<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the quarterly period ended March 31 ,1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the transition period from to
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Commission File Number 0-22508
SEDA SPECIALTY PACKAGING CORP.
------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-3928988
- - --------------------------------- -------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
2501 West Rosecrans Avenue, Los Angeles, CA 90059-3510
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(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code (310) 635-4444
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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 .
--- ---
At May 1, 1996, the registrant had 5,097,500 shares of common stock outstanding.
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SEDA SPECIALTY PACKAGING CORP.
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I - Financial Information
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheet at March 31,1996
(unaudited) and December 31, 1995 2
Unaudited Condensed Consolidated Statement of Income for the
Three Months ended March 31, 1996 and 1995 3
Unaudited Condensed Consolidated Statement of Cash Flows for
the Three Months ended March 31, 1996 and 1995 4
Notes to Unaudited Condensed Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-7
Part II - Other Information
Items 1-6 are either not applicable or the required information is
included in the Financial Statements or Notes thereto included
in this Form 10-Q. NA
Signatures 8
</TABLE>
1
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SEDA SPECIALTY PACKAGING CORP. & Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands except share data) 1996 1995
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 2,430 $ 3,508
Accounts receivable, less allowance for doubtful accounts
of $554 at March 31, 1996 and $424 at December 31, 1995 9,702 9,022
Inventories 6,845 7,158
Prepaid expenses and other current assets 584 743
Deferred income taxes 1,030 1,120
----------------------
Total current assets 20,591 21,551
Property, plant and equipment, net 42,609 43,342
Other assets 1,019 989
----------------------
$ 64,219 $ 65,882
======================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,739 $ 3,838
Income taxes payable 532 650
Accrued liabilities 1,664 1,718
Current portion of long-term debt 3,557 3,582
Current portion of obligations under capital leases 483 493
----------------------
Total current liabilities 9,975 10,281
Line of credit -- 1,520
Long-term debt 11,550 12,453
Obligations under capital leases 708 805
Deferred income taxes 4,104 3,708
----------------------
Total liabilities 26,337 28,767
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Commitments and contingencies
Minority interest in consolidated subsidiary 301 301
----------------------
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized
none outstanding -- --
Common stock, $0.001 par value, 30,000,000 shares authorized,
5,097,500 shares issued and outstanding 5 5
Capital in excess of par value 26,983 26,983
Retained earnings 11,555 9,967
Treasury stock, at cost, 69,000 shares at March 31, 1996
and 13,000 shares at December 31, 1995 (962) (141)
----------------------
Total stockholders' equity 37,581 36,814
----------------------
$ 64,219 $ 65,882
======================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
2
<PAGE> 4
SEDA SPECIALTY PACKAGING CORP. & Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
(In thousands, except per share data) 1996 1995
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 14,943 $ 8,363
Cost of sales 9,999 5,864
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Gross profit 4,944 2,499
Selling expenses 981 618
General and administrative expenses 1,132 521
-------------------------
Income from operations 2,831 1,360
Interest expense 336 281
Other income (26) (43)
-------------------------
Income before income taxes 2,521 1,122
Provision for income taxes 933 370
-------------------------
Net income $ 1,588 $ 752
=========================
Earnings per common and
common equivalent share $ 0.30 $ 0.15
=========================
Weighted average number of common
and common equivalent shares 5,218 5,032
=========================
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
3
<PAGE> 5
SEDA SPECIALTY PACKAGING CORP. & Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
(In thousands) 1996 1995
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,588 $ 752
--------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,202 715
Change in allowance for doubtful accounts receivable 130 --
Deferred income taxes 485 267
Change in assets and liabilities:
Accounts receivable (810) (775)
Inventory 313 (712)
Prepaid expenses and other current assets 159 185
Other assets 82 299
