<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 October 1, 2000
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
5875 Castle Creek Parkway, North Drive, Suite 440
Indianapolis, Indiana 46250-4330
----------------
Registrant's telephone number, including area code: (317) 577-5000
----------------
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.
<TABLE>
<CAPTION>
Class Outstanding at October 29, 2000
----- -------------------------------
<S> <C>
Common Stock, without par value 6,329,859 shares
</TABLE>
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<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the period ended October 1, 2000
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<C> <S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Condensed Consolidated Statements of Income
for the three and nine month periods ended October 1,
2000 and September 26, 1999........................... 3
Unaudited Statements of Comprehensive Income for the
three and nine month periods ended October 1, 2000 and
September 26, 1999.................................... 4
Unaudited Condensed Consolidated Balance Sheets at
October 1, 2000 and December 31, 1999................. 5
Unaudited Condensed Consolidated Statements of Cash
Flows for the nine month periods ended October 1, 2000
and September 26, 1999................................ 6
Notes to Unaudited Condensed Consolidated Financial
Statements............................................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 12
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.................................................. 17
PART II. OTHER INFORMATION...................................... 18
</TABLE>
2
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(thousands, except per share amounts)
<TABLE>
<CAPTION>
Three month period ended Nine month period ended
------------------------ ------------------------
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Net sales.................... $91,244 $107,659 $281,360 $268,533
Costs and expenses
Cost of sales.............. 68,281 73,962 209,168 188,938
Selling, general and
administrative expenses... 14,500 16,138 45,343 41,153
Goodwill amortization...... 1,632 1,555 4,771 3,052
------- -------- -------- --------
Operating earnings........... 6,831 16,004 22,078 35,390
Interest expense, net........ (3,041) (2,634) (9,204) (5,570)
Gain on sale of plastic
packaging product line...... -- -- -- 19,678
Reduction in long-term
performance-based
compensation................ -- -- 1,600 --
Litigation charges........... (2,219) -- (2,219) --
------- -------- -------- --------
Income from continuing
operations before taxes and
minority interest........... 1,571 13,370 12,255 49,498
Provision for income taxes... -- (5,557) (4,167) (19,358)
Minority interest in loss of
consolidated subsidiary..... 70 -- 207 --
------- -------- -------- --------
Income from continuing
operations.................. 1,641 7,813 8,295 30,140
Discontinued operations:
Gain on disposal of
discontinued operations,
net of income tax expense. -- -- -- 136
Extraordinary loss from early
extinguishment of debt, net
of income tax benefit....... -- -- -- (1,028)
------- -------- -------- --------
Net income................... $ 1,641 $ 7,813 $ 8,295 $ 29,248
======= ======== ======== ========
Basic earnings per share:
Income from continuing
operations................ $ .26 $ 1.16 $ 1.31 $ 4.47
Discontinued operations.... -- -- -- .02
Extraordinary loss from
early extinguishment of
debt, net of income tax
benefit................... -- -- -- (.15)
------- -------- -------- --------
Net income................. $ .26 $ 1.16 $ 1.31 $ 4.34
======= ======== ======== ========
Diluted earnings per share:
Income from continuing
operations................ $ .26 $ 1.14 $ 1.30 $ 4.41
Discontinued operations.... -- -- -- .02
Extraordinary loss from
early extinguishment of
debt, net of income tax
benefit................... -- -- -- (.15)
------- -------- -------- --------
Net income................. $ .26 $ 1.14 $ 1.30 $ 4.28
======= ======== ======== ========
Weighted average shares
outstanding:
Basic...................... 6,310 6,743 6,344 6,734
Diluted.................... 6,353 6,843 6,392 6,829
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
3
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME
(thousands of dollars)
<TABLE>
<CAPTION>
Three month period ended Nine month period ended
------------------------ ------------------------
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Net income.............. $1,641 $7,813 $8,295 $29,248
Foreign currency
translation............ (300) (37) (548) 203
------ ------ ------ -------
Comprehensive income.... $1,341 $7,776 $7,747 $29,451
====== ====== ====== =======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
4
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
<TABLE>
<CAPTION>
October 1, December 31,
2000 1999
---------- ------------
ASSETS
------
<S> <C> <C>
Current assets
Cash and cash equivalents............................ $ 2,908 $ 17,394
Accounts receivable, net............................. 43,683 36,931
Inventories:
Raw materials and supplies......................... 13,425 17,155
Work in process.................................... 12,154 9,400
Finished goods..................................... 27,342 31,353
Deferred taxes on income............................. 6,794 6,794
Prepaid expenses..................................... 1,283 2,449
-------- --------
Total current assets............................... 107,589 121,476
-------- --------
Property, plant and equipment, at cost................. 183,757 174,026
Accumulated depreciation............................... (94,299) (84,160)
-------- --------
89,458 89,866
Goodwill, net.......................................... 115,975 115,276
Other assets........................................... 11,412 12,133
-------- --------
Total assets....................................... $324,434 $338,751
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities
Current portion of long-term debt.................... $ 24,094 $ 19,094
Notes payable........................................ 9,300 607
Accounts payable..................................... 23,549 26,895
Accrued salaries, wages and employee benefits........ 9,641 10,889
Other current liabilities............................ 11,209 9,380
-------- --------
