
the Triangle Plastics acquisition cost to the fair values of the assets acquired
and liabilities assumed. The allocation is based on preliminary estimates of
the fair value of the related assets and liabilities. The actual allocation of
such consideration may differ from that reflected in the pro forma financial
information after certain valuations and other procedures have been performed.
The Company does not expect that the final allocation of the aggregate purchase
price will differ materially from the preliminary allocations. The unaudited pro
forma combined balance sheet also includes adjustments necessary to remove the
Alltrista Plastics' assets purchased and liabilities assumed by Spartech
Plastics.
The unaudited pro forma combined financial information is not necessarily
indicative of the Company's results of operations or financial position had the
Triangle Plastics acquisition or the plastic packaging sale reflected therein
actually been consummated at the assumed dates, nor is it necessarily indicative
of the Company's results of operations or financial position for any future
period. The unaudited pro forma combined financial information should be read
in conjunction with the Company's consolidated Financial Statements and notes
thereto incorporated by reference in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 and its Quarterly Report on Form 10-Q for
the quarter ended March 28, 1999.
3
<PAGE>
<TABLE>
<CAPTION>
Alltrista Corporation and Triangle Plastics, Inc.
Unaudited Pro Forma Combined Statement of Income
Three Months Ended March 28, 1999
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Alltrista Triangle
Corporation Plastics Pro Forma Pro Forma
Historical Historical Adjustments Combined
------------- ------------ ------------- -----------
Net sales $ 51,634 $ 29,608 $ (7,727) (1) $ 73,515
Costs and expenses
Cost of sales 39,341 23,677 (5,860) (1) 57,294
136 (2)
Selling, general and administrative expenses 8,556 3,192 (585) (1) 12,151
1,182 (3)
(194) (4)
------------- ------------ ------------- -----------
Operating earnings 3,737 2,739 (2,406) 4,070
Interest expense, net (568) (901) (1,439) (5) (2,908)
------------- ------------ ------------- -----------
Income from continuing operations before taxes 3,169 1,838 (3,845) 1,162
Provision for income taxes (1,206) - 762 (6) (444)
------------- ------------ ------------- -----------
Income from continuing operations $ 1,963 $ 1,838 $ (3,083) $ 718
============= ============ ============= ===========
Income from continuing operations per share:
Basic $ 0.29 $ 0.11
Dilutive $ 0.29 $ 0.10
Weighted average shares outstanding:
Basic 6,749 6,749
Dilutive 6,844 6,844
<FN>
See accompanying Notes to Unaudited Pro Forma Combined Financial Information
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Alltrista Corporation and Triangle Plastics, Inc.
Unaudited Pro Forma Combined Statement of Income
Twelve Months Ended December 31, 1998
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Alltrista Triangle
Corporation Plastics Pro Forma Pro Forma
Historical Historical Adjustments Combined
------------- ------------ ------------- -----------
Net sales $ 244,046 $ 114,055 $ (28,100) (1) $ 330,001
Costs and expenses
Cost of sales 174,333 87,040 (23,454) (1) 238,533
614 (2)
Selling, general and administrative expenses 38,249 16,924 (2,117) (1) 53,660
98 (2)
4,727 (3)
(4,221) (4)
Cost to exit facility 1,260 - - 1,260
------------- ------------ ------------- -----------
Operating earnings 30,204 10,091 (3,747) 36,548
Interest expense, net (1,822) (3,975) (4,667) (5) (10,464)
------------- ------------ ------------- -----------
Income from continuing operations before taxes 28,382 6,116 (8,414) 26,084
Provision for income taxes (10,785) (36) 909 (6) (9,912)
------------- ------------ ------------- -----------
Income from continuing operations $ 17,597 $ 6,080 $ (7,505) $ 16,172
============= ============ ============= ===========
Income from continuing operations per share:
Basic $ 2.48 $ 2.28
Dilutive $ 2.45 $ 2.25
Weighted average shares outstanding:
Basic 7,079 7,079
Dilutive 7,195 7,195
<FN>
See accompanying Notes to Unaudited Pro Forma Combined Financial Information
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Alltrista Corporation and Triangle Plastics, Inc.
Unaudited Pro Forma Balance Sheet
March 28, 1999
(In thousands of dollars)
<S> <C> <C> <C> <C> <C>
Alltrista Triangle
Corporation Plastics Pro Forma Pro Forma
Historical Historical Adjustments Combined
------------- ------------ ------------- -----------
ASSETS
Current assets
Cash and cash equivalents $ 2,264 $ 2 $ - $ 2,266
Accounts receivable, net 31,329 19,120 (1,952) (7) 48,497
Inventories 53,332 13,421 (1,550) (7) 65,203
Deferred taxes on income 4,512 - - 4,512
Prepaid expenses 1,857 774 (16) (7) 2,615
------------- ------------ ------------- -----------
Total current assets 93,294 33,317 (3,518) 123,093
Property, plant and equipment, at cost 151,067 38,266 (33,386) (7) 163,776
7,829 (8)
Accumulated depreciation (103,565) (11,353) 27,364 (7) (76,201)
11,353 (8)
------------- ------------ ------------- -----------
47,502 26,913 13,160 87,575
Goodwill, net 24,199 1,961 95,355 (9) 119,554
(1,961) (10)
Other assets 8,291 634 (44) (7) 11,113
2,232 (11)
------------- ------------ ------------- -----------
Total assets $ 173,286 $ 62,825 $ 105,224 $ 341,335
============= ============ ============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 4,286 $ 7,107 $ 3,607 (12) $ 15,000
Notes payable 2,900 23,240 (21,940) (12) 4,200
Accounts payable 25,281 7,216 (1,639) (7) 30,858
Other current liabilities 13,018 2,646 (945) (7) 23,357
8,638 (13)
------------- ------------ ------------- -----------
Total current liabilities 45,485 40,209 (12,279) 73,415
------------- ------------ ------------- -----------
Noncurrent liabilities
Long-term debt 21,429 19,582 94,496 (12) 135,507
Other noncurrent liabilities 9,920 381 13,500 (14) 23,801
------------- ------------ ------------- -----------
Total noncurrent liabilities 31,349 19,963 107,996 159,308
------------- ------------ ------------- -----------
Contigencies
Shareholders' equity:
Common stock 40,446 217 (217) (15) 40,446
Retained earnings 86,138 4,109 (4,109) (15) 98,298
12,160 (16)
Accumulated other comprehensive income -
cumulative translation adjustment (509) - (509)
------------- ------------ ------------- -----------
126,075 4,326 7,834 138,235
Less treasury stock (29,623) (1,673) 1,673 (15) (29,623)
------------- ------------ ------------- -----------
Total shareholders' equity 96,452 2,653 9,507 108,612
------------- ------------ ------------- -----------
Total liabilities and shareholders' equity $ 173,286 $ 62,825 $ 105,224 $ 341,335
============= ============ ============= ===========
<FN>
See accompanying Notes to Unaudited Pro Forma Combined Financial Information
</TABLE>
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<PAGE>
Alltrista Corporation and Triangle Plastics, Inc.
