SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED MARCH 31, 1998.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File No.: 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, no par value
(Title of Class)
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: _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of May 31, 1998, there were 3,742,993 shares of the registrant's common
stock, no par value, outstanding. The aggregate market value of the common stock
held by non-affiliates of the registrant (i.e., excluding shares held by
executive officers, directors, and control persons as defined in Rule 405) on
that date was approximately $10,439,546 computed on the closing price on that
date.
Portions of the Company's Proxy Statement for its 1998 Annual Meeting of
Shareholders are incorporated by reference into Part III.
Exhibit Index located at page 29
Page 1 of 32
PART I
Item 1. Business
(a) General Development of Business
Triple S Plastics, Inc. (the "Company" or "Triple S") was organized as a
Michigan corporation in 1969, when injection molding operations began in a
leased facility in Kalamazoo, Michigan. The building that currently houses
the Company's headquarters and principal manufacturing operations in
Vicksburg, Michigan, was constructed in 1974. In 1978, the Company constructed
a second injection molding facility (originally known as Victor Plastics) and
also constructed its Satellite Mold facility, which is dedicated to mold
production, both in Vicksburg. In 1983, the Company supplemented its mold
building capacity by acquiring the A-Tech Mold manufacturing plant in
Schoolcraft, Michigan. Also in 1983, the Company built its injection molding
plant in Tucson, Arizona.
The Company completed an initial public offering of its common stock in March
of 1994. Proceeds of that offering were used to finance building expansions,
purchase new equipment for those facilities, retire existing debt and fund
working capital needs.
Triple S completed two construction projects in fiscal 1995 for the purpose of
expanding its injection molding capacity. A new 64,000 square foot facility
was constructed in a modern industrial park in Battle Creek, Michigan. In
addition, the Company completed a 52,000 square foot expansion of its Tucson,
Arizona facility. In October 1995, the Company began operations in a 64,000
square foot leased injection molding facility in Georgetown, Texas. (See
Item 2, Properties)
In fiscal 1998, the Company consolidated the operations of its Victor Plastics
plant into its Vicksburg facility and its Battle Creek facility. The Victor
Plastics facility is currently being leased to a third party. In fiscal 1998,
the Company also consolidated its A-Tech Mold manufacturing operation into its
Satellite Mold facility in Vicksburg, Michigan, and renamed the operation
Triple S Plastics, Inc. Tooling and Technology Centre. (See Item 2,
Properties)
(b) Financial Information About Industry Segments
The Company's operations are in one industry segment--the manufacture of
thermoplastic components, most of which are complex, highly engineered
components primarily for sale to original equipment manufacturers. The Company
has no significant export sales. Therefore, no separate industry segment
information is presented.
(c) Narrative Description of Business
General
Triple S manufactures complex, highly engineered thermoplastic components and
the molds to produce those components primarily for the consumer products,
information technologies, automotive, medical/pharmaceutical and telecommu-
nications markets. During the most recent fiscal year, the Company
manufactured over 2,000 different components for more than 250 customers in
these markets. The Company considers both mold building and molded component
manufacturing to be integral parts of its business. The Company manufactures
only custom components based on customer specifications and, therefore, is
generally the exclusive source of supply for the product being sold to the
customer, although customers generally use more than one molder.
The Company's product development and production operations include design
assistance, component engineering, mold design, prototype and production mold
construction, process engineering and high quality component production. In
addition, the Company provides value added post-molding assembly and finishing
operations, including ultrasonic welding, heat staking, solvent bonding,
decorative services, machining and press-side packaging. Mold delivery lead
time and component quality are generally key factors in the award of contracts
for complex components. The Company has made significant investments in
state-of-the-art CAD/CAM systems and related design and machining equipment to
accelerate its component mold design and construction process. Each injection
molding machine is equipped with a computerized process controller to
continuously monitor component quality and consistency. The Company believes
that its integrated operations, ability for short lead-time mold delivery and
product quality provide competitive advantages in the markets in which it
operates.
Certain developments in markets served by the Company have created growth
opportunities for suppliers of plastic components. Efforts to reduce weight,
enhance design flexibility and reduce costs have resulted in the substitution
of plastic for wood, glass, paper, metal and other materials in numerous
applications. In addition, Original Equipment Manufacturers (OEMs) are
continuing to outsource not only the manufacture but also the design,
engineering and assembly of plastic components to qualified suppliers. OEMs
are consolidating their purchases with larger, integrated components suppliers
that possess full-service capabilities for all functions from mold design
through post-molding assembly and finishing operations. The Company believes
that its technical expertise with respect to plastic resins and injection
molding technology, and its capacity for full service, high-quality response
to the needs of customers will enable the Company to continue to grow as a
result of these market dynamics.
Markets and Products
The Company produces components for customers that operate principally in
five markets: consumer products, information technologies, automotive,
medical/pharmaceutical and telecommunications.
Consumer Products Market. Customers in the consumer products market manu-
facture products such as lawn and garden equipment, photographic equipment,
home entertainment devices and luggage. Products sold to customers in this
market include components for chain saws and string trimmers, camera
components, CD player enclosures, and various housings and covers. Sales to
this market in fiscal 1998, 1997 and 1996 represented approximately 38%, 32%
and 26% of total sales, respectively. The Company expects the use of plastics
in this broad market to continue to grow as new thermoplastic resins evolve,
with higher strengths, better impact and heat resistance and other physical
properties that will increase the trend towards the substitution of plastics
for other materials. Sales to one customer in this market, McCulloch
Corporation, accounted for 15%, 14% and 10% of total sales for fiscal 1998,
1997 and 1996, respectively.
Telecommunications Market. Customers in this market manufacture products such
as cellular phones, pagers and related accessories. Sales to this market in
fiscal 1998, 1997 and 1996 represented approximately 15%, 11% and 4% of total
sales, respectively. Customers in this market require high levels of CAD
assisted design engineering, thin-wall molding, in-mold decorating and
assembly. Because of the Company's expertise in these areas and the strong
growth demonstrated by OEMs in this market, telecommunications is a target
market for growth for the Company. Sales to one customer in this market, Nokia
Mobile Phones, accounted for 12% and 4% of total sales for fiscal 1998 and
1997, respectively, and was insignificant in fiscal 1996.
Medical/Pharmaceutical Market. Customers in the medical/pharmaceutical
market are comprised primarily of manufacturers of durable medical equipment
for use in non-sterile, non-invasive applications. Products sold to customers
in this market include components for urological appliances, hospital
stretchers and beds, disposable wound irrigation instruments, intravenous hose
connectors and glucose test kits. Sales to this market in fiscal 1998, 1997
and 1996 represented 14%, 11% and 11% of total sales, respectively. The
Company has targeted this market for expansion because customers tend to
require product engineering services for high volume components with close
tolerances and post-molding assembly and finishing services.
Information Technologies. Customers in the information technologies market
are primarily manufacturers of computers, printers, copy machines, laser
scanners and bar code readers. The products supplied by the Company to these
customers include components for personal computers and peripheral equipment,
and laser and bar code scanners. Sales to this market in fiscal 1998, 1997 and
1996 represented approximately 15%, 24% and 36% of total sales, respectively.
