Amendment #2
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
(X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
OR
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number: 0-23474
Triple S Plastics, Inc.
(Exact name of registrant as specified in its charter)
Michigan 38-1895876
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
14320 Portage Road, Vicksburg, Michigan 49097-0905
(Address of principal executive offices) (Zip Code)
(616) 649-0545
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No _____
The registrant had 3,744,189 shares of common stock outstanding as of
September 30, 1998.
TRIPLE S PLASTICS, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Condensed Financial Statements
Condensed Balance Sheets - 3
September 30, 1998 and March 31, 1998
Condensed Statements of Income - Three 4
Months and Six Months Ended
September 30, 1998 and 1997
Condensed Statements of Cash Flows - 5
Six Months Ended September 30, 1998 and 1997
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk (not applicable)
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
TRIPLE S PLASTICS, INC.
CONDENSED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
Sept. 30 March 31
1998 1998
----------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 4,839 $ 3,783
Accounts receivable, less allowance
of $325 and $350 for possible losses 9,843 13,275
Inventories (Note 3) 4,272 3,634
Deferred income taxes 360 360
Other 448 202
---------- ----------
Total Current Assets 19,762 21,254
Property, Plant and Equipment (Note 4) 41,361 38,508
Less accumulated depreciation and
amortization 15,223 13,483
---------- ----------
Net Property, Plant and Equipment 26,138 25,025
Other:
Cash restricted for capital expenditures
(Note 4) 1,848 2,932
Goodwill, net of accumulated amortization of
$489 and $469 3,972 679
Miscellaneous 124 140
---------- ----------
Total Other Assets 5,944 3,751
---------- ----------
$ 51,844 $ 50,030
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,967 $ 5,182
Accrued compensation 812 1,167
Deferred mold revenue 570 503
Other accrued expenses 900 888
Current maturities of long-term debt 1,375 1,346
--------- ---------
Total Current Liabilities 8,624 9,086
Long-Term Debt, less current maturities 8,430 6,603
Deferred Income Taxes 2,360 2,360
--------- ---------
Total Liabilities 19,414 18,049
Shareholders' Equity:
Preferred stock, no par value, 1,000,000
shares authorized, none issued -- --
Common stock, no par value, 10,200,000
shares authorized, 3,744,189 and
3,741,951 shares issued and outstanding 14,456 14,444
Retained earnings 17,974 17,537
---------- ----------
Total Shareholders' Equity 32,430 31,981
---------- ----------
$ 51,844 $ 50,030
========== ==========
See accompanying notes to financial statements.
TRIPLE S PLASTICS, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
September 30 September 30
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net Sales $ 16,398 $ 16,399 $ 32,039 $ 33,516
Cost of Sales 13,470 13,845 26,183 27,860
---------- ---------- ---------- ----------
Gross Profit 2,928 2,554 5,856 5,656
Total Selling, General &
Administrative Expenses 2,713 2,060 5,014 4,403
---------- ---------- ---------- ----------
Operating Income 215 494 842 1,253
Interest Expense (Income):
Interest expense 173 156 322 316
Interest income (77) (63) (154) (126)
---------- ---------- ---------- ----------
Net Interest Expense 96 93 168 190
---------- ---------- ---------- ----------
Income Before Income Taxes 119 401 674 1,063
Income Taxes 42 140 237 370
---------- ---------- ---------- ----------
Net Income $ 77 $ 261 $ 437 $ 693
========== ========== ========== ==========
Basic and Diluted
Earnings per Share $ .02 $ .07 $ .12 $ .19
========== ========== ========== ==========
Shares Used in Computing
Earnings per Share:
Basic 3,744 3,739 3,744 3,739
Diluted 3,745 3,767 3,749 3,758
TRIPLE S PLASTICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
September 30
------------------------
1998 1997
---------- ----------
Operating Activities:
Net income $ 437 $ 693
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 1,862 1,582
Changes in assets and liabilities:
Accounts receivable 3,432 175
Inventories (577) 506
Accounts payable and accruals (895) 250
Other 135 45
---------- ----------
CASH PROVIDED BY OPERATING ACTIVITIES 4,394 3,251
INVESTING ACTIVITIES:
Capital expenditures (2,651) (2,354)
Change in restricted cash 1,084 (55)
Business acquisition, net (Note 5) (909) --
---------- ----------
CASH USED IN INVESTING ACTIVITIES (2,476) (2,409)
FINANCING ACTIVITIES:
Proceeds from issuance of common
stock, net of fees 12 16
Principal payments on long-term debt (874) (816)
---------- ----------
CASH USED IN FINANCING ACTIVITIES (862) (800)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 1,056 $ 42
========== ==========
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, 1998 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. Business
During the six months ended September 30, 1998 and 1997, a consumer products
customer accounted for 8% and 15% of net sales, respectively, and a
telecommunications customer accounted for 20% and 10% of net sales,
respectively.
