<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
FORM 10-Q
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 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 April 30, 2000
----- -----------------------------
<S> <C>
Common Stock, without par value 6,309,640 shares
</TABLE>
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<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
For the period ended April 2, 2000
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Condensed Consolidated Statements of Income for the three
month periods ended April 2, 2000 and March 28, 1999............... 3
Unaudited Statements of Comprehensive Income for the three month
periods ended April 2, 2000 and March 28, 1999..................... 4
Unaudited Condensed Consolidated Balance Sheets at April 2, 2000 and
December 31, 1999.................................................. 5
Unaudited Condensed Consolidated Statements of Cash Flows for the
three month periods ended April 2, 2000 and March 28, 1999......... 6
Notes to Unaudited Condensed Consolidated Financial Statements...... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.... 13
PART II. OTHER INFORMATION.............................................. 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALLTRISTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three month
period ended
------------------
April March 28,
2, 2000 1999
------- ---------
<S> <C> <C>
Net sales................................................... $81,292 $51,634
Costs and expenses
Cost of sales............................................. 62,597 39,341
Selling, general and administrative expenses.............. 13,398 8,207
Goodwill amortization..................................... 1,551 349
------- -------
Operating earnings.......................................... 3,746 3,737
Interest expense, net....................................... (3,071) (568)
------- -------
Income from continuing operations before taxes and minority
interest................................................... 675 3,169
Provision for income taxes.................................. (263) (1,206)
Minority interest in loss of consolidated subsidiary........ 32 --
------- -------
Income from continuing operations........................... 444 1,963
Discontinued operations:
Gain on disposal of discontinued operations, net of income
tax expense.............................................. -- 136
------- -------
Net income.............................................. $ 444 $ 2,099
======= =======
Basic earnings per share:
Income from continuing operations......................... $ .07 $ .29
Discontinued operations................................... -- .02
------- -------
Net income.............................................. $ .07 $ .31
======= =======
Diluted earnings per share:
Income from continuing operations......................... $ .07 $ .29
Discontinued operations................................... -- .02
------- -------
Net income.............................................. $ .07 $ .31
======= =======
Weighted average shares outstanding:
Basic..................................................... 6,421 6,749
Diluted................................................... 6,474 6,844
</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
------------------
April 2, March 28,
2000 1999
-------- ---------
<S> <C> <C>
Net income................................................... $444 $2,099
Foreign currency translation................................. (206) 110
---- ------
Comprehensive income......................................... $238 $2,209
==== ======
</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>
April 2, December 31,
ASSETS 2000 1999
------ -------- ------------
<S> <C> <C>
Current assets
Cash and cash equivalents.................................. $ 1,855 $ 17,394
Accounts receivable, net................................... 49,643 36,931
Inventories:
Raw materials and supplies............................... 11,753 17,155
Work in process.......................................... 15,781 9,400
Finished goods........................................... 40,419 31,353
Deferred taxes on income..................................... 6,794 6,794
Prepaid expenses............................................. 2,624 2,449
-------- --------
Total current assets................................... 128,869 121,476
-------- --------
Property, plant and equipment, at cost....................... 177,449 174,026
Accumulated depreciation..................................... (87,541) (84,160)
-------- --------
89,908 89,866
Goodwill, net................................................ 112,998 115,276
Other assets................................................. 11,982 12,133
-------- --------
Total assets........................................... $343,757 $338,751
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities
Current portion of long-term debt.......................... $ 20,344 $ 19,094
Notes payable.............................................. 17,526 607
Accounts payable........................................... 33,166 26,895
Accrued salaries, wages and employee benefits.............. 9,629 10,889
Other current liabilities.................................. 6,059 9,380
-------- --------
Total current liabilities.............................. 86,724 66,865