Notes to Unaudited Pro Forma Combined Financial Information
Following is a description of pro forma adjustments reflected in the Unaudited
Pro Forma Combined Statements of Income and Balance Sheet:
(1) Represents the removal of the plastic packaging product line operating
results.
(2) Represents the increase in depreciation expense due to recording the
fixed assets of Triangle Plastics at fair value.
(3) Represents the amortization of the goodwill recorded in the acquisition
and the elimination of goodwill amortization recorded by Triangle Plastics from
former acquisitions.
(4) Represents the elimination of expenses specifically related to the
former owners of Triangle Plastics. These expenses consist primarily of
compensation and acquisition costs.
(5) Represents the incremental interest expense and fees relating to the
financing of the transactions. Interest on the borrowings is based upon fixed
increments over the adjusted London Interbank Offered Rate or the agent bank's
alternate borrowing rate as defined in the agreement. The average borrowing
rate for three months ended March 31, 1999 and the twelve months ended December
31, 1998 was 7.0%. If the average borrowing rate had fluctuated 1/8% for the
three months ended March 31, 1999, the pro forma interest expense would have
changed by $47,000. If the average borrowing rate had fluctuated by 1/8% in
1998, the pro forma interest expense would have changed by $189,000.
(6) Assuming an effective tax rate of 38.2% and 38.0% for the three months
ended March 31, 1999 and the twelve months ended December 31, 1998,
respectively. The adjustment represents the estimated tax related to the pro
forma adjustments and the taxation of Triangle Plastics historical earnings as
though they were treated as a C Corporation under the provisions of the Internal
Revenue Code.
(7) Represents the removal of assets purchased and liabilities assumed by
Spartech Plastics.
(8) Represents the adjustment of Triangle Plastics' fixed assets to fair
value.
(9) Represents the goodwill recorded in the acquisition of Triangle
Plastics.
(10) Represents the removal of goodwill recorded on the historical balance
sheet of Triangle Plastics.
(11) Represents debt issuance costs incurred in connection with the
financing of the Triangle Plastics acquisition.
(12) Represents the debt incurred for the Triangle Plastics acquisition less
the debt not assumed offset by the proceeds from the sale of the plastic
packaging operation.
(13) Represents the liabilities resulting from the acquisition of Triangle
Plastics and the sale of the plastic packaging operation including the income
taxes payable on the gain from the sale.
(14) Represents the deferred tax effect of estimated differences between the
book and tax basis of assets and liabilties assumed in the acquisition of
Triangle Plastics.
(15) Represents the elimination of Triangle Plastics shareholders' equity.
(16) Represents the gain on sale of the plastic packaging operation, net of
income taxes.
7
<PAGE>
(c) Exhibits.
Exhibit No. Description
23.1 Consent of Independent Auditors
23.2 Consent of Independent Public Accountants
99.1 Financial Statements of Business Acquired.
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 hereunto duly authorized
ALLTRISTA CORPORATION
(Registrant)
/s/ Kevin D. Bower
Kevin D. Bower
Senior Vice President and Chief Financial Officer
July 12, 1999
8
<PAGE>
EXHIBIT INDEX
Exhibit No.
23.1 Consent of Independent Auditors
23.2 Consent of Independent Public Accountants
99.1 Financial Statements of Business Acquired.
Consent of Independent Auditors
We consent to the incorporation by reference in the Form S-8 Registration
Statements of Alltrista Corporation pertaining to Alltrista Corporation 1998
Long-Term Equity Incentive Plan (No. 333-67033), Alltrista Corporation 1996
Employee Stock Purchase Plan (No. 333-27459), Alltrista Corporation 1996 Stock
Option Plan for Nonemployee Directors (No. 333-27461), Employee Stock Purchase
Plan of Alltrista Corporation (No. 33-60624), 1993 Restricted Stock Plan and
1993 Stock Option Plan (No. 33-60730), and 1993 stock Option Plan for
Nonemployer Directors of Alltrista Corporation (No. 33-60622), of our report
dated January 29, 1999, with respect to the consolidated financial statements of
Triangle Plastics, Inc. included in this Current Report on Form 8-KA of
Alltrista Corporation dated July 12, 1999.
/s/ Ernst & Young LLP
Des Moines, Iowa
July 8, 1999
ARTHUR ANDERSEN LLP
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the inclusion in this
Form S-8 Registration Statements of Alltrista Corporation pertaining to
Alltrista Corporation 1998 Long-Term Equity Incentive Plan (No. 333-67033),
Alltrista Corporation 1996 Employee Stock Purchase Plan (No. 333-27459),
Alltrista Corporation 1996 Stock Option Plan for Nonemployee Directors (No.