This decrease represents the completion of several customer projects during
1997 which were not replaced with domestic suppliers. Shortened product life
cycles in this market have driven OEMs to find and work closely with suppliers
who can effectively compress lead times through concurrent engineering and
accelerated mold deliveries. Sales to one customer in this market,
International Business Machines Corporation, accounted for 5%, 8% and 16% of
total sales for fiscal 1998, 1997 and 1996, respectively.
Automotive Market. Sales in the automotive market are made mostly to first-
tier suppliers to automobile manufacturers. Products sold to customers in
this market include interior mechanical and seating components, headlight
adjustment brackets, outside mirror shells and components for electrical and
audio systems. Sales to this market in fiscal 1998, 1997 and 1996 represented
approximately 15%, 18% and 19% of total sales, respectively. Automotive OEMs
and first-tier suppliers are relying on fewer vendors possessing broader
capabilities. First-tier suppliers have been increasing the outsourcing of
the design and manufacture of plastic components and are purchasing more
complex subassemblies from a shrinking base of suppliers. While this market
becomes increasingly competitive, the Company believes it has the capabilities
to serve many customers in this market, but it is not one of the key market
areas for the Company. The Company's Battle Creek, Michigan facility, which
was constructed in fiscal 1995, was strategically located to more effectively
serve the Company's automotive customers.
Sales and Marketing
The Company currently markets its services on a national basis through its
direct sales force of eight people and four independent manufacturers'
representative organizations. During fiscal year 1998 the Company added a
Vice President of Sales and Marketing in addition to three salespeople, an
increase of 100% compared to fiscal year 1997.
Operations
The Company designs, engineers and constructs molds used to produce thermo-
plastic components at its Tooling and Technology Centre in Vicksburg, Michigan.
This facility is equipped with modern design and machining equipment, including
CAD/CAM systems, translators and plotters, electrical discharge machining
equipment, CNC milling equipment and miscellaneous support equipment. The
Company's mold production capacity is generally devoted to the production of
molds to be used by the Company for the production of injection molded
components for its customers. In substantially all cases, the customer owns the
mold, but possession is retained by the Company for production. The Tooling
and Technology Centre also conducts prototype and development projects,
frequently in conjunction with resin suppliers and customers' engineers. Through
the many projects undertaken at its Tooling and Technology Centre, the Company
has gained experience with nearly all resins currently in use for injection
molding. This expertise combined with the Company's injection molding
production experience enables the Company to provide innovative solutions for
its customers.
The Company has four facilities that are full service custom injection molding
plants with post-molding secondary operations. These facilities collectively
house 97 horizontal injection molding machines with capacities ranging from
55 tons to 720 tons and 1 vertical machine with capacity of 40 tons. Each
machine utilizes a computerized process controller that continuously monitors
key process parameters on a real time basis and signals the operator if any
parameter falls outside predetermined statistical limits. The injection molding
process is supported by automated systems for raw material drying, conveying and
regrinding. Two of the Company's plants have received ISO 9002 certification,
an international quality standard. The Company is also pursuing certification
of its facilities in Georgetown, Texas and Battle Creek, Michigan.
Value added post-molding secondary services, including ultrasonic inserting and
welding, heat staking, solvent bonding, finishing, machining, assembly and
on-line packaging are offered to the Company's customers. These important
services support the customers' requirements for subassembled components, which
provide cost savings and manufacturing efficiencies.
Raw Materials
The principal raw materials used by the Company are thermoplastic resins. The
Company uses over 300 different resins, nearly all of which are classified as
engineering grade resins, as compared to lower priced commodity grade resins.
Resins are generally purchased for the production of existing orders. The
Company purchases its raw materials from several different sources, and these
materials are available from several suppliers.
Backlog
At March 31, 1998, the Company's backlog was approximately $15 million, which is
up slightly from the previous year. Backlog generally does not exceed one
quarter's manufacturing capacity and the Company's customers generally do not
issue purchase orders for more than the next quarter's requirements. Management
believes that all of the existing backlog will be completed during the current
fiscal year.
Employees
At March 31, 1998, the Company employed 627 full time and 8 part time employees.
The Company has no employees who are represented by a labor union, and considers
its relations with its employees to be good.
Competition
The injection molding business in the Company's markets is highly competitive.
The Company focuses on complex components with close tolerances where it
competes principally on the basis of technical expertise, customer service,
product quality and rapid mold production, although price is also an important
competitive factor. There are many suppliers of plastic injection molded
components, including many that are larger than the Company with greater
financial resources.
Patents and Trademarks
The Company does not own any patents, registered trademarks or licenses,
although the Company claims certain common law trademark rights. In general,
the Company relies on its technological capabilities, manufacturing quality
control and know-how, rather than patents, in the conduct of its business.
Item 2. Properties
The following table sets forth information regarding the Company's mold making
and component production facilities:
Location Size Function
Tucson, Arizona 92,000 sq. ft. Injection molding, post-molding
operations and office
Battle Creek, Michigan 64,000 sq. ft. Injection molding, post-molding
operations and office
Georgetown, Texas 64,000 sq. ft. Injection molding, post-molding
operations and office
Vicksburg, Michigan 59,000 sq. ft. Corporate headquarters, injection
molding, post-molding operations
and warehouse
Vicksburg, Michigan 26,000 sq. ft. Mold manufacturing, Tech Centre
and office
The Company owns all of its facilities except for the Georgetown facility, which
is leased. In addition, the Company owns a 40,000 sq. ft. facility in Vicksburg,
Michigan which is leased to a third party. The Company's current facilities are
considered suitable and adequate for current and near-term production needs.
Item 3. Legal Proceedings
The Company is not a party to any legal proceedings that are material within the
meaning of Regulation S-K.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter ended March 31, 1998.
Additional Item: Executive Officers of the Registrant.
The following table lists the names, ages and positions of all of the Company's
executive officers. Officers are elected annually by the Board of Directors at
the first meeting of the Board following the annual meeting of shareholders.
Name Age Position
Daniel B. Canavan 44 Chairman of the Board and Chief
Executive Officer
Victor V. Valentine, Jr. 52 President
Robert D. Monk 47 Vice President of Finance, Chief
Financial Officer, Secretary/Treasurer
Michael E. Zaagman 40 Vice President of Operations
Phillip W. Weaver 45 Vice President of Human Resources and
Organizational Development
Matthew E. Bliemeister 38 Vice President of Sales and Marketing
Daniel B. Canavan has been Chairman of the Board and Chief Executive Officer of
the Company for more than five years.
Victor V. Valentine, Jr, has been President of the Company for more than five
years.
Robert D. Monk joined the Company as Vice President of Finance, C.F.O. and
Secretary/Treasurer on April 1, 1996. For the prior 12 years, Mr. Monk was
employed by Stryker Corporation, as Vice President - Finance of the Medical
Division for the most recent two years, and prior to that as Treasurer and
Corporate Controller.