-------- --------
Noncurrent liabilities
Long-term debt............................................. 115,987 121,060
Deferred taxes on income................................... 11,348 11,865
Other noncurrent liabilities............................... 15,067 14,554
-------- --------
Total noncurrent liabilities........................... 142,402 147,479
-------- --------
Minority interest in subsidiary.............................. 1,388 1,382
-------- --------
Contingencies................................................ -- --
Shareholders' equity:
Common stock (7,964,766 common shares issued and 6,309,703
shares outstanding at April 2, 2000)...................... 39,860 39,952
Retained earnings.......................................... 113,675 113,231
Accumulated other comprehensive loss-cumulative translation
adjustment................................................ (625) (419)
-------- --------
152,910 152,764
Less: treasury stock (1,655,063 shares at cost at April 2,
2000)....................................................... (39,667) (29,739)
-------- --------
Total shareholders' equity............................. 113,243 123,025
-------- --------
Total liabilities and shareholders' equity............. $343,757 $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>
Three month
period ended
------------------
April 2, March
2000 28, 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income............................................... $ 444 $ 2,099
Reconciliation of net income to net cash provided by
operating activities:
Depreciation........................................... 3,527 2,226
Amortization........................................... 1,652 408
Deferred employee benefits............................. 399 63
Minority interest...................................... (32) --
Other, net............................................. 326 (45)
Changes in working capital components.................... (20,893) (22,745)
-------- --------
Net cash used in operating activities................ (14,577) (17,994)
-------- --------
Cash flows from financing activities
Proceeds from revolving credit borrowings................ 20,082 2,900
Payments on revolving credit borrowings.................. (3,164) --
Payments on notes payable................................ (3,823) --
Proceeds from issuance of common stock................... 458 258
Purchase of treasury stock............................... (10,485) (910)
-------- --------
Net cash provided by financing activities............ 3,068 2,248
-------- --------
Cash flows from investing activities
Additions to property, plant and equipment............... (4,076) (4,226)
Proceeds from sale of property, plant and equipment...... -- 866
Proceeds from divestitures of businesses and product
lines................................................... -- 362
Investments in insurance contracts....................... -- (274)
Other, net............................................... 46 (172)
-------- --------
Net cash used in investing activities................ (4,030) (3,444)
-------- --------
Net decrease in cash....................................... (15,539) (19,190)
Cash and cash equivalents, beginning of period............. 17,394 21,454
-------- --------
Cash and cash equivalents, end of period................... $ 1,855 $ 2,264
======== ========
</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
------------------
April 2, March 28,
2000 1999
-------- ---------
<S> <C> <C>
Income from continuing operations..................... $ 444 $1,963
Discontinued operations............................... -- 136
----- ------
Net income........................................ $ 444 $2,099
===== ======
Weighted average shares outstanding................... 6,421 6,749
Additional shares assuming conversion of stock
options.............................................. 53 95
----- ------
Weighted average shares outstanding assuming
conversion........................................... 6,474 6,844
===== ======
Basic earnings per share:
Income from continuing operations................... $ .07 $ .29
Discontinued operations............................. -- .02
===== ======
Net income........................................ $ .07 $ .31
===== ======
Diluted earnings per share--assuming conversion:
Income from continuing operations................... $ .07 $ .29
Discontinued operations............................. -- .02
----- ------
Net income........................................ $ .07 $ .31
===== ======
</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. The pro forma adjustments do not reflect any benefits from
operational synergies that may result from the acquisition of Triangle
Plastics. (In thousands except per share data.)
<TABLE>
<CAPTION>
Three month
period ended
March 28, 1999
--------------
<S> <C>
Net sales.................................................. $73,515
Income from continuing operations.......................... 718
Net income................................................. 854
Diluted earnings per share:
Income from continuing operations........................ $ .10
Net income............................................... $ .12
</TABLE>
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 toilet, 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.