Total current liabilities.......................... 77,793 66,865
-------- --------
Noncurrent liabilities
Long-term debt....................................... 102,057 121,060
Deferred taxes on income............................. 11,349 11,865
Other noncurrent liabilities......................... 10,796 14,554
-------- --------
Total noncurrent liabilities....................... 124,202 147,479
-------- --------
Minority interest in subsidiary........................ 1,101 1,382
-------- --------
Contingencies.......................................... -- --
Shareholders' equity:
Common stock (7,963,351 common shares issued and
6,329,009 shares outstanding at October 1, 2000).... 40,033 39,952
Retained earnings.................................... 121,526 113,231
Accumulated other comprehensive loss-cumulative
translation adjustment.............................. (967) (419)
-------- --------
160,592 152,764
Less: treasury stock (1,634,342 shares at cost at
October 1, 2000)...................................... (39,254) (29,739)
-------- --------
Total shareholders' equity......................... 121,338 123,025
-------- --------
Total liabilities and shareholders' equity......... $324,434 $338,751
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
5
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
<TABLE>
<CAPTION>
Nine month period ended
------------------------
October 1, September 26,
2000 1999
---------- -------------
<S> <C> <C>
Cash flows from operating activities
Net income.......................................... $ 8,295 $ 29,248
Reconciliation of net income to net cash provided by
operating activities:
Depreciation...................................... 10,892 8,761
Amortization...................................... 5,050 3,823
Gain on sale of plastic packaging product line.... -- (19,678)
Reduction in long-term performance-based
compensation..................................... (1,600) --
Deferred employee benefits........................ 76 331
Minority interest................................. (207) --
Other, net........................................ 941 1,988
Changes in working capital components............... (5,523) (29)
-------- ---------
Net cash provided by operating activities....... 17,924 24,444
-------- ---------
Cash flows from financing activities
Proceeds from revolving credit borrowings........... 44,932 37,039
Payments on revolving credit borrowings............. (36,240) (36,112)
Proceeds from issuance of long-term debt............ -- 150,000
Payments on long-term debt.......................... (14,003) (29,534)
Debt issue cost..................................... -- (2,261)
Proceeds from issuance of common stock.............. 990 1,391
Purchase of treasury stock.......................... (10,485) (2,176)
-------- ---------
Net cash provided by (used in) financing
activities..................................... (14,806) 118,347
-------- ---------
Cash flows from investing activities
Additions to property, plant and equipment.......... (10,786) (12,270)
Proceeds from sale of property, plant and equipment. 72 1,400
Acquisitions of businesses, net of cash acquired.... (6,930) (149,718)
Proceeds from divestitures of businesses and product
lines.............................................. 66 29,152
Investments in insurance contracts.................. -- (274)
Other, net.......................................... (26) (318)
-------- ---------
Net cash used in investing activities........... (17,604) (132,028)
-------- ---------
Net increase (decrease) in cash....................... (14,486) 10,763
Cash and cash equivalents, beginning of period........ 17,394 21,454
-------- ---------
Cash and cash equivalents, end of period.............. $ 2,908 $ 32,217
======== =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
6
<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 for home food preservation
products. The accompanying unaudited condensed 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 Calculation
Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share are calculated based on the weighted average number of
outstanding common shares plus the dilutive effect of stock options as if they
were exercised.
A computation of earnings per share is as follows (in thousands except per
share data):
<TABLE>
<CAPTION>
Three month period ended Nine month period ended
------------------------ ------------------------
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Income from continuing
operations.................. $1,641 $7,813 $8,295 $30,140
Discontinued operations...... -- -- -- 136
Extraordinary loss from early
extinguishment of debt...... -- -- -- (1,028)
------ ------ ------ -------
Net income............... $1,641 $7,813 $8,295 $29,248
====== ====== ====== =======
Weighted average shares
outstanding................. 6,310 6,743 6,344 6,734
Additional shares assuming
conversion of stock options. 43 100 48 95
------ ------ ------ -------
Weighted average shares
outstanding assuming
conversion.................. 6,353 6,843 6,392 6,829
====== ====== ====== =======
Basic earnings per share:
Income from continuing
operations................ $ .26 $ 1.16 $ 1.31 $ 4.47
Discontinued operations.... -- -- -- .02
Extraordinary loss from
early extinguishment of
debt...................... -- -- -- (.15)
------ ------ ------ -------
Net income............... $ .26 $ 1.16 $ 1.31 $ 4.34
====== ====== ====== =======
Diluted earnings per share--
assuming conversion:
Income from continuing
operations................ $ .26 $ 1.14 $ 1.30 $ 4.41
Discontinued operations.... -- -- -- .02
Extraordinary loss from
early extinguishment of
debt...................... -- -- -- (.15)
------ ------ ------ -------
Net income............... $ .26 $ 1.14 $ 1.30 $ 4.28
====== ====== ====== =======
</TABLE>
7
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Pro Forma Financial Information
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company as if the April 25, 1999
acquisition of Triangle Plastics and the May 24, 1999 disposal of the plastic
packaging product line had occurred at the beginning of 1999. Pro forma
adjustments give effect to an increase in goodwill amortization, increase in
depreciation expense due to recording the fixed assets of Triangle Plastics at
fair value and an increase in interest expense related to the acquisition
financing. (In thousands except per share data.)
