1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
Form 10-Q
---------------
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended September 28, 1997
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 0-15214
Plasti-Line, Inc.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of incorporation or organization)
62-1218546
(I.R.S. Employer Identification Number)
623 E. Emory Road, P.O. Box 59043, Knoxville, Tennessee 37950-9043
(Address of principal executive offices)
(423) 938-1511
(Registrant's phone number including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
-----------------------------------------------------------------
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X
No
As of October 28, 1997, there were 3,820,092 shares of common stock outstanding.
-----------------------------------------------------------------
2
PART I
ITEM 1 FINANCIAL INFORMATION
PLASTI-LINE, INC.
Consolidated Condensed Balance Sheets
September 28, 1997 and December 29, 1996
(in thousands)
Assets Sept. 28, 1997 Dec. 29, 1996
------ -------------- -------------
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 4,325 $ 10
Receivables, net 18,185 22,870
Inventories 25,788 27,331
Prepaid expenses 966 754
Deferred income taxes 1,337 1,337
-------- --------
Total current assets 50,601 52,302
Net property and equipment 14,489 13,260
Goodwill 1,327 1,403
Funds held by trustee 3,724 -
Other assets 435 279
-------- --------
Total Assets $ 70,576 $ 67,244
======== ========
See accompanying notes to consolidated condensed financial statements.
3
Liabilities and Stockholders' Equity Sept. 28, 1997 Dec. 29, 1996
------------------------------------ -------------- -------------
(Unaudited) (Audited)
Current liabilities:
Current portion of long-term debt $ 745 $ 745
Accounts payable 7,721 8,096
Accrued liabilities 6,950 6,116
Income taxes currently payable 600 83
Customer deposits and deferred revenue 16,187 11,509
------ ------
Total current liabilities 32,203 26,549
Long-term debt, excluding current portion 8,791 12,220
Deferred income taxes 1,196 1,196
Deferred liabilities 208 77
Stockholders' equity:
Preferred stock--$.001 par value, 5,000,000 shares
authorized, none issued and outstanding - -
Common stock--$.001 par value, 20,000,000 shares
authorized, issued and outstanding: 1997: 3,815,797;
1996: 3,803,414 4 4
Additional paid-in-capital 2,922 2,859
Notes receivable, common stock (124) (136)
Retained earnings 25,376 24,475
------- -------
Total Stockholders' Equity 28,178 27,202
------- -------
Total Liabilities and
Stockholders' Equity $70,576 $67,244
======= =======
See accompanying notes to consolidated condensed financial statements.
4
PLASTI-LINE, INC.
Consolidated Condensed Statements of Operations
For the three months and nine months ended Sept. 28, 1997 and Sept. 29, 1996
(in thousands, except per share data)
(Unaudited)
----- Three months ----- ------ Nine months ------
Sept. 28, 1997 Sept. 29, 1996 Sept. 28, 1997 Sept. 29, 1996
-------------- -------------- -------------- --------------
Net sales $ 32,263 $ 33,960 $ 94,361 $ 96,412
Cost of sales 26,254 27,797 77,212 79,929
-------- -------- -------- --------
Gross profit 6,009 6,163 17,149 16,483
Selling, general,
and administrative 3,989 4,074 12,019 11,666
-------- -------- -------- --------
Operating income 2,020 2,089 5,130 4,817
Interest income (129) (3) (133) (7)
Interest expense 215 419 588 1,320
-------- -------- -------- --------
Income before income
taxes 1,934 1,673 4,675 3,504
Income taxes 773 636 1,870 1,331
-------- -------- -------- --------
Net income $ 1,161 $ 1,037 $ 2,805 $ 2,173
======== ======== ======== ========
Net income per share $ 0.30 $ 0.27 $ 0.73 $ 0.57
======== ======== ======== ========
See accompanying notes to consolidated condensed financial statements.
5
PLASTI-LINE, INC.
Consolidated Condensed Statements of Cash Flows
Nine months ended Sept. 28, 1997 and Sept. 29, 1996
(in thousands)
(Unaudited)
Sept. 28,1997 Sept. 29, 1996
------------- --------------
Cash flows from operating activities:
Net income $ 2,805 $ 2,173
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,879 1,616
Loss on disposal of fixed assets 3 -
Provision for losses on accounts receivable 41 169
Decrease in net receivables 4,644 3,525
Decrease in inventories 1,543 3,088
Decrease (increase) in prepaid expenses (212) 132
Increase in other assets (249) (41)
Decrease in accounts payable (375) (4,324)
Increase in accrued liabilities 834 691
Increase in income taxes payable 517 188
Increase in deferred liabilities 131 -
Increase in customer deposits
and deferred revenue 4,678 1,866
------ ------
Net cash provided by operating activities 16,239 9,083
------ ------
Cash flows from investing activities:
Purchases of property and equipment (2,925) (854)
------ ------
Net cash used by investing activities (2,925) (854)
------ ------
Cash flows from financing activities:
Net payments on line of credit (8,391) (8,289)
Principal payments on long-term debt (39) (46)
Proceeds from industrial revenue bonds,
net of funds held by trustee 1,259 -
Payment of dividends (1,906) -
Proceeds from sales of common stock 65 70
Payments of notes receivable - common stock 13 36
------ ------
Net cash used by financing activities (8,999) (8,229)
------ ------
Net increase in cash and cash equivalents 4,315 -
Cash and cash equivalents at beginning of year 10 10
------ ------
Cash and cash equivalents at end of period $ 4,325 $ 10
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 429 $ 1,344
Income taxes 1,354 1,109
====== ======
Noncash transactions:
Amortization of compensation from
restricted stock $ 6 $ 5
====== ======
See accompanying notes to consolidated condensed financial statements.