333-27461, Employee Stock Purchase Plan of Altrista Corporation (No. 33-60624),
1993 Restricted Stock Plan and 1993 Stock Option Plan (No. 33-60730), and 1993
Stock Option Plan for Nonemployer Directors of Alltrista Corporation (No.
33-60622), of our report dated January 17, 1997 with respect to the financial
statements of Triangle Plastics, Inc. included in this Current Report on Form
8-KA of Alltrista Corporation dated July 12, 1999. It should be noted that we
have not audited any financial statements of the Company subsequent to December
31, 1996 or performed any audit procedures subsequent to the date of our report.
/s/ARTHUR ANDERSEN LLP
Milwaukee Wisconsin
July 8, 1999
Report of Independent Auditors
The Board of Directors and Stockholders
Triangle Plastics, Inc.
We have audited the accompanying consolidated balance sheets of Triangle
Plastics, Inc. as of December 31, 1998 and 1997, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The consolidated financial statements
of Triangle Plastics, Inc. for the year ended December 31, 1996, were audited by
other auditors whose report dated January 17, 1997, expressed an unqualified
opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1998 and 1997 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Triangle Plastics, Inc. at December 31, 1998 and 1997, and the consolidated
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Des Moines, Iowa
January 29, 1999, except for
Note 9, as to which the date
is April 25, 1999
<PAGE>
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
The Board of Directors and
Stockholders of Triangle Plastics, Inc.:
We have audited the accompanying statements of operations, stockholders'
investment and cash flows of Triangle Plastics, Inc. (an Iowa S Corporation) for
the year ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, Triangle Plastics, Inc.'s results of operations and cash
flows for the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ARTHUR ANDERSEN LLP
Milwaukee Wisconsin
January 17, 1997
<PAGE>
<TABLE>
<CAPTION>
Triangle Plastics, Inc.
Consolidated Balance Sheets
<S> <C> <C>
December 31
1998 1997
------------- ------------
Assets
Current assets:
Cash and cash equivalents $ 440,037 $ 7,036
Accounts receivable, less allowance for doubtful
accounts of $45,000 in 1998 and $50,000 in 1997 17,023,271 9,609,339
Inventories 12,975,464 8,151,744
Other receivable 857,443 1,587,000
Other current assets 585,233 114,312
------------- ------------
Total current assets 31,881,448 19,469,431
Property, plant and equipment:
Land, building and improvements 8,314,592 2,960,187
Office equipment 1,946,689 1,374,455
Machinery and equipment 25,621,023 10,841,751
Construction in progress 902,343 -
------------- ------------
36,784,647 15,176,393
Less allowances for depreciation (9,074,814) (5,164,514)
------------- ------------
27,709,833 10,011,879
Intangibles:
Non-compete agreements, less accumulated
amortization of $450,000 in 1998 and $225,000
in 1997 425,000 650,000
Goodwill, less accumulated amortization of $139,370
in 1998 and $38,952 in 1997 1,986,328 1,627,786
Other 9,867 -
------------- ------------
2,421,195 2,277,786
------------- ------------
Total assets $ 62,012,476 $31,759,096
============= ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
December 31
1998 1997
------------- ------------
Liabilities and stockholders' equity
Current liabilities:
Notes payable $ 18,956,325 $ 3,462,500
Accounts payable 5,281,784 4,836,434
Accrued liabilities 4,199,364 3,709,626
Current portion of long-term debt 7,538,490 3,027,425
------------- ------------
Total current liabilities 35,975,963 15,035,985
Long-term debt, less current portion 23,358,261 12,530,211
Non-compete agreements 425,000 600,000
Commitments and contingencies (Notes 5 and 9)
Stockholders' equity:
Common stock, par value $.02 per share - authorized
25,000,000 shares, issued 1,032,000 shares in 1998
and 1997, outstanding 302,000 shares in 1998 and
1997 20,640 20,640
Additional paid-in capital 196,120 196,120
Retained earnings 3,709,813 5,049,461
Treasury stock, at cost (1,673,321) (1,673,321)
------------- ------------
Total stockholders' equity 2,253,252 3,592,900
------------- ------------
Total liabilities and stockholders' equity $ 62,012,476 $31,759,096
============= ============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Triangle Plastics, Inc.
Consolidated Statements of Income
<S> <C> <C> <C>
Year ended December 31
1998 1997 1996
-------------- ------------ ------------
Net sales $ 114,054,737 $73,377,734 $55,288,956
Cost of sales 87,040,141 57,627,751 40,948,093
-------------- ------------ ------------
Gross profit 27,014,596 15,749,983 14,340,863
Operating expenses 17,982,574 11,282,710 9,918,024
-------------- ------------ ------------
Income from operations 9,032,022 4,467,273 4,422,839
Other income (expense):
Interest expense (3,986,418) (1,629,603) (1,374,945)
Interest income 11,723 1,357 14,729
Non-operating income, net 1,058,914 624,611 150,470
-------------- ------------ ------------
Income before state income taxes 6,116,241 3,463,638 3,213,093
State and foreign income taxes 36,027 26,671 21,200
-------------- ------------ ------------
Net income $ 6,080,214 $ 3,436,967 $ 3,191,893
============== ============ ============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Triangle Plastics, Inc.
