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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
(Mark One)
/X/ Amended Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 1995
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 0-22508
SEDA SPECIALTY PACKAGING CORP.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-3928988
(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification Number)
2501 WEST ROSECRANS AVENUE, LOS ANGELES, CALIFORNIA 90059-3510
(Address of Principal Executive Offices) (Zip Code)
(310) 635-4444
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $0.001 par value Nasdaq National Market
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 the Form 10-K or by amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant based upon the closing sales price of its Common Stock on March 1,
1996 on the Nasdaq National Market was $27,162,000.
The number of shares of Common Stock outstanding as of March 1, 1996: 5,092,500.
DOCUMENTS INCORPORATED BY REFERENCE
None
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SEDA SPECIALTY PACKAGING CORP.
1995 FORM 10-K/A AMENDED ANNUAL REPORT
TABLE OF CONTENTS
PART I
Page
Item 1 Business No change
Item 2 Properties No change
Item 3 Legal Proceedings No change
Item 4 Submission of Matters to a Vote of Security Holders No change
PART II
Item 5 Market for Registrant's Common Equity and Related Shareholder Matters No change
Item 6 Selected Financial Data No change
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations 2
Item 8 Financial Statements and Supplementary Data 5
Item 9 Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure No change
PART III
Item 10 Directors and Executive Officers of the Registrant No change
Item 11 Executive Compensation No change
Item 12 Security Ownership of Certain Beneficial Owners and Management No change
Item 13 Certain Relationships and Certain Transactions No change
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K No change
Signatures 6
1
3
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction
with Item 6 - "Selected Financial Data" and Item 8 - "Financial Statements and
Supplementary Data" included elsewhere herein.
RESULTS OF OPERATIONS
SEDA's financial performance in 1995 reflects the continued strength of
the Company's core business as evidenced by demand for the Company's products
from both new and existing customers. The results of operations of American
Safety Closure Corp. ("ASC") and its subsidiary have been consolidated with the
results of the Company commencing June 22, 1995. On June 22, 1995, SEDA acquired
65% of ASC, bringing its holdings to 68%. Prior to this date SEDA was seeking to
abort the transaction via legal action. The acquisition of the remaining
minority equity interest in ASC, including 18% of ASC acquired by the Company
after June 22, 1995, was the subject of litigation until October 1995. On a pro
forma basis, if the acquisition of approximately 86% of ASC had occurred on
January 1, 1995 and the results of ASC had been consolidated with SEDA for all
of 1995, net sales, net income and earnings per share would have approximated
$45.7 million, $4.0 million and $0.78, respectively. Refer to Note 3 to the
consolidated financial statements appearing elsewhere in this Annual Report for
further information regarding the acquisition and the pro forma data.
As a result of the acquisition, the Company saw a significant increase
in sales volume in the last six months of 1995. The acquisition of ASC also
broadened the Company's family of products for both containers and closures. The
Company's line of plastic containers was expanded in 1995 to include single- and
double-wall plastic jars, plastic vials and polyethylene terephthalate ("PET")
bottles in addition to the Company's flexible plastic tubes. The Company's line
of plastic closures now includes more styles and sizes of stock and
tamper-evident closures as well as a number of specialty closures. Additional
custom products were also added to the Company's operations. The following is a
percentage analysis of operating results for the past three years:
1995 1994 1993
--------------------------------
Plastic containers 60.6% 62.1% 60.0%
Plastic closures and custom products 39.4 37.9 40.0
----- ----- -----
Net sales 100.0 100.0 100.0
Cost of sales 69.3 60.7 58.3
----- ----- -----
Gross profit 30.7 39.3 41.7
Selling expenses 6.4 7.1 6.5
General and administrative expenses 6.7 6.2 5.0
----- ----- -----
Income from operations 17.6 26.0 30.2
Interest expense 3.5 3.2 3.9
Interest income (0.4) (0.9) (0.2)
Other (income) expense (0.1) 0.3 0.1
----- ----- -----
Income before income taxes 14.6 23.4 26.4
Provision for income taxes (pro forma in 1993) 4.7 7.5 9.5
----- ----- -----
Net income (pro forma in 1993) 9.9% 15.9% 16.9%
===== ===== =====
1995 COMPARED TO 1994
Net sales for the year ended December 31, 1995 increased 37% to $41.7
million compared to $30.4 million for 1994. Approximately 44% of the 1995
increase in net sales was a result of the ASC acquisition. The remaining
increases were largely due to increased demand from existing customers and an
expanding customer base. Sales of containers increased 34% from $18.9 million in
1994 to $25.3 million in 1995 and sales of closures and custom products
increased 43% from $11.5 million in 1994 to $16.4 million in 1995. Container and
closure unit volumes increased approximately
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4
46% and 37%, respectively from 1994 to 1995. Changes in per-unit prices for 1995
as compared to 1994 were largely a result of changes in product mix with the
addition of ASC products and a higher percentage of tubes sold with
customer-requested third-party dispensing closures.