Michael E. Zaagman has been Vice President of Operations since January 1997.
Mr. Zaagman joined Triple S Plastics, Inc. as the Corporate Director of
Materials in March 1995. Previously he held various positions with the Sequest
Closures Division of Aptar Corporation.
Phillip W. Weaver has been Vice President of Human Resources and Organizational
Development since April 1997. Mr. Weaver joined Triple S Plastics, Inc. as the
Corporate Director of Human Resources in April 1996. For the prior four years he
was employed at Atlantic Automotive components, a joint venture between Ford
Motor Company and Rockwell International, as the Director of Human Resources.
Matthew E. Bliemeister joined the Company as Vice president of Sales and
Marketing in December 1997. For the prior 13 years, Mr. Bliemeister was employed
by Polymerland, Inc., a subsidiary of General Electric Company where he held
several sales and sales management positions.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
The Company's common stock is traded on the Nasdaq Stock Market under the symbol
TSSS. The price quotations reported below were supplied by the NASD.
Fiscal Quarter High Low Close
1998 4th 6 3/4 5 3/4 6 1/4
3rd 7 1/2 6 1/8 6 3/16
2nd 9 1/4 7 1/4 7 1/2
1st 8 3/8 6 5/8 8
1997 4th 9 1/2 6 1/2 7
3rd 8 3/4 5 7 3/4
2nd 6 1/4 4 1/2 5 3/8
1st 7 5/8 5 3/8 5 5/8
As of April 30, 1998, there were 280 record holders of the Company's common
stock. Based on the number of sets of proxy materials mailed by the Company's
transfer agent, the Company estimates there are 2,000 additional beneficial
owners of the Company's common stock who hold the stock in street name. No
cash dividends have been paid during the past two years. Management has no plans
to pay cash dividends in the near future.
Item 6. Selected Financial Data
Fiscal Years Ended March 31
(in thousands, except per share data)
1998 1997 1996 1995 1994
Income Statement Data:
Net sales $ 67,414 $ 64,608 $ 61,270 $ 54,051 $ 43,472
Gross profit 11,830 10,464 9,271 12,245 10,917
Operating income 2,782 2,447 1,995 5,372 5,663
Interest expense, net 325 358 408 80 619
-------- -------- -------- -------- --------
Income before income taxes 2,457 2,089 1,587 5,292 5,044
Income taxes 860 760 549 1,866 1,685
-------- -------- -------- -------- --------
Net income $ 1,597 $ 1,329 $ 1,038 $ 3,426 $ 3,359
======== ======== ======== ======== ========
Basic and Diluted Per Share Data:
Net income $ .43 $ .36 $ .28 $ .92 $ 1.30
======== ======== ======== ======== ========
Weighted average shares outstanding:
Basic 3,740 3,734 3,727 3,724 2,586
Diluted 3,752 3,738 3,727 3,724 2,586
March 31 (in thousands)
1998 1997 1996 1995 1994
Balance Sheet Data:
Working capital $ 12,168 $ 10,683 $ 9,561 $ 12,241 $ 16,290
Total assets $ 50,030 $ 48,870 $ 46,150 $ 42,339 $ 38,113
Long-term debt, less
current maturities $ 6,603 $ 7,251 $ 8,747 $ 5,666 $ 6,077
Shareholders' equity $ 31,981 $ 30,353 $ 28,981 $ 27,902 $ 24,471
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company is a full-service custom injection molder, providing mold design
and engineering services, mold manufacturing, injection molding, and post-
molding assembly and finishing operations to a diverse base of customers. Its
customers are primarily in the consumer products, telecommunications,
medical/pharmaceutical, information technologies, and automotive markets. The
Company operates in one business segment and backlog generally does not exceed
one quarter's manufacturing capacity. The Company's fiscal year is March 31 and,
unless otherwise noted, references to fiscal 1998, 1997, and 1996 relate to the
fiscal years ended March 31, 1998, 1997, and 1996.
RESULTS OF OPERATIONS
The table below outlines the components of the Company's Statements of Income
as a percentage of net sales:
Fiscal Year ended March 31 1998 1997 1996
Net sales 100.0% 100.0% 100.0%
Cost of sales 82.5 83.8 84.9
Gross profit 17.5 16.2 15.1
S,G&A expenses 13.4 12.4 11.8
Operating income 4.1 3.8 3.3
Interest expense, net .5 .6 .7
Income before income taxes 3.6 3.2 2.6
Income taxes 1.2 1.1 .9
Net income 2.4% 2.1% 1.7%
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales for fiscal year 1998 were $67.4 million, an increase of $2.8 million,
or 4.3%, over net sales of $64.6 million for fiscal year 1997. The overall
increase in sales is primarily related to volume as no significant price
increases occurred during fiscal 1998. Sales to customers in the telecommuni-
cations market showed strong growth increasing $3.4 million, or 49%, in fiscal
1998 and represented 15% of sales compared to 11% in 1997. Sales to customers
in the consumer products market increased 22% and represented 38% of sales in
fiscal 1998 compared to 32% in 1997. One major customer in this market has
notified the Company that they intend to transition their plastic component
production to Mexico. Therefore, the Company's future sales to this market may
be reduced. Sales to customers in the medical market represented 14% of sales in
fiscal 1998 compared to 11% in 1997 and remained strong, reflecting growth of
24% in fiscal 1998. These increases were somewhat offset by decreases of 35%
and 14% to customers in the information technologies and automotive markets,
respectively. These decreases represent the completion of several customer
projects during 1997 which were not replaced with new projects. The decrease in
the automotive market was also impacted by one customer who moved their tools
into their own molding facility. However, shortly thereafter the work was
returned to the Company.
Cost of sales represented 82.5% of sales in fiscal 1998 compared to 83.8% in
1997. The lower cost of sales percentage in 1998 is principally attributed to
mold manufacturing cost reductions in addition to the Company's continued
efforts in molded part manufacturing cost reductions as a result of
manufacturing efficiency improvement initiatives. These initiatives contributed
to reduced labor as a percentage of sales. Also contributing to the lower cost
of sales was the consolidation of the Company's Victor Plastics plant into its
Vicksburg and Battle Creek facilities, as well as the consolidation of its mold
manufacturing operations into its Tooling and Technology Centre. All costs
incurred relating to facility consolidations were incurred during fiscal 1998
and no additional costs are anticipated for future periods. These cost
reductions were offset by increased depreciation expense of $241,000 compared
to the prior year as a result of increased capital expenditures.
Selling, general, and administrative expenses increased 13% to $9.0 million in
1998 from $8.0 million in 1997, and increased as a percentage of net sales to
13.4% in 1998 compared to 12.4% in 1997. The increase principally relates to
increased compensation due to increased sales and engineering staff and taxes
other than income taxes. The Company's effective tax rate decreased slightly to
35.0% in fiscal 1998 compared to 36.4% in 1997. Net income in fiscal 1998 was
$1.6 million compared to $1.3 million in 1997, an increase of 20%.
