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 December 31, 1999
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.)
14320 Portage Road, Vicksburg, Michigan 49097-0905
(Address of principal executive offices) (Zip Code)
(616) 649-0545
(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 3,758,266 shares of common stock outstanding as of
December 31, 1999.
TRIPLE S PLASTICS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
December 31, 1999 and March 31, 1999
Condensed Consolidated Statements of Income - Three Months 4
and Nine Months Ended December 31, 1999 and 1998
Condensed Consolidated Statements of Cash Flows - 5
Nine Months Ended December 31, 1999 and 1998
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 (not applicable)
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
TRIPLE S PLASTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands)
December 31 March 31
1999 1999
----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,139 $ 5,594
Accounts receivable, less allowance of
$300 and $709 for possible losses 12,362 9,487
Inventories (Note 4) 7,347 4,386
Deferred income taxes 384 384
Other 597 1,223
----------- -----------
Total Current Assets 23,829 21,074
Property, Plant and Equipment 39,009 42,003
Less accumulated depreciation and amortization 15,835 16,293
----------- -----------
Net Property, Plant and Equipment 23,174 25,710
Other:
Assets held for sale (Note 2) 868 --
Goodwill, net of accumulated amortization
of $784 and $592 3,705 3,897
Miscellaneous 68 128
----------- -----------
Total Other Assets 4,641 4,025
----------- -----------
$ 51,644 $ 50,809
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6,978 $ 6,649
Accrued compensation 1,267 921
Deferred mold revenue 583 750
Other accrued expenses (Note 6) 1,831 1,133
Current maturities of long-term debt 1,299 1,334
----------- -----------
Total Current Liabilities 11,958 10,787
Long-Term Debt, less current maturities 4,837 6,862
Deferred Income Taxes 2,207 2,207
----------- -----------
Total Liabilities 19,002 19,856
Shareholders' Equity:
Preferred stock, no par value, 1,000,000
shares authorized, none issued -- --
Common stock, no par value, 10,200,000 shares
authorized, 3,758,266 and 3,747,268 shares
issued and outstanding 14,516 14,468
Retained earnings 18,126 16,485
----------- -----------
Total Shareholders' Equity 32,642 30,953
----------- -----------
$ 51,644 $ 50,809
=========== ===========
See accompanying notes to condensed consolidated financial statements.
TRIPLE S PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
December 31 December 31
-------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Net Sales $ 27,964 $ 16,329 $ 70,919 $ 48,368
Cost of Sales 22,676 13,850 57,547 40,033
--------- --------- --------- ---------
Gross Profit 5,288 2,479 13,372 8,335
Selling and marketing expenses 900 902 3,309 2,473
General and administrative expenses 2,284 1,773 5,935 5,216
Plant closing costs (Note 6) -- -- 1,312 --
Unusual item (Note 7) -- 1,440 -- 1,440
--------- --------- --------- ---------
Total Operating Expenses 3,184 4,115 10,556 9,129
--------- --------- --------- ---------
Operating Income (Loss) 2,104 (1,636) 2,816 (794)
Interest Expense (Income):
Interest expense 131 157 397 479
Interest income (46) (58) (157) (212)
--------- --------- --------- ---------
Net Interest Expense 85 99 240 267
--------- --------- --------- ---------
Income (Loss) Before Income Taxes 2,019 (1,735) 2,576 (1,061)
Income Tax Expense (Credit) 730 (555) 935 (318)
--------- --------- --------- ---------
Net Income (Loss) $ 1,289 $ (1,180) $ 1,641 $ (743)
========= ========= ========= =========
Basic Earnings per Share of
Common Stock $ .34 $ (.32) $ .44 $ (.20)
========= ========= ========= =========
Diluted Earnings per Share
of Common Stock $ .30 $ (.32) $ .38 $ (.20)
========= ========= ========= =========
Shares Used in Computing Earnings
per Share:
Basic 3,757 3,746 3,754 3,744
Diluted 4,311 3,746 4,297 3,747
See accompanying notes to condensed consolidated financial statements.
