UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 March 31, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ______________ to _______________.
Commission file number 0-023454
TOTAL CONTAINMENT, INC.
Exact name of registrant as specified in its charter)
Delaware 23-2394872
(State or other jurisdiction (IRS Employer
incorporation or organization identification No.)
(610) 666-7777
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if
changed since last report)
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 report(s) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date: 4,641,600 shares of Common Stock, par value $0.01 per
share were outstanding at May 15, 1996.
TOTAL CONTAINMENT, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet -
March 31, 1996 and December 31, 1995 3
Condensed Consolidated Statement of
Income - Three months ended March 31,
1996 and 1995 4
Condensed Statement of Cash Flows -
Three months ended March 31, 1996
and 1995 5
Notes to Condensed Consolidated Financial
Statements - March 31, 1996 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES
TOTAL CONTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
March
31, Dec. 31,
1996 1995
ASSETS
Current Assets:
Cash and cash equivalents $
384 $ 337
Accounts receivable, net
6,373 6,316
Inventories - Note 2
6,186 5,691
Other assets
2,117 2,244
Other current assets
15,060 14,588
Molds and tooling costs, net
1,319 1,398
Property ad equipment, net
3,119 1,545
Patents, patent rights and licenses, net
4,932 5,019
Goodwill, net
5,260 5,299
Other assets
2,602 2,853
$32,292 $30,702
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit borrowings $
2,067 $ 251
Current portion of long-term bank debt
320 240
Accounts payable and accrued expenses
2,339 2,910
Income taxes payable
53 ---
Warranty reserve
3,063 2,963
Total current liabilities
7,842 6,364
Long-term debt
820 414
Warranty reserve
5,020 5,309
Total liabilities
13,682 12,087
Shareholders' Equity:
Preferred stock - $0.01 par value, authorized
1,000 shares; none issued and outstanding
- --- ---
Common stock - $0.01 par value; authorized
20,000,000 shares; 4,641,600 shares issued
and outstanding
46 46
Capital in excess of par value
13,728 13,728
Retained earnings
4,832 4,819
Equity adjustment from foreign currency translation
4 22
Total shareholders' equity
18,610 18,615
$
32,292 $ 30,702
======== ========
See notes to condensed consolidated financial
statements.
TOTAL CONTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months ended
March 31,
1996 1995
(In thousands, except per share data)
Net sales
$7,045 $8,138
Cost of sales
4,464 4,677
Gross profit
2,581 3,461
Selling, general and administrative
2,357 2,449
Amortization of patents, licenses and goodwill
126 121
Income from operations
98 891
Interest expenses
52 30
Income before taxes
46 861
Income tax expense
33 368
Net income
$ 13 $ 493
====== ======
Net income per share
$ 0.00 $ 0.11
====== ======
Weighted average shares and share
equivalents used in computation of
net income per share
4,642 4,642
====== ======
See notes to condensed consolidated
financial statements.
TOTAL CONTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
1996 1995
(In thousands)
Cash flows from operating activities:
Net cash used for operating activities
($658) ($710)
Cash flows from investing activities:
Purchase of property and equipment
(1,597) (305)
Other
--- (144)
Net cash used for investing activities
(1,597) (449)
Cash flows from financing activities:
Net borrowings on long-term debt
486 ---
Net borrowings under line of credit
1,816 1,429
Net cash provided by financing activities
2,302 1,429
Net increase in cash
$ 47 $ 270
======== =======
See notes to condensed consolidated financial
statements.
TOTAL CONTAINMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The unaudited Condensed Consolidated Financial Statements of
Total Containment, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and disclosures required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. The results of
operations of the Company for the three month period ended
March 31, 1996, are not necessarily indicative of the results
that may be expected for any other interim period or for a full
year. For further information, refer to the Consolidated
Financial Statements and notes thereto included in the Registrant
Company's Annual Report and Form 10-K for the year ended
December 31, 1995.
Note 2 - Inventories
The components of inventory consist of the following:
Mar. 31, Dec. 31,
1996 1995
(In thousands)
Raw materials $ 422 $ 396
Finished goods 5,764 5,295
$ 6,186 $ 5,691
======== ========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is a Delaware corporation organized in 1986.
The Company is engaged in the business of designing, engineering
and selling flexible double-wall underground piping systems,
sump/risers and dispenser sumps, jackets for underground storage
tanks and related products for use in connection with the
underground conveyance and containment of petroleum and alcohol
based motor vehicle fuels, including gasoline and gasohol. The
principal end users of the Company's products are service
stations, convenience stores and other retail sellers of
gasoline, gasohol and other motor vehicle fuels, and government
bodies, utilities and other fleet vehicle operators.
