SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED MARCH 31, 1999.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File No.: 0-23474
TRIPLE S PLASTICS, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-1895876
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14320 Portage Road, Vicksburg, Michigan 49097-0905
(Address of principal executive offices) (Zip Code)
(616)649-0545
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, no par value
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
As of May 31, 1999, there were 3,751,249 shares of the registrant's common
stock, no par value, outstanding. The aggregate market value of the common stock
held by non-affiliates of the registrant (i.e., excluding shares held by
executive officers, directors, and control persons as defined in Rule 405) on
that date was approximately $11,191,877 computed on the closing price on that
date.
Portions of the Company's definitive Proxy Statement for its 1999 Annual Meeting
of Shareholders are incorporated by reference into Part III.
Exhibit Index located at page 30
Page 1 of 33
<PAGE>
PART I
Item 1. Business
(a) General Development of Business
Triple S Plastics, Inc. (the "Company" or "Triple S") was organized as a
Michigan corporation in 1969, when injection molding operations began in a
leased facility in Kalamazoo, Michigan. The building that currently houses
the Company's headquarters and principal manufacturing operations in
Vicksburg, Michigan, was constructed in 1974. In 1978, the Company
constructed a second injection molding facility (originally known as Victor
Plastics) and also constructed its Satellite Mold facility, which is
dedicated to mold production, both in Vicksburg. In 1983, the Company
supplemented its mold building capacity by acquiring the A-Tech Mold
manufacturing plant in Schoolcraft, Michigan. Also in 1983, the Company
built its injection molding plant in Tucson, Arizona.
The Company completed an initial public offering of its common stock in
March of 1994. Proceeds of that offering were used to finance building
expansions, purchase new equipment for those facilities, retire existing
debt and fund working capital needs.
Triple S completed two construction projects in fiscal 1995 for the purpose
of expanding its injection molding capacity. A new 64,000 square foot
facility was constructed in a modern industrial park in Battle Creek,
Michigan. In addition, the Company completed a 52,000 square foot expansion
of its Tucson, Arizona facility. In October 1995, the Company began
operations in a 64,000 square foot leased injection molding facility in
Georgetown, Texas. (See Item 2, Properties)
In fiscal 1998, the Company consolidated the operations of its Victor
Plastics plant into its Vicksburg facility and its Battle Creek facility.
The Victor Plastics facility is currently being leased to a third party. In
fiscal 1998, the Company also consolidated its A-Tech Mold manufacturing
operation into its Satellite Mold facility in Vicksburg, Michigan, and
renamed the operation Triple S Plastics, Inc. Tooling and Technology
Centre. (See Item 2, Properties)
In fiscal 1999, the Company purchased the assets of Dynacept Company, Inc.
Dynacept is a preeminent rapid prototyping and model making organization that
produces concept models, appearance models, engineering prototypes and
pre-production samples using a wide range of techniques including
stereolithography, conventional modeling techniques and RTV rubber molding,
along with advanced painting and decorating processes. The 11,000 square foot
facility is located in Westchester County, New York. (See Item 2, Properties)
(b) Financial Information About Segments
The Company's operations are in one segment--the manufacture of
thermoplastic components, most of which are complex, highly engineered
components primarily for sale to original equipment manufacturers. The
Company has no significant export sales. Product and major customer
information is disclosed in Item 1(c).
(c) Narrative Description of Business
GENERAL
Triple S manufactures complex, highly engineered thermoplastic components
and the molds to produce those components primarily for the
telecommunications, medical/pharmaceutical, information technologies,
consumer products and automotive markets. During the most recent fiscal
year, the Company manufactured over 2,000 different components for more than
250 customers in these markets. The Company considers rapid prototyping,
model making, mold building and molded component manufacturing to be
integral parts of its business. The Company manufactures only custom
components based on customer specifications and, therefore, is generally the
exclusive source of supply for the product being sold to the customer,
although customers generally use more than one molder.
The Company's product development and production operations include rapid
prototyping, model making, design assistance, component engineering, mold
design, prototype and production mold construction, process engineering and
high quality component production. In addition, the Company provides value
added post-molding assembly and finishing operations, including ultrasonic
welding, heat staking, solvent bonding, decorative services, machining and
press-side packaging. Mold delivery lead time and component quality are
generally key factors in the award of contracts for complex components. The
Company has made significant investments in state-of-the-art CAD/CAM systems
and related design and machining equipment to accelerate its component mold
design and construction process. Each injection molding machine is equipped
with a computerized process controller to continuously monitor component
quality and consistency. The Company believes that its integrated
operations, ability for short lead-time mold delivery and product quality
provide competitive advantages in the markets in which it operates.
Certain developments in markets served by the Company have created growth
opportunities for suppliers of plastic components. Efforts to reduce weight,
enhance design flexibility and reduce costs have resulted in the
substitution of plastic for wood, glass, paper, metal and other materials
in numerous applications. In addition, Original Equipment Manufacturers
(OEMs) are continuing to outsource not only the manufacture but also the
design, engineering and assembly of plastic components to qualified
suppliers. OEMs are consolidating their purchases with larger, integrated
components suppliers that possess full-service capabilities for all
functions from mold design through post-molding assembly and finishing
operations. The Company believes that its technical expertise with respect
to plastic resins and injection molding technology, and its capacity for
full service, high-quality response to the needs of customers will enable
the Company to grow as a result of these market dynamics.
MARKETS AND PRODUCTS
The Company produces components for customers that operate principally in
five markets: telecommunications, medical/pharmaceutical, information
technologies, consumer products and automotive.
The following table summarizes each of the Company's markets as a percentage
of total sales:
% of Sales
Market 1999 1998 1997
-------------------------------- ------ ------ ------
Telecommunications 37% 15% 11%
Medical/Pharmaceutical 13% 14% 11%
Information Technologies 11% 15% 24%
Consumer Products 25% 38% 32%
Automotive 11% 15% 18%
Other 3% 3% 4%
TELECOMMUNICATIONS MARKET. Customers in this market manufacture products
such as cellular phones, pagers and related accessories. Customers in this
market require high levels of CAD assisted design engineering, thin-wall
molding, in-mold decorating and assembly. Because of the Company's expertise
in these areas and the strong growth demonstrated by OEMs in this market,
telecommunications is a target market for growth for the Company. Sales to
one customer in this market, Nokia Mobile Phones, accounted for 34%, 12% and
4% of total sales for fiscal 1999, 1998 and 1997, respectively.
MEDICAL/PHARMACEUTICAL MARKET. Customers in the medical/pharmaceutical
market are comprised primarily of manufacturers of durable medical equipment
for use in non-sterile, non-invasive applications. Products sold to
customers in this market include components for hospital stretchers and
beds, disposable wound irrigation instruments, intravenous hose connectors,
urological appliances and glucose test kits. The Company has targeted this
market for expansion because customers tend to require product engineering
services for high volume components with close tolerances and post-molding
assembly and finishing services.
INFORMATION TECHNOLOGIES. Customers in the information technologies market
are primarily manufacturers of computers, printers, copy machines, laser
scanners and bar code readers. The products supplied by the Company to
these customers include components for personal computers and peripheral
equipment, and laser and bar code scanners. The decrease in sales noted
above represents the completion of several customer projects during 1998
and the relocation of new projects overseas. Shortened product life cycles
in this market have driven OEMs to find and work closely with suppliers who
can effectively compress lead times through concurrent engineering and
accelerated mold deliveries.
CONSUMER PRODUCTS MARKET. Customers in the consumer products market
manufacture products such as home entertainment devices, garden equipment,
office equipment, and photographic equipment. Products sold to customers in
this market include CD player enclosures, chain saws and string trimmers,
paper binding equipment, camera components, and various housings and covers.
The Company expects the use of plastics in this broad market to continue to
grow as new thermoplastic resins evolve, with higher strengths, better
impact and heat resistance and other physical properties that will increase
the substitution of plastics for other materials. Sales to one customer in
this market, McCulloch Corporation, accounted for 4%, 15% and 14% of total
sales for fiscal 1999, 1998 and 1997, respectively. See discussion regarding
McCulloch Corporation in Item 7.
AUTOMOTIVE MARKET. Sales in the automotive market are made mostly to
first-tier suppliers to automobile manufacturers. Products sold to customers
in this market include outside mirror shells, interior mechanical and
seating components, headlight adjustment brackets, and components for
electrical and audio systems. Automotive OEMs and first-tier suppliers are
relying on fewer vendors possessing broader capabilities. First-tier
suppliers have been increasing the outsourcing of the design and manufacture
of plastic components and are purchasing more complex subassemblies from a
shrinking base of suppliers. While this market becomes increasingly
competitive, the Company believes it has the capabilities to serve many
customers in this market. The Company's Battle Creek, Michigan facility was
constructed in fiscal 1995 to more effectively serve the Company's
automotive customers.
