SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2000
OR
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number: 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.)
7950 Moorsbridge Road, Suite 200, Portage, Michigan 49024
(Address of principal executive offices) (Zip Code)
(616) 327-3417
(Registrant's telephone number, including area code)
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 _____
The registrant had 3,782,153 shares of common stock outstanding as of
September 30, 2000.
<PAGE>
TRIPLE S PLASTICS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
September 30, 2000 and March 31, 2000
Condensed Consolidated Statements of Income - 4
Three Months and Six Months Ended
September 30, 2000 and 1999
Condensed Consolidated Statements of Cash Flows - 5
Six Months Ended September 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
TRIPLE S PLASTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands)
September 30 March 31
2000 2000
ASSETS ------------ ------------
Current Assets:
Cash and cash equivalents $ 1,478 $ 1,806
Accounts receivable, less allowance of $300 20,185 13,929
Inventories (Note 4) 7,639 6,344
Deferred income taxes 427 427
Other 1,950 656
------------ ------------
Total Current Assets 31,679 23,162
Property, Plant and Equipment 48,044 40,482
Less accumulated depreciation and amortization 18,330 16,726
------------ ------------
Net Property, Plant and Equipment 29,714 23,756
Other:
Assets held for sale (Note 2) -- 868
Goodwill, net of accumulated amortization of
$999 and $848 (Note 6) 4,891 3,641
Miscellaneous 19 59
------------ ------------
Total Other Assets 4,910 4,568
------------ ------------
$ 66,303 $ 51,486
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable (Note 5) $ 3,367 $ --
Accounts payable 10,153 5,543
Accrued compensation 1,946 1,570
Income taxes payable 1,617 831
Deferred mold revenue 1,763 547
Other accrued expenses (Note 7) 1,002 1,331
Current maturities of long-term debt 1,947 1,312
------------ ------------
Total Current Liabilities 21,795 11,134
Long-Term Debt, less current maturities 3,758 4,618
Deferred Income Taxes 1,949 1,949
------------ ------------
Total Liabilities 27,502 17,701
Shareholders' Equity:
Preferred stock, no par value, 1,000,000
shares authorized, none issued -- --
Common stock, no par value, 10,200,000 shares
authorized, 3,782,153 and 3,759,716 shares
issued and outstanding 14,622 14,529
Retained earnings 24,179 19,256
------------ ------------
Total Shareholders' Equity 38,801 33,785
------------ ------------
$ 66,303 $ 51,486
============ ============
See accompanying notes to condensed consolidated financial statements.
<PAGE>
TRIPLE S PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
September 30 September 30
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net Sales $39,713 $23,709 $71,851 $42,955
Cost of Sales 31,419 19,165 56,946 34,871
---------- ---------- ---------- ----------
Gross Profit 8,294 4,544 14,905 8,084
Selling and marketing expenses 699 1,427 1,389 2,409
General and administrative expenses 3,185 1,494 5,585 3,651
Plant closing costs (Note 7) -- -- -- 1,312
---------- ---------- ---------- ----------
Total Operating Expenses 3,884 2,921 6,974 7,372
---------- ---------- ---------- ----------
Operating Income 4,410 1,623 7,931 712
Interest Expense (Income):
Interest expense 195 131 307 266
Interest income (9) (41) (31) (111)
---------- ---------- ---------- ----------
Net Interest Expense 186 90 276 155
---------- ---------- ---------- ----------
Income Before Income Taxes 4,224 1,533 7,655 557
Income Tax Expense 1,513 560 2,733 205
---------- ---------- ---------- ----------
Net Income $ 2,711 $ 973 $ 4,922 $ 352
========== ========== ========== ==========
Basic Earnings per Share of
Common Stock $ .72 $ 0.26 $ 1.31 $ 0.09
========== ========== ========== ==========
Diluted Earnings per Share
of Common Stock $ .59 $ 0.24 $ 1.09 $ 0.09
========== ========== ========== ==========
Shares Used in Computing Earnings per Share:
Basic 3,768 3,753 3,764 3,752
Diluted 4,564 4,057 4,514 3,952
See accompanying notes to condensed consolidated financial statements.