3. Inventories
($000s)
Inventories are summarized as follows: September 30 March 31
1998 1998
------------ --------------
Raw materials and packaging $ 2,286 $ 2,039
Finished goods and work-in-process 1,986 1,595
---------- ----------
Total Inventories $ 4,272 $ 3,634
========== ==========
4. Cash Restricted for Capital Expenditures
This amount represents the remaining proceeds from a $5 million Industrial
Revenue Bond and is available for investment in machinery and equipment for the
Company's Texas facility through October 1, 1998. The remaining balance at
October 1, 1998 will be used to reduce the outstanding debt.
5. Acquisition of Dynacept Company, Inc.
On June 1, 1998, Triple S Plastics, Inc. purchased, for cash and long-term
debt, the assets of Dynacept Company, Inc. (Dynacept). Dynacept is a preeminent
rapid prototyping and model making organization that produces concept models,
engineering prototypes, and pre-production samples. The transaction has been
accounted for using the purchase method.
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 constumers' specifications
and orders. Its customers are primarily in the consumer products,
telecommunications, medical/pharmaceutical, information technologies, and
automotive markets. The Company considers both the manufacture of molded
products and mold sales to be an integral part of its business. The Company's
fiscal year end is March 31.
Results of Operations
Subsequent to its year-end, the Company recognized that results of
operations for the second quarter of its fiscal year required restatement.
Accordingly, the Company recorded adjustments in the second quarter related
to inventory valuation, the timing of the recognition of certain expenses and
accrued liabilities, and the timing of the recognition of revenue. The effect
of these adjustments was a decrease in net income for the quarter of $260, or
$.07 per basic and fully diluted share.
The following table sets forth, for the three months and six months ended
September 30, 1998 and 1997, certain items from the Company's Condensed
Statements of Income expressed as a percentage of net sales, as well as the
percentage change in those items.
Three months ended Six Months ended
September 30 September 30 % Change
------------------ ---------------- ------------
2nd Six
1998 1997 1998 1997 Qtr. Mos.
-------- -------- ------- ------- ------ -----
Net Sales 100.0% 100.0% 100.0% 100.0% -- % (4.4)%
Cost of Sales 82.1 84.4 81.7 83.1 (2.7) (6.0)
-------- -------- ------- -------
Gross Profit 17.9 15.6 18.3 16.9 14.6 3.5
Selling, General &
Admin. Expenses 16.6 12.6 15.7 13.2 31.7 13.9
-------- -------- ------- -------
Operating Income 1.3 3.0 2.6 3.7 (56.5) (32.8)
Interest Expense, net 0.6 0.6 0.5 0.5 3.2 (11.6)
-------- -------- ------- -------
Income Before Income
Taxes 0.7 2.4 2.1 3.2 (70.3) (36.6)
Income Taxes 0.2 0.8 0.7 1.1 (70.0) (35.9)
-------- -------- ------- -------
Net Income 0.5% 1.6% 1.4% 2.1% (70.5)% (36.9)%
======== ======== ======= =======
Net Sales
Net sales for the second quarter ended September 30, 1998 were consistent
with the second quarter of the prior year. In the second quarter, sales to
customers in the Company's two major target markets, Telecommunications and
Medical, increased while sales to customers in the Consumer Products,
Information Technologies and Automotive markets decreased.
Net sales for the first six months of fiscal 1999 were down 4.4% compared to
the same period last year. For the first six months of the year, sales to
customers in the Consumer Products market comprised the largest percentage of
sales at 32%, but Telecommunications continues to show strong growth and could
overtake Consumer Products market sales this year. Telecommunications market
sales now comprise nearly 28% of sales, Medical market sales comprise 15% and
Information Technologies and Automotive are at 10% of sales each. The overall
change in sales is principally related to volume, including sales relating
to the Dynacept acquisition, as no significant price increases or decreases
occurred during the first six months of fiscal 1999. The Company's twenty
largest customers, including at least one in each of the primary business
markets served, accounted for approximately 80% of the Company's net sales for
the first six months of fiscal 1999 and 1998.