SALES AND MARKETING
The Company currently markets its services on a national basis through its
direct sales force of six people and six independent manufacturers'
representative organizations.
OPERATIONS
Triple S Plastics, Inc. is a full-service custom injection molder, providing
rapid prototyping and design models, mold design and engineering services,
mold manufacturing, injection molding, and post-molding assembly and
finishing operations to a diverse base of customers.
At its subsidiary, Dynacept Corporation, located in Westchester County,
New York, the Company produces concept models, appearance models,
engineering prototypes and pre-production samples using a wide range of
techniques including stereolithography, conventional modeling techniques and
RTV rubber molding, along with advanced painting and decorating processes.
The Company designs, engineers and constructs molds used to produce
thermoplastic components at its Tooling and Technology Centre in Vicksburg,
Michigan. This facility is equipped with modern design and machining
equipment, including CAD/CAM systems, translators and plotters, electrical
discharge machining equipment, CNC milling equipment and miscellaneous
support equipment. The Company's mold production capacity is generally
devoted to the production of molds to be used by the Company for the
production of injection molded components for its customers. In
substantially all cases, the customer owns the mold, but possession is
retained by the Company for production. The Tooling and Technology Centre
also conducts prototype and development projects, frequently in conjunction
with resin suppliers and customers' engineers. Through the many projects
undertaken at its Tooling and Technology Centre, the Company has gained
experience with nearly all resins currently in use for injection molding.
This expertise combined with the Company's injection molding production
experience enables the Company to provide innovative solutions for its
customers.
The Company has four facilities that are full service custom injection
molding plants with post-molding secondary operations. These facilities
collectively house 98 horizontal injection molding machines with
capacities ranging from 55 tons to 720 tons and 1 vertical machine with
capacity of 40 tons. Each machine utilizes a computerized process controller
that continuously monitors key process parameters on a real time basis and
signals the operator if any parameter falls outside predetermined
statistical limits. The injection molding process is supported by automated
systems for raw material drying, conveying and regrinding. Three of the
Company's plants have received ISO 9002 certification, an international
quality standard. The Company is also pursuing certificatino of its facility
in Battle Creek, Michigan.
Value added post-molding secondary services, including ultrasonic inserting
and welding, heat staking, solvent bonding, finishing, machining, assembly
and on-line packaging are offered to the Company's customers. These
important services support the customers' requirements for subassembled
components, which provide cost savings and manufacturing efficiencies.
RAW MATERIALS
The principal raw materials used by the Company are thermoplastic resins.
The Company uses over 490 different resins, nearly all of which are
classified as engineering grade resins, as compared to lower priced
commodity grade resins. Resins are generally purchased for the production
of existing orders. The Company purchases its raw materials from several
different sources, and these materials are available from several
suppliers.
PATENTS AND TRADEMARKS
The Company does not own any patents, registered trademarks or licenses,
although the Company claims certain common law trademark rights. In
general, the Company relies on its technological capabilities, manufacturing
quality control and know-how, rather than patents, in the conduct of its
business.
WORKING CAPITAL
The Company's primary cash requirements are for operating expenses and
capital expenditures. Historically, the Company's main sources of cash
have been from operations, bank borrowings and industrial revenue bonds.
The Company has adequate liquidity and expects this to continue into the
future.
BACKLOG
At March 31, 1999, the Company's backlog was approximately $15 million,
which is comparable to the previous year. Backlog generally does not exceed
one quarter's manufacturing capacity and the Company's customers generally
do not issue purchase orders for more than the next quarter's requirements.
Management believes that all of the existing backlog will be completed
during the current fiscal year.
COMPETITION
The injection molding business in the Company's markets is highly
competitive. The Company focuses on complex components with close
tolerances where it competes principally on the basis of technical
expertise, customer service, product quality and rapid mold production,
although price is also an important competitive factor. There are many
suppliers of plastic injection molded components, including many that are
larger than the Company with greater financial resources.
EMPLOYEES
At March 31, 1999, the Company employed 574 full time and 2 part time
employees. The Company has no employees who are represented by a labor
union, and considers its relations with its employees to be good.
Item 2. Properties
The following table sets forth information regarding the Company's rapid
prototyping, model making, mold making and component production facilities:
Location Size Function
Tucson, Arizona 92,000 sq. ft. Injection molding, post-
molding operations and office
Battle Creek, Michigan 64,000 sq. ft. Injection molding, post-molding
operations and office
Georgetown, Texas 64,000 sq. ft. Injection molding, post-molding
operations and office
Vicksburg, Michigan 59,000 sq. ft. Corporate headquarters, injection
molding, post-molding operations
and warehouse
Vicksburg, Michigan 32,000 sq. ft. Mold manufacturing, Technology
Centre and office
Westchester Cnty, New York 11,000 sq. ft. Rapid prototyping, model making
and office
The Company owns all of its facilities except for the Texas and New York
facilities, which are leased. In addition, the Company owns a 40,000 sq. ft.
facility in Vicksburg, Michigan which is leased to a third party. The Company's
current facilities are considered suitable and adequate for current and
near-term production needs. See discussion regarding utilization of facilities
in Item 7.
Item 3. Legal Proceedings
On March 4, 1998, Capital Vials, Inc. ("Capital Vials"), filed a lawsuit
against the Company alleging that the process used by the Company to produce
certain vials infringed one or more of Capital Vials' patents. Discovery in
this proceeding, which is pending in the United States District Court in
Arizona, is substantially complete. The Company has denied infringement on the
grounds of invalidity and non-infringement and has asserted an antitrust
counterclaim arising from Capital Vials' alleged fraud on the Patent Office in
obtaining the patent. These actions have been consolidated and a trial has been
scheduled for September 13, 1999. In addition, the parties have filed
dispositive motions for the respective claims; the parties anticipate a ruling
on those motions during the second quarter of the Company's fiscal year. The
parties did conduct a "Markman" hearing on May 4 through 5, 1999, to determine
the scope of the patent claims which Capital Vials alleges have been infringed
by the Company. The Company expects a decision on this hearing in the latter
portion of its first quarter. The Company has not produced or sold vials using
the alleged patented process and has acquired a letter of non-infringement from
a patent attorney based upon both the invalidity of Capital Vials' patent and
the non-infringement by the Company. The Company continues to defend its
position vigorously. At this time, management does not expect the ultimate
resolution of this matter to have a material adverse effect on the Company's
consolidated financial condition. However, the outcome of this matter is not
subject to prediction with certainty.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter ended March 31, 1999.
Additional Item: Executive Officers of the Registrant
The following table lists the names, ages and positions of all of the Company's
executive officers. Officers are elected annually by the Board of Directors
at the first meeting of the Board following the annual meeting of shareholders.
- -----------------------------------------------------------------------------
Name Age Position
- -----------------------------------------------------------------------------
Daniel B. Canavan 45 Chairman of the Board and Chief Executive Officer
Victor V. Valentine, Jr. 53 President
Robert D. Monk 48 Vice President of Finance, Chief Financial
Officer, Secretary/Treasurer
Michael E. Zaagman 41 Vice President of Operations
Phillip W. Weaver 46 Vice President of Human Resources and
Organizational Development
Daniel B. Canavan has been Chairman of the Board and Chief Executive Officer
of the Company for more than five years.
Victor V. Valentine, Jr, has been President of the Company for more than
five years.
Robert D. Monk joined the Company as Vice President of Finance, CFO and
and Secretary/Treasurer on April 1, 1996. For the prior 12 years, Mr. Monk
was employed by Stryker Corporation, as Vice President - Finance of the Medical
Division for the most recent two years, and prior to that as Treasurer and
Corporate Controller. Mr. Monk's services with the Company terminated on
April 30, 1999.
Michael E. Zaagman has been Vice President of Operations since January 1997.
Mr. Zaagman joined Triple S Plastics, Inc. as the Corporate Director of
Materials on April 1, 1995. Previously he held various positions with the
Sequest Closures Division of Aptar Corporation.
Phillip W. Weaver has been Vice President of Human Resources and
Organizational Development since April 1997. Mr. Weaver joined Triple S
Plastics, Inc. as the Corporate Director of Human Resources in April 1996.
For the prior four years he was employed at Atlantic Automotive components, a
joint venture between Ford Motor Company and Rockwell International, as the
Director of Human Resources.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
The Company's common stock is traded on the NASDAQ Stock Market under the symbol
TSSS. The following table sets forth the price quotations for the Company's
common stock in the over-the-counter market for the period indicated, as
furnished by the National Association of Securities Dealers, Inc.