<PAGE>
TRIPLE S PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
September 30
-------------------------
2000 1999
------- -------
OPERATING ACTIVITIES:
Net income $ 4,922 $ 352
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation and amortization 2,293 1,975
Changes in assets and liabilities,
net of amounts acquired from
business acquisition:
Accounts receivable (6,171) (1,748)
Inventories (1,285) (1,258)
Accounts payable 4,579 1,590
Other 546 (1,166)
---------- ----------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 4,884 (255)
INVESTING ACTIVITIES:
Capital expenditures (6,971) (2,735)
Proceeds from sale of property and
equipment 203 --
Business acquisition (Note 6) (1,310) --
---------- ---------
CASH USED IN INVESTING ACTIVITIES (8,078) (2,735)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 93 20
Net borrowings under note payable 3,367 --
Proceeds from issuance of long-term debt 660 --
Principal payments on long-term debt (1,254) (892)
---------- ----------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,866 (872)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (328) (3,862)
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 1,806 5,594
---------- ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,478 $ 1,732
========== ==========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
TRIPLE S PLASTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, Dollars in thousands)
1. Presentation of Interim Information
In the opinion of the management of Triple S Plastics, Inc. (the Company),
the accompanying unaudited condensed consolidated financial statements include
all normal adjustments considered necessary to present fairly the financial
position of the Company as of September 30, 2000 and the results of its
operations for the periods shown. Interim results are not necessarily indicative
of results for a full year.
The condensed consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and therefore, do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
2. Assets Held for Sale
As discussed in Note 7, the Company's Tucson, Arizona facility was sold
in December 1999 and at that time, the former Victor Plastics facility was
being held for sale. These facilities were written down to their estimated
fair market value in the first quarter ended June 30, 1999, and depreciation
of the facilities was terminated at the time of closure. In September 2000,
management decided to reactivate the former Victor Plastics facility. The asset
has been reclassified from "assets held for sale" to "property, plant and
equipment."
3. Business
During the six months ended September 30, 2000 and 1999, a telecom-
munications customer accounted for 70% and 56% of net sales, respectively.
4. Inventories
Inventories are summarized as follows:
September 30 March 31
2000 2000
------------ ------------
Raw materials and packaging $ 4,498 $ 3,658
Finished goods and work-in-process 3,141 2,686
------------ ------------
Total Inventories $ 7,639 $ 6,344
============ ============
5. Note Payable
The Company has a $10,000 unsecured line of credit with a bank, due on
demand, with interest on the unpaid principal balance at a variable rate based
on certain financial ratios. There was $3,367 outstanding under this agreement
at September 30, 2000. There were no borrowings under the agreement at
March 31, 2000.
6. Acquisition of Burco Precision Products, Inc.
On June 16, 2000, Triple S Plastics, Inc. purchased, for cash of
$1,310, assumption of long-term debt of $309 and a note payable of $60, the
outstanding stock of Burco Precision Products, Inc. (Burco), a precision mold-
building business located in Denton, Texas. The transaction has been accounted
for using the purchase method. Burco's results have been included in the
Company's condensed consolidated financial statements from the date of
acquisition. Goodwill amounting to $1,400 is being amortized on a straight-line
basis over 15 years.
7. Plant Closing Costs
On June 18, 1999, the Company announced that it was closing its Tucson,
Arizona facility and transferring the machinery and equipment to its new
facility in Fort Worth, Texas and other locations in Michigan. A charge for
closing costs was recorded in the first quarter ended June 30, 1999 and
reflected the cost of closing the Tucson facility and disposition of the former
Victor Plastics facility. The estimated loss on closing included the writedown
of property, plant and equipment to market value based on an independent
appraisal, as well as closedown expenses. The pre-tax effect of this charge is
shown in the Condensed Consolidated Statements of Income as plant closing costs.