6
PLASTI-LINE, INC.
Notes to Consolidated Condensed Financial Statements
1. Condensed Consolidated Financial Statements
The consolidated condensed balance sheet as of September 28, 1997, and the
consolidated condensed statements of operations and cash flows for the
nine months ended September 28, 1997 and September 29, 1996, have been
prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and changes in
cash flows at September 28, 1997, and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's 1996
Annual Report to Stockholders. The results of operations for the period ended
September 28, 1997, are not necessarily indicative of the operating results for
the full year.
2. Principles of Consolidation
The financial statements include the accounts of the Company and its
wholly owned subsidiaries, American Sign & Marketing Services, Inc.,
Plasti-Line Services Company, Inc. and Plasti-Line Columbia, Inc. All
significant intercompany accounts and transactions have been eliminated.
3. Inventories
Inventories consist of the following: Sept. 28, 1997 Dec. 29, 1996
-------------- -------------
(in thousands)
Finished goods $ 20,606 $ 20,006
Work-in-process 3,177 4,397
Raw materials 5,391 6,314
------ ------
29,174 30,717
Less: LIFO inventory reserve (3,386) (3,386)
------ ------
Total net inventory $ 25,788 $ 27,331
====== ======
7
Inventories are stated at the lower-of-cost or market. Cost is determined by
the last-in, first-out method (LIFO). The Company reports interim LIFO
reserves based on projected year-end calculations. Historically,
these interim calculations, based on the LIFO layers which can be reasonably
estimated, have not yielded material interim differences; therefore, no
adjustment has been made.
4. Earnings Per Share
Net income per common share is based on the weighted average number of
common and common equivalent shares outstanding in each period. For
purposes of computing common equivalent shares outstanding, shares relating
to options have been calculated using the treasury stock method for the
portion of each period for which the options were outstanding and using the
fair value of the Company' s stock for each of the respective periods.
The weighted average number of common and common stock equivalent
shares outstanding for the three and nine months period ended September 28,
1997 were 3,847,000 and 3,842,000, respectively.
8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
A. Consolidated results of operations for the three months ended September
28, 1997 compared to the consolidated results of operations for the three
months ended September 29, 1996:
The Company's sales for the three months ended September 28, 1997 decreased
5.0% to $32.3 million from $34 million for the same period last year. The
principal reason for the decrease was delays in new program start-ups and
re-images for automotive and food service customers throughout the Company.
The Company's gross profit margin during the three months ended September
28, 1997 was 18.6%, which was higher than the margin during the comparable
period of 1996 of 18.1%. The margin improvement is primarily due to
manufacturing cost reductions as well as a favorable sales mix.
Selling, general, and administrative expenses were $3.99 million for the
third fiscal quarter of 1997, as compared to $4.07 million for the third fiscal
quarter of 1996, a 2.1% decrease. The decrease is primarily due to lower
sales volumes. Selling, general and administrative expenses, as a percentage
of sales, were relatively flat at 12.4% for the third fiscal quarter of 1997 and
12.0% for the third fiscal quarter of 1996. The slight increase in such expenses
as a percent of sales is primarily due to increased spending on new business
development.
Operating income was $2.02 million and $2.09 million for the third fiscal
quarters of 1997 and 1996, respectively. The 3.3% decrease is due to lower
sales.
As a result of decreased interest expense from lower working capital, the
Company's pre-tax income for the three months ended September 28, 1997 improved
to $1.93 million from $1.67 million, a 15.6% increase over the comparable period
of the preceding year.
B. Consolidated results of operations for the nine months ended September 28,
1997, as compared to the consolidated results of operations for the nine months
ended September 29, 1996:
Net sales were $94.3 million for the first nine months of 1997, compared to
$96.4 million for the first nine months of 1996. The principal reason for the
decrease was delays in new program start-ups and re-images for automotive and
retail customers, which resulted in lower sales for Plasti-Line West and with
respect to automotive and food service customers throughout the Company.
Cumulative gross profit as a percentage of sales at the end of the third
quarter of 1997 was 18.2%, which was higher than the margin of 17.1% for the
same period in 1996. The margin improvement is due to manufacturing cost
reductions as well as a favorable sales mix.