Fiscal Quarter High Low Close
------ ------- ------ ----- -----
1999 4th 5 11/16 3 1/2 3 1/2
3rd 5 1/2 3 1/8 4 1/2
2nd 6 3/4 4 1/4 4 1/2
1st 8 11/16 5 7/8 6 9/16
1998 4th 6 3/4 5 3/4 6 1/4
3rd 7 1/2 6 1/8 6 3/16
2nd 9 1/4 7 1/4 7 1/2
1st 8 3/8 6 5/8 8
As of May 31, 1999, there were approximately 250 stockholders of record
of the Company's common stock. Based on the number of sets of proxy materials
mailed by the Company's transfer agent, the Company estimates there are 1,100
additional beneficial owners of the Company's common stock who hold the stock in
street name. The Company currently intends to retain earnings for future
capital requirements and growth. No cash dividends have been paid during the
past two years and management does not anticipate paying cash dividends to
holders of its common stock for the foreseeable future.
Item 6. Selected Financial Data
Fiscal Years Ended March 31
(in thousands, except per share data)
1999 1998 1997 1996 1995
Income Statement Data:
Net sales $67,772 $67,414 $64,608 $61,270 $54,051
Gross profit 11,125 11,830 10,464 9,271 12,245
Operating income (loss) (1,166) 2,782 2,447 1,995 5,372
Interest expense, net 339 325 358 408 80
------- ------- ------- ------- -------
Income (loss) before
income tax exp (benefit) (1,505) 2,457 2,089 1,587 5,292
Income tax exp (benefit) (453) 860 760 549 1,866
------- ------- ------- ------- -------
Net income (loss) $(1,052) $ 1,597 $ 1,329 $ 1,038 $ 3,426
======= ======= ======= ======= =======
Basic and Diluted Per Share Data:
Net income (loss) $ (.28) $ .43 $ .36 $ .28 $ .92
======= ======= ======= ======= =======
Weighted average shares outstanding:
Basic 3,745 3,740 3,734 3,727 3,724
Diluted 3,745 3,752 3,738 3,727 3,724
March 31 (in thousands)
----------------------------------------------
1999 1998 1997 1996 1995
Balance Sheet Data:
Working capital $10,287 $12,168 $10,683 $ 9,561 $12,241
Total assets $50,809 $50,030 $48,870 $46,150 $42,339
Long-term debt, less
current maturities $ 6,862 $ 6,603 $ 7,251 $ 8,747 $ 5,666
Shareholders' equity $30,953 $31,981 $30,353 $28,981 $27,902
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company is a full-service custom injection molder providing rapid
prototyping and design models, mold design and engineering services, mold
manufacturing, injection molding, and post-molding assembly and finishing
operations to a diverse base of customers. Its customers are primarily in
telecommunications, medical/pharmaceutical, information technologies, consumer
products, and automotive markets. The Company operates in one business segment
and backlog generally does not exceed one quarter's manufacturing capacity.
The Company's fiscal year is March 31 and, unless otherwise noted, references to
fiscal 1999, 1998, and 1997 relate to the fiscal years ended March 31, 1999,
1998, and 1997.
RESULTS OF OPERATIONS
The Company's fiscal 1999 operating results were far below its plans and
expectations. The Company incurred a net loss of $(1,052,000) or $(.28) per
share, compared with net income of $1,597,000 or $.43 per share for the prior
fiscal year. The principal reason for the loss was the charge incurred in the
Company's third quarter relating to the provision for losses on accounts
receivable and inventories for three customers, two of which filed for
protection under Chapter 11 of the U.S. Bankruptcy Code near the end of that
quarter as discussed below. The Company is reassessing its entire operations and
intends to identify those costs and expenses that will be reduced or eliminated.
While these results are disappointing, the Company has challenged the entire
organization to redouble its efforts and become even more aggressive in
capturing new business and reducing costs.
In the last fiscal year, the Company incurred legal expenses of approximately
$1 million in its lawsuit with Capital Vials, as discussed in Item 3
"Legal Proceedings," above. While discovery in the proceeding is substantially
complete, the Company expects to continue to incur legal expenses in connection
with that matter. The Company anticipates that the Court will issue a decision
on the "Markman" hearing by the end of its first quarter of fiscal year 2000,
and that dispositive motions by the parties will be resolved by the Court during
the second quarter of fiscal year 2000. The trial has been scheduled for
September 13, 1999. Continuing expenses will be charged to earnings as incurred.
Near the end of the third quarter of fiscal 1999 two of the Company's customers
filed for protection under Chapter 11 of the U.S. Bankruptcy Code and a third
customer indicated that it was having extreme financial difficulty obtaining
needed additional financing to pay amounts owed to the Company. Accordingly, in
the third quarter the Company recorded a pre-tax charge of $1.4 million
($935 after tax, or $.25 per basic and diluted share) relating to a provision
for losses on accounts receivable balances and inventory on hand for these
customers. This pre-tax charge is shown in the Statements of Income as an
unusual item. Company management is actively involved in trying to recover
these amounts owed. The two customers that filed for bankruptcy protection are
serviced by the Company's facility in Tucson, Arizona. Also, one of these
customers accounted for approximately 4%, 15% and 14% of the Company's net sales
for fiscal 1999, 1998 and 1997, respectively. Given the uncertainty as to future
sales volumes to these customers, as well as other factors impacting the
operations of the Company's Tucson facility, the Company is evaluating several
alternatives for the Company's operational structure at that location. Based
on the Company's preliminary analysis of the various alternatives, further
charges relating to impairment of the facility's long-lived assets are not
expected to be material to the Company's financial position or results of
operations. Should the alternatives not produce the results currently
anticipated, a future impairment charge may be necessary.
The table below outlines the components of the Company's Statements of Income
as a percentage of net sales:
Fiscal Year ended March 31 1999 1998 1997
- ----------------------------------------------------------------------------
Net sales 100.0% 100.0% 100.0%
Cost of sales 83.6 82.5 83.8
Gross profit 16.4 17.5 16.2
Selling & marketing expenses 5.2 3.0 2.7
General & administrative expenses 10.8 10.4 9.7
Unusual item 2.1 -- --
Operating income (loss) (1.7) 4.1 3.8
Interest expense, net .5 .5 .6
Income (loss) before income taxes (2.2) 3.6 3.2
Income taxes (.6) 1.2 1.1
Net income (loss) (1.6)% 2.4% 2.1%
The following table summarizes each of the Company's markets as a percentage
of total sales:
% of Sales
Market 1999 1998 1997
---------------------------------------------------------------
Telecommunications 37% 15% 11%
Medical/Pharmaceutical 13% 14% 11%
Information Technologies 11% 15% 24%
Consumer Products 25% 38% 32%
Automotive 11% 15% 18%
Other 3% 3% 4%
FISCAL 1999 COMPARED TO FISCAL 1998
Net sales for fiscal year 1999 were $67.8 million compared to net sales of
$67.4 million for fiscal year 1998. The Company's sales decreased to all the
markets the Company serves except telecommunications, which showed strong
growth, increasing 148%. The overall increase in sales is primarily related to
volume as no significant price increases occurred during fiscal 1999. The
Company's Chairman assumed the sales leadership role in January 1999 and is now
devoted full time to the Company's sales agents and marketing strategy. This
strategy is focused on customers in the telecommunications, medical and
information technologies markets. The Company has placed salespeople in
strategic geographic areas and each salesperson has defined target customers
with a secondary list of lower priority accounts.
Cost of sales represented 83.6% of net sales in fiscal 1999 compared to 82.5% in
1998. The higher cost of sales percentage in 1999 is primarily attributed to
competitive pricing on new projects, underutilized production capacity at the
Tucson facility, and increased depreciation expense as a result of investment in
new technology.
Selling and marketing expenses increased $1.5 million compared to the prior
year and represent 5.2% of net sales compared to 3.0% in the prior year. The
increase principally relates to increased commissions as a result of the shift
in sales from non-commissioned accounts to commissioned accounts. Compensation
also increased due to the build up of the direct sales force. The return on our
investment in the additional salespeople has developed slower than expected.
General and administrative expenses increased 3.9% to $7.3 million and increased
as a percentage of net sales to 10.8% in 1999 compared to 10.4% in 1998. The
increase is primarily due to increased legal fees as a result of the litigation
described in Item 3 and the notes to the consolidated financial statements.
This increase was somewhat offset by a decrease in compensation.
The Company's effective tax rate is (30.0%) due to the net operating loss
incurred in fiscal 1999 less non-deductible expenses compared to 35.0% in the
prior year.