Consolidated Statements of Changes in Stockholders' Equity
<S> <C> <C> <C> <C> <C>
Additional Treasury Total
Common Paid-in Retained Stock, Stockholders'
Stock Capital Earnings at Cost Equity
------- ----------- ------------ ------------ ---------------
Balance at January 1,
1996 $20,600 $ 114,900 $ 5,058,238 $(1,063,959) $ 4,129,779
Dividends and
distributions to
stockholders - - (3,636,389) - (3,636,389)
Purchase of 15,000
shares of common
stock pursuant to
stock option - - - (609,362) (609,362)
Net income for 1996 - - 3,191,893 - 3,191,893
------- ----------- ------------ ------------ ---------------
Balance at December
31, 1996 20,600 114,900 4,613,742 (1,673,321) 3,075,921
Dividends and
distributions to
stockholders - - (3,001,248) - (3,001,248)
Issuance of 2,000
shares of common
stock pursuant to
stock option 40 81,220 - - 81,260
Net income for 1997 - - 3,436,967 - 3,436,967
------- ----------- ------------ ------------ ---------------
Balance at December
31, 1997 20,640 196,120 5,049,461 (1,673,321) 3,592,900
Dividends and
distributions to
stockholders - - (7,419,862) - (7,419,862)
Net income for 1998 - - 6,080,214 - 6,080,214
------- ----------- ------------ ------------ ---------------
Balance at December
31, 1998 $20,640 $ 196,120 $ 3,709,813 $(1,673,321) $ 2,253,252
======= =========== ============ ============ ===============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Triangle Plastics, Inc.
Consolidated Statements of Cash Flows
<S> <C> <C> <C>
Year ended December 31
1998 1997 1996
---------------- ------------- -------------
Operating activities
Net income for year $ 6,080,214 $ 3,436,967 $ 3,191,893
Adjustments to reconcile net income to net cash provided
by operating activities:
Share of losses of limited liability company - - 47,452
Depreciation and amortization 4,439,263 1,527,404 1,290,599
Gain on sale of property, plant and equipment (83,400) (607,120) (214,548)
Payments pursuant to non-compete agreements (175,000) (175,000) (100,000)
Changes in operating assets and liabilities:
Accounts receivable (4,097,328) (2,064,870) (17,522)
Other receivables 1,110,333 - -
Inventories 108,281 (1,749,086) 81,202
Other current assets 2,913 79,737 (48,297)
Accounts payable (1,723,480) 2,303,575 (1,375,235)
Accrued liabilities (556,800) 2,347,796 (1,056,697)
---------------- ------------- -------------
Net cash provided by operating activities 5,104,996 5,099,403 1,798,847
Investing activities
Purchases of property, plant and equipment (3,050,531) (2,165,940) (506,086)
Proceeds from sale of property, plant and equipment 179,104 138,775 390,105
Acquisition of TriEnda Corporation, net of cash acquired (8,116,818) - -
Acquisitions of Solar Plastics, Inc. and Bigelow Packaging
Division (202,312) (4,461,336) -
---------------- ------------- -------------
Net cash used in investing activities (11,190,557) (6,488,501) (115,981)
Financing activities
Proceeds from notes payable 47,753,625 38,590,500 17,779,200
Repayments of notes payable (37,859,800) (36,061,900) (18,915,202)
Proceeds from issuance of long-term debt 18,223,862 7,640,655 5,909,458
Payments for long-term debt (14,179,263) (5,860,164) (2,212,550)
Dividends and distributions to stockholders (7,419,862) (3,001,248) (3,636,389)
Issuance of common stock - 81,260 -
Purchase of common stock for treasury - - (609,362)
---------------- ------------- -------------
Net cash provided by (used in) financing activities 6,518,562 1,389,103 (1,684,845)
---------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 433,001 5 (1,979)
Cash and cash equivalents at beginning of year 7,036 7,031 9,010
---------------- ------------- -------------
Cash and cash equivalents at end of year $ 440,037 $ 7,036 $ 7,031
================ ============= =============
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 3,176,435 $ 1,623,383 $ 1,327,520
State and foreign income taxes 36,616 17,614 26,635
Noncash investing and financing activities:
Issuance of other receivable for sale of extrusion
equipment - 1,587,000 -
Non-compete agreement in conjunction with Solar
Plastics, Inc. acquisition - 375,000 -
Long-term debt issued to sellers in connection with
acquisition of TriEnda Corporation 9,020,844 - -
Noncash consideration (inventory) paid for acquisition of
Bigelow Packaging Division 236,662 - -
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements
December 31, 1998
1. Significant Accounting Policies
Nature of Business
Triangle Plastics, Inc. (Triangle) and its wholly-owned subsidiary, TriEnda
Corporation (TriEnda, see Note 2) are engaged in extruding and thermoforming
various plastic products for the U. S. government and the transportation,
agricultural and recreational industries throughout North America.
Principles of Consolidation
The consolidated financial statements include the accounts of the parent
company, Triangle, and its wholly-owned subsidiary, TriEnda, collectively, the
"Company". Significant intercompany accounts and transactions have been
eliminated in consolidation.
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 estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Accounts Receivable and Concentrations of Credit Risk
The Company's customer base is tied to the transportation, agricultural and
recreational industries and, as such, may be affected by cyclical trends in
those industries. The credit risk associated with trade receivables is minimized
due to the Company's large customer base and their geographic dispersion. The
Company performs ongoing credit evaluations of its customers, generally does not
require collateral, and maintains allowances for potential credit losses. In
1998, 1997 and 1996, the Company's sales are concentrated among eight customers
that make up 60%, 52% and 61% of total sales, respectively. In addition, of
these amounts, four customers comprised more than 10% of net sales in either
1998, 1997 or 1996 as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year ended December 31
1998 1997 1996
------------------------------------
Customer A - Trucking Industry $ 15,190,000 $9,775,000 $5,237,000
Customer B - Packaging/Delivery Industry 12,251,000 - -
Customer C - Trucking Industry 10,096,000 7,323,000 5,762,000
Customer D - Automotive Industry 5,109,000 6,722,000 5,641,000
</TABLE>
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Inventories
Inventories are stated at the lower of cost using the last-in, first-out (LIFO)
method of accounting, or market.