<TABLE>
<CAPTION>
Nine month
period ended
September 26,
1999
-------------
<S> <C>
Net sales................................................... $292,117
Income from continuing operations........................... 16,088
Net income.................................................. 16,224
Diluted earnings per share:
Income from continuing operations......................... $ 2.36
Net income................................................ $ 2.38
</TABLE>
8
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Segment Information
The Company is organized into two distinct segments: metal products and
plastic products. The metal products segment includes sales of zinc and
consumer products. This segment provides cast zinc strip and fabricated zinc
products primarily for zinc coinage and industrial applications. It also
markets a line of home food preservation products including home canning jars,
home canning metal closures and related food products, which are distributed
through a wide variety of retail outlets. The plastic products segment
produces injection molded plastic products used in medical, pharmaceutical and
consumer products and industrial thermoformed plastic parts for appliances,
manufactured housing, recreational vehicles, heavy trucking, agriculture
equipment, portable restrooms, recreational and construction products.
Effective April 25, 1999, the plastic products segment includes Triangle
Plastics. Effective May 24, 1999, the multi-layer plastic sheet and formed
container product lines were sold.
Net sales, operating earnings and assets employed in operations by segment
are summarized as follows (thousands of dollars):
<TABLE>
<CAPTION>
Three month period ended Nine month period ended
------------------------ ------------------------
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Net Sales:
Metal products:
Consumer products........ $38,816 $ 46,617 $103,995 $108,988
Zinc products............ 12,917 15,809 42,579 43,537
Other.................... 154 -- 320 --
------- -------- -------- --------
Total metal products... 51,887 62,426 146,894 152,525
------- -------- -------- --------
Plastic products:
Industrial thermoformed
parts................... 30,275 35,512 103,711 75,054
Injection molded
products................ 9,144 9,722 31,544 28,521
Plastic packaging........ -- -- -- 12,907
------- -------- -------- --------
Total plastic products. 39,419 45,234 135,255 116,482
------- -------- -------- --------
Intercompany............... (62) (1) (789) (474)
------- -------- -------- --------
Total net sales........ $91,244 $107,659 $281,360 $268,533
======= ======== ======== ========
Operating earnings:
Metal products............. $ 8,493 $ 12,710 $ 20,137 $ 25,815
Plastic products........... (1,615) 3,376 2,230 9,940
Intercompany............... (47) 10 (73) (46)
Unallocated corporate
expenses.................. -- (92) (216) (319)
------- -------- -------- --------
Total operating
earnings.............. 6,831 16,004 22,078 35,390
Interest expense, net........ (3,041) (2,634) (9,204) (5,570)
Gain on sale of plastic
packaging product line...... -- -- -- 19,678
Reduction in long-term
performance-based
compensation................ -- -- 1,600 --
Litigation charges........... (2,219) -- (2,219) --
------- -------- -------- --------
Income from continuing
operations before taxes and
minority interest........... $ 1,571 $ 13,370 $ 12,255 $ 49,498
======= ======== ======== ========
<CAPTION>
October 1, December 31,
2000 1999
---------- -------------
<S> <C> <C> <C> <C>
Assets employed in
operations:
Metal products............. $ 92,100 $ 96,588
Plastic products........... 214,011 207,656
-------- --------
Total assets employed
in operations......... 306,111 304,244
Corporate(1)............... 18,323 34,507
-------- --------
Total assets........... $324,434 $338,751
======== ========
</TABLE>
--------
(1) Corporate assets primarily include cash and cash equivalents, amounts
relating to benefit plans, deferred tax assets and corporate facilities
and equipment.
9
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Synergy World, Inc. Acquisition
On June 1, 2000, the Company acquired the net assets of Synergy World, Inc.