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales for fiscal year 1998 were $67.4 million, an increase of $2.8 million,
or 4.3%, over net sales of $64.6 million for fiscal year 1997. The overall
increase in sales was primarily related to volume as no significant price
increases occurred during fiscal 1998. Sales to customers in the
telecommunications market showed strong growth increasing $3.4 million, or 49%,
in fiscal 1998 and represented 15% of net sales comparted to 11% in 1997. Sales
to customers in the consumer products market increased 22% and represented 38%
of net sales in fiscal 1998 compared to 32% in 1997. One major customer in this
market notified the Company that they intended to transition their plastic
component production to Mexico. Sales to customers in the medical market
represented 14% of sales in fiscal 1998 compared to 11% in 1997 and remained
strong, reflecting growth of 24% in fiscal 1998. These increases were somewhat
offset by decreases of 35% and 14% to customers in the information technologies
and automotive markets, respectively. These decreases represented the
completion of several customer projects during 1997 which were not replaced with
new projects. The decrease in the automotive market was also impacted by one
customer who moved their tools into their own molding facility. However, shortly
thereafter the work was returned to the Company.
Cost of sales represented 82.5% of sales in fiscal 1998 compared to 83.8% in
1997. The lower cost of sales percentage in 1998 was principally attributed
to mold manufacturing cost reductions in addition to the Company's continued
efforts in molded part manufacturing cost reductions as a result of
manufacturing efficiency improvement initiatives. These initiatives contributed
to reduced labor as a percentage of sales. Also contributing to the lower cost
of sales was the consolidation of the Company's Victor Plastics plant into its
Vicksburg and Battle Creek facilities, as well as the consolidation of its mold
manufacturing operations into its Tooling and Technology Centre. All costs
incurred relating to facility consolidations were incurred during fiscal 1998.
These cost reductions were offset by increased depreciation expense of $241,000
compared to the prior year as a result of increased capital expenditures.
Selling and marketing expenses increased 13.5% from $1.8 million in 1997 to
$2.0 million in 1998, and increased as a percentage of net sales to 3.0% in
1998 compared to 2.7% in 1997. The increase principally related to increased
compensation due to the addition of three salespeople.
General and administrative expenses increased $800,000 to $7.1 million and
represented 10.4% of net sales in 1998 compared to 9.7% in 1997. The increase
was primarily due to increased professional fees and taxes other than income
taxes.
The Company's effective tax rate decreased slightly to 35.0% in fiscal 1998
compared to 36.4% in 1997. Net income in fiscal 1998 was $1.6 million compared
to $1.3 million in 1997, an increase of 20.2%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for operating expenses and capital
expenditures. The Company recently announced facility expansions in Texas and
New York. Capital expenditures related to these expansions are estimated to be
$7.0 million. Historically, the Company's main sources of cash have been from
operations, bank borrowings and industrial revenue bonds. The Company has
adequate liquidity and expects this to continue into the future.
Net cash provided by operating activities was $5.7 million for fiscal 1999.
Working capital decreased $1.9 million in the year to $10.3 million, primarily
resulting from the decrease in accounts receivable. Significant improvement was
made in accounts receivable as the balance decreased $3.8 million, or 28.5%, and
days sales outstanding decreased 22 days to 39 days compared to the prior year
end. The decrease is generally due to the write-off of accounts receivable
relating to customer bankruptcies and improved collection efforts. Excluding
the $359,000 increase in the reserve that was recorded in 1999, days sales
outstanding of 44 days still reflects significant improvement of 17 days
compared to the prior year. Inventories increased $752,000, or 21%, compared
to the prior fiscal year end, primarily due to increased inventory requirements
related to the higher sales in our Texas facility. Accounts payable and
accruals increased $1.7 million (including $688,000 of non-cash equipment
purchases) or 22% primarily due to payables related to the increases in
inventories, payables related to equipment purchases, and accruals related to
legal costs and health insurance. Refundable income taxes increased to $737,000
primarily due to the utilization of the current year net operating loss
available for carryback. Net capital investments totaled $4.4 million,
$3.7 million, and $2.2 million in fiscal 1999, 1998 and 1997, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 131, Disclosures about Segments of an Enterprise and Related Information.
SFAS No. 131 established standards for the way in which publicly-held companies
report financial and descriptive information about their operating segments in
financial statements for both interim and annual periods, and requires
additional disclosures with respect to products and services, geographic areas
of operation and major customers. The Company operates as a single operating
segment. The adoption of SFAS No. 131 had no impact on the Company's
consolidated results of operations, cash flows or financial position.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. This statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. An exposure draft
has been proposed by the FASB extending the effective date to all fiscal
quarters for all fiscal years beginning after June 15, 2000. Historically, the
Company has not entered into derivative contracts either to hedge existing risks
or for speculative purposes. Accordingly, the Company does not expect adoption
of the new standard to affect its financial statements.
Statement of Position (SOP) 98-5 Reporting on the Costs of Start-Up Activities,
issued by the American Institute of Certified Public Accountants, effective for
fiscal years beginning after December 15, 1998, provides guidance on financial
reporting of costs of start-up activities. The Company expenses all start-up
costs when incurred, consistent with the SOP and, accordingly, this standard
will not affect the Company's consolidated financial statements.
OTHER MATTERS
During fiscal 1999, the Company's program to address the Year 2000 date
recognition problem continued to make progress toward its goal to ensure the
millennium event does not have a material adverse effect on its business
operations. The Company has substantially completed the process of identifying,
evaluating and implementing changes to computer programs and equipment necessary
to address the Year 2000 issue. This issue involves the ability of computer
systems and equipment that have time-sensitive programs to properly recognize
the year 2000. The inability to do so could result in major failures or
miscalculations. These plans provide for systems to be Year 2000 compliant by
the end of 1999. Costs to date consisting of internal costs, which are not
incremental in nature, have not been tracked by the Company. Future costs to
be incurred to complete Y2K compliance and testing procedures, primarily
internal costs related to direct Company personnel, are not expected to have
a material impact on the Company's results of operations or financial position.
During fiscal year 1999, the Company developed a plan to determine the Year 2000
compliance status of its key suppliers and customers. The plan involves
soliciting information from suppliers and customers through use of surveys, and
follow-up discussions and testing where needed. The Company has sent out
surveys to all of its key suppliers and certain key customers and received back
a majority of these surveys. While the Company cannot guarantee Year 2000
compliance by its key suppliers and customers, and in many cases will be relying
on statements from outside vendors without independent verification, preliminary
surveys indicate that key suppliers and customers are aware of this issue and
are working on a solution to achieve compliance before the Year 2000. The
Company is also in the process of developing a contingency plan to deal with
those key suppliers and customers who may not be Year 2000 compliant prior to
the year 2000. If certain key suppliers or customers were not Year 2000
compliant and the Company did not have a contingency plan in place related to
those key suppliers or customers because the Company was unaware of the
noncompliance, the Company's results of operations and financial condition
could be significantly and negatively impacted. However, at this time the
Company is not aware, based on information received from these customers and
suppliers, of any key suppliers or customers who will not be Year 2000
compliant by the year 2000.
This annual report contains statements which, to the extent they are not
historical facts, constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are identified by the use of forward-looking words such as
"anticipates", "intends", "expects", "plans", "believes", "estimates" or
similar words. These forward-looking statements are subject to numerous
assumptions, risks, and uncertainties, and the statements looking forward beyond
1999 are subject to greater uncertainty because of the increased likelihood of
changes in underlying factors and assumptions. Actual results could differ
materially from those anticipated by the forward-looking statements. By making
forward-looking statements, the Company assumes no obligation to update them to
reflect new, or unanticipated events or circumstances.
Item 8. Financial Statements and Supplementary Data
The following financial statements are filed with this report as pages F-1
through F-14 following the signature page:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
PART III
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
Item 10. Directors and Executive Officers of the Registrant
Information relating to executive officers is included in this report in the
last section of Part I under the caption "Executive Officers of the Registrant".
Information relating to directors appearing under the caption "Election of
Directors" in the definitive Proxy Statement for the 1999 Annual Meeting of
Shareholders to be held July 22, 1999, and to be filed with the Commission is
hereby incorporated herein by reference. Information concerning compliance
with Section 16(a) of the Securities Exchange Act of 1934 appearing under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the
definitive Proxy Statement for the 1999 Annual Meeting of Shareholders and filed
with the Commission is hereby incorporated herein by reference.
Item 11. Executive Compensation
The information contained under the caption "Executive Compensation" contained
in the definitive Proxy Statement for the 1999 Annual Meeting of Shareholders
is hereby incorporated herein by reference excluding the information under the
caption "Compensation Committee Report" and "Stock Performance Graph".
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information contained under the caption "Securities Ownership of Management"
contained in the definitive Proxy Statement for the 1999 Annual Meeting of
Shareholders is hereby incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information relating to certain relationships and related party transactions
is incorporated by reference to the Company's definitive Proxy Statement for
the 1999 Annual Meeting of Shareholders under the caption "Election of
Directors".
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) The following financial statements are filed as part of this report as
pages F-1 through F-14 following the signature page:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
(b) No reports on Form 8-K were filed for the three-month period ended
March 31, 1999.
(c) See Exhibit Index located on pages 29 and 30.