<TABLE>
<CAPTION>
The components of inventories are as follows:
<S> <C> <C>
December 31
1998 1997
------------ -----------
At current costs:
Raw materials $ 4,565,075 $4,055,668
Work-in-progress 2,648,821 1,491,280
Finished goods 5,761,568 2,803,174
------------ -----------
Current cost 12,975,464 8,350,122
Excess of current cost over LIFO cost - (198,378)
------------ -----------
$ 12,975,464 $8,151,744
============ ===========
</TABLE>
During 1998, raw material prices decreased substantially, which resulted in an
excess of LIFO cost over current cost at December 31, 1998 aggregating $886,000.
The Company has established a matching valuation allowance against this excess
amount so as to state the inventory at market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less allowances for
depreciation. Depreciation is computed using the straight-line method over the
estimated useful life of the assets, generally 10-40 years for building and
improvements, 3-7 years for machinery and equipment, and 3-7 years for office
equipment.
Intangibles
The non-compete agreements are being amortized on a straight-line basis over the
period of the related agreements (five years). Goodwill represents the excess of
purchase price over the fair value of identifiable net assets acquired of two
companies. Goodwill is amortized on a straight-line basis over a period of 15 -
25 years. The carrying amount of goodwill is regularly reviewed for indicators
of impairment, which in the view of management are other than temporary. If
facts and circumstances suggest that goodwill is impaired, the Company reduces
goodwill to an amount that results in the carrying amount of the underlying
business approximating fair value. The Company has not recorded any such
writedowns during the periods presented.
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
Other Income
The Company receives royalty income related to patents owned by TriEnda. The
patents are scheduled to expire in 2001. Royalty income received during the year
ended December 31, 1998 totaled approximately $732,000, of which approximately
$480,000 is in other receivables at December 31, 1998. No royalty income was
recorded by the Company in 1997 or 1996 (see Notes 2 and 5).
Research and Development Costs
The Company's research and development costs incurred and charged to expense
during the years ended December 31, 1998, 1997 and 1996 totaled $5,557,839,
$1,737,232 and $1,049,671, respectively.
Tax Status
The Company and its stockholders have elected to be treated as an S Corporation
under the provisions of the Internal Revenue Code for periods beginning after
December 1986. The Company's taxable income is included in the individual tax
returns of its stockholders for federal and, when allowed, state income tax
purposes. No tax provision for federal income taxes is included in the financial
statements. However, a provision for income taxes in states which do not
recognize S Corporation status is provided. In the event the S Corporation
election is terminated, any liability or benefit for deferred income taxes would
be reflected in the Company's financial statements.
Reclassifications
Certain amounts in the 1996 financial statements have been reclassified to
conform to presentation in the 1998 and 1997 financial statements. The
reclassifications have no effect on net income for 1996.
2. Acquisitions
TriEnda Corporation Acquisition
In January 1998, Triangle purchased all of the outstanding common stock of
TriEnda of Portage, Wisconsin for $17,220,844. The transaction was accounted for
as a purchase. In addition, Triangle has agreed to pay the former owners of
TriEnda 50% of the fair value (as determined by an arms-length sale or a
business appraisal) of TriEnda in excess of twice the purchase price as of
January 1, 2000. Such amounts, if any, payable under this provision are not yet
determinable.
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
Under the terms of the agreement, $8,200,000 of the purchase price was paid at
closing, with the remaining amount due in two equal annual installments, in
January of 1999 and 2000, plus interest at rates adjusted annually (see Note 3).
In connection with the agreement, Triangle transferred certain lines of
manufacturing to TriEnda. The purchase price was allocated based on fair value
as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 83,182
Accounts receivable 3,316,604
Other receivables 380,776
Inventories 5,167,150
Other current assets 485,845
Property, plant and equipment 18,855,554
Other intangibles 11,854
Notes payable (5,600,000)
Accounts payable (2,159,911)
Accrued liabilities (1,046,538)
Long-term debt (2,273,672)
------------
$17,220,844
============
</TABLE>
Solar Plastics, Inc. Acquisition
Effective January 1, 1997, Triangle purchased certain assets of Solar Plastics,
Inc. of Tampa, Florida (Solar) for cash in the amount of $2,761,336. The
acquisition has been accounted for as a purchase and the operating results of
Solar have been included in the statement of income since the date of
acquisition. The purchase price has been allocated based on fair value as
follows:
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable $ 871,108
Inventories 452,000
Other current assets 31,242
Equipment 817,950
Goodwill 589,036
Covenant not to compete (asset) 375,000
Covenant not to compete (liability) (375,000)
-----------
$2,761,336
===========
</TABLE>
In connection with the Solar purchase, Triangle entered into a
non-compete/consulting agreement with Solar's President and Chief Executive
Officer. The agreement requires quarterly payments of $25,000 through December
31, 2001 (see Note 7).
