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 June 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 Identification No.)
Incorporation or Organization)
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 3,763,541 shares of common stock outstanding as of
August 11, 2000.
TRIPLE S PLASTICS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
June 30, 2000 and March 31, 2000
Condensed Consolidated Statements of Income - Three Months 4
Ended June 30, 2000 and 1999
Condensed Consolidated Statements of Cash Flows - 5
Three Months Ended June 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 (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)
June 30 March 31
2000 2000
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,759 $ 1,806
Accounts receivable, less allowance of $300 16,982 13,929
Inventories (Note 4) 8,478 6,344
Deferred income taxes 427 427
Other 1,374 656
------------- ------------
Total Current Assets 29,020 23,162
Property, Plant and Equipment 44,765 40,482
Less accumulated depreciation and amortization 18,002 16,726
------------- ------------
Net Property, Plant and Equipment 26,763 23,756
Other:
Assets held for sale (Note 2) 868 868
Goodwill, net of accumulated amortization of
$912 and $848 (Note 6) 4,978 3,641
Miscellaneous 49 59
------------- ------------
Total Other Assets 5,895 4,568
------------- ------------
$ 61,678 $ 51,486
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable (Note 5) $ 3,244 $ --
Accounts payable 8,593 5,543
Accrued compensation 1,433 1,570
Income taxes payable 1,297 831
Deferred mold revenue 1,912 547
Other accrued expenses (Note 7) 1,446 1,331
Current maturities of long-term debt 1,949 1,312
------------- ------------
Total Current Liabilities 19,874 11,134
Long-Term Debt, less current maturities 3,850 4,618
Deferred Income Taxes 1,949 1,949
------------- ------------
Total Liabilities 25,673 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, 3,761,143 and 3,759,716 shares
issued and outstanding 14,538 14,529
Retained earnings 21,467 19,256
------------- ------------
Total Shareholders' Equity 36,005 33,785
------------- ------------
$ 61,678 $ 51,486
============= ============
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
June 30
------------------------------
2000 1999
------------ ------------
Net Sales $ 32,138 $ 19,246
Cost of Sales 25,527 15,706
------------ ------------
Gross Profit 6,611 3,540
Selling and marketing expenses 690 982
General and administrative expenses 2,400 2,157
Plant closing costs (Note 7) -- 1,312
------------ ------------
Total Operating Expenses 3,090 4,451
------------ ------------
Operating Income (Loss) 3,521 (911)
Interest Expense (Income):
Interest expense 112 135
Interest income (22) (70)
------------ ------------
Net Interest Expense 90 65
------------ ------------
Income (Loss) Before Income Taxes 3,431 (976)
Income Tax Expense (Benefit) 1,220 (355)
------------ ------------
Net Income (Loss) $ 2,211 $ (621)
============ ============
Basic Earnings (Loss) per Share of
Common Stock $ .59 $ (.17)
============ ============
Diluted Earnings (Loss) per Share of
Common Stock $ .50 $ (.17)
============ ============
Shares Used in Computing Earnings per Share:
Basic 3,761 3,751
Diluted 4,449 3,751
See accompanying notes to condensed consolidated financial statements.
TRIPLE S PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended
June 30
----------------------------
2000 1999
------------ ------------
OPERATING ACTIVITIES:
Net income (loss) $ 2,211 $ (621)
Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities:
Depreciation and amortization 1,107 992
Plant closing costs (Note 7) -- 1,312
Changes in assets and liabilities, net
of amounts acquired from business
acquisition:
Accounts receivable (2,924) (612)
Inventories (2,124) (610)
Accounts payable 3,019 (448)
Other 988 (66)
------------ ------------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,277 (53)
INVESTING ACTIVITIES:
Capital expenditures (3,814) (665)
Proceeds from sale of property and equipment 47 8
Business acquisition, net (Note 6) (1,310) --
------------ ------------
CASH USED IN INVESTING ACTIVITIES (5,077) (657)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 9 12
Net borrowings under note payable 3,057 --
Principal payments on long-term debt (313) (340)
------------ ------------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,753 (328)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (47) (1,038)
CASH AND CASH EQUIVALENTS-BEGINNING OF PERIOD 1,806 5,594
------------ ------------
CASH AND CASH EQUIVALENTS-END OF PERIOD $ 1,759 $ 4,556
============ ============
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 June 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 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 three months ended June 30, 2000 and 1999, a telecommnications
customer accounted for 68% and 50% of net sales, respectively.
