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, 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: 0-23474
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)
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 3,733,032 shares of common stock outstanding as of
September 30, 1996.
TRIPLE S PLASTICS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Condensed Financial Statements
Condensed Balance Sheets - 3
September 30, 1996 and March 31, 1996
Condensed Statements of Income - Three Months and 4
Six Months Ended September 30, 1996 and 1995
Condensed Statements of Cash Flows - 5
Six Months Ended September 30, 1996 and 1995
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
TRIPLE S PLASTICS, INC.
CONDENSED BALANCE SHEETS
(in thousands)
(Unaudited)
September 30 March 31
1996 1996
ASSETS
Current Assets:
Cash and cash equivalents $ 1,672 $ 1,382
Accounts receivable, less allowance of
$280 and $250 for possible losses 10,333 9,637
Inventories (Note 2) 5,051 4,718
Other 388 571
--------- ---------
Total Current Assets 17,444 16,308
Property, Plant and Equipment (Note 3) 34,496 32,998
Less accumulated depreciation and amortization 9,429 8,070
--------- ---------
Net Property, Plant and Equipment 25,067 24,928
Other:
Cash restricted for capital expenditures (Note 3) 3,902 3,827
Goodwill, net of accumulated amortization of
$412 and $393 736 755
Miscellaneous 320 332
--------- ---------
Total Other Assets 4,958 4,914
--------- ---------
$ 47,469 $ 46,150
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Note payable to bank __ $ 998
Accounts payable $ 4,457 2,170
Accrued compensation 1,093 997
Deferred mold revenue 733 866
Other accrued expenses 700 635
Current maturities of long-term debt (Note 3) 1,081 1,081
--------- ---------
Total Current Liabilities 8,064 6,747
Long-Term Debt, less current maturities (Note 3) 8,100 8,747
Deferred Income Taxes 1,675 1,675
--------- ---------
Total Liabilities 17,839 17,169
Shareholders' Equity:
Preferred stock, no par value, 1,000 shares
authorized, none issued -- --
Common stock, no par value, 10,200 shares
authorized, 3,733 and 3,729 shares
issued and outstanding 14,393 14,370
Retained earnings 15,237 14,611
--------- ---------
Total Shareholders' Equity 29,630 28,981
--------- ---------
$ 47,469 $ 46,150
========= =========
See accompanying notes to financial statements.
TRIPLE S PLASTICS, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
September 30 September 30
1996 1995 1996 1995
Net Sales $ 16,716 $ 16,118 $ 31,232 $ 31,063
Cost of Sales 13,668 13,474 26,100 25,393
-------- -------- -------- --------
Gross Profit 3,048 2,644 5,132 5,670
Operating Expenses:
Administrative and general 1,711 1,393 3,157 2,530
Selling 390 485 827 928
-------- -------- -------- --------
Total Operating Expenses 2,101 1,878 3,984 3,458
Operating Income 947 766 1,148 2,212
Interest Expense (Income):
Interest expense 170 105 301 206
Interest income (60) (34) (119) (99)
-------- -------- -------- --------
Total Interest Expense 110 71 182 107
Income Before Income Taxes 837 695 966 2,105
Income Taxes 295 247 340 732
-------- -------- -------- --------
Net Income $ 542 $ 448 $ 626 $ 1,373
Earnings per Share of
Common Stock $ .15 $ .12 $ .17 $ .37
Weighted Average Number of
Common Shares Outstanding 3,733 3,726 3,732 3,725
TRIPLE S PLASTICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
September 30
1996 1995
Operating Activities:
Net Income $ 626 $ 1,373
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 1,379 1,187
Changes in assets and liabilities:
Accounts receivable (697) (816)
Inventories (333) (1,661)
Accounts payable and accruals 2,738 (647)
Other (182) (136)
--------- ---------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 3,531 (700)
INVESTING ACTIVITIES:
Capital expenditures (1,543) (2,708)
Other __ (6)
--------- ---------
CASH USED IN INVESTING ACTIVITIES (1,543) (2,714)
FINANCING ACTIVITIES:
Payments on note payable to bank (998) __
Proceeds from issuance of common stock, net 23 14
of fees
Principal payments on long-term debt (648) (389)
--------- ---------
CASH USED IN FINANCING ACTIVITIES (1,623) (375)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 365 $ (3,789)
========= =========
TRIPLE S PLASTICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Presentation of Interim Information
In the opinion of the management of Triple S Plastics, Inc.(the Company),
the accompanying unaudited condensed financial statements include all normal
adjustments considered necessary to present fairly the financial position of
the Company as of September 30, 1996, and the results of its operations for the
periods shown. Interim results are not necessarily indicative of results for a
full year.