(d) The following financial statement schedule is filed as part of this
report as page F-16 following the signature page:
Schedule II - Valuation and Qualifying Accounts
All other schedules required by Form 10-K Annual Report have been omitted
because they were not applicable, the required information was included in the
notes to the consolidated financial statements, or were otherwise not required
under the instructions contained in Regulation S-X.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: June 8, 1999 TRIPLE S PLASTICS, INC.
By __ALBERT C. SCHAUER__________________
Albert C. Schauer, Chief Executive Officer
and
By __ALBERT C. SCHAUER__________________
Albert C. Schauer
(Acting Principal Financial Officer)
and
By __CATHERINE A. TAYLOR________________
Catherine A. Taylor, Corporate Controller
(Principal Accounting Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below on this 8th day of June 1999, by the following
persons on behalf of the Registrant and in the capacities indicated.
Each Director of the Registrant whose signature appears below, hereby appoints
Daniel B. Canavan as his attorney-in-fact to sign in his name and on his behalf
as a Director of the Registrant, and to file with the Commission any and all
Amendments to this report on Form 10-K to the same extent and with the same
effect as if done personally.
__DANIEL B. CANAVAN______________ __VICTOR V. VALENTINE, JR._______
Daniel B. Canavan, Chairman of the Board Victor V. Valentine, Director
__ALBERT C. SCHAUER______________ __DAVID L. STEWART_______________
Albert C. Schauer, Director David L. Stewart, Director
__JAMES F. HETTINGER_____________ __ROBERT D. BEDILION_____________
James F. Hettinger, Director Robert D. Bedilion, Director
__EVAN C. HARTER_________________
Evan C. Harter, Director
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Consolidated Balance Sheets as of March 31, 1999 and 1998 F-2
Consolidated Statements of Income for the years ended
March 31, 1999, 1998 and 1997 F-3
Consolidated Statements of Shareholders' Equity for the years
ended March 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Cash Flows for the years ended
March 31, 1999, 1998 and 1997 F-5
Notes to Consolidated Financial Statements F-6
Report of Independent Certified Public Accountants F-14
F-1
<PAGE>
TRIPLE S PLASTICS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
MARCH 31 1999 1998
- -----------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 5,594 $ 3,783
Accounts receivable, less allowance of
$709 and $350 for possible losses (Note 4) 9,487 13,275
Refundable income taxes 737 --
Inventories (Notes 2 and 4) 4,386 3,634
Deferred income taxes (Note 6) 384 360
Other 486 202
------- -------
Total Current Assets 21,074 21,254
------- -------
Property, Plant and Equipment (Notes 4 and 5):
Machinery and equipment 25,271 22,709
Land and buildings 12,510 12,076
Office furniture and equipment 4,180 3,696
Leasehold improvements 42 27
------- -------
42,003 38,508
Less accumulated depreciation and amortization 16,293 13,483
------- -------
Net Property, Plant and Equipment 25,710 25,025
------- -------
Other:
Cash restricted for capital expenditures (Note 4) -- 2,932
Goodwill, net of accumulated amortization of
$592 and $469 (Note 11) 3,897 679
Miscellaneous 128 140
------- -------
Total Other Assets 4,025 3,751
------- -------
$50,809 $50,030
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6,649 $ 5,182
Accruals:
Compensation 921 1,167
Other 1,133 888
Deferred mold revenue 750 503
Current maturities of long-term debt (Note 4) 1,334 1,346
------- -------
Total Current Liabilities 10,787 9,086
Long-Term Debt, less current maturities (Note 4) 6,862 6,603
Deferred Income Taxes (Note 6) 2,207 2,360
------- -------
Total Liabilities 19,856 18,049
------- -------
Commitments and Contingencies (Notes 5, 7, and 13)
Shareholders' Equity (Notes 4 and 9):
Preferred stock, no par value, 1,000,000
shares authorized, none issued -- --
Common stock, no par value, 10,200,000
shares authorized, 3,747,268 and
3,741,951 shares issued and outstanding 14,468 14,444
Retained earnings 16,485 17,537
------- -------
Total Shareholders' Equity 30,953 31,981
------- -------
$50,809 $50,030
======= =======
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
TRIPLE S PLASTICS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Years ended March 31
1999 1998 1997
-------------------------------------
Net Sales $ 67,772 $ 67,414 $ 64,608
Cost of Sales 56,647 55,584 54,144
--------- --------- ---------
Gross Profit 11,125 11,830 10,464
Selling and Marketing Expenses 3,521 1,994 1,757
General and Administrative Expenses 7,329 7,054 6,260
Unusual Item (Note 12) 1,441 -- --
--------- --------- ---------
Operating Income (Loss) (1,166) 2,782 2,447
Interest (Income) Expense:
Interest expense 603 603 594
Interest income (264) (278) (236)
--------- --------- ---------
Net Interest Expense 339 325 358
--------- --------- ---------
Income(Loss) Before Income Tax Exp(Benefit) (1,505) 2,457 2,089
Income Tax Expense (Benefit) (Note 6) (453) 860 760
--------- --------- ---------
Net Income (Loss) $ (1,052) $ 1,597 $ 1,329
========= ========= =========
Basic and Diluted Earnings Per
Share (Note 10) $ (.28) $ .43 $ .36
========= ========= =========
Shares Used in Computing
Earnings Per Share:
Basic 3,745 3,740 3,734
Diluted 3,745 3,752 3,738
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
TRIPLE S PLASTICS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
Total
Common Retained Shareholders'
Stock Earnings Equity
---------------------------------------
Balance, March 31, 1996 $ 14,370 $ 14,611 $ 28,981
Issuance of 8,102 shares of
common stock 43 -- 43
Net income for the year -- 1,329 1,329
---------------------------------------
Balance, March 31, 1997 14,413 15,940 30,353
Issuance of 5,010 shares of
common stock 31 -- 31
Net income for the year -- 1,597 1,597
---------------------------------------
Balance, March 31, 1998 14,444 17,537 31,981
Issuance of 5,251 shares of
common stock 24 -- 24
Net loss for the year -- (1,052) (1,052)
---------------------------------------
Balance, March 31, 1999 $ 14,468 $ 16,485 $ 30,953
=======================================
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
TRIPLE S PLASTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years ended March 31
1999 1998 1997
-------------------------------------
Operating Activities
Net income (loss) $ (1,052) $ 1,597 $ 1,329
Adjustments to reconcile net
income (loss) to cash provided
by operating activities:
Depreciation 3,684 3,203 2,934
Amortization 169 74 75
Provision for losses on
accounts receivable 30 95 30
Deferred income taxes 177 135 190
Loss (gain) on sale of
equipment (12) 14 54
Unusual item (Note 12) 1,441 -- --
Changes in assets and
liabilities, net of amounts
acquired from business
acquisition:
Receivables:
Trade 2,528 (2,223) (1,540)
Refundable income taxes (1,284) -- 329
Inventories (890) 1,199 (115)
Other current assets (333) 127 (87)
Accounts payable and accruals 931 919 2,323
Income taxes payable -- 35 158
Deferred mold revenue 277 (119) (244)
--------------------------------------
Cash Provided by Operating Activities 5,666 5,056 5,436
Investing Activities
Purchases of property, plant and
equipment, net of disposals (3,419) (3,655) (2,229)
Decrease in restricted cash 2,932 855 40
Business acquisition (Notes 8
and 11) (909) -- --
Other investing activities -- 66 53
--------------------------------------
Cash Used in Investing Activities (1,396) (2,734) (2,136)
Financing Activities
Net payments on note payable to bank -- -- (998)
Proceeds from issuance of common
stock, net of fees paid 24 31 43
Principal payments on long-term
debt (2,483) (1,251) (1,046)
---------------------------------------
Cash Used in Financing Activities (2,459) (1,220) (2,001)
---------------------------------------
Increase in Cash and Cash
Equivalents 1,811 1,102 1,299
Cash and Cash Equivalents,
beginning of year 3,783 2,681 1,382
---------------------------------------
Cash and Cash Equivalents, end of
year $ 5,594 $ 3,783 $ 2,681
=======================================
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
TRIPLE S PLASTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Business
The Company operates in a single operating segment and is a fully integrated
manufacturer of complex, highly engineered thermoplastic components for
customers primarily in the telecommunications, medical/pharmaceutical,
information technologies, consumer products, and automotive markets.
During the years ended March 31, 1999, 1998 and 1997, a telecommunications
customer accounted for 34%, 12% and 4% of net sales, respectively, and a
consumer products customer accounted for 4%, 15% and 14% of net sales,
respectively.