Net Sales
The Company's net sales for the quarter ended March 31,
1996, were $7.0 million compared to $8.1 million for the
corresponding quarter in 1995. The decrease was primarily
attributable to a decrease in sales of all products in the North
American and European markets due to extreme weather conditions
which caused construction delays in these markets and to a lesser
extent a decrease in selling price on certain products due to
increased competition in the flexible piping market.
Gross Profit
The primary component of the Company's cost of sales is the
product manufacturing costs paid to various third party
manufacturers. Other components are the variable and fixed costs
of operating the Company's warehouses, depreciation of molds,
tools and equipment, warranty expense and limited assembly costs.
The Company's gross profit for the quarter ended March 31, 1996,
was $2.6 million compared to $3.5 million for the corresponding
quarter in 1995. The decrease resulted primarily from decreased
sales, an increase in cost on certain products and a decrease in
the selling price on certain products due to increased
competition in the flexible piping market.
The Company's gross profit percentage decreased to 36.6% for
the quarter ended March 31, 1996, compared to 42.5% for the
corresponding quarter in 1995. The decrease was primarily
attributable to a decrease in the selling price on certain
products due to increased competition in the flexible piping
market coupled with an increase in cost on certain products and
to a lesser extent the unfavorable impact of certain fixed
operating costs being spread over a decreased sales base.
Operating Expense
Selling, general and administrative expenses consist
primarily of salaries and related employee benefits, payroll
taxes, commissions, royalties, legal expenses and other general,
administrative and overhead costs. Selling, general and
administrative expenses for the quarter ended March 31, 1996 and
1995, were $2.4 million.
Interest Expense
Interest expense for the quarter ended March 31, 1996, was
$52,000 compared to $30,000 for the corresponding quarter in
1995. The increase was due to the Company's borrowings on its
term loan to increase its manufacturing capabilities which did
not begin until the latter part of fiscal year 1995.
Amortization of Intangibles
Amortization of Intangibles consists of the amortization of
goodwill over a period of 40 years and the amortization of
various patents and licenses that are amortized on a
straight-line basis over the estimated lives of the patents
(which range from 13 to 17 years) at the acquisition or
subsequent issuance date.
Income Taxes
Income tax expense for the quarter ended March 31, 1996, was
$33,000 compared to $368,000 for the corresponding quarter in
1995. The decrease was due to the decrease in the Company's
income before income taxes.
Net Income
The Company's net income for the quarter ended March 31,
1996, was $13,000 compared to $493,000 for the corresponding
quarter in 1995. The decrease for the period is the result of
decreased sales, an increase in cost for certain products and a
decrease in the selling price on certain products due to
increased competition in the flexible piping market.
Seasonality and Economic Conditions
The Company's sales are affected by the timing of planned
construction of new service stations and the retrofitting of
existing service stations by the end users, both of which are
influenced by inclement weather and general economic conditions.
Accordingly, the Company's net sales and operating results for
the quarter ended March 31 are generally adversely affected.
Liquidity and Capital Resources
The Company had working capital of $7.2 million and $8.2
million at March 31, 1996 and December 31, 1995, respectively.
The $1.0 million decrease in working capital was primarily
attributable to an increase in the Company's line of credit
borrowings to fund its working capital needs.
The Company satisfies its working capital needs primarily
through funds generated by operations and by borrowings under a
$4.0 million unsecured and line of credit facility with a
commercial bank.
The Company believes that its presently available funds,
existing credit facility and the cash flow expected to be
generated from operations, will be adequate to satisfy its
anticipated working capital requirements for the foreseeable
future.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
A description of the Company's pending legal
proceedings has been previously reported in the
Company's Annual Report and Form 10-K for the fiscal
year ended December 31, 1995.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of the Company,
incorporated herein by reference to
exhibit 3(a) to Registration Statement
No. 33-370456 on Form S-1 of the Company
3.2 Bylaws of the Company, Incorporated herein by
reference to exhibit 3(a) to Registration
Statement No. 33-70456 on Form S-1 of the
Company
11 Statement re: Computation of Earnings Per
share (unaudited)
27 Financial Data Schedule
(b) Reports on Form 8-K
On January 31, 1996, the Company filed a Current Report
on Form 8-K, dated January 16, 1996, reporting
information under Item 1.
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.
Total Containment, Inc.
(Registrant)
Date May 15, 1996 /s/ Marc Guindon
Marc Guindon
President and C.E.O.
Date May 15, 1996 /s/ Jeffrey Boehmer
Jeffrey Boehmer
Principal Financial Officer
EXHIBIT INDEX
Exhibit No. Description
3.1 Certificate of Incorporation of the Company,
incorporated herein by reference to
exhibit 3(a) to Registration Statement
No. 33-370456 on Form S-1 of the Company
3.2 Bylaws of the Company, Incorporated herein by
reference to exhibit 3(a) to Registration
Statement No. 33-70456 on Form S-1 of the
Company
11 Statement re: Computation of Earnings Per
share (unaudited)
27 Financial Data Schedule