The condensed 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. Inventories
Inventories are summarized as follows: ($000s)
September 30 March 31
1996 1996
Raw materials and packaging $ 2,308 $ 2,153
Finished goods and work-in-process 2,743 2,565
-------- --------
Total Inventories $ 5,051 $ 4,718
3. Long-Term Debt
During October, 1995, the Company received the proceeds of a $5 million
Georgetown Industrial Development Corporation Industrial Revenue Bond Series
1995 maturing in monthly installments ranging from $48,000 to $80,000 through
2002. Interest is fixed at 6.56% through September, 2000 and thereafter at a
rate equal to 77% of the bank's base lending rate. The bonds are collateralized
by machinery and equipment acquired with the proceeds. The proceeds from the
bond issue, which are restricted for investment in machinery and equipment for
the Texas facility, are classified as non-current restricted cash.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(In thousands)
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 information technologies
(principally computer and business equipment), consumer products, automotive,
medical/pharmaceutical, telecommunications and electronics markets. The Company
considers both the manufacture of molded products and mold sales to be an
integral part of its business. Typically the Company manufactures molds in
2 - 16 weeks, after which the Company begins producing injection molded
components. These production runs can range from as short as one day to as
long as several months. The Company's fiscal year end is March 31.
RESULTS OF OPERATIONS
The following table sets forth, for the three months ended
September 30, 1996 and 1995 and the six months then ended, certain items from
the Company's Condensed Statements of Income expressed as a percentage of net
sales, as well as the change in those items for the respective periods.
Percentage of Net Sales
Three Months Ended Six Months Ended
September 30 September 30 % Change
1996 1995 1996 1995 2nd Qtr 6 Mos.
Net Sales 100.0% 100.0% 100.0% 100.0% 3.7% .5%
Cost of Sales 81.8 83.6 83.6 81.7 1.4 2.8
----- ----- ----- -----
Gross Profit 18.2 16.4 16.4 18.3 15.3 (9.5)
Operating Expenses 12.5 11.6 12.7 11.2 11.9 15.2
----- ----- ----- -----
Operating Income 5.7 4.8 3.7 7.1
Interest Expense, net .7 .5 .6 .3 54.9 70.1
----- ----- ----- -----
Income Before
Income Taxes 5.0 4.3 3.1 6.8 20.4 (54.1)
Income Taxes 1.8 1.5 1.1 2.4 19.4 (53.6)
----- ----- ----- -----
Net Income 3.2 2.8 2.0 4.4 21.0 (54.4)
===== ===== ===== =====
NET SALES
Net sales for the second quarter ended September 30, 1996 increased 4%
compared to the second quarter of the prior year. The increase was led by sales
to customers in the consumer products, telecommunication, automotive and
medical products markets. Sales to customers in the information technologies
market declined due to the expiration of certain significant sales programs in
the prior year which have not yet been replaced. The increase in sales is
primarily related to volume as no significant price increases occurred during
the second quarter of fiscal 1997.
Net sales for the first half of fiscal 1997 were up 0.5% compared to the same
period in the prior year. Strong growth in sales to customers in the
telecommunications products market, along with a 10% increase in sales to
customers in the consumer products and automotive markets more than offset a
30% decrease in sales to the information technologies market. Management
believes the unfavorable sales comparison in the information technologies
market will continue for the balance of the year, but also expects comparable
sales increases in the other markets to largely offset this unfavorable trend
during that period. The ten largest customers of the Company for the first half
of fiscal 1997, including at least one in each of the primary business markets
served, accounted for approximately 70% of the Company's net sales for that
period.