FISCAL 1997 COMPARED TO FISCAL 1996
Triple S Plastics' net sales increased 5% in fiscal 1997 to $64.6 million from
$61.3 million in 1996. The increase in sales was primarily attributable to
increased sales to established customers and sales to new customers, rather than
price increases on existing products. Approximately 70% of the Company's sales
in 1997 were to 10 customers, including at least one customer in each of the
business markets served by the Company. The Company's sales increased to all the
markets the Company serves except information technologies, which decreased 30%,
but still represented 24% of total sales. This decrease represented the
completion of several customer projects during 1997 which were not replaced with
new projects. Sales to the consumer products market grew 30% in fiscal 1997 and
represented 32% of sales compared to 26% in 1996. Sales to the telecommuni-
cations market showed strong growth of 152%, increasing to 11% of sales in 1997
compared to 4% in 1996. Sales in the medical and automotive markets also
remained strong, increasing 13% and 4%, respectively.
Cost of sales increased 4% over the prior year but decreased to 83.8% of sales
compared to 84.9% in 1996. The lower cost of sales percentage in 1997
principally resulted from a reduced material cost of sales ratio (due to the
sales mix) and from some realized manufacturing efficiencies and cost reductions
compared to the prior year. This decrease occurred despite a 14% across the
board production associate wage increase in the third quarter and an increase in
depreciation expense of $384,000 resulting from increased capital expenditures.
Selling, general and administrative expenses increased $741,000 or 10%, to
$8.0 million in 1997. As a percentage of net sales, these expenses increased
slightly to 12.4% in 1997 compared to 11.8% in 1996. The increase was
principally due to increased depreciation, salaries and professional services as
the Company completed the comprehensive upgrade of its information systems in
the third quarter.
Net interest expense decreased slightly to $358,000 or .6% of net sales in 1997,
compared to $408,000 or .7% in 1996. The decrease is due to the Company not
borrowing on its available line of credit during 1997 as well as a general
reduction of long-term debt.
The effective income tax rate increased to 36.4% in fiscal 1997 compared to
34.6% in 1996. The increase is due to variances in non-deductible expenses for
income tax purposes. Net earnings increased 28% to $1.3 million in 1997 compared
to $1.0 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for operating expenses and capital
expenditures. Historically, the Company's primary sources of cash have been
from operations, bank borrowings, and industrial revenue bonds.
Net cash provided by operating activities was $5.0 million for fiscal 1998.
Working capital increased $1.5 million during the year to $12.2 million,
primarily resulting from the increase in accounts receivable. Accounts
receivable increased $2.1 million, or 19%, and days sales outstanding increased
7 days to 61 days compared to the prior year end. The increase is generally due
to the timing of collections on several large tooling programs. The Company is
concentrating more resources in this area to speed up collections. Inventories
decreased $1.2 million, or 25%, compared to the prior fiscal year end, and
represented only 26 days in inventory compared to 31 days at the prior fiscal
year end.
The Company has made a significant investment in capital equipment in the last
two years. Capital expenditures were $3.7 million and $2.2 million for fiscal
1998 and 1997, respectively.
The Company has $2.9 million of restricted cash on hand at March 31, 1998 from
the $5.0 million industrial revenue bond issued in October of 1995 to finance
the expansion of the Georgetown, Texas plant. The Company also has a
$5.0 million unsecured line of credit agreement with a bank, which has not been
drawn on during 1998. These sources of cash, along with internally generated
cash, are expected to be sufficient to fund planned future operating and capital
requirements.
OTHER MATTERS
Early in fiscal 1998, the Company began the process of identifying, evaluating
and implementing changes to computer programs and equipment necessary to address
the Year 2000 issue. 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's plans provide for systems to be Year 2000 compliant by the end of
1999. Based on information currently available form the work performed,
management does not expect that amounts to be expensed for Year 2000 activities
over the next two years will have a material impact on the Company's results of
operations or financial position.
The Company has begun formal communications with its customers and suppliers to
determine the extent to which interface systems are vulnerable to Year 2000
issues. There can be no guarantee that the computer systems of other companies
on which the Company depends will be compliant on a timely basis.
This report contains statements which, to the extent they are not historical
facts, constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
identified by the use of forward-looking words such as "anticipates," "intends,"
"expects," "plans," "believes," "estimates," or similar words. These forward-
looking statements are subject to numerous assumptions, risks, and
uncertainties, and the statements looking forward beyond 1998 are subject to
greater uncertainty because of the increased likelihood of changes in underlying
factors and assumptions. Actual results could differ materially from those
anticipated by the forward-looking statements. By making forward-looking
statements, the Company assumes no obligation to update them to reflect new,
changed, or unanticipated events or circumstances.
Item 8. Financial Statements and Supplementary Data
The following financial statements are filed with this report as pages F-1
through F-13 following the signature page:
Balance Sheets
Statements of Income
Statements of Shareholders' Equity
Statements of Cash Flows
Notes to Financial Statements
Report of Independent Certified Public Accountants
PART III
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
Item 10. Directors and Executive Officers of the Registrant
Information relating to executive officers is included in this report in the
last section of Part I under the caption "Executive Officers of the Registrant".
Information relating to directors appearing under the caption "Election of
Directors" in the definitive Proxy Statement for the 1998 Annual Meeting of
Shareholders to be held June 30, 1998, and to be filed with the Commission is
hereby incorporated herein by reference. Information concerning compliance
with Section 16(a) of the Securities Exchange Act of 1934 appearing under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the
definitive Proxy Statement for the 1998 Annual Meeting of Shareholders and filed
with the Commission is hereby incorporated herein by reference.
Item 11. Executive Compensation
The information contained under the caption "Executive Compensation" contained
in the definitive Proxy Statement for the 1998 Annual Meeting of Shareholders is
hereby incorporated herein by reference excluding the information under the
caption "Compensation Committee Report" and "Stock Performance Graph".
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information contained under the caption "Securities Ownership of Management"
contained in the definitive Proxy Statement for the 1998 Annual Meeting of
Shareholders is hereby incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information relating to certain relationships and related party transactions is
incorporated by reference to the Company's definitive Proxy Statement for the
1998 Annual Meeting of Shareholders under the caption "Election of Directors".
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a) The following financial statements are filed as part of this report as
pages F-1 through F-13 following the signature page:
Balance Sheets
Statements of Income
Statements of Shareholders' Equity
Statements of Cash Flows
Notes to Financial Statements
Report of Independent Certified Public Accountants
(b) No reports on Form 8-K were filed for the three-month period ended
March 31, 1998.
(c) See Exhibit Index located on pages 29 and 30.
(d) The following financial statement schedule is filed as part of this
report as page F-15 following the signature page:
Schedule II - Valuation and Qualifying Accounts
All other schedules required by Form 10-K Annual Report have been omitted
because they were not applicable, were included in the notes to the financial
statements, or were otherwise not required under the instructions contained in
Regulation S-X.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: May 27, 1998 TRIPLE S PLASTICS, INC.