Gross profit for 1995 increased 7% to $12.8 million from $12.0 million
for 1994. As a percentage of net sales, gross profit decreased to 30.7% for 1995
from 39.3% in 1994. This change in gross margin percentages resulted primarily
from higher material costs (approximately 4.3%), including higher resin prices
and a higher percentage of third-party dispensing closures on tubes sold,
increased costs associated with greater production capacity and the start-up of
a new PET bottle manufacturing operation (approximately 2.2%), and the
consolidation of ASC which produced products with lower gross margins than the
other operations of the Company (approximately 1.2%). The Company is exploring
opportunities to manufacture a portion of its future dispensing closure
requirements.
Selling expenses increased 24% in 1995 to $2.7 million from $2.2
million in 1994, and as a percentage of net sales, selling expenses decreased to
6.4% for 1995 from 7.1% the prior year. The changes were due primarily to the
inclusion of ASC selling expenses and increased salaries and other expenses
associated with additional personnel, partially offset by lower commission
expenses.
General and administrative expenses for the year ended December 31,
1995 increased 48% to $2.8 million from $1.9 million for 1994. As a percentage
of net sales, general and administrative expenses increased to 6.7% from 6.2%
for 1994. The addition of ASC administrative expenses, higher salaries,
insurance and bad debt expenses were partially offset by lower professional fees
for legal and accounting fees required in 1994 related to the Company's new
status as a publicly held corporation, which required more expenditures for
legal and accounting services. In 1995 the Company developed the experience to
handle some of these needs in-house.
Interest expense in 1995 increased to $1.4 million as compared to $1.0
million for the comparable period of 1994 as a result of the addition of ASC
interest-bearing debt as well as borrowing related to the Company's new bottle
operation and its investment in ASC. Interest income in 1995 decreased from 1994
because of lower cash and cash equivalents on hand throughout the year.
The Company's effective tax rate was relatively unchanged at 32.1% in
1995 compared to 31.9% in 1994, with both years reflecting state income tax
credits related to the Company's location in a designated Revitalization Zone.
1994 COMPARED TO 1993
Net sales for the year ended December 31, 1994 increased 20% to $30.4
million compared to $25.3 million for 1993. Sales of containers increased 24%
from $15.2 million in 1993 to $18.9 million in 1994 and sales of closures and
custom products increased 14% from $10.1 million in 1993 to $11.5 million in
1994. Container and closure unit volumes increased approximately 8% and 13%,
respectively from 1993 to 1994. These increases were largely due to increases in
production capacity to accommodate a larger customer base and increased demand
from existing customers. Changes in per-unit prices for 1994 as compared to 1993
were largely a result of changes in product mix and a higher percentage of tubes
sold with customer-requested third-party dispensing closures.
Gross profit for 1994 increased 13% to $12.0 million from $10.5 million
for 1993. As a percentage of net sales, gross profit decreased to 39.3% for 1994
from 41.7% in 1993. This change in gross margin percentages resulted primarily
from higher material costs, including a higher percentage of third-party
dispensing closures on tubes sold, and increased costs associated with greater
production capacity.
Selling expenses increased 31% in 1994 to $2.2 million from $1.7
million in 1993, and as a percentage of net sales, selling expenses increased to
7.1% for 1994 from 6.5% the prior year as a result of an expanded direct sales
force and other increases related to the growth in sales.