("Synergy World") for $6.9 million in cash plus acquisition costs. The Company
may pay up to an additional $2.0 million based upon future performance through
March 31, 2002. The transaction was accounted for as a purchase, and
accordingly, the purchase price was allocated to the assets purchased and
liabilities assumed based on their estimated fair values as of the date of
acquisition. The purchase price in excess of the fair value of assets
purchased and liabilities assumed has been allocated to goodwill and is being
amortized over a twenty-year period on a straight-line basis. Any additional
payments made by the Company would be recorded as goodwill.
Synergy World is a St. Louis, Missouri-based designer and marketer of
portable restrooms sold to equipment rental companies, waste services
companies and diversified sanitation firms. Prior to the acquisition, the
Company was the exclusive supplier of the thermoformed plastic restrooms to
Synergy World. Synergy World employs 10 people and had 1999 sales of $10.5
million. Synergy World's operating results are included in the Company's
financial statements beginning on June 1, 2000. The impact of including the
financial results of Synergy World on a pro forma basis would not have been
material.
6. Costs to Exit Facility
In October 1999, management initiated a plan to exit the Company's plastic
thermoforming facility in El Dorado, Arkansas. Operations in this facility
ceased in January 2000 and were moved to the Company's Auburndale, Florida
facility. The total cost to exit the facility was $2.3 million and includes a
$0.8 million loss on the sale and disposal of equipment, $0.6 million in
future lease obligations, net of assumed sublease revenue and $0.9 million in
other costs consisting primarily of employee severance, consulting and
employment obligations and other related fees. Of this $2.3 million charge,
which was recorded in the fourth quarter of 1999, $1.7 million has been
expended through October 1, 2000.
7. Litigation Charges
In September 2000, the Company reached settlements in two cases incurring
$2.2 million in settlement and legal expenses in the aggregate. On May 19,
1997 the Company purchased certain assets and assumed certain liabilities of
Viking Industries. Through the second quarter of 2000, the Company had paid
$9.4 million for the net assets and, in accordance with the terms of the asset
purchase agreement and subsequent amendment, could pay up to an additional
$4.0 million of purchase price based upon performance through May 2001. The
former owner had initiated arbitration proceedings in an effort to accelerate
payment of the additional $4.0 million. No additional amounts are payable in
connection with the acquisition. The Company had also been named a defendant
in a lawsuit with respect to a royalty agreement, whereby the plaintiff
(licensee) believed the Company was obligated to extend a paid-up royalty-free
license to the plaintiff. The Company reached a settlement and extended a
paid-up royalty-free license to the plaintiff through October 9, 2001, the
date the patent in question expires.
8. Contingencies
The Company is involved in various legal disputes in the ordinary course of
business. In addition, the Environmental Protection Agency has designated the
Company as a potentially responsible party, along with numerous other
companies, for the clean up of several hazardous waste sites. Information at
this time does not indicate that disposition of any of the legal or
environmental disputes the Company is currently involved in will have a
material, adverse effect upon the financial condition, cash flows or
competitive position of the Company, but could possibly be material to the
consolidated results of operations of any one period.
10
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Taxes on Income
An adjustment to reduce the year-to-date effective tax rate to the
anticipated effective rate for 2000 of 34 percent resulted in the recognition
of no tax expense in the third quarter of 2000. The 2000 effective tax rate of
34 percent is lower than the 1999 rate of 39 percent primarily due to the
recognition of a tax benefit from exiting the Central European home canning
test market.
10. New Accounting Pronouncements
Statement of Financial Accounting Standard 133 (SFAS 133), Accounting for
Derivative Instruments and Hedging Activities (as amended by SFAS 137 and SFAS
138) provides accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS 133 is effective for the Company beginning with the
first quarter of 2001. The Company does not expect the adoption of SFAS 133 to
have a material impact on its results of operations or financial position.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," which summarizes the SEC staff's views regarding the recognition
and reporting of revenues in certain transactions. The Company must adopt SAB
No. 101 by the end of 2000. The Company does not expect SAB No. 101 will have
a material impact on its results of operations.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Significant Events
On June 1, 2000, the Company acquired the net assets of Synergy World, Inc.
("Synergy World") for $6.9 million in cash plus acquisition costs. The
transaction was accounted for as a purchase. Synergy World's operating results
are included in the Company's financial statements beginning on June 1, 2000.
Synergy World is a St. Louis, Missouri-based designer and marketer of
portable restrooms sold to equipment rental companies, waste services
companies and diversified sanitation firms. Prior to the acquisition, the
Company was the exclusive supplier of the thermoformed plastic restrooms to
Synergy World. Synergy World employs 10 people and had 1999 sales of $10.5
million.