8
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Net sales, operating earnings and assets employed in operations by segment
are summarized as follows (thousands of dollars):
<TABLE>
<CAPTION>
Three month period
ended
-------------------
April 2, March 28,
2000 1999
-------- ---------
<S> <C> <C>
Net Sales:
Metal products
Consumer products...................................... $ 17,498 $ 12,380
Zinc products.......................................... 15,865 13,572
Other.................................................. 63 --
-------- --------
Total metal products................................. 33,426 25,952
-------- --------
Plastic products:
Industrial thermoformed parts.......................... 36,608 9,264
Injection molded products.............................. 11,888 9,044
Plastic packaging...................................... -- 7,727
-------- --------
Total plastic products............................... 48,496 26,035
-------- --------
Intercompany............................................. (630) (353)
-------- --------
Total net sales...................................... $ 81,292 $ 51,634
======== ========
Operating earnings:
Metal products........................................... $ 1,843 $ 1,671
Plastic products......................................... 2,112 2,349
Intercompany............................................. (18) (56)
Unallocated corporate expenses........................... (191) (227)
-------- --------
Total operating earnings............................. 3,746 3,737
Interest expense, net...................................... (3,071) (568)
-------- --------
Income from continuing operations before taxes and minority
interest.................................................. $ 675 $ 3,169
======== ========
<CAPTION>
April 2, March 28,
2000 1999
-------- ---------
<S> <C> <C>
Assets employed in operations:
Metal products........................................... $110,673 $101,558
Plastic products......................................... 214,059 55,697
-------- --------
Total assets employed in operations.................. 324,732 157,255
Corporate (1)............................................ 19,025 16,031
-------- --------
Total assets......................................... $343,757 $173,286
======== ========
</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. 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 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 1999, $1.5 million has been expended through
April 2, 2000.
6. Contingencies
On May 19, 1997 the Company purchased certain assets and assumed certain
liabilities of Viking Industries. To date, the Company has paid $9.4 million
and, in accordance with the terms of the asset purchase agreement and
subsequent amendment, could pay up to an additional $4.0 million based upon
incremental sales over the next fourteen months. The former owner has
initiated arbitration proceedings in an effort to accelerate payment of the
additional $4.0 million.
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
(licensee) alleges damages in excess of $500,000. In addition, at April 2,
2000, the Company had a receivable of approximately $749,000 recorded in its
consolidated balance sheet for royalties due from the licensee. Subsequent
collections have reduced this receivable to $191,000. The Company is prepared
to vigorously defend the action and pursue collection of its remaining
receivable; however, collection of the receivable and future royalties are
dependent upon the ultimate outcome of the lawsuit. In accordance with the
terms of the Triangle Plastics asset purchase agreement, the former owner is
obligated to pay the first $500,000 of defense costs related to this action.
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, results of operations,
cash flows or competitive position of the Company.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Continuing Operations--Comparing First Quarter 2000 to First
Quarter 1999
The Company reported net sales of $81.3 million for the first three months
of 2000, an increase of 57.4% from sales of $51.6 million for the same 1999
period. Operating earnings of $3.7 million for the first three months were
level with the 1999 period. The metal products segment reported higher sales
and earnings. The plastic products segments reported higher sales with lower
earnings.
Net sales within the metal products segment increased from $26.0 million in
the first three months of 1999 to $33.4 million in 2000. Sales of consumer
products increased $5.1 million primarily due to early demand from retailers
for home canning supplies. Sales of zinc products increased $2.3 million with
the majority of the increase coming from the sale of strip and other
industrial products. Penny blank shipments to the U.S. Mint were substantially
equal to last year while shipments to the Royal Canadian Mint decreased. The
average price of zinc ingot increased 9.6% in the first three months of 2000
compared to the same 1999 period adding approximately $1.4 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 from $26.0 million
in the first three months of 1999 to $48.5 million in 2000. Triangle Plastics,
which was acquired on April 25, 1999, contributed $26.4 million to 2000 sales.
Industrial thermoformed part sales to appliance manufacturers increased $1.8
million on increased demand for refrigerators. Bath product sales decreased
$1.1 million, as the manufactured housing market remains soft. The Company
does not anticipate a recovery in the manufactured housing market during 2000.