Accounts payable (99) 608
Income taxes payable (118) 103
Accrued liabilities (54) (179)
--------------------
Total adjustments 1,290 511
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Net cash provided by operating activities 2,878 1,263
--------------------
Cash flows from investing activities:
Investment in ASC (112) (3,343)
Capital expenditures (469) (2,639)
--------------------
Net cash used in investing activities (581) (5,982)
--------------------
Cash flows from financing activities:
Repayments of lines of credit (1,520) --
Purchase of treasury stock (821) --
Proceeds from issuance of long-term debt -- 4,000
Principal payments of long-term debt and capital lease obligations (1,034) (488)
--------------------
Net cash provided by (used in) financing activities (3,375) 3,512
--------------------
Net decrease in cash and cash equivalents (1,078) (1,207)
Cash and cash equivalents at beginning of period 3,508 5,585
--------------------
Cash and cash equivalents at end of period $ 2,430 $ 4,378
====================
Other cash flow information:
Cash paid during the period for interest $ 338 $ 281
Cash paid during the period for taxes on income $ 500 $ --
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
4
<PAGE> 6
SEDA SPECIALTY PACKAGING CORP. & Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - UNAUDITED INTERIM INFORMATION
The accompanying unaudited condensed consolidated financial statements include
all adjustments which in the opinion of management are necessary for a fair
presentation of the information for the interim periods herein reported. The
unaudited condensed consolidated financial statements include amounts that are
based on management's best estimates and judgments. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates. These unaudited condensed consolidated financial statements should be
read in conjunction with the financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995 as filed with
the Securities and Exchange Commission. The results for the three months ended
March 31, 1996 are not necessarily indicative of results of operations for the
year ending December 31, 1996.
NOTE 2 - EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share is calculated using the weighted
average number of common shares issued and outstanding, adjusted for treasury
shares, and equivalent common shares derived from dilutive stock options and
warrants. The number of shares used in the calculations were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1996 1995
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(In thousands)
<S> <C> <C>
Average shares outstanding 5,069 5,015
Common stock equivalents 149 17
-------------------
Weighted average number of common and
common equivalent shares 5,218 5,032
===================
</TABLE>
NOTE 3 - INVENTORIES
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------------------------
(In thousands)
<S> <C> <C>
Finished goods $2,736 $2,771
Work-in-process 1,455 1,845
Raw materials 2,654 2,542
--------------------------
$6,845 $7,158
==========================
</TABLE>
5
<PAGE> 7
SEDA SPECIALTY PACKAGING CORP. & Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - MARCH 31, 1996 VS. 1995
RESULTS OF OPERATIONS:
Net sales for the three months ended March 31, 1996 increased approximately 79%
to $14.9 million compared to $8.4 million for the three months ended March 31,
1995. This increase resulted from an 84% increase in sales of containers and a
71% increase in sales of closures and custom products. Approximately 42% of the
increase in net sales was a result of the Company's acquisition of a majority
interest in American Safety Closure Corp. ("ASC") in mid 1995. The remaining
increases were largely due to increased demand from existing customers and an
expanding customer base. The increase in net sales was primarily a result of
increased quantities of products sold, a greater percentage of tubes with
dispensing closures, and higher average container prices resulting from a change
in product mix.
Gross profit for the three months ended March 31, 1996 increased approximately
98% to $4.9 million from $2.5 million in the comparable period of 1995. As a
percentage of net sales, gross profit increased to 33.1% for the three months
ended March 31, 1996, from 29.9% in the comparable period of the prior year. The
improvement in gross margin percentage was caused primarily by lower raw
material costs (approximately 4%), a favorable change in product mix reflecting
a greater percentage of higher margin products (approximately 3%), and improved
manufacturing economies related to higher production levels (approximately 2%),
partially offset by a higher percentage of third party dispensing closures on
tubes sold (approximately 3 %) and the consolidation of ASC which produced
products with lower gross margins than the other operations of the Company
(approximately 3%).