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
Bigelow Packaging Division Acquisition
On December 19, 1997, Triangle purchased certain assets of the Bigelow Packaging
Division of Fieldcrest Cannon, Inc. (Bigelow) for cash in the amount of
$1,700,000, subject to certain post-closing adjustments. Subsequent to December
31, 1997, the Company paid $202,312 in consideration for the post-closing
adjustments. In addition, the Company wrote off Triangle inventory which was
required to be maintained (per the Bigelow Manufacturing agreement) of $236,662,
net of regrind value, representing inventory on-hand at the purchase date which
was obsolete at the time of purchase. The acquisition has been accounted for as
a purchase and the operating results of Bigelow included in the statement of
income since the date of acquisition. The purchase price has been allocated
based on fair value as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Allocation as of
December 31 Subsequent Final
1997 Adjustments Allocation
------------------ ------------- ------------
Accounts receivable $ 617,132 $ - $ 617,132
Inventories 119,959 1,513 121,472
Other current assets 12,011 (12,011) -
Equipment 21,069 (569) 20,500
Goodwill 1,077,702 458,960 1,536,662
Accounts payable (147,873) (8,919) (156,792)
------------------ ------------- ------------
$ 1,700,000 $ 438,974 $ 2,138,974
================== ============= ============
</TABLE>
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
3. Credit Arrangements
<TABLE>
<CAPTION>
Notes payable consist of the following:
<S> <C> <C>
December 31
1998 1997
------------ ----------
Line of credit payable to Union Planters Bank, formerly
Magna Bank, N.A., maximum borrowing of
$25,000,000; expires in June, 1999; variable interest
rate (6.75% at December 31, 1998); secured by real
property, a general security agreement covering
substantially all assets, and a personal guarantee by
the majority stockholder. $ 18,655,025 $ -
Line of credit payable to Union Planters Bank;
maximum borrowing of $11,000,000; expired in
May, 1998; variable interest rate (8.50% at
December 31, 1997); secured by a general security
agreement covering substantially all assets. - 3,058,000
Unsecured notes with related parties; due on demand at
variable interest rates (7.75% and 8.50% at
December 31, 1998 and 1997, respectively). 301,300 404,500
------------ ----------
$ 18,956,325 $3,462,500
============ ==========
</TABLE>
<TABLE>
<CAPTION>
Long-term debt consists of the following:
<S> <C> <C>
December 31
1998 1997
------------ ----------
Unsecured notes payable to majority stockholder;
interest payable monthly at variable rates (7.75% and
8.50% at December 31, 1998 and 1997, respectively);
notes are subordinated to the bank debt and due on
demand; however, stockholder has agreed not to
demand payment during the next year. $ 6,000,000 $6,300,000
Term loan payable to Union Planters Bank, 8.00%;
payable in monthly principal installments of
$157,262 plus interest with final payment due
October, 2001; secured by real property, a general
security agreement covering substantially all assets
and a personal guaranty by the majority shareholder. 12,809,338 -
Term loan payable to Union Planters Bank, 8.50%;
agreement refinanced during 1998. - 4,231,643
Note payable to Union Planters Bank, 8.50%; agreement
refinanced during 1998. - 2,393,617
</TABLE>
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
3. Credit Arrangements (continued)
<S> <C> <C>
December 31
1998 1997
------------- ------------
Term loan payable to former owners of TriEnda; interest
rates adjusted annually (8.50% at December 31,
1998); payable in two equal annual installments in
January of 1999 and 2000 plus interest; secured by a
stock pledge agreement. $ 9,020,844 $ -
Mortgage payable to South Trust Bank; 7.60%; payable
in monthly principal and interest installments of
$10,799 with final payment due June 2004;
collateralized by certain land, buildings and land
improvements; guaranteed by majority stockholder of
the Company. 1,203,295 1,237,707
Term loan payable, assumed in acquisition, to a former
owner of TriEnda; 8.00%; payable in semiannual
principal installments of $383,750 plus interest
payable monthly with final payment due September,
1999; secured by a stock pledge agreement. 767,500 -
Term loan payable to Union Planters Bank; 8.50%, with
final payment in October 1998. - 709,677
Term loans payable to Wisconsin Power and Light;
3.00%; payable in various monthly principal and
interest installments totaling $15,183 with final
payments due December, 2002; secured by specified
machinery and equipment. 576,414 -
Unsecured note payable to a former officer of the
Company; variable interest rate at 2% under prime
(6.50% at December 31, 1998 and 1997); payable in
quarterly principal installments of $12,187 plus
interest, with final payment due December 2005. 341,243 389,992
Term loan payable to South Trust Bank; 7.60%; payable
in monthly principal installments of $9,833 plus
interest, with final payment due June 2000;
collateralized by a general security agreement
covering substantially all assets; guaranteed by
majority stockholder of the Company. 178,117 295,000
------------- ------------
30,896,751 15,557,636
Less current portion (7,538,490) (3,027,425)
------------- ------------
$ 23,358,261 $12,530,211
============= ============
</TABLE>
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
3. Credit Arrangements (continued)
The Company paid interest to its majority stockholder and other related parties
totaling $1,471,492, $572,724 and $509,142 during the years ended December 31,
1998, 1997 and 1996, respectively. Included in accrued expenses at December 31,
1998 is $771,888 of interest payable to former owners. There was no accrued
interest to a related party at December 31, 1997.
Certain of the above credit arrangements contain various restrictive covenants
including, among others, the maintenance of certain financial ratios, tangible
net worth, as defined and including subordinated stockholder debt, of not less
than $2,200,000 and certain working capital requirements. The Company was in
violation of its working capital and debt service ratios at December 31, 1998.
The Company has obtained a waiver of these covenants through January 1, 2000.
The annual maturities of long-term debt during the next five years and
thereafter are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31:
1999 $ 7,538,490
2000 6,721,310
2001 9,307,267
2002 157,757
2003 102,221
Thereafter, through December 2005 1,069,706
Maturities not scheduled (unsecured notes payable to majority
stockholder) 6,000,000
-----------
$30,896,751
===========
</TABLE>
4. Stockholders' Agreement
Under the terms of an agreement with its minority stockholders, the Company is
required to purchase the shares of a minority stockholder upon their death or in
the event a minority stockholder desires to sell his or her interest as a
stockholder. Under the agreement, the Company is required to pay stockholders
20% of the purchase price (determined by management of the Company) at the time
of purchase with the balance paid over a ten-year period.
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
5. Commitments and Contingencies
The Company has various operating leases for buildings and equipment. Rent
expense under these leases, including lease payments to related parties, in
1998, 1997 and 1996 was $913,019, $856,480 and $504,452, respectively.
Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of December 31, 1998, for each of the
following years are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31:
1999 $ 760,026
2000 553,442
2001 425,394
2002 8,147
----------
$1,747,009
==========
</TABLE>
Certain of the leases described above relate to buildings the Company leases
from The Blin Corporation, owned by James L. Blin, the majority stockholder of
the Company, and his relatives. Total payments under these agreements were
$468,000 for each of the years ended December 31, 1998 and 1997 and were
$414,000 for the year ended December 31, 1996.