Selling, general and administrative expenses for the first nine months of 1997
were $12.0 million as compared to $11.7 million for the same period in 1996, an
increase of 3.0%. Selling, general and administrative expenses as a percentage
of sales for the first nine months of 1997 were 12.7%, as compared to 12.1%
during the same period of 1996. This slight increase in expenses as a
percentage of sales is primarily due to increased spending on new business
development, as well as the costs of implementing the Company's manufacturing
software at Columbia and Plasti-Line West.
Operating income for the first nine months of 1997 was $5.1 million, as
compared to $4.8 million during the same period in 1996, a 6.5% increase. The
increase was due to improved margins.
As a result of the improved margins and decreased interest expense (from lower
working capital), the Company's pre-tax income for the first nine months of
1997 increased to $4.6 million from $3.5 million for the first nine months of
1996, a 33.4% increase.
9
Net income for the first nine months of 1997 was $2.8 million as compared to
$2.2 million for the first nine months of 1996, a 29.1% increase. Net income
per share was $0.73 for the first nine months of 1997, compared to $0.57 for
the comparable period of the preceding year.
Liquidity and Capital Resources
Excluding cash and cash equivalents of $4.3 million, the Company had operating
working capital at September 28, 1997 of $14.1 million, a decrease of $11.6
million from the amount of working capital at December 31, 1996. This
reduction was primarily due to decreases in net receivables and inventories and
an increase in customer deposits.
During the first nine months of 1997, the Company completed the financing of a
new manufacturing facility in Columbia, through the issuance of $5.0 million of
industrial revenue bonds. In July 1997, the Company requisitioned $1.259
million of these bonds to finance the facility's construction, and the balance
of the bonds remains in trust.
The Company's long-term debt includes the following:
Revolving Credit Facility: The Company has available up to $20
million under this line of credit through June 30, 1998. The outstanding
balance was approximately $8.4 million and $0 as of December 31, 1996 and
September 28, 1997, respectively. The annual interest rate varies and was
8.413% and 6.902% as of December 31, 1996 and September 28, 1997, respectively.
The loan is secured by the Company' s accounts receivable and inventory.
Knox County, Tennessee Industrial Revenue Bonds: The total
outstanding principal balance as of December 31, 1996 and September 28, 1997
was approximately $4 million and $4 million, respectively. The annual interest
rate on $2.15 million of this balance varies, and was 4.15% and 4.25% at
December 31, 1996 and September 28, 1997, respectively. The annual interest
rate on the remaining balance is 7.65%. Interest is payable quarterly, and
$680,000 of principal is payable annually, with a balloon payment of $2.63
million payable on November 1, 1999. The bonds are collateralized by the
Knoxville, Tennessee real property.
Florence, Kentucky Industrial Revenue Bonds: The total
outstanding principal balance as of December 31, 1996 and September 28, 1997
was approximately $584,000 and $553,000, respectively. The annual interest
rate varies, and was 7.4% and 7.4% at December 31, 1996 and September 28, 1997,
respectively. Principal payments of $16,250 plus accrued interest are payable
quarterly through December 1, 2005. The bonds are collateralized by the
Florence, Kentucky real property.
Columbia, South Carolina Industrial Revenue Development Bonds:
As discussed above, the Company obtained this financing in July 1997 for the
development of a building on the Columbia, South Carolina property. The
principal balance is $5 million and bears interest at an annual average coupon
rate of 5.96%. Interest is payable semi-annually, and principal payments will
begin in July 2000, with the final payment being due in July 2017. The bonds
are secured by the Columbia, South Carolina real property.
Cash flow provided from operations during the first nine months of 1997 was
$16.2 million, resulting primarily from income from operations and working
capital reductions. Investing activities in 1997 have used $2.9 million,
primarily for capital expenditures. Financing activities in 1997 have used
$9.0 million, primarily for payments on the Company's line of credit.
The Company's only current plans for capital expenditure relate to the
acquisition of new machinery, equipment, furniture and fixtures designed to
increase productivity and factory efficiency. The Company believes its cash
generated from operations and the funds available to it under its existing line
of credit and the industrial revenue bonds are sufficient for these operating
and capital requirements.
Seasonality
The Company's sales exhibit limited seasonality, with sales in the first
quarter of each fiscal year generally being the lowest and fourth quarter sales
the highest. First quarter sales tend to be relatively lower because of
weather conditions that delay or extend customers' construction schedules and,
therefore, their pattern of sign purchases. Sales have normally accelerated in
the second, third and fourth quarters, corresponding with accelerating
construction schedules
10
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Default Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule (for SEC purposes only).
(b) No reports on Form 8-K were filed during the quarter ended
September 28, 1997.
11
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLASTI-LINE, INC.
By: /s/ Mark J. Deuschle
- --------------------------
Name: Mark J. Deuschle
Title: Vice President -- Finance
Dated: November 4, 1997