By __DANIEL B. CANAVAN__________
Daniel B. Canavan, Chairman of the Board and
Chief Executive Officer
and
By __ROBERT D. MONK_____________
Robert D. Monk, Vice President, C.F.O.,
and Secretary/Treasurer
(Principal Financial Officer)
and
By __CATHERINE A. TAYLOR________
Catherine A. Taylor, Corporate Controller
(Principal Accounting Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below on this 27th day of May 1998, by the following
persons on behalf of the Registrant and in the capacities indicated.
Each Director of the Registrant whose signature appears below, hereby appoints
Daniel B. Canavan and Robert D. Monk, and each of them individually as his
attorney-in-fact to sign in his name and on his behalf as a Director of the
Registrant, and to file with the Commission any and all Amendments to this
report on Form 10-K to the same extent and with the same effect as if done
personally.
__VICTOR V. VALENTINE_________ __ALBERT C. SCHAUER__________
Victor V. Valentine, Director Albert C. Schauer, Director
__DAVID L. STEWART____________ __JAMES F. HETTINGER_________
David L. Stewart, Director James F. Hettinger, Director
__ROBERT D. BEDILION__________
Robert D. Bedilion, Director
INDEX TO FINANCIAL STATEMENTS
Page
Balance Sheets as of March 31, 1998 and 1997 F-2
Statements of Income for the years ended March 31, 1998, 1997 and 1996 F-3
Statements of Shareholders' Equity for the years ended March 31, 1998,
1997 and 1996 F-4
Statements of Cash Flows for the years ended March 31, 1998, 1997 and 1996 F-5
Notes to Financial Statements F-6
Report of Independent Certified Public Accountants F-13
F-1
TRIPLE S PLASTICS, INC.
BALANCE SHEETS
(Dollars in thousands)
MARCH 31 1998 1997
ASSETS
Current Assets:
Cash and cash equivalents $ 3,783 $ 2,681
Accounts receivable, less allowance of $350
and $255 for possible losses (Note 4) 13,275 11,147
Inventories (Notes 2 and 4) 3,634 4,833
Deferred income taxes (Note 6) 360 547
Other 202 329
---------- ----------
Total Current Assets 21,254 19,537
---------- ----------
Property, Plant and Equipment (Notes 4 and 5):
Machinery and equipment 22,709 20,967
Land and buildings 12,076 11,036
Office furniture and equipment 3,696 3,198
Leasehold improvements 27 102
---------- ----------
38,508 35,303
Less accumulated depreciation and amortization 13,483 10,716
---------- ----------
Net Property, Plant and Equipment 25,025 24,587
---------- ----------
Other:
Cash restricted for capital expenditures (Note 4) 2,932 3,787
Goodwill, net of accumulated amortization
of $469 and $431 679 717
Miscellaneous 140 242
---------- ----------
Total Other Assets 3,751 4,746
---------- ----------
$ 50,030 $ 48,870
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,182 $ 4,540
Accruals:
Compensation 1,167 1,096
Other 888 647
Deferred mold revenue 503 622
Current maturities of long-term debt (Note 4) 1,346 1,949
---------- ----------
Total Current Liabilities 9,086 8,854
Long-Term Debt, less current maturities (Note 4) 6,603 7,251
Deferred Income Taxes (Note 6) 2,360 2,412
---------- ----------
Total Liabilities 18,049 18,517
---------- ----------
Shareholders' Equity (Notes 4 and 9):
Preferred stock, no par value, 1,000,000
shares authorized, none issued -- --
Common stock, no par value, 10,200,000
shares authorized, 3,741,951 and 3,736,941
shares issued and outstanding 14,444 14,413
Retained earnings 17,537 15,940
---------- ----------
Total Shareholders' Equity 31,981 30,353
---------- ----------
$ 50,030 $ 48,870
========== ==========
See accompanying notes to financial statements.
F-2
TRIPLE S PLASTICS, INC.
STATEMENTS OF INCOME
(In thousands, except per share amounts)
Years ended March 31
1998 1997 1996
Net Sales $ 67,414 $ 64,608 $ 61,270
Cost of Sales 55,584 54,144 51,999
--------- --------- ---------
Gross Profit 11,830 10,464 9,271
Selling, General & Administrative Expenses 9,048 8,017 7,276
--------- --------- ---------
Operating Income 2,782 2,447 1,995
--------- --------- ---------
Interest (Income) Expense:
Interest expense 603 594 607
Interest income (278) (236) (199)
--------- --------- ---------
Net Interest Expense 325 358 408
--------- --------- ---------
Income Before Income Taxes 2,457 2,089 1,587
Income Taxes (Note 6) 860 760 549
--------- --------- ---------
Net Income $ 1,597 $ 1,329 $ 1,038
========= ========= =========
Basic and Diluted Earnings Per
Share (Note 10) $ .43 $ .36 $ .28
========= ========= =========
Shares Used in Computing Earnings
Per Share:
Basic 3,740 3,734 3,727
Diluted 3,752 3,738 3,727
See accompanying notes to financial statements.
F-3
TRIPLE S PLASTICS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
Total
Common Retained Shareholders'
Stock Earnings Equity
---------- ----------- -------------
Balance, March 31, 1995 $ 14,329 $ 13,573 $ 27,902
Issuance of 4,702 shares of
Common Stock 41 -- 41
Net income for the year -- 1,038 1,038
---------- ----------- -------------
Balance, March 31, 1996 14,370 14,611 28,981
Issuance of 8,102 shares of
Common Stock 43 -- 43
Net income for the year -- 1,329 1,329
---------- ----------- -------------
Balance, March 31, 1997 14,413 15,940 30,353
Issuance of 5,010 shares of
Common Stock 31 -- 31
Net income for the year -- 1,597 1,597
---------- ----------- -------------
Balance, March 31, 1998 $ 14,444 $ 17,537 $ 31,981
========== =========== =============
See accompanying notes to financial statements.
F-4
TRIPLE S PLASTICS, INC.
STATEMENTS OF CASH FLOW
(Dollars in thousands)
Years ended March 31
1998 1997 1996
Operating Activities
Net income $ 1,597 $ 1,329 $ 1,038
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation 3,203 2,934 2,492
Amortization 74 75 72
Provision for losses on accounts receivable 95 30 188
Deferred income taxes 135 190 (175)
Loss on sale of equipment 14 54 47
Changes in assets and liabilities:
Receivables:
Trade (2,223) (1,540) 1,049
Refundable income taxes -- 329 (329)
Inventories 1,199 (115) (601)
Other current assets 127 (87) (18)
Accounts payable and accruals 919 2,323 (2,094)
Income taxes payable 35 158 (172)
Deferred mold revenue (119) (244) (126)
--------- --------- ---------
Cash Provided by Operating Activities 5,056 5,436 1,371
Investing Activities
Purchases of property, plant and
equipment, net of disposals (3,655) (2,229) (5,352)
Change in restricted cash 855 40 (3,827)
Other investing activities 66 53 (97)
--------- --------- ---------
Cash Used in Investing Activities (2,734) (2,136) (9,276)
Financing Activities
Net borrowings (payments) on note
payable to bank -- (998) 998
Proceeds from issuance of common
stock, net of fees paid 31 43 41
Proceeds from issuance of long-term debt -- -- 5,000
Principal payments on long-term debt (1,251) (1,046) (699)
--------- --------- ---------
Cash Provided by (Used in) Financing
Activities (1,220) (2,001) 5,340
--------- --------- ---------
Increase (Decrease) in Cash and
Cash Equivalents 1,102 1,299 (2,565)
Cash and Cash Equivalents, beginning
of year 2,681 1,382 3,947
--------- --------- ---------
Cash and Cash Equivalents, end of year $ 3,783 $ 2,681 $ 1,382
========= ========= =========
See accompanying notes to financial statements.