Sales of injection molded products increased by $2.8 million. New customers
and increased sales to ammunition manufacturers accounted for $2.0 million of
this increase. Sales from the plastic packaging product line (disposed of May
24, 1999) were $7.7 million in the first three months of 1999.
The Company anticipates sales of truck parts will be lower in 2000 as
compared to the previous year. Orders for truck parts have declined as
manufacturers have slowed production. The ability of operators to purchase
trucks has diminished due to increased fuel and interest costs. Parts for
Class 8 (heavy) trucks accounted for approximately 18% of the Company's 1999
net sales within the plastic products segment on a pro forma basis, as if the
acquisition of Triangle Plastics and the disposal of the plastic packaging
product line had occurred at the beginning of 1999.
Gross margin percentages decreased from 23.8% in the first three months of
1999 to 23.0% in the first three months of 2000. Plastic products, which
generally sell for lower margins than metal products, represented 59% of total
2000 net sales compared to 50% in 1999. Gross margin percentages on plastic
products decreased slightly from 20.0% in 1999 to 19.5% in 2000 due to several
factors. First, resin prices have steadily 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
Company has experienced operating inefficiencies relating to the transfer of
bath product production from the El Dorado, Arkansas facility to the
Auburndale, Florida facility. Efficiencies are expected to improve for the
remainder of the year. As previously noted, the manufactured housing market
remains soft. The full benefit from the facility consolidation will not be
realized until market conditions improve. Third, sales of material handling
products have shifted from higher margin proprietary products to lower margin
custom dunnage for the automotive industry. This shift was partly due to a
decision made by the United States Postal Service in 1999 not to purchase
hampers from the Company in 2000. Finally, gross margins on the plastic
packaging products for the first three months of 1999 were extraordinarily
high. The Company did not believe these margins were sustainable and the
product line was divested in the second quarter of 1999. Gross margin
percentages on metal products increased slightly from 27.6% to 28.0%.
Selling, general and administrative expenses as a percentage of net sales
increased from 15.9% in the first three months of 1999 to 16.5% for the first
three months of 2000. Expenses within the plastics segment have increased
during the first three months of 2000 compared to the first three months of
1999 due to the Company's
11
<PAGE>
formation of a dedicated marketing organization for its plastic furniture line
and addition of sales, engineering and product development personnel. The
acquisition of Triangle Plastics and disposal of the plastic packaging product
line also resulted in increased expenses during the first three months of 2000
compared to the first three 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 support such services. Warehousing, freight and
sales and marketing costs for consumer products also increased expenses in the
metal products segment. Higher fuel cost and a higher concentration of
consumer products shipped to the west coast increased freight cost. The
Company experienced higher levels of glass breakage relating to a recently
introduced specialty glassware item. The Company has modified the packaging of
this product to reduce damages and is filing a claim with the vendor. Also in
the metals segment, the Company's research and development of new battery
technology applications and a two-week maintenance shut down of the zinc
products facility, delayed from December 1999, increased expenses as a
percentage of sales. The maintenance shut down cost was approximately
$350,000.
Goodwill amortization expense increased from $0.3 million in 1999 to $1.6
million in 2000 due to the acquisition of Triangle Plastics.
Interest expense, net in the first three months of 2000 was $3.1 million
compared to $0.6 million for the same period last year. The increase was
primarily due to increased borrowings to finance the Triangle Plastics
acquisition. The Company's effective tax rate increased from 38.0% in the
first three months of 1999 to 39.0% in the first three months of 2000 due
primarily to foreign losses for which a tax benefit has not been recorded.
Income from continuing operations decreased from $2.0 million in the first
three months of 1999 to $0.4 million in the first three months of 2000.