The Tucson facility was sold in December 1999 and no additional provision for
closing costs was necessary. In September 2000, management decided to reactivate
the former Victor Plastics facility as discussed in Note 2.
8. Other Matters
On July 14, 2000, the Company and Eimo Oyj of Finland announced that it had
entered into a formal merger agreement pursuant to which a subsidiary of
Eimo Oyj will merge into the Company, and the Company will become a wholly-owned
subsidiary of Eimo Oyj. The transaction is subject to approval by the stock-
holders of the Company and Eimo. The merger is intended to be tax free to the
shareholders of the Company and is intended to be accounted for as a
pooling-of-interests under Finnish generally accepted accounting principles.
9. Commitments
On August 30, 2000 the Company announced the formation of a new business
in Manaus, Brazil. The business, known as Triple S Cosmosplast
da Amazonia, Ltda., is being formed in collaboration with Cosmosplast
Industria e Comercio de Plasticos Ltda., a Brazilian plastics company serving
the electronics and other selected consumer goods industries. The Company owns a
70% interest in the new venture and Cosmosplast Industria owns the remaining
30%.
10. Supplemental Disclosure of Cash Flow Information
Non-cash investing and financing activities in conjunction with the
acquisition of Burco were as follows:
Equipment additions $ 274
Long-term debt 369
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands)
Certain matters discussed in this Form 10-Q constitute forward-looking
statements which are necessarily subject to certain risks and uncertainties,
and they may change in a material way based upon various market, industry and
other important factors, many of which are beyond the control of the Company.
From time to time, the Company identifies factors in its Form 10-K filed with
the Securities and Exchange commission and its other interim reports that may
influence future results, and the Company recommends that investors consult
those reports. The Company cautions investors that actual results may differ
materially from the forward-looking statements contained in these reports.
Overview
The Company designs and builds molds and manufactures complex, highly
engineered thermoplastic molded components based on customers' specifications
and orders. Its customers are primarily in the telecommunications, consumer
products, automotive, medical/pharmaceutical, and information technologies
markets. The Company considers both the manufacture of molded products and mold
sales to be an integral part of its business. The Company's fiscal year end is
March 31.
Results of Operations
On June 18, 1999, the Company announced that it was closing its Tucson,
Arizona facility and transferring the machinery and equipment to its new
facility in Fort Worth, Texas and other locations in Michigan. The facility
was sold in December 1999. The impact of these actions are discussed in
Note 7 to the Condensed Consolidated Financial Statements.
The following table sets forth, for the three months and six months ended
September 30, 2000 and 1999, certain items from the Company's Condensed
Consolidated Statements of Income expressed as a percentage of net sales.
Three months ended Six months ended
September 30 September 30
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 79.1 80.8 79.3 81.2
-------- -------- -------- --------
Gross Profit 20.9 19.2 20.7 18.8
Selling & Marketing Expenses 1.8 6.0 1.9 5.6
General & Administrative Expenses 8.0 6.3 7.8 8.5
Plant Closing Costs -- -- -- 3.0
-------- -------- -------- --------
Operating Expenses 9.8 12.3 9.7 17.1
Operating Income 11.1 6.9 11.0 1.7
Interest Expense, net 0.5 0.4 0.3 0.4
-------- -------- -------- --------
Income Before Income Taxes 10.6 6.5 10.7 1.3
Income Tax Expense 3.8 2.4 3.8 0.5
-------- -------- -------- --------
Net Income 6.8% 4.1% 6.9% 0.8%
======== ======== ======== ========
<PAGE>
Net Sales
Net sales for the second quarter and six months ended September 30, 2000
increased 67.5% and 67.3%, respectively, compared to their respective prior year
periods. The sales increase reflected exceptionally strong shipments to the
telecommunications market which comprised 76.1% of net sales for the second
quarter of this year and 73.9% for the six months ended September 30, 2000.
Sales to customers in all the other markets the Company serves reflected
decreases as a percentage of net sales. Management anticipates the Company's
reliance on the telecommunications market will continue into the foreseeable
future.