F-5
TRIPLE S PLASTICS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The Company operates in a single business segment and is a fully integrated
manufacturer of complex, highly engineered thermoplastic components for
customers primarily in the consumer products, telecommunications,
medical/pharmaceutical, information technologies and automotive markets.
During the years ended March 31, 1998, 1997 and 1996, a consumer products
customer accounted for 15%, 14% and 10% of net sales, respectively, an
information technologies customer accounted for 5%, 8% and 16% of net sales,
respectively, and a telecommunications customer accounted for 12% and 4% of net
sales for fiscal 1998 and 1997, respectively, and was insignificant in fiscal
1996.
ACQUISITIONS AND GOODWILL
The financial statements include the net assets of businesses purchased at their
fair value at the acquisition date. The excess of acquisition costs over the
fair value of net assets acquired is included in and has been allocated to
goodwill. Goodwill is amortized on a straight-line basis over a thirty year
life.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined by the
first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Expenditures for renewals and
betterments are capitalized and maintenance and repairs are expensed as
incurred. Depreciation and amortization are computed by the straight-line method
over the estimated useful lives of the assets as follows:
Buildings 40 years
Machinery and equipment 5 to 10 years
Office furniture and equipment 3 to 10 years
Leasehold improvements 10 years
INCOME TAXES
The Company follows the liability method of accounting for income taxes and
provides deferred income taxes based on enacted income tax rates in effect on
the dates temporary differences between the financial reporting and tax bases of
assets and liabilities are expected to reverse. The effect on deferred tax
assets and liabilities of a change in income tax rates is recognized in the
period that includes the enactment date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, which consist of
cash, receivables, notes payable, accounts payable and long-term debt, approx-
imate their fair values. For long-term debt, the present value of future cash
flows, discounted at the Company's current effective borrowing rate, was used to
estimate fair value.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized on plastic molded products when the products are shipped
to customers. Revenue on molds is recognized when the mold is completed and
samples of molded parts produced by the tool are shipped to customers. Prior to
that time, mold revenue and direct mold costs are deferred. Losses are
recognized when reasonable estimates of the amount of loss can be made.
F-6
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of unrestricted cash on hand and held in
banks, money market funds, commercial paper and other short-term investments
with an original maturity of three months or less when purchased.
LONG-LIVED ASSETS
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. SFAS No. 121 requires that long-lived assets and
certain intangibles to be held and used by the Company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. Additionally, SFAS No. 121
requires that certain long-lived assets to be disposed of be reported at the
lower of carrying amount or fair value less costs to sell. This statement does
not have a material impact on the financial statements of the Company.
STOCK BASED COMPENSATION
The Company has adopted SFAS No. 123, Accounting for Stock-Based Compensation.
SFAS No. 123 allows companies to continue to measure compensation cost for
stock-based employee compensation plans using the intrinsic value method of
accounting as prescribed in Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. The
Company has elected to continue its APB Opinion No. 25 accounting treatment for
stock-based compensation, and has adopted the provisions of SFAS No. 123
requiring disclosure of the pro forma effect on net earnings and earnings per
share as if compensation cost had been recognized based upon the estimated fair
value at the date of grant for options awarded.
EARNINGS PER SHARE
The Company has adopted SFAS No. 128, Earnings Per Share, which establishes
standards for computing and presenting earnings per share (EPS) for entities
with publicly-held common stock or potential common stock. SFAS 128 simplifies
the standards for computing EPS and makes them comparable to international EPS
standards. The statement requires dual presentation of "basic" and "diluted" EPS
which replace primary and fully diluted EPS, respectively, required under
previous guidance. All EPS amounts have been recalculated in accordance with
SFAS No. 128 yielding the same basic and diluted EPS amounts, therefore no
restatement is necessary.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1998
presentation.
2. INVENTORIES
Inventories are summarized as follows (in thousands):
March 31
1998 1997
Raw materials and packaging $ 2,039 $ 2,084
Finished goods and work-in-process 1,595 2,749
------- -------
Total Inventories $ 3,634 $ 4,833
======= =======
3. LINE OF CREDIT
The Company has entered into a $5 million unsecured line-of-credit agreement
with a bank, due on demand, with interest on the unpaid principal balance at the
bank's prime rate (8.5% at March 31, 1998). There were no borrowings under this
agreement at March 31, 1998 or 1997, or during the years then ended.
F-7
4. LONG-TERM DEBT
Long-term debt consists of (in thousands):
March 31
1998 1997
Georgetown Industrial Development
Corporation Revenue Bond $ 3,580 $ 4,216
Michigan Strategic Fund Limited
Obligation Revenue Bonds (1989
and 1990 series) 2,425 2,820
Mortgage notes payable to bank 1,636 1,692
Other 308 472
-------- --------
Long-term debt 7,949 9,200
Current maturities of long-term debt 1,346 1,949
-------- --------
Long-term debt, less current maturities $ 6,603 $ 7,251
======== ========
The Georgetown Industrial Development Corporation Revenue Bond provides for
monthly principal payments ranging from $48,000 to $80,000 plus interest through
November 2002. Interest is fixed at 6.56% through September 2000, and then
becomes variable at 77% of the bank's base lending rate. Cash restricted for
capital expenditures represents the remaining proceeds from this bond issue,
which are available for capital purchases made through October 1, 1998.
The Michigan Strategic Fund Limited Obligation Revenue bonds (1989 and 1990
series) provide for semi-annual interest payments with rates that vary from 6.4%
to 7.65% and annual principal payments through September 2001. The bonds are
collateralized by a letter of credit with the bank which requires annual
interest payments of .875% of the outstanding bond balance.
The mortgage notes payable to the bank, maturing $17,607 monthly, include
interest at rates ranging from 7.07% to 8.06%, and are due at varying dates
through October 2012.
The above debt is secured by accounts receivable, inventories and property and
equipment. In connection with the overall bank financing agreement, the Company
must comply with certain financial and non-financial restrictive covenants. The
restrictive covenants include limitations on the amount of required working
capital, the ratio of debt to tangible net worth and the minimum amount of
tangible net worth. At March 31, 1998 and 1997, retained earnings of $6 million
was restricted by terms of the long-term debt described above. At March 31,
1998, the Company was in compliance with all restrictive covenants.