COST OF SALES
Cost of sales as a percentage of sales decreased to 81.8% in the second
quarter of fiscal 1997 compared to 83.6% for the second quarter last year.
At the higher level of sales in the second quarter of fiscal 1997, the
Company was better able to leverage its fixed manufacturing costs, which
produced the lower cost of sales percentage.
For the first six months of fiscal 1997, the cost of sales percentage is
higher than the previous year at 83.6% compared to 81.7% for the comparable
period last year. This increase generally relates to resin cost increases in
the last half of the prior year and the increased depreciation and other fixed
costs relating to the Company's expansion in the second half of the previous
year. The Company's costs of raw material highly engineered resins has now
stabilized over the first half of fiscal 1997 compared to resin costs at the
end of the previous year.
OPERATING EXPENSES
Operating expenses were 12.5% of sales in the second quarter of fiscal 1997
compared to 11.6% for the same period last year. For the first six months of
fiscal 1997, these expenses were 12.7% of sales compared to 11.2% for the
comparable period last year. For the second quarter, operating expenses
increased 12% compared to the second quarter last year and for the first six
months of fiscal 1997, these costs are up 15% compared to the comparable
period one year ago. This increase in operating expenses principally relates
to increased personnel costs and the administrative costs relating to the
Company's Georgetown, Texas facility, which was added late last year.
The increase in interest expense relates to the interest on the $5 million
industrial revenue bond, which was issued late last year to finance equipment
for the Company's Georgetown, Texas facility.
INCOME TAXES
For the first six months of fiscal 1997, the income tax rate is 35.2%, which
is comparable to the rate for the same period last year of 34.8%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for operating expenses and
capital expenditures. Historically, the Company's prime sources of cash have
been from operations, bank borrowings and industrial revenue bonds.
In the first six months of fiscal 1997, the Company generated $3.5 million
of cash from operations which was used to pay off debt and acquire $1.4 million
of capital equipment. Since the end of the previous fiscal year, the Company's
cash and cash equivalents have increased by $.4 million.
Accounts receivable increased by $.7 million at September 30, 1996 compared
to the prior fiscal year end, but days sales outstanding in accounts receivable
improved to 54 days compared to 57 days at the end of the prior year.
Inventories increased 7% at September 30, 1996 compared to the prior year end,
but still represent only 30 days in inventory, which is comparable to the prior
year end figure and compares favorably to the figure of 40 days one year ago.
The Company still has $3.9 million available from the $5.0 million
industrial revenue bond issued late last year. In addition, the Company has a
$5.0 million unsecured line of credit agreement with a bank, which has not been
drawn on at September 30, 1996. Management believes that these sources of cash,
along with internally generated cash, will be adequate to fund future
operating and capital requirements.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) The Company's annual meeting of shareholders was held on
July 25, 1996.
(b) The director elected at the meeting was:
Shares
---------------------------------
For Against Withheld
David L. Stewart 3,341,063 __ 129,311
Other directors who terms of office continued after the
meeting are as follows:
Daniel B. Canavan, Victor V. Valentine, Jr., Albert C.
Schauer, William J. Stewart, Daniel D. Northup, and James F.
Hettinger.
(c) Other matters voted upon at the meeting and the results of
those votes were as follows:
Shares
--------------------------------
Broker
Non-
For Against Withheld Votes
Adoption of Outside Director
Option Plan 2,710,587 120,778 39,255 --
Amendment to Employee Stock
Option Plan 2,602,940 214,115 35,555 --
The foregoing matters are described in detail in the Company's
proxy statement dated June 25, 1996 for the 1996 Annual Meeting
of Shareholders.
Item 6 - Exhibits and Reports on Form 8-K
(a) No reports were filed on Form 8-K during this quarter.
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, 1996 __ROBERT D. MONK___________________
Robert D. Monk
Chief Financial Officer
Date: November 13, 1996 __CATHERINE A. TAYLOR______________
Catherine A. Taylor
Corporate Controller
(Chief Accounting Officer)