Acquisitions and Goodwill
The financial statements include the net assets of businesses purchased at
their fair value at the acquisition date. The excess of acquisition costs over
the fair value of net assets acquired is included in and has been allocated to
goodwill. Goodwill is amortized on a straight-line basis over a 30 year life.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary Dynacept Corporation, Inc. (see Note 11) after
elimination of all significant intercompany accounts and transactions.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for renewals
and betterments are capitalized and maintenance and repairs are expensed as
incurred. Depreciation and amortization are computed by the straight-line
method over the estimated useful lives of the assets as follows:
Buildings 40 years
Machinery and equipment 5 to 10 years
Office furniture and equipment 3 to 10 years
Leasehold improvements 10 years
Income Taxes
The Company follows the liability method of accounting for income taxes and
provides deferred income taxes based on enacted income tax rates in effect on
the dates temporary differences between the financial reporting and tax bases
of assets and liabilities are expected to reverse. The effect on deferred tax
assets and liabilities of a change in income tax rates is recognized in the
period that includes the enactment date.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, which consist
of cash, receivables, notes payable, accounts payable and long-term debt,
approximate their fair values. For long-term debt, the present value of future
cash flows, discounted at the Company's current effective borrowing rate, was
used to estimate fair value.
Estimates
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 at the
date of the financial statements. Actual results could differ from those
estimates.
Revenue Recognition
Revenue is recognized on plastic molded products when the products are
shipped to customers. Revenue on molds is recognized when the mold is completed
and samples of molded parts produced by the tool are shipped to customers. Prior
to that time, mold revenue and direct mold costs are deferred. Losses are
recognized when reasonable estimates of the amount of loss can be made.
F-6
<PAGE>
Cash and Cash Equivalents
Cash and cash equivalents consist of unrestricted cash on hand and held in
banks, money market funds, commercial paper and other short-term investments
with an original maturity of three months or less when purchased.
Long-Lived Assets
The Company evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposition is less than its carrying amount.
Stock Based Compensation
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 allows companies
to continue to measure compensation cost for stock-based employee compensation
plans using the intrinsic value method of accounting as prescribed in Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations. The Company has elected to continue its APB
Opinion No. 25 accounting treatment for stock-based compensation, and has
adopted the provisions of SFAS No. 123 requiring disclosure of the pro forma
effect on net earnings and earnings per share as if compensation cost had been
recognized based upon the estimated fair value at the date of grant for options
awarded.
Earnings Per Share
The Company has adopted SFAS No. 128, Earnings Per Share, which establishes
standards for computing and presenting earnings per share (EPS) for entities
with publicly-held common stock or potential common stock. SFAS 128 simplifies
the standards for computing EPS and makes them comparable to international EPS
standards. The statement requires dual presentation of "basic" and "diluted" EPS
which replace primary and fully diluted EPS, respectively, required under
previous guidance. All EPS amounts have been recalculated in accordance with
SFAS No. 128 yielding the same basic and diluted EPS amounts, therefore no
restatement is necessary.
Recent Accounting Pronouncements
The Company has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 established standards for the
way in which publicly-held companies report financial and descriptive
information about their operating segments in financial statements for both
interim and annual periods, and requires additional disclosures with respect
to products and services, geographic areas of operation and major customers.
The Company operates as a single operating segment. The adoption of SFAS
No. 131 had no impact on the Company's consolidated results of operations, cash
flows or financial position.
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. This statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. An exposure draft
has been proposed by the FASB extending the effective date to all fiscal
quarters for all fiscal years beginning after June 15, 2000. Historically,
the Company has not entered into derivative contracts either to hedge existing
risks or for speculative purposes. Accordingly, the Company does not expect
adoption of the new standard to affect its financial statements.
Statement of Position (SOP) 98-5 Reporting on the Costs of Start-Up
Activities, issued by the American Institute of Certified Public Accountants,
effective for fiscal years beginning after December 15, 1998, provides
guidance on financial reporting of costs of start-up activities. The Company
expenses all start-up costs when incurred, consistent with the SOP and,
accordingly, this standard will not affect the Company's consolidated financial
statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1999
presentation.
F-7
<PAGE>
2. Inventories
Inventories are summarized as follows (in thousands):
March 31
1999 1998
---------- ----------
Raw materials and packaging $ 2,582 $ 2,039
Finished goods and work-in-process 1,804 1,595
---------- ----------
Total Inventories $ 4,386 $ 3,634
========== ==========
3. Line of Credit
The Company has entered into a $5 million unsecured line-of-credit
agreement with a bank, due on demand, with interest on the unpaid principal
balance at the bank's prime rate (7.75% at March 31, 1999). There were no
borrowings under this agreement at March 31, 1999 or 1998, or during the years
then ended.
4. Long-Term Debt
Long-term debt consists of (in thousands):
March 31
1999 1998
-------- --------
Note payable to Dynacept Company (now
known as MLM Liquidation Corp.) $ 2,730 $ --
Michigan Strategic Fund Limited Obligation
Revenue Bonds (1989 and 1990 series) 2,005 2,425
Georgetown Industrial Development
Corporation Revenue Bond 1,766 3,580
Mortgage notes payable to bank 1,660 1,770
Other 35 174
-------- --------
Long-term debt 8,196 7,949
Current maturities of long-term debt 1,334 1,346
-------- --------
Long-term debt, less current maturities $ 6,862 $ 6,603
The note payable to Dynacept Company provides for monthly installments of
interest only, at a rate of 5%, with the entire principal balance due and
payable in full on March 31, 2003. The note is secured by a letter of credit
with the bank which requires annual payments of .90% of the outstanding note
balance.
The Michigan Strategic Fund Limited Obligation Revenue bonds (1989 and
1990 series) provide for semi-annual interest payments with rates that vary from
6.4% to 7.65% and annual principal payments through September 2001. The bonds
are collateralized by a letter of credit with the bank which requires annual
interest payments of .875% of the outstanding bond balance.
The Georgetown Industrial Development Corporation Revenue Bond provides for
monthly principal payments ranging from $55,000 to $80,000 plus interest through
November 2002. Interest is fixed at 6.56% through September 2000, and then
becomes variable at 77% of the bank's base lending rate. Cash restricted for
capital expenditures at March 31, 1998 represented the remaining proceeds from
this bond issue, which was available for capital purchases
made through October 1, 1998.
The mortgage notes payable to the bank, maturing $17,607 monthly, include
interest at rates ranging from 7.07% to 8.06%, and are due at varying dates
through October 2012.
The above debt is secured by accounts receivable, inventories and property
and equipment. In connection with the overall bank financing agreement, the
Company must comply with certain financial and non-financial restrictive
covenants. The restrictive covenants include limitations on the amount of
required working capital, the ratio of debt to tangible net worth and the
minimum amount of tangible net worth. At March 31, 1999 and 1998, retained
earnings of $6 million was restricted by terms of the long-term debt described
above.
Maturities of long-term debt for the four fiscal years succeeding 2000 are:
2001 - $1,380,000; 2002 - $1,488,000; 2003 - $543,000; and 2004 - $2,826,000.
F-8
<PAGE>
5. Leases and Commitments
The Company leases certain transportation equipment and manufacturing
facilities under operating leases expiring at various dates through 2004.
Management expects that in the normal course of business, leases will be renewed
or replaced by other leases. Minimum lease payments required under operating
leases for future years are as follows: 2000 - $693,000; 2001 - $600,000;
2002 - $500,000; 2003 - $475,000; 2004 - $199,000.
Obligations under capital leases included in long-term debt-other include
$35,000 for computer equipment with an original cost of $432,000 and a net
book value at March 31, 1999 of $46,000.
Total lease expense for facilities and equipment amounted to $706,000 in
1999; $407,000 in 1998; and $423,000 in 1997.
6. Income Taxes
Provisions for income tax expense (benefit) consist of the following (in
thousands):
Years Ended March 31
1999 1998 1997
------------------------------
Current:
Federal $(276) $ 675 $ 525
State and local -- 50 45
------ ------ ------
(276) 725 570
Deferred (177) 135 190
------ ------ ------
Total income tax expense (benefit) $(453) $ 860 $ 760
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
at fiscal year ends were as follows (in thousands):
March 31
1999 1998
---------- ----------
Deferred tax assets
Accrued compensation and benefits $ 105 $ 120
Accounts receivable reserves 282 170
Inventory valuation and related reserves 148 277
Other 16 53
--------- ----------
551 620
--------- ----------
Deferred tax liabilities
Accounts receivable valuation (167) (222)
Accumulated depreciation and amortization (2,207) (2,360)
Other -- (38)
--------- ----------
(2,374) (2,620)
--------- ----------
Net deferred tax liability $ (1,823) $ (2,000)
========= ==========
A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:
Years Ended March 31
1999 1998 1997
----------------------------------
Statutory federal income tax rate (34.0%) 34.0% 34.0%
State and local income taxes, net
of federal income tax effect -- 2.0 1.4
Other 4.0 (1.0) 1.0
-------- ------- -------
Effective income tax rate (30.0%) 35.0% 36.4%
======== ======= =======
F-9
<PAGE>
7. Employee Benefit Plan
The Company maintains a defined contribution plan covering substantially
all employees. Under the Plan, employees' contributions are made on a tax
deferred basis and are partially matched by the Company. Total expense under the
Plan was $131,000, $128,000, and $140,000 for 1999, 1998 and 1997, respectively.