Maturities of long-term debt for the four fiscal years succeeding 1999 are:
2000 - $1,322,000; 2001 - $1,380,000; 2002 - $2,041,000; and 2003 - $1,127,000
5. LEASES AND COMMITMENTS
The Company leases transportation equipment and manufacturing facilities
under operating leases expiring at various dates through 2003. Management
expects that in the normal course of business, leases will be renewed or
replaced by other leases. Minimum lease payments required under operating leases
for future years are as follows: 1999 - $313,000; 2000 - $315,000;
2001 - $307,000; 2002 - $317,000; and 2003 - $108,000.
Obligations under capital leases included in long-term debt-other include
$174,000 for computer equipment with an original cost of $432,000 and a net book
value at March 31, 1998 of $192,000.
Total lease expense for facilities and equipment amounted to $407,000 in 1998;
$423,000 in 1997; and $232,000 in 1996.
F-8
6. INCOME TAXES
Provisions for income taxes consist of the following (in thousands):
Years Ended March 31
1998 1997 1996
Current:
Federal $ 675 $ 525 $ 680
State and local 50 45 44
--------- -------- --------
725 570 724
Deferred 135 190 (175)
--------- -------- --------
Total income taxes $ 860 $ 760 $ 549
========= ======== ========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities at
fiscal year ends were as follows (in thousands):
March 31
1998 1997
Deferred tax assets
Accrued compensation and benefits $ 120 $ 160
Accounts receivable reserves 170 87
Inventory valuation and related reserves 277 286
Other 53 29
--------- ---------
620 562
Deferred tax liabilities
Accounts receivable valuation (222) --
Other (38) (15)
Accumulated depreciation and
amortization (2,360) (2,412)
--------- ---------
(2,620) (2,427)
--------- ---------
Net deferred tax liability $ (2,000) $ (1,865)
========= =========
A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:
Years Ended March 31
1998 1997 1996
Statutory federal income tax rate 34.0% 34.0% 34.0%
State and local income taxes, net of
federal income tax effect 2.0 1.4 1.8
Other (1.0) 1.0 (1.2)
---- ---- ----
Effective income tax rate 35.0% 36.4% 34.6%
7. EMPLOYEE BENEFIT PLAN
The Company maintains a defined contribution plan covering substantially all
employees. Under the Plan, employees' contributions are made on a tax deferred
basis and are partially matched by the Company. Total expense under the Plan was
$128,000, $140,000, and $114,000 for 1998, 1997 and 1996, respectively.
F-9
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(in thousands) Years Ended March 31
1998 1997 1996
Operating Activities:
Interest paid, net of amount capitalized $ 604 $ 599 $ 610
Interest received $ 278 $ 236 $ 199
Income taxes paid $ 689 $ 310 $ 1,225
Income tax refund received -- $ 229 --
Non-cash Investing and
Financing Activities:
Capital expenditures financed by
capital lease obligation -- $ 418 --
9. CAPITAL STOCK
The Company maintains a stock option plan for key employees and has reserved
450,000 shares of Common Stock for such plan. The options must be exercised
within ten years from the date of grant and the exercise price must equal the
fair market value of the Company's stock at the date of the grant. The options
generally vest from two to five years from the date of grant.
In July 1996, the Company established an Outside Director Stock Option Plan
and has reserved 300,000 shares of Common Stock for such plan. The options must
be exercised within three-and-a half to ten years from the date of grant and the
exercise price must equal the fair market value of the Company's stock at the
date of the grant. The options become exercisable six months to three years
after the grant date.
A summary of stock option activity is as follows:
Weighted
Option Price Average Price
Shares Per Share Per Share
Options outstanding at
March 31, 1995 57,000 $12.00 - $12.50 $12.48
Canceled (7,000) $12.50 $12.50
--------
Options outstanding at
March 31, 1996 50,000 $12.00 - $12.50 $12.48
Granted 66,200 $5.00 - $6.75 $5.99
Canceled (20,000) $6.13 - $12.50 $9.90
--------
Options outstanding at
March 31, 1997 96,200 $5.00 - $12.50 $8.55
Granted 261,000 $6.25 - $8.50 $6.98
Canceled (17,000) $6.13 - $12.50 $10.25
-------
Options outstanding at
March 31, 1998 340,200 $5.00 - $12.50 $7.26
There were 360,800 and 471,800 shares available for future grant under the
plans at March 31, 1998 and 1997, respectively. The following table summarizes
significant ranges of outstanding and exercisable options at March 31, 1998:
F-10
Options Outstanding Options Exercisable
-------------------------------------------- ------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Ranges of Life In Exercise Exercise
Exercise Prices Shares Years Price Shares Price
- --------------------------------------------------------------------------------------------------
$5.00 to $6.00 10,000 8.3 $5.08 9,500 $5.04
$6.01 to $7.00 169,200 8.7 $6.26 21,950 $6.18
$7.01 to $8.00 94,000 9.1 $7.25 -- --
$8.01 to $9.00 40,000 2.8 $8.50 -- --
over $9.00 27,000 6.0 $12.50 27,000 $12.50
The weighted average fair value per share of employee stock based compensation
issued during fiscal 1998 and 1997 was $3.90 and $4.23, respectively. There were
no options issued during fiscal 1996. The fair value was estimated using the
Black-Scholes model with the following weighted average assumptions:
1998 1997
------ ------
Expected life (in years) 10 10
Interest rate 6.12% 6.65%
Volatility 34.0% 50.9%
Dividend yield -- --
Employee stock based compensation costs would have reduced pre-tax income by
$277,000, and $145,000 in 1998 and 1997, respectively, if the fair values of
such compensation in that year had been recognized as compensation expense on a
straight-line basis over the vesting period of the grant.
Net earnings and net earnings per share would not be materially different if the
Company accounted for its outside director stock options under the fair value
method as provided for under SFAS No. 123, Accounting for Stock-Based
Compensation.
As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, the
Company has elected to continue following the guidance of Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, for
measurement and recognition of stock-based transactions with employees.
Accordingly, no compensation cost has been recognized for the Company's option
plans. Had the Company determined compensation cost based on the fair value at
the grant date for its stock options, consistent with the method of SFAS
No. 123, the Company's net earnings and net earnings per share would approximate
the following pro forma amounts (in thousands except per share amounts):
Years Ended March 31
1998 1997 1996
Net Earnings:
As reported $ 1,597 $ 1,329 $ 1,038
Pro forma $ 1,417 $ 1,237 $ 1,038
Basic Earnings per Share:
As reported $ .43 $ .36 $ .28
Pro forma $ .38 $ .33 $ .28
Diluted Earnings per Share:
As reported $ .43 $ .36 $ .28
Pro forma $ .38 $ .33 $ .28
The Company maintains an Employee Stock Purchase Plan and reserved 100,000
shares of Common Stock for such plan. Under the plan, any eligible employee
may purchase stock at a price equal to 85% of the fair market value as of the
last day of the option period.