The Company has been named a defendant in a lawsuit with respect to a royalty
agreement, whereby the licensee believes the Company is obliged to extend a
paid-up royalty-free license to the plaintiff. The plaintiff alleges damages in
excess of $500,000. In addition, at December 31, 1998, the Company has a
receivable of approximately $480,000 recorded in its consolidated balance sheet
from this licensee. The Company is prepared to vigorously defend the action and
pursue collection of its receivable; however, collection of the receivable is
dependent upon the ultimate outcome of the lawsuit.
The Company is involved in various other pending or threatened legal proceedings
arising from the normal course of its business operations. In management's
opinion, these proceedings will be ultimately resolved without materially
affecting the financial condition of the Company.
6. Retirement Plans
Triangle has a defined contribution plan under the provisions of Section 401(k)
of the Internal Revenue Code covering all employees represented for collective
bargaining purposes by a bargaining unit. Under this plan, Triangle provides a
matching contribution equal to 50% of each participant's contribution up to a
maximum of 2% of their salary. Triangle also has a 401(k) and profit sharing
plan covering employees not represented for collective bargaining purposes.
Under this plan, Triangle matches 50% of each participant's contribution up to a
maximum of 2% of their salary.
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
6. Retirement Plans (continued)
TriEnda also has a defined contribution plan under the provisions of Section
401(k) of the Internal Revenue Code covering substantially all employees. Under
this plan, TriEnda provides a matching contribution equal to 50% of each
participant's contribution up to a maximum of $250.
Additional contributions to these plans are at the discretion of the Company's
Board of Directors. During the years ended December 31, 1998, 1997 and 1996,
Company contributions to the plans were approximately $439,000, $385,000 and
$365,000, respectively.
7. Non-Compete Agreements
On March 1, 1996, the Company entered into a five year non-compete agreement
with a former officer and stockholder of the Company. The agreement requires 60
monthly payments of $8,333 beginning retroactively to January 1, 1996.
In January 1997, as discussed in Note 2, another non-compete agreement was
entered into in conjunction with the Solar Plastics, Inc. acquisition. In that
regard, the Company will treat quarterly payments of $18,750 as related to the
non-compete portion of the non-compete/consulting agreement, with the remainder
related to the consulting portion that will be expensed as incurred.
8. Disposal of Certain Assets
Disposal of Extrusion Equipment
In December 1997, Triangle disposed of extrusion equipment at its Oelwein plant
in anticipation of the acquisition of TriEnda, whose primary business consists
of the manufacture of plastics through the extrusion process. The extrusion
equipment was sold for $1,587,000, resulting in a gain of $518,218, which has
been classified as non-operating income in the 1997 statement of income. The
entire amount of $1,587,000 was recorded as an other receivable at December 31,
1997 and was collected in 1998.
Disposal of Buchanan Aviation, L.C.
Prior to December 31, 1996, the Company had a 45% interest in a limited
liability company, Buchanan Aviation, L.C. (Buchanan), that was accounted for
using the equity method. As such, the Company included 45% of Buchanan's losses
of $47,452 for the year ended December 31, 1996, in operating expenses in the
statements of operations. During the year ended December 31, 1996, the Company
purchased $119,423 of flight services from Buchanan.
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
8. Disposal of Certain Assets (continued)
Effective December 31, 1996, Buchanan was dissolved and the related aircraft
sold at a loss of $114,000. The Company recorded their 45% share of this loss
in non-operating income (expense). The Company has recorded its 45% share of
Buchanan's remaining net worth of $73,991 on December 31, 1996 in other current
assets in the accompanying 1996 balance sheet. The Company received cash of
substantially this amount during the year ended December 31, 1997.
9. Subsequent Event
Effective April 25, 1999, Alltrista Corporation acquired substantially all of
the consolidated net assets of Triangle Plastics, Inc. and its TriEnda
subsidiary ("Triangle Plastics") for $148.0 million in cash.
10. Impact of Year 2000 (Unaudited)
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has completed an assessment and will have to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The total Year 2000
project cost is expensed as incurred and is considered immaterial to the
consolidated financial statements of the Company.
<PAGE>
Triangle Plastics, Inc.
Notes to Consolidated Financial Statements (continued)
10. Impact of Year 2000 (Unaudited) (continued)
The project is estimated to be completed not later than September 30, 1999,
which is prior to any anticipated impact on its operating systems. The Company
believes that with modifications to existing software and conversions to new
software, the Year 2000 Issue will not pose significant operational problems for
its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 Issue could have a material
impact on the operations of the Company. Residual testing will continue through
1999 and into 2000 to ensure subsequent changes do not cause Year 2000 problems.
The Company has initiated formal communications with its significant suppliers
and large customers to determine the extent to which the Company's interface
systems are vulnerable to those third parties' failure to remediate their own
Year 2000 Issues. There is no guarantee that the systems of other companies on
which the Company's systems rely will be timely converted and would not have an
adverse effect on the Company's systems.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
<PAGE>
<TABLE>
<CAPTION>
Triangle Plastics, Inc.