In September 2000, the Company reached settlements in two legal disputes
incurring $2.2 million in settlement and legal expenses in the aggregate. On
May 19, 1997 the Company purchased certain assets and assumed certain
liabilities of Viking Industries. Through the second quarter of 2000, the
Company had paid $9.4 million for the assets and, in accordance with the terms
of the asset purchase agreement and subsequent amendment, could pay up to an
additional $4.0 million of purchase price based upon performance through May
2001. The former owner had initiated arbitration proceedings in an effort to
accelerate payment of the additional $4.0 million. No additional amounts are
payable in connection with the acquisition. The Company had also been named a
defendant in a lawsuit with respect to a royalty agreement, whereby the
plaintiff (licensee) believed the Company was obligated to extend a paid-up
royalty-free license to the plaintiff. The Company reached a settlement and
extended a paid-up royalty-free license to the plaintiff through October 9,
2001, the date the patent in question expires.
On September 28, 2000, the Company announced the realignment of its
thermoforming operations in an effort to reduce costs and address capacity
issues. Production of thermoformed plastic parts will be moved from the
Oelwein, Iowa facility to other Company locations in Iowa and Wisconsin. The
Oelwein facility will serve as a distribution center. The realignment will
enable the other plants in the region to produce closer to capacity. The
Company recorded a $0.4 million charge in the third quarter for the write-down
of fixed assets and severance cost relating to this action. The Company
anticipates annual savings of $1.5 million as a result of the realignment.
During the third quarter of 2000, the Company decided to exit the Central
European home canning test market and recorded a $1.2 million pre-tax charge
to write-down inventory. While the Company achieved good retail distribution,
consumer sales did not justify continuing this activity.
Results of Continuing Operations--Comparing Year to Date 2000 to Year to Date
1999
The Company reported net sales of $281.4 million for the first nine months
of 2000, an increase of 4.8% from net sales of $268.5 million for the same
1999 period. Operating earnings of $22.1 million for the first nine months
decreased 37.6% from $35.4 million in the first nine months of 1999. The metal
products segment reported lower sales and operating earnings and plastic
products segment reported increased sales and lower operating earnings.
Net sales within the metal products segment decreased 3.7% from $152.5
million in the first nine months of 1999 to $146.9 million in the first nine
months of 2000. Consumer product sales decreased $5.0 million primarily due to
a decrease in sales of home canning jars and closures. In 2000, home canning
sales volumes returned to normal levels compared to the 1999 season, which was
influenced by the Year 2000 phenomenon. Sales of home canning products in
Canada have been hampered by unfavorable growing conditions. Partially
offsetting the decline in sales of home canning jars and closures were higher
sales of houseware products, a new liquid pectin product line and closures to
commercial customers. Zinc product sales decreased $1.0 million. Coinage sales
volumes were 2.1% and 42.1% lower to the U.S. and Royal Canadian Mints,
respectively, offset in part by an increase in additional coinage exports.
Battery can sales volume was 24.5% lower as battery manufacturers
12
<PAGE>
continue to move production of zinc carbon cells out of the United States.
Zinc strip, other industrial products and cathodic protection system sales
volume all increased. The average price of zinc ingot increased 10.7% in the
first nine months of 2000 compared to the same 1999 period adding
approximately $1.0 million to sales. The Company passes on fluctuations in
zinc ingot prices to those customers who do not purchase their own zinc ingot.
Net sales within the plastic products segment increased 16.1% from $116.5
million in the first nine months of 1999 to $135.3 million in the first nine
months of 2000. Triangle Plastics and its wholly owned subsidiary TriEnda,
which was acquired on April 25, 1999, contributed $74.1 million to 2000 sales
compared to $46.3 million in 1999. Industrial thermoformed part sales to
appliance manufacturers increased $2.9 million primarily on increased consumer
demand. Synergy World contributed $1.1 million to incremental net sales after
accounting for the elimination of intercompany transactions. Bath product
sales decreased $3.5 million, as the manufactured housing market remains soft.
The industry has excess retail inventory and has been further aggravated by a
curtailment of consumer financing. The supply of units has also grown as a
result of repossessions. Sales of injection molded products increased by $3.0
million. New customers and increased sales to ammunition manufacturers
accounted for the growth. Sales from the plastic packaging product line
(disposed of May 24, 1999) were $12.9 million in 1999.
Gross margin percentages decreased from 29.6% in the first nine months of
1999 to 25.7% in the first nine months of 2000. Plastic products, which
generally carry lower margins than metal products, represented 47.8% of total
2000 net sales compared to 43.2% in 1999. Gross margin percentages on plastic
products decreased from 22.2% in 1999 to 17.1% in 2000 due to a number of
factors. First, resin prices have increased concurrent with petroleum price
increases. In the majority of the Company's supply agreements, raw material
price increases can be passed on to customers. However, some contracts do not
allow all increases to be passed on and others call for pass-through delays.