TRIPLE S PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)
Nine Months Ended
December 31
-----------------------
1999 1998
-------- --------
OPERATING ACTIVITIES:
Net income (loss) $ 1,641 $ (743)
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 2,987 2,843
Unusual item (Note 7) -- 1,440
Changes in assets and liabilities:
Accounts receivable (2,875) 4,052
Inventories (2,961) (1,618)
Accounts payable 329 (2,023)
Other 1,685 168
-------- --------
CASH PROVIDED BY OPERATING ACTIVITIES 806 4,119
INVESTING ACTIVITIES:
Capital expenditures (5,473) (3,293)
Proceeds from sale of property and equipment 4,224 --
Decrease in restricted cash -- 2,932
Business acquisition (Note 5) -- (909)
-------- --------
CASH USED IN INVESTING ACTIVITIES (1,249) (1,270)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 48 18
Principal payments on long-term debt (2,060) (2,242)
-------- --------
CASH USED IN FINANCING ACTIVITIES (2,012) (2,224)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $(2,455) $ 625
======== ========
See accompanying notes to condensed consolidated financial statements.
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 December 31, 1999 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 6 to the Condensed Consolidated Financial Statements,
the Company's Tucson, Arizona facility was sold in December 1999 and the former
Victor Plastics facility is 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.
3. Business
During the nine months ended December 31, 1999 and 1998, a
Telecommunications customer accounted for 59% and 30% of net sales,
respectively.
4. Inventories
Inventories are summarized as follows:
December 31 March 31
1999 1999
------------- -------------
Raw materials and packaging $ 4,183 $ 2,582
Finished goods and work-in-process 3,164 1,804
------------- -------------
Total Inventories $ 7,347 $ 4,386
============= =============
5. Acquisition of Dynacept Company, Inc.
On June 1, 1998, Triple S Plastics, Inc. purchased, for cash and long-term
debt, 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.
6. 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. The charge
recorded in the first quarter ended June 30, 1999, reflects 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. All expenses related
to these actions are expected to be incurred by the end of the current fiscal
year. The sale of this facility was final in December 1999 and no additional
provision for closing costs was necessary.
7. Unusual Item
Near the end of the third quarter of fiscal year 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 of fiscal 1999 the Company recorded a pre-tax
charge of $1.4 million ($935 after tax, or $.25 per basic and diluted share)
relating to an increase in its allowance for doubtful accounts, inventory
reserves and accrued liabilities to provide for anticipated losses and legal
costs concerning accounts receivable balances and inventory on hand for these
customers. This pre-tax charge is shown in the Condensed Consolidated Statements
of Income as an unusual item.
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,
medical/pharmaceutical, information technologies, consumer products, and
automotive 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 sale of this
facility was final in December 1999. The impact of these actions is discussed in
Note 6 to the Condensed Consolidated Financial Statements.
The following table sets forth, for the three and nine month periods ended
December 31, 1999 and 1998, certain items from the Company's Condensed
Consolidated Statements of Income expressed as a percentage of net sales.
Three Months Ended Nine Months Ended
December 31 December 31
-------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 81.1 84.8 81.1 82.8
-------- -------- -------- --------
Gross Profit 18.9 15.2 18.9 17.2
Selling & Marketing Expenses 3.2 5.5 4.7 5.1
General & Administrative Exp. 8.2 10.9 8.4 10.7
Plant Closing Costs -- -- 1.8 --
Unusual Item -- 8.8 -- 3.0
-------- -------- -------- --------
Operating Expenses 11.4 25.2 14.9 18.8
Operating Income (Loss) 7.5 (10.0) 4.0 (1.6)
Interest Expense, net 0.3 0.6 0.4 0.6
-------- -------- -------- --------
Income (Loss) Before Income Taxes 7.2 (10.6) 3.6 (2.2)
Income Tax Expense (Credit) 2.6 (3.4) 1.3 (0.7)
-------- -------- -------- --------
Net Income (Loss) 4.6% (7.2)% 2.3% (1.5)%
======== ======== ======== ========
Net Sales
Net sales for the third quarter ended December 31, 1999 increased 71.3% compared
to the third quarter of the prior year. The third quarter sales increase
reflected strong shipments to the Telecommunications market. Sales to customers
in the Automotive market showed a moderate increase. Sales to customers in the
Medical, Consumer Products and Information Technologies markets decreased
approximately 9%.