Cost of Sales
Cost of sales as a percentage of sales decreased to 82.1% in the second
quarter of fiscal 1999 compared to 84.4% for the second quarter last year.
The lower cost of sales percentage in fiscal 1999 is principally attributed
to molded part manufacturing cost reductions, primarily in material cost, as a
result of manufacturing efficiency improvement initiatives at the Company. For
the first six months of fiscal 1999, the cost of sales percentage decreased to
81.7% compared to 83.1% for the comparable period last year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 31.7% in the second
quarter of fiscal 1999 compared to the second quarter of the prior year. For the
first six months of fiscal 1999, these expenses increased 13.9% and represented
15.7% and 13.2% of sales for fiscal 1999 and 1998, respectively. The increase in
selling, general and administrative expenses was principally due to increased
compensation relating to the Company's increased investment in its sales force,
and the addition of Dynacept Corporation expenses in the current fiscal year.
Income Taxes
The Company's effective income tax rate of 35.2% for the first six months
of fiscal 1999 is comparable to the rate for the same period last year.
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.
In the first six months of fiscal 1999, the Company generated $4.4 million
of cash from operations which was used to acquire $2.7 million of capital
equipment, to acquire the assets of Dynacept Company, and to pay debt.
Accounts receivable decreased by $3.4 million at September 30, 1998 compared
to the prior fiscal year end, and improved to 52 days sales outstanding compared
to 61 days at the end of the prior fiscal year. This improvement is due to an
overall increase in collection efforts. Inventories increased by $638 at
September 30, 1998 compared to the prior fiscal year end, and represented
35 days in inventory compared to 26 days at the end of the prior fiscal year.
The Company has a $5.0 million unsecured line of credit agreement with a
bank which has not been drawn on at June 30, 1998. Management believes that
these sources of cash, along with internally generated cash, will be adequate to
fund future operating and capital requirements.
Other Matters
The Company's program to address the Year 2000 date recognition problem
continued to make progress toward its goal to ensure the millennium event does
not have a material adverse effect on its business operations. The Company is
currently in the implementation phase of testing its software and is in the
process of entering selected transactions into the new system to test the date
parameter. Projects to ensure this compliance are currently underway and are
anticipated to be completed by the end of 1999. Based on information currently
available from the work performed, management does not expect that amounts to be
expensed for Year 2000 activities will have a material impact on the Company's
results of operations or financial position.
During fiscal year 1999, the Company developed a plan to determine the
Year 2000 compliance status of its key suppliers and customers. The plan
involves soliciting information from suppliers and customers through use of
surveys, and follow-up discussions and testing where needed. The Company has
sent out surveys to all of its key suppliers and certain key customers and
received back a majority of these surveys. While the Company cannot guarantee
Year 2000 compliance by its key suppliers and customers, and in many cases will
be relying on statements from outside vendors without independent verification,
preliminary surveys indicate that key suppliers and customers are aware of the
issues and are working on a solution to achieve compliance before the
Year 2000. The Company is also in the process of developing a contingency plan
to deal with those key suppliers and customers who may not be Year 2000
compliant prior to the Year 2000. If certain key suppliers or customers were not
Year 2000 compliant and the Company did not have a contingency plan in place
related to those key suppliers or customers because the Company was unaware of
the noncompliance, the Company's results of operations and financial condition
could be significantly negatively impacted. However, at this time the Company
is not aware of any key suppliers or customers who will not be Year 2000
compliant by the Year 2000.
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 June 30, 1998.
(b) The directors elected at the meeting were:
Shares
-----------------------------------------
For Against Withheld
-----------------------------------------
James F. Hettinger 3,239,963 -- 18,125
Victor V. Valentine, Jr. 3,239,613 -- 18,475
Other directors whose terms of office continued after the meeting are as
follows: Robert D. Bedilion, Daniel B. Canavan, Albert C. Schauer, and
David L. Stewart.
(c) Other matters voted upon at the meeting and the results of those votes
were as follows:
Shares
----------------------------------------------
Broker
For Against Withheld Non-Votes
----------------------------------------------
Amendment to Restated
Employee Stock Purchase
Plan 3,146,963 66,700 44,425 --
The foregoing matters are described in detail in the Company's proxy statement
dated May 29, 1998 for the 1998 Annual Meeting of Shareholders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) 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: May 25, 1999 _DANIEL B. CANAVAN__________________________
Daniel B. Canavan
Acting Chief Financial Officer
Date: May 25, 1999 _CATHERINE A. TAYLOR________________________
Catherine A. Taylor
Corporate Controller
(Chief Accounting Officer)