Second, during the first quarter of 2000, the Company experienced operating
inefficiencies relating to the transfer of bath product production from the El
Dorado, Arkansas facility to the Auburndale, Florida facility. As previously
noted, the manufactured housing market remains soft. Third, during the second
quarter of 2000, labor costs and material usage increased as the seasonal
demand for portable restrooms coupled with new customer programs created
operating inefficiencies. Fourth, sales of material handling products have
shifted from higher margin proprietary products to lower margin units for the
automotive industry. This shift was partly due to a decision made by the
United States Postal Service ("USPS") in 1999 to not purchase hampers from the
Company in 2000. Fifth, plastic product sales to truck manufacturers decreased
36% during the third quarter of 2000 compared to the third quarter of 1999.
Orders for Class 8 (heavy) truck parts have declined as manufacturers have
slowed production in response to weak demand in the marketplace caused by
higher fuel prices and interest rates among other factors. Growth in the
industry inventory of used trucks has compounded the problem. Smaller orders
have reduced production runs and, thus, diminished operating efficiencies.
Finally, gross margins on the plastic packaging products for the first five
months of 1999 were extraordinarily high and not sustainable over the longer
term.
Gross margin percentages on metal products decreased from 35.3% in the
first nine months of 1999 to 33.4% in the first nine months of 2000. Excluding
the $1.2 million charge for the write down of inventory in Central Europe,
gross margin percentages on metal products decreased slightly. Gross margin
percentages on consumer products decreased due to a shift in sales to lower
margin products. Gross margin percentages on zinc products declined due to
lower coinage and battery can volumes, higher zinc ingot prices, unfavorable
currency exchange rates and higher cost for copper anodes and plating
chemicals.
Selling, general and administrative expenses as a percentage of net sales
increased from 15.3% in the first nine months of 1999 to 16.1% for the first
nine months of 2000. Expenses within the metal products segment increased
primarily due to higher depreciation expense on a new information system and
increased research and development cost for proprietary battery technology.
The acquisition of Triangle Plastics and disposal of the plastic packaging
product line resulted in increased expenses as a percentage of net sales
during the first nine months of 2000 compared to the first nine months of
1999. Triangle Plastics maintains a significant sales force and personnel
necessary to offer customers extensive design, engineering and development
services. The operations of the plastic packaging product line did not require
this level of staffing.
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Goodwill amortization expense increased from $3.1 million in 1999 to $4.8
million in 2000 primarily due to the acquisition of Triangle Plastics.
Interest expense, net in the first nine months of 1999 was $5.6 million
compared to $9.2 million for the first nine months of this year. The increase
was primarily due to increased borrowings to finance the Triangle Plastics
acquisition. The Company's effective tax rate decreased from 39.1% in the
first nine months of 1999 to 34.0% in the first nine months of 2000 primarily
due to the recognition of a tax benefit from exiting the Central European home
canning test market.
Excluding the $1.0 million after-tax benefit from the reduction in long-
term performance-based compensation and the $1.4 million after-tax charge for
the settlement of litigation cases in 2000 and the $12.2 million after-tax
gain on the sale of the plastic packaging product line in 1999, income from
continuing operations decreased from $18.0 million in the first nine months of
1999 to $8.7 million in the first nine months of 2000. Diluted earnings per
share from continuing operations, as adjusted, were $1.36 for the first nine
months of 2000 compared to $2.62 for the same 1999 period. Diluted weighted
average shares outstanding decreased from 6,829,000 in the first nine months
of 1999 to 6,392,000 in 2000 due to the Company purchasing its common stock in
the open market.
Results of Continuing Operations--Comparing Third Quarter 2000 to Third
Quarter 1999
The Company reported net sales of $91.2 million for the third quarter of
2000, a 15.2% decrease from net sales of $107.7 million in the third quarter
of 1999. Third quarter operating earnings of $6.8 million decreased 57.3% from
third quarter 1999 operating earnings of $16.0 million. Both the metal and
plastic product segments reported lower sales and earnings.
Net sales within the metal products segment decreased from $62.4 million in
the third quarter of 1999 to $51.9 million in 2000. Sales of consumer products
decreased $7.8 million, as demand for home canning products returned to a more
traditional, seasonal pattern compared to 1999 which was influenced by the
Year 2000 phenomenon. Increased sales of houseware products partially offset
the decrease in home canning supply sales. Sales of zinc products decreased
$2.9 million. Coinage sales volume was 3.6% and 74.4% lower to the U.S. and
Royal Canadian Mints, respectively. The Company also experienced lower battery
can sales and lower foreign sales of industrial zinc products due to
unfavorable currency exchange rates. These decreases were offset in part by an
increase in Lifejacket(R) anti-corrosion system sales and zinc ingot prices.