Net sales for the nine months ended December 31, 1999 increased 46.6% compared
to the same period last year. For the first nine months of the year, sales to
customers in the Telecommunications market comprised 62% of net sales, with
sales to the Consumer Products market at 13%, and the balance (25%) to the
Medical, Automotive and Information Technologies markets.
The overall increase in sales is principally related to volume as no significant
price increases occurred during the first nine months of fiscal 2000. The
Company's five largest customers accounted for approximately 74% of the
Company's net sales for the first nine months of fiscal 2000 and 55% in fiscal
1999.
Cost of Sales
Cost of sales as a percentage of sales decreased to 81.1% in the third
quarter of fiscal 2000 compared to 84.8% for the third quarter last year. The
lower cost of sales percentage in fiscal 2000 is primarily attributed to molded
part manufacturing cost reductions, primarily in material and labor cost, as a
result of manufacturing efficiency improvement initiatives at the Company. The
lower cost of sales percentage is also attributed to higher overhead absorption
as a result of increased sales. For the first nine months of fiscal 2000, the
cost of sales percentage decreased to 81.1% compared to 82.8% for the comparable
period last year.
Selling and Marketing Expenses
Selling and marketing expenses remained level with the third quarter of the
prior year, but represented 3.2% of net sales compared to 5.5% in the prior year
third quarter. For the first nine months of fiscal 2000, these expenses
increased 33.8% and represented 4.7% and 5.1% of net sales for fiscal 2000 and
1999, respectively. The year-to-date increase principally relates to increased
commissions as a result of a one-time expense incurred to settle a commission
contract in addition to the shift in sales from non-commissioned accounts to
commissioned accounts.
General and Administrative Expenses
General and administrative expenses increased 28.8% in the third quarter of
fiscal 2000 compared to the third quarter of the prior year, but represented
8.2% and 10.9% of sales for fiscal 2000 and 1999, respectively. This increase
was principally due to increased compensation and increased recruitment
expenses. For the first nine months of fiscal 2000, these expenses increased
$719 and represented 8.4% and 10.7% of net sales for fiscal 2000 and 1999,
respectively. This increase is primarily due to increased compensation and
professional fees.
Income Taxes
The Company's effective tax rate for the first nine months of fiscal 2000 is
36.3% compared to the prior year rate of (30.0)%. The prior year rate is
reflective of the losses incurred in the first nine months of fiscal 1999.
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 future.
Due to the net loss in the first quarter of fiscal 2000, and the increase in
accounts receivable and inventories, the Company has generated only $806 of cash
from operations in the first nine months of fiscal year 2000.
As a result of the higher sales level, accounts receivable increased by $2.9
million at December 31, 1999 compared to the prior fiscal year end, and
represented 41 days sales outstanding, which is 2 days higher than the end of
the prior fiscal year. Inventories increased by $3.0 million at December 31,
1999 compared to the prior fiscal year end, and represented 33 days in inventory
compared to 28 days at the end of the prior fiscal year. The increase is
primarily due to increased inventory requirements related to the higher sales in
our Texas facilities in addition to having more tooling projects in process at
December 31, 1999 compared to the prior fiscal year end.
The Company has a $5.0 million unsecured line of credit agreement with a
bank which has not been drawn on this fiscal year. Management believes that this
source of cash, along with internally generated cash, will be adequate to fund
future operating and capital requirements.
Other Matters
The Company has completed the process of identifying, evaluating and
implementing changes to computer programs and equipment necessary to address the
Year 2000 date recognition problem. 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. The Company has not experienced any significant Year 2000
issues to date. 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.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
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: February 9, 2000 _MARLAN R. SMITH____________________________
Marlan R. Smith
Chief Financial Officer
Date: February 9, 2000 _CATHERINE A. TAYLOR________________________
Catherine A. Taylor
Corporate Controller (Chief Accounting Officer)