4. Inventories
Inventories are summarized as follows:
June 30 March 31
2000 2000
------------- --------------
Raw materials and packaging $ 5,277 $ 3,658
Finished goods and work-in-process 3,201 2,686
------------- --------------
Total Inventories $ 8,478 $ 6,344
============= ==============
5. Note Payable
The Company has a $10.0 million 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 $3.1 million outstanding under
this agreement at June 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
$1.3 million and a note payable of $60, the outstanding stock of Burco
Precision Products, Inc. (Burco), a tool shop 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 $1.4 million 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. 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. The sale of the Tucson
facility was final in December 1999 and no additional provision for closing
costs was necessary.
8. Subsequent Event
On July 14, 2000, the Company and Eimo Oyj of Finland announced that they
had entered into a formal merger agreement. The transaction is subject to
approval by the stockholders of the Company and Eimo and certain government
entities and agencies. 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. 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
Notes payable 187
Long-term debt 182
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 sale of
this facility was final 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 ended June 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
June 30
-----------------------
2000 1999
---------- ----------
Net Sales 100.0% 100.0%
Cost of Sales 79.4 81.6
---------- ----------
Gross Profit 20.6 18.4
Selling & Marketing Expenses 2.1 5.1
General & Administrative Expenses 7.5 11.2
Plant Closing Costs -- 6.8
---------- ----------
Operating Expenses 9.6 23.1
Operating Income (Loss) 11.0 (4.7)
Interest Expense, net 0.3 0.4
---------- ----------
Income (Loss) Before Income Taxes 10.7 (5.1)
Income Tax Expense (Benefit) 3.8 (1.9)
---------- ----------
Net Income (Loss) 6.9% (3.2)%
========== ==========
Net Sales
Net sales for the first quarter ended June 30, 2000 increased 67.0%
compared to the first quarter of the prior year. The first quarter sales
increase reflected exceptionally strong shipments to the telecommunications
market which comprised 71.2% of net sales for the first quarter of this year.
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 three months of fiscal
2001.
Cost of Sales
Cost of sales as a percentage of net sales decreased to 79.4% in the first
quarter of fiscal 2001 compared to 81.6% for the first quarter last 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
2.1% in the first quarter of fiscal 2001 compared to 5.1% for the first quarter
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 decreased
to 7.5% compared to 11.2% for the first quarter last year. This decrease was
principally due to higher absorption as a result of increased sales, as well
as to decreased legal and professional fees.
Income Taxes
The Company's effective tax rate for the first three months of fiscal 2001
is 35.6% compared to the prior year rate of (36.4)%. The prior year rate is
reflective of the losses incurred in the first three months of fiscal 2000.
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 used from operations of $5.1 million for the first three months of
fiscal year 2001 consisted primarily of an increase in accounts receivable and
inventories.
As a result of the higher sales level, accounts receivable increased by
$3.1 million at June 30, 2000 compared to the prior fiscal year end, and
represented 43 days sales outstanding which is 2 days lower than the end of the
prior fiscal year. Inventories increased by $2.1 million at June 30, 2000
compared to the prior fiscal year end, and represented 32 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
in our Texas facilities, in addition to increased tooling projects in process
at June 30, 2000 compared to the prior fiscal year end.
The Company has a $10.0 million unsecured line of credit agreement with a
bank of which $6.9 million is available at June 30, 2000. Management believes
that this source of cash, along with internally generated cash, will be
adequate to fund future operating and capital requirements.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10 - Effective April 1, 2000, Evan C. Harter, a Director,
became a consultant to the Company to advise senior management on
strategic issues. His compensation was fixed at $20,000 per month
beginning in April 2000 and will continue for the foreseeable future.
This agreement was approved by the Company's Board of Directors at
their meeting on July 13, 2000.
(b) 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: August 14, 2000 _/s/_MARLAN R. SMITH__________________
Marlan R. Smith
Chief Financial Officer
Date: August 14, 2000 _/s/_CATHERINE A. TAYLOR______________
Catherine A. Taylor
Corporate Controller (Chief Accounting
Officer)