Net sales within the plastic products segment decreased from $45.2 million
in the third quarter of 1999 to $39.4 million in 2000. Sales of industrial
thermoformed parts decreased $5.2 million or 14.7%. Truck parts, bath and
material handling product sales decreased $3.2 million, $1.9 million and $1.2
million, respectively. These declines were offset in part by increased sales
to appliance and construction equipment manufacturers. Sales of portable
restrooms added $0.3 million to incremental sales. Sales of injection molded
products decreased by $0.6 million due to softness in the healthcare and
consumer products markets. Several of the Company's healthcare customers
implemented inventory reduction programs, which have slowed sales.
Gross margin percentages decreased from 31.3% in the third quarter of 1999
to 25.2% in the third quarter of 2000. Gross margin percentages on plastic
products decreased from 23.3% in the third quarter of 1999 to 12.7% in the
third quarter of 2000 due to a number of factors. First, resin prices have
increased concurrent with petroleum prices. In the majority of the Company's
supply agreements, price increases can be passed on to customers. However,
some contracts do not allow all increases to be passed on and others call for
pass-through delays. Second, the significant decline in truck part sales had a
negative impact on margins. Third, lower margins were realized on sales of
material handling products due to higher resin costs and competitive pricing
pressures. Finally, the decrease in injection molded products to the
healthcare and consumer products markets coupled with the delay of a major
customer project decreased margins. Gross margin percentages on metal products
decreased from 37.1% to 34.7%. Excluding the charge to write-down the
inventory relating to the Central European home canning test market, gross
margin percentages on metal products were the same as 1999.
14
<PAGE>
Selling, general and administrative expenses as a percentage of net sales
increased from 15.0% in the third quarter of 1999 to 15.9% for the third
quarter of 2000. Expenses within the metal products segment increased
primarily due to higher depreciation expense on a new information system and
increased research and development cost for proprietary battery technology.
Excluding the charges relating to the realignment of the thermoforming
operations, selling, general and administrative expenses as a percentage of
net sales within the plastic products segment were slightly higher than last
year.
Net interest expense in the third quarter of 2000 was $3.0 million compared
to $2.6 million for the same period last year. The increase was primarily due
to increased borrowings to finance the Synergy World acquisition and the
Company's stock purchase program. The Company did not record a provision for
income taxes in the third quarter of 2000. The quarter includes an adjustment
to bring the nine-month effective tax rate to 34 percent which reflects the
recognition of a tax benefit for the losses incurred in the Central European
home canning test market. The Company's effective tax rate was 41.6% in the
third quarter of 1999 due primarily to foreign losses for which a tax benefit
had not been recorded.
Excluding the $1.4 million after-tax charge for the settlement of
litigation cases in 2000, income from continuing operations decreased from
$13.4 million in the third quarter of 1999 to $3.8 million in the third
quarter of 2000. Diluted earnings per share from continuing operations, as
adjusted, were $0.47 for the third quarter of 2000 compared to $1.14 for the
same 1999 period. Diluted weighted average shares outstanding decreased from
6,843,000 in the third quarter of 1999 to 6,353,000 in 2000 due to the Company
purchasing its common stock in the open market.
Outlook
The Company anticipates 2000 operating earnings per diluted share will be
65% to 70% lower than 1999 results (excluding the $1.0 million after-tax
benefit from the reduction in long-term performance-based compensation and the
$1.4 million after-tax charge for the settlement of litigation cases in 2000
and the $12.2 million after-tax gain on the sale of the plastic packaging
product line and the $1.4 million after-tax charge to exit the facility in El
Dorado, Arkansas, in 1999). Resin price increases, the continued downturn in
the heavy-truck and manufactured housing markets, softness in healthcare and
consumer products markets, competitive pricing pressures and the absence of
earnings from the plastic packaging product line have adversely affected
results in the plastic products segment. The return to more normal home
canning product sales versus record levels in 1999 and the margin impact of
the strong U.S. dollar on foreign zinc product sales have adversely affected
results in the metal products segment. The Company anticipates these market
conditions will continue through the remainder of 2000. Higher interest
expense primarily due to increased borrowings to finance the Triangle Plastics
acquisition is also a contributing factor.
In response to these conditions, the Company has taken several steps to
increase sales and reduce operating costs including the consolidation of
thermoforming facilities, reduction in workforce, and a realignment of the
plastic segment's organization. The Company anticipates these initiatives will
add approximately $10.0 million to operating earnings on an annual basis.
Financial Condition, Liquidity and Capital Resources
Working capital (excluding the current portion of long-term debt and notes
payable) decreased $11.1 million from $74.3 million at year-end 1999 to $63.2
million at October 1, 2000. Cash and cash equivalents decreased $14.5 million
and short-term borrowings increased $8.7 million to fund seasonal working
capital requirements, the Company's stock repurchase program and the Synergy
World acquisition. Accounts receivable increased $6.8 million due to seasonal
sales of consumer products.
The Company acquired the net assets of Synergy World for $6.9 million in
cash plus acquisition costs. The Company may pay up to an additional $2.0
million based upon future performance through March 31, 2002.