8. Supplemental Disclosures of Cash Flow Information
(in thousands) Years Ended March 31
1999 1998 1997
-----------------------------
Operating Activities:
Interest paid, net of amount capitalized $ 614 $ 604 $ 599
Interest received $ 264 $ 278 $ 236
Income taxes paid $ 654 $ 689 $ 310
Income tax refund received -- -- $ 229
Non-cash Investing and Financing Activities:
Capital expenditures financed by capital
lease obligation -- -- $ 418
Capital expenditures included in accounts
payable $ 688 -- --
Issuance of note payable related
to acquisition $2,730 -- --
9. Capital Stock
The Company maintains a stock option plan for key employees and has
reserved 450,000 shares of Common Stock for such plan. The options must be
exercised within ten years from the date of grant and the exercise price must
equal the fair market value of the Company's stock at the date of the grant.
The options generally vest from two to five years from the date of grant.
In July 1996, the Company established an Outside Director Stock Option Plan
and has reserved 300,000 shares of Common Stock for such plan. The options must
be exercised within three-and-a half to ten years from the date of grant and the
exercise price must equal the fair market value of the Company's stock at the
date of the grant. The options become exercisable six months to three years
after the grant date.
A summary of stock option activity is as follows:
Weighted
Option Price Average
Shares Per Share Price per Share
------------------------------------------
Options outstanding at March 31, 1996 50,000 $12.00 - $12.50 $12.48
Granted 66,200 $5.00 - $6.75 $5.99
Canceled (20,000) $6.13 - $12.50 $9.90
---------
Options outstanding at March 31, 1997 96,200 $5.00 - $12.50 $8.55
Granted 261,000 $6.25 - $8.50 $6.98
Canceled (17,000) $6.13 - $12.50 $10.25
---------
Options outstanding at March 31, 1998 340,200 $5.00 - $12.50 $7.26
Granted 49,000 $4.63 - $6.56 $6.28
Canceled (35,000) $6.25 - $12.50 $6.80
---------
Options outstanding at March 31, 1999 354,200 $4.63 - $12.50 $7.17
There were 395,800 and 409,800 shares available for future grant under the
plans at March 31, 1999 and 1998, respectively. The following table summarizes
significant ranges of outstanding and exercisable options at March 31, 1999:
F-10
<PAGE>
Options Outstanding Options Exercisable
----------------------------- -------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Ranges of Life in Exercise Exercise
Exercise Prices Shares Years Price Shares Price
- ---------------------------------------------------- -------------------------
$4.01 to $5.00 7,000 .8 $4.63 -- --
$5.01 to $6.00 10,000 7.3 $5.08 10,000 $5.08
$6.01 to $7.00 179,200 7.4 $6.30 42,200 $6.15
$7.01 to $8.00 93,000 8.1 $7.25 46,500 $7.25
$8.01 to $9.00 40,000 1.8 $8.50 13,332 $8.50
over $9.00 25,000 5.0 $12.50 25,000 $12.50
For all plans, options of 137,032, 58,450, and 34,000 shares were
exercisable at March 31, 1999, 1998, and 1997 with a weighted average exercise
price of $7.83, $8.91, and $10.51, respectively.
The weighted average fair value per share of employee stock based
compensation issued during fiscal 1999, 1998 and 1997 was $3.24, $3.90 and $4.23
respectively. The fair value was estimated using the Black-Scholes model with
the following weighted average assumptions:
1999 1998 1997
------------ ------------ ------------
Expected life (in years) 6.9 10 10
Interest rate 5.59% 6.12% 6.65%
Volatility 37.9% 34.0% 50.9%
Dividend yield -- -- --
Employee stock based compensation costs would have reduced pre-tax income
by $292,000, $277,000, and $145,000 in 1999, 1998 and 1997, respectively, if
the fair values of such compensation in that year had been recognized as
compensation expense on a straight-line basis over the vesting period of the
grant.
Net earnings and net earnings per share would not be materially different
if the Company accounted for its outside director stock options under the fair
value method as provided for under SFAS No. 123, Accounting for Stock-Based
Compensation.
As permitted by SFAS No. 123, the Company has elected to continue following
the guidance of Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, for measurement and recognition of stock-based
transactions with employees. Accordingly, no compensation cost has been
recognized for the Company's option plans. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options, consistent with the method of SFAS No. 123, the Company's net earnings
and net earnings per share would approximate the following pro forma amounts (in
thousands except per share amounts):
Years Ended March 31
1999 1998 1997
--------------------------------
Net Earnings (Loss):
As reported $(1,052) $ 1,597 $1,329
Pro forma $(1,242) $ 1,417 $1,237
Basic Earnings per Share:
As reported $ (.28) $ .43 $ .36
Pro forma $ (.33) $ .38 $ .33
Diluted Earnings per Share:
As reported $ (.28) $ .43 $ .36
Pro forma $ (.33) $ .38 $ .33
The Company maintains an Employee Stock Purchase Plan and reserved 100,000
shares of Common Stock for such plan. Under the plan, any eligible employee may
purchase stock at a price equal to 85% of the fair market value as of the last
day of the option period.
F-11
<PAGE>
10. Earnings Per Share
Earnings per share has been computed in accordance with the provisions of
SFAS No. 128. The following table sets forth the computation of basic and
diluted earnings per share (in thousands except per share amounts):
Years Ended March 31
1999 1998 1997
--------------------------------
Net income (loss) $(1,052) $ 1,597 $ 1,329
Weighted average shares outstanding
for basic earnings per share 3,745 3,740 3,734
Effect of dilutive stock options -- 12 4
Adjusted weighted average shares
outstanding for diluted earnings
per share 3,745 3,752 3,738
Basic and diluted earnings per share $ (.28) $ .43 $ .36
Options to purchase 386,200, 345,200 and 112,200 shares of common stock in
fiscal years 1999, 1998 and 1997, respectively, were not included in the
computation of diluted earnings per share because the option exercise price was
greater than the average market price of the stock. Diluted earnings per share
for the year ended March 31, 1999 is based only on the weighted average number
of common shares outstanding as the inclusion of 3,000 common share equivalents
would have been anti-dilutive.
11. Acquisition of Dynacept Company, Inc.
On June 1, 1998, Triple S Plastics, Inc. purchased, for cash of $909,000
and long-term debt of $2.7 million the assets of Dynacept Company, Inc.
(Dynacept). Dynacept is a rapid prototyping and model making organization that
produces concept models, engineering prototypes, and pre-production samples. The
transaction has been accounted for using the purchase method. The results of
Dynacept have been included in the Company's consolidated financial statements
from June 1, 1998. Goodwill, amounting to $3.3 million, is being amortized on a
straight line basis over 30 years.
12. Unusual Item
Near the end of the third quarter, two of the Company's customers filed
for protection under Chapter 11 of the U.S. Bankruptcy Code and a third customer
indicated that it was having extreme financial difficulty obtaining needed
additional financing to pay amounts owed to the Company. Accordingly, in the
third quarter of fiscal 1999 the Company recorded a pre-tax charge of
$1.4 million ($935,000 after tax, or $.25 per basic and diluted share) relating
to a provision for losses on accounts receivable and inventories on hand for
these customers. This pre-tax charge is shown in the Statements of Income as an
unusual item. The two customers that filed for bankruptcy protection are
serviced by the Company's facility in Tucson, Arizona. Given the uncertainty as
to future sales volumes to these customers, as well as other factors impacting
the operations of the Company's Tucson facility, the Company is evaluating
several alternatives for the Company's operational structure at that location.
Based on the Company's preliminary analysis of the various alternatives, further
charges relating to impairment of the facility's long-lived assets are not
expected to be material to the Company's financial position or results of
operations. Should the alternatives not produce the results currently
anticipated, a future impairment charge may be necessary.