F-11
10. EARNINGS PER SHARE
Earnings per share has been computed in accordance with the provisions of
SFAS No. 128. The following table sets forth the computation of basic and
diluted earnings per share (in thousands except per share amounts):
Years Ended March 31
1998 1997 1996
--------------------------------
Net income $ 1,597 $ 1,329 $ 1,038
Weighted average shares outstanding
for basic earnings per share 3,740 3,734 3,727
Effect of dilutive stock options 12 4 --
Adjusted weighted average shares
outstanding for diluted earnings
per share 3,752 3,738 3,727
Basic and diluted earnings per share $ .43 $ .36 $ .28
Options to purchase 368,200, 92,200 and 50,000 shares of common stock in fiscal
years 1998, 1997 and 1996, respectively, were not included in the computation of
diluted earnings per share because the option exercise price was not greater
than the average market price of the stock.
11. CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
normal course of business. Management, after review with its legal counsel, does
not anticipate material losses as a result of these actions.
F-12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Triple S Plastics, Inc.
Vicksburg, Michigan
We have audited the accompanying balance sheets of Triple S Plastics, Inc. as
of March 31, 1998 and 1997 and the related statements of income, shareholders'
equity and cash flow for each of the three years in the period ended
March 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Triple S Plastics, Inc. at
March 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 1998 in conformity
with generally accepted accounting principles.
BDO Seidman, LLP
Kalamazoo, Michigan
April 23, 1998
F-13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON FINANCIAL
STATEMENT SCHEDULE
The Board of Directors
Triple S Plastics, Inc.
Vicksburg, Michigan
The audits referred to in our report dated April 23, 1998 relating to the
financial statements of Triple S Plastics, Inc. which is contained in Item 8
of this Form 10-K, included the audit of the financial statement schedule listed
in the accompanying index. This financial statement schedule is the responsi-
bility of the Company's management. Our responsibility is to express an opinion
on this financial statement schedule based upon our audits.
In our opinion such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
BDO Seidman, LLP
Kalamazoo, Michigan
April 23, 1998
F-14
TRIPLE S PLASTICS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at charged to Charged Balance
beginning costs of against Other at end of
Description of period expenses reserves changes period
- --------------------------------------------------------------------------------------------------------------------------
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts receivable:
Year ended March 31, 1998 $255,000 $ 95,000 -- -- $350,000
Year ended March 31, 1997 $250,000 $ 30,000 $ 25,000 -- $255,000
Year ended March 31, 1996 $160,000 $188,000 $ 98,000 -- $250,000
F-15
EXHIBIT INDEX
Exhibit No. Description Page
3(a) Registrant's Second Amended and Restated Articles of
Incorporation were filed as Exhibit 3(a) to a
Registration Statement on Form S-1 (No. 33-74866)
and the same is incorporated herein by reference.
3(b) Registrant's Bylaws were filed as Exhibit 3(b) to a
Registration Statement on Form S-1 (No. 33-74866)
and the same is incorporated herein by reference.
4 A specimen Form of Stock Certificate was filed as
Exhibit 4 to a Registration Statement on Form S-1
(No. 33-74866) and the same is incorporated herein
by reference.
10(a)(1) A Business Loan Agreement between Registrant and
First of America Bank - Michigan, N.A. dated
November 1, 1992, and as amended December 21, 1993,
with respect to Registrant's Line of Credit, Secured
Term Loan Availability, Secured End Mortgage, Real
Estate Mortgage for Subsidiary, and Secured Term
Loan to subsidiary were filed as Exhibit 10(a)(1)
to a Registration Statement on Form S-1 (No. 33-74866)
and the same is incorporated herein by reference.
10(a)(2) A Loan Agreement between Registrant and Michigan
Strategic Fund dated May 1, 1989 was filed as
Exhibit 10(a)(2) to a Registration Statement on
Form S-1 (No. 33-74866) and the same is
incorporated herein by reference.
10(a)(3) A Loan Agreement between Registrant and Michigan
Strategic Fund dated September1, 1990 was filed as
Exhibit 10(a)(3) to a Registration Statement on
Form S-1 (No. 33-74866) and the same is
incorporated herein by reference.
10(a)(4) A Bond Purchase Agreement among Registrant,
Michigan Strategic Fund and Roney & Company,
dated September 24, 1990 was filed as
Exhibit 10(a)(4) to a Registration Statement on
Form S-1 (No. 33-74866) and the same is incorporated
herein by reference.
10(a)(5) A Reimbursement Agreement between Registrant and
First of America Bank - Michigan, N.A. dated
November 1, 1992 backing the 1989 Michigan Strategic
Fund Limited Obligation Revenue Bonds was filed
as Exhibit 10(a)(5) to a Registration Statement on
Form S-1 (No. 33-74866) and the same is incorporated
herein by reference.
10(a)(6) A Reimbursement Agreement between Registrant and
First of America Bank - Michigan, N.A. dated
November 1, 1992 backing the 1990 Michigan Strategic
Fund Limited Obligation Revenue Bonds was filed
as Exhibit 10(a)(6) to a Registration Statement on
Form S-1 (No. 33-74866) and the same is incorporated
herein by reference.
10(b) A Loan Guarantee Agreement and related Security
Agreement between Subsidiary and First of
America Bank - Michigan, N.A. dated November 1, 1992
was filed as Exhibit 10(b) to a Registration
Statement on Form S-1 (No. 33-74866) and the same is
incorporated herein by reference.
*10(d)(1) The Triple S Plastics, Inc. Employee Stock Option
Plan was filed as Exhibit 10(d)(1) to a
Registration Statement on Form S-1 (No. 33-74866)
and the same is incorporated herein by reference.
*10(d)(2) A Form of Nonqualified Stock Option Agreement was
filed as Exhibit 10(d)(2) to a Registration
Statement on Form S-1 (No. 33-74866) and the same
is incorporated herein by reference.
*10(d)(3) A Form of Qualified Stock Option Agreement was
filed as Exhibit 10(d)(3) to a Registration
Statement on Form S-1 (No. 33-74866) and the
same is incorporated herein by reference.
*10(d)(4) An Outside Directors Stock Option Plan dated
July 25, 1996 was filed as Exhibit 99 to a
Registration Statement on Form S-8 (No. 333-20365)
and the same is incorporated herein by reference.
10(e) A Form of Indemnity Agreement between Registrant
and each of its directors was filed as Exhibit 10(e)
to Registration Statement on Form S-1 (No. 33-74866)
and the same is incorporated by reference.
10(f) Lease between Triple S Plastics, Inc. and
Westinghouse Road Joint Venture regarding the
manufacturing and office building for the
Georgetown, Texas manufacturing facility.
23 Consent of Experts and Counsel 31
27 Financial Data Schedule 32
*Indicates a compensatory arrangement
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Triple S Plastics, Inc.
Vicksburg, Michigan
We hereby consent to the incorporation by reference in the Company's
Registration Statements (No. 33-83214, No. 33-83212, No. 333-20365 and No. 333-
20451) of our reports dated April 23, 1998, relating to the financial statements
and schedule of Triple S Plastics, Inc. appearing in the Company's Annual Report
on Form 10-K for the year ended March 31, 1998.
BDO Seidman, LLP
Kalamazoo, Michigan
April 23, 1998