The overall increase in sales is principally related to volume as no
significant price increases occurred during the first six months of fiscal 2001.
Cost of Sales
Cost of sales as a percentage of net sales decreased to 79.1% in the second
quarter of fiscal 2001 compared to 80.8% for the second quarter last year. For
the first six months of fiscal 2001 cost of sales as a percentage of net sales
decreased to 79.3% compared to 81.2% for the six months of the prior year. The
lower cost of sales percentage in fiscal 2001 is primarily attributed to higher
overhead absorption as a result of increased sales. The lower cost of sales
percentage is also attributed to molded part manufacturing cost reductions,
primarily in labor cost, as a result of manufacturing efficiency improvement
initiatives at the Company.
Selling and Marketing Expenses
Selling and marketing expenses as a percentage of net sales decreased to
1.8% in the second quarter of fiscal 2001 compared to 6.0% for the second
quarter of the prior year. For the first six months of fiscal 2001, selling and
marketing expenses as a percentage of net sales decreased to 1.9% compared to
5.6% for the six months of the prior year. The decrease principally relates
to decreased commissions as a result of contract re-negotiation.
General and Administrative Expenses
General and administrative expenses as a percentage of net sales increased
to 8.0% compared to 6.3% for the second quarter last year. This increase was
principally due to organization costs related to the merger with Eimo Oyj. For
the first six months of fiscal 2001 general and administrative expenses as a
percentage of sales decreased to 7.8% compared to 8.5% for the six months of
the prior year. This decrease is principally attributed to higher overhead
absorption as a result of increased sales.
Income Taxes
The Company's effective tax rate for the second quarter of fiscal 2001
was 35.8% compared to the prior year rate of 36.5% and was 35.7% for the first
six months of fiscal 2001 compared to 36.8% for the first six months of the
prior year.
Liquidity and Capital Resources
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
foreseeable future.
Cash provided from operations of $4,884 for the first six months of
fiscal year 2001 consisted primarily of earnings and an increase in accounts
payable, offset by increases in accounts receivable and inventories.
As a result of the higher sales level, accounts receivable increased by
$6,171 at September 30, 2000 compared to the prior fiscal year end, and
represented 40 days sales outstanding which is 5 days lower than the end of
the prior fiscal year. Inventories increased by $1,285 at September 30, 2000
compared to the prior fiscal year end, and represented 24 days in inventory
compared to 34 days at the end of the prior fiscal year. The increase is
primarily due to increased inventory requirements related to the higher sales
at the Texas facilities.
The Company has a $10,000 unsecured line of credit agreement with a bank
of which $6,633 is available at September 30, 2000. The Company has utilized
$3,367 for business acquisitions and facility expansions during the six months
ended September 30, 2000. The Company anticipates investing, over the next
two to three years, $5,000 in capital acquisitions related to the Manaus,
Brazil operation. Management believes that this source of cash, along with
internally generated cash, will be adequate to fund future operating and
capital requirements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As a result of its variable rate line of credit, the Company is exposed
to the risk of rising interest rates. The $10,000 line of credit had an
interest rate ranging from 8.5% to 9.0% for the six months ended
September 30, 2000.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 4 - By-laws of Triple S Plastics, Inc., as amended
(b) Exhibit 27 - Financial Data Schedule
(c) The Company filed a Current Report on Form 8-K with the
Securities and Exchange Commission on July 19, 2000, under
Item 2, relating to the merger agreement, dated July 13, 2000,
entered into by the Company and Eimo Oyj, and the transactions
contemplated thereby.
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.
TRIPLE S PLASTICS, INC.
(Registrant)
Date: November 13, 2000 _/s/_A. CHRISTIAN_SCHAUER_________________
A. Christian Schauer
Chief Executive Officer and Chief
Financial Officer
Date: November 13, 2000 _/s/_CATHERINE_A._TAYLOR_________________
Catherine A. Taylor
Treasurer, Corporate Controller
(Chief Accounting Officer)