Unaudited Condensed Consolidated Balance Sheets
<S> <C> <C>
March 31, December 31,
1999 1998
------------- --------------
Assets
Current assets:
Cash and cash equivalents $ 2,300 $ 440,037
Accounts receivable, net 19,120,452 17,023,271
Inventories 13,421,377 12,975,464
Other current assets 774,422 1,442,676
------------- --------------
Total current assets 33,318,551 31,881,448
------------- --------------
Property, plant and equipment, at cost 38,266,430 36,784,647
Accumulated depreciation (11,353,094) (9,074,814)
------------- --------------
26,913,336 27,709,833
Goodwill, net 1,961,225 1,986,328
Other intangibles 633,764 434,867
------------- --------------
Total assets $ 62,826,876 $ 62,012,476
============= ==============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 23,240,000 $ 18,956,325
Accounts payable 7,217,072 5,281,784
Accrued liabilities 2,646,382 4,199,364
Current portion of long-term debt 7,107,097 7,538,490
------------- --------------
Total current liabilities 40,210,551 35,975,963
------------- --------------
Long-term debt, less current portion 19,581,980 23,358,261
Non-compete agreements 381,251 425,000
Commitments and Contingencies (see Note 3)
Stockholders' equity:
Common stock 20,640 20,640
Additional paid-in capital 196,120 196,120
Retained earnings 4,109,655 3,709,813
Treasury stock, at cost (1,673,321) (1,673,321)
------------- --------------
Total stockholders' equity 2,653,094 2,253,252
------------- --------------
Total liabilities and stockholders' equity $ 62,826,876 $ 62,012,476
============= ==============
<FN>
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Triangle Plastics, Inc.
Unaudited Condensed Consolidated Statements of Income
<S> <C> <C>
Three Months Ended March 31,
1999 1998
------------ -----------
Net sales $ 29,607,897 $25,608,781
Cost of sales 23,676,681 19,347,584
------------ -----------
Gross Profit 5,931,216 6,261,197
Operating expenses 3,191,901 3,596,986
------------ -----------
Income from operations 2,739,315 2,664,211
Interest expense 900,840 986,786
------------ -----------
Income before state income taxes 1,838,475 1,677,425
State and foreign income taxes - -
Net income $ 1,838,475 $ 1,677,425
============ ===========
<FN>
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Triangle Plastics, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
<S> <C> <C>
Three Months
Ended March 31,
-------------------------------
1999 1998
----------------- ------------
Operating activities
Net income $ 1,838,475 $ 1,677,425
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,000,663 1,040,444
Gain on sale of property, plant and equipment (18,214) (2,996)
Changes in operating assets and liabilities:
Accounts receivable (1,239,738) (1,614,664)
Inventories (445,913) (850,458)
Other current assets (202,134) (76,545)
Accounts payable 1,935,290 (661,918)
Accrued liabilities (1,552,984) (2,246,467)
----------------- ------------
Net cash provided by (used in) operating activities 1,315,445 (2,735,179)
Investing activities
Purchases of property, plant and equipment (410,548) (327,364)
Proceeds from the sale of property, plant and equipment 20,000 33,367
Acquisition of TriEnda Corporation, net of cash acquired - (8,116,818)
Acquisition of Bigelow Packaging Division - (202,312)
----------------- ------------
Net cash used in investing activities (390,548) (8,613,127)
Financing activities
Proceeds from notes payable 11,594,245 13,881,092
Repayments of notes payable (7,310,570) (8,566,000)
Proceeds from issuance of long-term debt 1,700,000 9,800,000
Payments for long-term debt (5,907,676) (1,652,233)
Dividends and distributions to stockholders (1,438,633) (2,107,576)
----------------- ------------
Net cash (used in) provided by financing activities (1,362,634) 11,355,283
----------------- ------------
Net (decrease) increase in cash and cash equivalents (437,737) 6,977
Cash and cash equivalents, beginning of period 440,037 7,036
----------------- ------------
Cash and cash equivalents, end of period $ 2,300 $ 14,013
================= ============
<FN>
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>
Triangle Plastics, Inc.
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 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. The accompanying unaudited
condensed financial statements should be read in conjunction with the latest
annual Consolidated Financial Statements and Notes to Consolidated Financial
Statements of Triangle Plastics, Inc. (the "Company").
2. Inventories
Inventories are stated at the lower of cost using the last in, first out (LIFO)
method of accounting, or market.
<TABLE>
<CAPTION>
The components of inventories are as follows:
<S> <C> <C>
March 31, December 31,
1999 1998
----------- -------------
At current costs:
Raw Materials $ 4,630,307 $ 4,565,075
Work-in-progress 2,853,546 2,648,821
Finished goods 5,937,524 5,761,568
----------- -------------
$13,421,377 $ 12,975,464
=========== =============
</TABLE>
3. Commitments and Contingencies
The Company has been named a defendant in a lawsuit with respect to a royalty
agreement, whereby the licensee believes the Company is obligated to extend a
paid-up royalty-free license to the plaintiff. The plaintiff alleges damages in
excess of $500,000. In addition, at March 31, 1999, the Company has a
receivable of approximately $558,209 recorded in its consolidated balance sheet
from this licensee. The Company is prepared to vigorously defend the action and
pursue collection of its receivable; however, collection of the receivable is
dependent upon the ultimate outcome of the lawsuit.
The Company is involved in various other pending or threatened legal proceedings
arising from the normal course of its business operations. In management's
opinion, these proceedings will be ultimately resolved without materially
affecting the financial condition of the Company.
4. Subsequent Event
Effective April 25, 1999, Alltrista Corporation acquired substantially all of
the consolidated net assets of Triangle Plastics, Inc. and its TriEnda
subsidiary ("Triangle Plastics") for $148.0 million in cash.
<PAGE>
Triangle Plastics, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
5. Impact of Year 2000
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has completed an assessment and will have to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The total Year 2000
project cost is expensed as incurred and is considered immaterial to the
consolidated financial statements of the Company.
The project is estimated to be completed no later than September 30, 1999, which
is prior to any anticipated impact on its operating systems. The Company
believes that with modifications to existing software and conversions to new
software, the Year 2000 Issue will not pose significant operational problems for
its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 Issue could have a material
impact on the operations of the Company. Residual testing will continue through
1999 and into 2000 to ensure subsequent changes do not cause Year 2000
problems.
The Company has initiated formal communications with its significant suppliers
and large customers to determine the extent to which the Company's interface
systems are vulnerable to those third parties' failure to remediate their own
Year 2000 Issues. There is no guarantee that the systems of other companies on
which the Company's systems rely will be timely converted and would not have an
adverse effect on the Company's systems.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