13. Commitments and Contingencies
On March 4, 1998, Capital Vials, Inc. ("Capital Vials"), filed a lawsuit
against the Company alleging that the process used by the Company to produce
certain vials infringed one or more of Capital Vials' patents. Discovery in this
proceeding, which is pending in the United States District Court in Arizona,
is substantially complete. The Company has denied infringement on the grounds
of invalidity and non-infringement and has asserted an antitrust counterclaim
arising from Capital Vials' alleged fraud on the Patent Office in obtaining the
patent. These actions have been consolidated and a trial has been scheduled for
September 13, 1999. In addition, the parties have filed dispositive motions for
the respective claims; the parties anticipate a ruling on those motions during
the second quarter of the Company's fiscal year. The parties did conduct a
"Markman" hearing on May 4 through 5, 1999, to determine the scope of the patent
claims which Capital Vials alleges have been infringed by the Company. The
Company expects a decision on this hearing in the latter portion of its first
quarter. The Company has not produced or sold vials using the alleged patented
F-12
<PAGE>
patented process and has acquired a letter of non-infringement from a patent
attorney based upon both the invalidity of Capital Vials' patent and the non-
infringement by the Company. The Company continues to defend its position
vigorously. At this time, management does not expect the ultimate resolution
of this matter to have a material adverse effect on the Company's consolidated
financial condition. However, the outcome of this matter is not subject to
prediction with certainty.
F-13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Triple S Plastics, Inc.
Vicksburg, Michigan
We have audited the accompanying consolidated balance sheets of Triple S
Plastics, Inc. as of March 31, 1999 and 1998 and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended March 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Triple S
Plastics, Inc. at March 31, 1999 and 1998, and the results of its operations and
its cash flows for each of the three years in the period ended March 31, 1999 in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
Kalamazoo, Michigan
May 11, 1999
F-14
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON FINANCIAL
STATEMENT SCHEDULE
The Board of Directors
Triple S Plastics, Inc.
Vicksburg, Michigan
The audits referred to in our report dated May 11, 1999 relating to the
consolidated financial statements of Triple S Plastics, Inc. which is contained
in Item 8 of this Form 10-K, included the audit of the financial statement
schedule listed in the accompanying index. This financial statement schedule
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based upon our audits.
In our opinion such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO Seidman, LLP
Kalamazoo, Michigan
May 11, 1999
F-15
<PAGE>
<TABLE>
TRIPLE S PLASTICS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<S> <C> <C> <C> <C> <C>
Additions
Balance at charged to Charged Balance
beginning costs and against Other at end of
Description of period expenses reserves changes period
- -----------------------------------------------------------------------------------------
Reserves and allowances
deducted from asset
accounts:
Allowance for
uncollectible
accounts receivable:
Year ended March 31, 1999 $350,000 $1,071,000 $712,000 -- $709,000
Year ended March 31, 1998 $255,000 $ 95,000 -- -- $350,000
Year ended March 31, 1997 $250,000 $ 30,000 $ 25,000 -- $255,000
Reserve for inventory
obsolescence:
Year ended March 31, 1999 $493,340 -- $383,340 -- $110,000
Year ended March 31, 1998 $425,000 $ 68,340 -- -- $493,340
Year ended March 31, 1997 $350,000 $ 75,000 -- -- $425,000
F-16
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- --------------------------------------------------- ----
3(a) Registrant's Second Amended and Restated Articles of
Incorporation were filed as Exhibit 3(a) to a
Registration Statement on Form S-1 (No. 33-74866) and
the same is incorporated herein by reference.
3(b) Registrant's Bylaws were filed as Exhibit 3(b) to a
Registration Statement on Form S-1 (No. 33-74866) and
the same is incorporated herein by reference.
4 A specimen Form of Stock Certificate was filed as
Exhibit 4 to a Registration Statement on Form S-1
(No. 33-74866) and the same is incorporated herein by
reference.
10(a)(1) A Business Loan Agreement between Registrant and
First of America Bank - Michigan, N.A. dated
November 1, 1992, and as amended December 21, 1993,
with respect to Registrant's Line of Credit, Secured
Term Loan Availability, Secured End Mortgage, Real
Estate Mortgage for Subsidiary, and Secured Term Loan
to subsidiary were filed as Exhibit 10(a)(1) to a
Registration Statement on Form S-1 (No. 33-74866) and
the same is incorporated herein by reference.
10(a)(2) A Loan Agreement between Registrant and Michigan
Strategic Fund dated May 1, 1989 was filed as
Exhibit 10(a)(2) to a Registration Statement on
Form S-1 (No. 33-74866) and the same is incorporated
herein by reference.
10(a)(3) A Loan Agreement between Registrant and Michigan
Strategic Fund dated September 1, 1990 was filed as
Exhibit 10(a)(3) to a Registration Statement on
Form S-1 (No. 33-74866) and the same is incorporated
herein by reference.
10(a)(4) A Bond Purchase Agreement among Registrant,
Michigan Strategic Fund and Roney & Company,
dated September 24, 1990 was filed as Exhibit
10(a)(4) to a Registration Statement on Form S-1
(No. 33-74866) and the same is incorporated
herein by reference.
10(a)(5) A Reimbursement Agreement between Registrant and
First of America Bank - Michigan, N.A. dated
November 1, 1992 backing the 1989 Michigan
Strategic Fund Limited Obligation Revenue Bonds
was filed as Exhibit 10(a)(5) to a Registration
Statement on Form S-1 (No. 33-74866) and the
same is incorporated herein by reference.
10(a)(6) A Reimbursement Agreement between Registrant and
First of America Bank - Michigan, N.A. dated
November 1, 1992 backing the 1990 Michigan
Strategic Fund Limited Obligation Revenue Bonds
was filed as Exhibit 10(a)(6) to a Registration
Statement on Form S-1 (No. 33-74866) and the
same is incorporated herein by reference.
10(b) A Loan Guarantee Agreement and related Security
Agreement between Subsidiary and First of
America Bank - Michigan, N.A. dated November 1, 1992
was filed as Exhibit 10(b) to a Registration
Statement on Form S-1 (No. 33-74866) and the same
is incorporated herein by reference.
*10(d)(1) The Triple S Plastics, Inc. Employee Stock
Option Plan was filed as Exhibit 10(d)(1) to a
Registration Statement on Form S-1 (No. 33-74866)
and the same is incorporated herein by reference.
*10(d)(2) A Form of Nonqualified Stock Option Agreement
was filed as Exhibit 10(d)(2) to a Registration
Statement on Form S-1 (No. 33-74866) and the
same is incorporated herein by reference.
*10(d)(3) A Form of Qualified Stock Option Agreement was
filed as Exhibit 10(d)(3) to a Registration
Statement on Form S-1 (No. 33-74866) and the
same is incorporated herein by reference.
*10(d)(4) An Outside Directors Stock Option Plan dated
July 25, 1996 was filed as Exhibit 99 to a
Registration Statement on Form S-8
(No. 333-20365) and the same is incorporated
herein by reference.
10(e) A Form of Indemnity Agreement between Registrant
and each of its directors was filed as
Exhibit 10(e) to Registration Statement on
Form S-1 (No. 33-74866) and the same is
incorporated by reference.
10(f) Lease between Triple S Plastics, Inc. and
Westinghouse Road Joint Venture regarding the
manufacturing and office building for the
Georgetown, Texas manufacturing facility.
10(g) Lease between Dynacept Corporation, Inc.,
subsidiary of Triple S Plastics, Inc., and
Dynacept Company, Inc., now known as MLM
Liquidation Corp., regarding the manufacturing
and office building for the Dynacept
Corporation, Inc. facility.
21 List of Subsidiaries 32
23 Consent of Experts and Counsel 33
27 Financial Data Schedule 34
*Indicates a compensatory arrangement
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
Dynacept Corporation, Inc., a New York Corporation
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Triple S Plastics, Inc.
Vicksburg, Michigan
We hereby consent to the incorporation by reference in the Company's
Registration Statements (No. 33-83214, No. 33-83212, No. 333-20365 and
No. 333-20451) of our reports dated May 11, 1999, relating to the consolidated
financial statements and schedule of Triple S Plastics, Inc. appearing in the
Company's Annual Report on Form 10-K for the year ended March 31, 1999.
BDO Seidman, LLP
Kalamazoo, Michigan
May 11, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-K and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000918642
<NAME> TRIPLE S PLASTICS, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 5594000
<SECURITIES> 0
<RECEIVABLES> 10196000
<ALLOWANCES> 709000
<INVENTORY> 4386000
<CURRENT-ASSETS> 21074000
<PP&E> 42003000
<DEPRECIATION> 16293000
<TOTAL-ASSETS> 50809000
<CURRENT-LIABILITIES> 10787000
<BONDS> 6862000
0
0
<COMMON> 14468000
<OTHER-SE> 16485000
<TOTAL-LIABILITY-AND-EQUITY> 50809000
<SALES> 67772000
<TOTAL-REVENUES> 67772000
<CGS> 56647000
<TOTAL-COSTS> 56647000
<OTHER-EXPENSES> 1441000
<LOSS-PROVISION> 1071000
<INTEREST-EXPENSE> 603000
<INCOME-PRETAX> (1505000)
<INCOME-TAX> (453000)
<INCOME-CONTINUING> (1052000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1052000)
<EPS-BASIC> (.28)
<EPS-DILUTED> (.28)
</TABLE>