Selling expenses for the three months ended March 31, 1996 increased 59% to
$981,000 compared to $618,000 for the comparable period of the prior year. As a
percentage of net sales, selling expenses decreased to 6.6% for the three months
ended March 31, 1996 from 7.4% for the corresponding period of 1995. The changes
were due primarily to the inclusion of ASC selling expenses and higher freight
costs.
General and administrative expenses for the three months ended March 31, 1996
increased to $1,132,000 from $521,000 for the three months ended March 31, 1995.
As a percentage of sales, general and administrative expenses increased to 7.6%
for the three months ended March 31, 1996 from 6.2% for the same period in 1995.
The addition of ASC administrative expenses, higher salaries, higher bad debt
expenses and higher professional fees related to investment banking services
were the primary reasons for the increase in 1996.
Interest expense for the three months ended March 31, 1996 increased to $336,000
as compared to $281,000 in the same period in 1995, primarily as a result of the
addition of ASC interest bearing debt. Other income is primarily interest income
on short-term investments.
The higher effective tax rate for the first quarter of 1996 of 37.0% as compared
to 33.0% for the comparable period of 1995 reflects a reduction in the estimated
state income tax credits related to the Company's location in a designated
revitalization zone.
6
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term liquidity needs have generally consisted of operating
capital necessary to fund growth in receivables and inventory. It has satisfied
the short-term requirements with cash generated from operations and secured bank
lines of credit. Long-term liquidity needs generally relate to capital
expenditures necessary to expand the Company's manufacturing operations. The
Company meets its long-term liquidity requirements with cash generated from
operations and five-year secured notes or capital leases with banks and finance
companies. The Company believes that cash generated by operations, supplemented
as necessary with funds expected to be available under its bank credit agreement
(which expires June 30, 1997), will provide sufficient resources to meet present
and reasonably foreseeable working capital requirements, debt service and other
cash needs throughout the term of the agreement.
Cash provided by operations for the three months ended March 31, 1996 was $2.9
million as compared to $1.3 million for the same period of 1995, reflecting the
higher net income in the first quarter of 1996. Cash used for the acquisition of
machinery and equipment was $0.5 million in the first three months of 1996
compared to $2.6 million for the same period of 1995. Cash used in the first
three months of 1996 related to the acquisition of ASC was only $0.1 million
compared to $3.3 million in the first three months of 1995. Cash used in
financing activities during the three months ended March 31, 1996 was $3.4
million as compared to $3.5 million cash provided by financing activities in the
first three months of 1995, due to new long-term debt of $4.0 million in 1995
versus the repayment of $1.5 million on the Company's line of credit and the
purchase of treasury stock in the first three months of 1996.
7
<PAGE> 9
SEDA SPECIALTY PACKAGING CORP.
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 thereunto duly authorized.
SEDA SPECIALTY PACKAGING CORP.
--------------------------------------------------
(Registrant)
Date May 13, 1996 Shawn Sedaghat
-------------------- --------------------------------------------------
Shawn Sedaghat
Chairman, President and Chief Executive Officer
Date May 13, 1996 Ronald W. Johnson
-------------------- --------------------------------------------------
Ronald W. Johnson
Vice President of Finance, Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
COMPANY'S MARCH 31, 1996 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STAEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,430
<SECURITIES> 0
<RECEIVABLES> 10,256
<ALLOWANCES> 554
<INVENTORY> 6,845
<CURRENT-ASSETS> 20,591
<PP&E> 54,855
<DEPRECIATION> 12,246
<TOTAL-ASSETS> 64,219
<CURRENT-LIABILITIES> 9,975
<BONDS> 12,258
0
0
<COMMON> 5
<OTHER-SE> 37,576
<TOTAL-LIABILITY-AND-EQUITY> 64,219
<SALES> 14,943
<TOTAL-REVENUES> 14,943
<CGS> 9,999
<TOTAL-COSTS> 9,999
<OTHER-EXPENSES> 2,113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 336
<INCOME-PRETAX> 2,521
<INCOME-TAX> 933
<INCOME-CONTINUING> 1,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,588
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