Diluted earnings per share from continuing operations was $0.07 for the first
three months of 2000 compared to $0.29 for the same 1999 period. Diluted
weighted average shares outstanding decreased from 6,844,000 in the first
three months of 1999 to 6,474,000 in 2000 due to the Company purchasing its
common stock in the open market. Due to the seasonality of home food
preservation, the Company's first quarter results of operations have less of
an impact on full year results.
Financial Condition, Liquidity and Capital Resources
Working capital (excluding the current portion of long-term debt and notes
payable) increased $5.7 million from $74.3 million at year-end 1999 to $80.0
million at April 2, 2000. Accounts receivable increased $12.7 million on
increased sales across most product lines. Inventories and accounts payable
increased $10.0 million and $6.3 million, respectively, due to the customary
build-up in anticipation of seasonal home canning activity. Cash and cash
equivalents decreased $15.5 million and short-term borrowings increased $16.9
million to fund seasonal working capital requirements and to fund the
Company's stock repurchase program.
During the first three 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 April 2,
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 $4.1 million in the first three months of 2000
compared to $4.2 million for the same period in 1999 and are largely related
to maintaining facilities and improving manufacturing efficiencies. The
largest 2000 expenditures included new injection molding machines to support
growth and an investment in a new high precision slitting line for zinc
products.
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.
12
<PAGE>
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 1999, $1.5 million has been expended through
April 2, 2000.
Contingencies
On May 19, 1997 the Company purchased certain assets and assumed certain
liabilities of Viking Industries. To date, the Company has paid $9.4 million
and, in accordance with the terms of the asset purchase agreement and
subsequent amendment, could pay up to an additional $4.0 million based upon
incremental sales over the next fourteen months. The former owner has
initiated arbitration proceedings in an effort to accelerate payment of the
additional $4.0 million.
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
(licensee) alleges damages in excess of $500,000. In addition, at April 2,
2000, the Company had a receivable of approximately $749,000 recorded in its
consolidated balance sheet for royalties due from the licensee. Subsequent
collections have reduced this receivable to $191,000. The Company is prepared
to vigorously defend the action and pursue collection of its remaining
receivable; however, collection of the receivable and future royalties are
dependent upon the ultimate outcome of the lawsuit. In accordance with the
terms of the Triangle Plastics asset purchase agreement, the former owner is
obligated to pay the first $500,000 of defense costs related to this action.
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, results of operations,
cash flows or competitive position of the Company.
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 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.
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
13
<PAGE>
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 $150,000 for the three month period
ended April 2, 2000. 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.
Since the debt obligation and related interest rate swap to which this
exposure relates was put in place during the second quarter of 1999, a
comparative analysis of the impact of interest rate changes on prior periods
would not be meaningful.
The Company does not invest or trade in any derivative financial or
commodity instruments, nor does it invest in any foreign financial
instruments.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
<TABLE>
<C> <S> <C>
27 Financial Data Schedule
</TABLE>
b. Reports on Form 8-K
None.
14
<PAGE>
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: May 15, 2000
_________________________________
15
<PAGE>
ALLTRISTA CORPORATION AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
April 2, 2000
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
------- ----------- ----
<C> <S> <C>
27 Financial Data Schedule [EDGAR filing only]
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME
FOUND IN THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> APR-02-2000
<CASH> 1855
<SECURITIES> 0
<RECEIVABLES> 49643
<ALLOWANCES> 0
<INVENTORY> 67953
<CURRENT-ASSETS> 128869
<PP&E> 177449
<DEPRECIATION> 87541
<TOTAL-ASSETS> 343757
<CURRENT-LIABILITIES> 86724
<BONDS> 115987
0
0
<COMMON> 39860
<OTHER-SE> 73383
<TOTAL-LIABILITY-AND-EQUITY> 343757
<SALES> 81292
<TOTAL-REVENUES> 81292
<CGS> 62597
<TOTAL-COSTS> 77546
<OTHER-EXPENSES> (32)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3071
<INCOME-PRETAX> 707
<INCOME-TAX> 263
<INCOME-CONTINUING> 444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 444
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