15
<PAGE>
During the first nine months of 2000, the Company repurchased 452,600
shares of the Company's stock for $10.5 million. In 1999, the Company's board
of directors approved the repurchase of up to 500,000 shares. Through October
1, 2000 the Company repurchased 402,400 shares under this program. In
addition, the Company has a policy to annually repurchase shares to offset the
dilutive effect of shares issued under employee benefit plans.
Capital expenditures were $10.8 million in the first nine months of 2000
compared to $12.3 million for the same period in 1999 and are largely related
to maintaining facilities and improving manufacturing efficiencies. The
largest 2000 expenditures included injection-molding machines to support
growth and an investment in a high precision slitting line for zinc products.
In October 1999, management initiated a plan to exit the Company's plastic
thermoforming facility in El Dorado, Arkansas. Operations in this facility
ceased in January 2000 and were moved to the Company's Auburndale, Florida
facility. The estimated total cost to exit the facility is $2.3 million and
includes a $0.8 million loss on the sale and disposal of equipment, $0.6
million in future lease obligations, net of assumed sublease revenue and $0.9
million in other costs consisting primarily of employee severance, consulting
and employment obligations and other related fees. Of this $2.3 million
charge, which was recorded in the fourth quarter of 1999, $1.7 million has
been expended through October 1, 2000.
The Company believes that existing funds, cash generated from operations
and the debt facility 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.
Contingencies
The Company is involved in various legal disputes in the ordinary course of
business. In addition, the Environmental Protection Agency has designated the
Company as a potentially responsible party, along with numerous other
companies, for the clean up of several hazardous waste sites. Information at
this time does not indicate that disposition of any of the legal or
environmental disputes the Company is currently involved in will have a
material, adverse effect upon the financial condition, cash flows or
competitive position of the Company, but could possibly be material to the
consolidated results of operations of any one period.
Forward-Looking Information
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 forward-looking statements contained herein are based on
reasonable assumptions, any of those assumptions could prove to be inaccurate.
As a result, the forward-looking statements based on those assumptions could
also be incorrect. Please see the Company's 1999 Form 10-K and Form 10-Q for
period ended July 2, 2000 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.
16
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
In general, business enterprises can be exposed to market risks including
fluctuations in commodity prices, foreign currency values, and interest rates
that can affect the cost of operating, investing, and financing. The Company's
exposures to these risks are low. Over 90% of the Company's zinc business is
conducted on a tolling basis whereby customers supply zinc to the Company for
processing or supply contracts provide for fluctuations in the price of zinc
to be passed on to the customer.
The Company from time to time invests in short-term financial instruments
with original maturities usually less than thirty days. The Company is exposed
to short-term interest rate variations with respect to London Interbank
Offered Rate ("LIBOR") on its term and revolving debt obligations. A portion
of this risk has been managed through the use of an interest rate swap,
completed in 1999, whereby the Company effectively pays a maximum interest
rate of 7.48% on 60% of the outstanding term debt balance for a period of
three years.
Changes in LIBOR interest rates would affect the earnings of the Company
either positively or negatively depending on the changes in short-term
interest rates. Assuming that LIBOR rates increased 100 basis points over
period end rates on the outstanding term and revolver debt, the Company's
interest expense, after considering the effects of its interest rate swap,
would have increased by approximately $485,000 and $250,000 for the nine month
periods ended October 1, 2000 and September 26, 1999, respectively. The amount
was determined by considering the impact of the hypothetical interest rates on
the Company's borrowing cost, short-term investment rates, interest rate swap
and estimated cash flow. Actual changes in rates may differ from the
assumptions used in computing this exposure.
The Company does not invest or trade in any derivative financial or
commodity instruments, nor does it invest in any foreign financial
instruments.
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<PAGE>
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
The Company received a letter from Martin Franklin, Managing Partner of
Marlin Partners II, L.P., requesting the calling of a special meeting of
the shareholders. The purpose of the meeting would be to consider a
resolution to initiate a sale process of the Company. In a Form 8-K
(Commission File Number 0-21052) dated August 15, 2000, the Company
acknowledged receipt of Mr. Franklin's letter and indicated that his
request would be referred to the Company's Board of Directors.
In a Form 8-K (Commission File Number 0-21052) dated October 10, 2000,
the Company filed two press releases addressing the Company's expectations
for earnings for the year ended December 31, 2000 and clarifying the status
of the Company's review of its strategic options.
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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)
/s/ Kevin D. Bower
By: _________________________________
Kevin D. Bower
Senior Vice President and
Chief Financial Officer
Date: November 14, 2000
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ALLTRISTA CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
October 1, 2000
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
------- ----------- ----
<C> <S> <C>
27 Financial Data Schedule [EDGAR filing only]
</TABLE>
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