General and administrative expenses for the year ended December 31,
1994 increased 50% to $1.9 million from $1.3 million for 1993. As a percentage
of net sales, general and administrative expenses increased to 6.2% from 5.0%
for 1993. The increases were primarily due to additional expenses related to the
Company's status as a publicly-held corporation, such as professional fees,
shareholder communication expenses and directors fees. Increases in salaries and
wages were largely offset by lower bad debt expenses.
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Interest expense in 1994 was substantially unchanged from 1993. Lower
interest rates on short-term and long-term borrowings resulting from the
Company's new credit facilities and the refinancing of certain higher-rate debt
offset the interest on borrowing for the Company's new facility. Interest income
in 1994 increased from 1993 because of higher cash and cash equivalents on hand
throughout the year.
The Company's effective tax rate decreased to 31.9% in 1994 from a pro
forma rate of 35.9% in 1993, reflecting increased state income tax credits
related to the Company's relocation in 1993 to its new facility, which is
located in a designated Revitalization Zone.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced rapid growth throughout its history, which
has required substantial capital expenditures for manufacturing equipment and
the corresponding financing of that equipment through the use of bank lines of
credit, five-year notes payable to finance companies and capital leases. Cash
generated by operations together with bank lines of credit have satisfied the
short-term liquidity requirements of the Company over the past three years. The
Company's short-term needs have included the financing of growth in receivables
and inventory and, while it maintained S Corporation status, the funding of
distributions to shareholders. Long-term requirements have been satisfied by
cash from operations, five-year notes and capital leases. The Company's initial
public stock offering in 1993 enhanced its ability to meet both short-term and
long-term liquidity requirements. The Company believes that cash generated by
operations, supplemented as necessary with funds expected to be available under
the Company's credit agreement, will provide sufficient resources to meet
present and reasonably foreseeable working capital requirements, debt service
and other cash needs throughout the term of its credit agreement.
The Company has a revolving line of credit agreement with a bank,
expiring June 30, 1997, under which it may borrow up to $7.0 million to fulfill
working capital requirements. Amounts drawn under the line are secured by all of
the Company's assets, except certain property, plant and equipment where the
bank's security interest is subordinated to the holder of the related equipment
notes payable. The interest rate on this line is at the bank's prime rate or, at
the Company's option, 1.2% above LIBOR for a specified period. The credit line
requires the Company to comply with financial covenants regarding minimum levels
of tangible net worth (which limits the payment of dividends), working capital
and net income and certain financial ratios. The Company is currently in
compliance with such covenants.
Working capital increased to $11.3 million at December 31, 1995, from
$11.1 million at the end of 1994. As of December 31, 1995 the Company had cash
and cash equivalents of $3.5 million. Accounts receivable and inventories
increased 68% and 86%, respectively, from the December 31, 1994 levels because
of the growth in the Company's business, the addition of receivables and
inventories from ASC and, in the case of inventories, the start-up of PET bottle
manufacturing operations.
Operating activities generated cash flows of $7.1 million in 1995
compared to $3.5 million and $6.3 million in 1994 and 1993, respectively. The
decrease in 1994 from 1993 was due to the reduction in accounts payable and
accrued liabilities in 1994 caused by the timing of capital expenditures. The
increase from 1994 to 1995 related primarily to the growth in earnings before
depreciation and increases in accounts payable and accrued liabilities from 1994
to 1995.
Principal investing activities over the past three years have been
capital expenditures for new PET bottle manufacturing equipment, new tube
extrusion and heading lines, new tube printing equipment, new injection molding
equipment and improvements to the Company's facility. Total capital expenditures
were $7.6 million, $8.7 million and $8.5 million in 1995, 1994 and 1993,
respectively. In addition, $831,000 of machinery and equipment was added in 1993
through a capital lease agreement. The Company's net investment in the
acquisition of a majority interest in ASC in 1995 required a cash investment of
$3.4 million, from available cash reserves, and 82,500 shares of the Company's
common stock. An additional investment will be made in 1996 to acquire the
remaining minority interest in ASC.
In April 1994, the Company acquired its current facility through
financing agreements aggregating $6.3 million, from a related party, as
contemplated in a September 1993 agreement. The financing agreements included an
unsecured promissory note in the principal amount of $1.6 million, which was
repaid in June 1995, and the assumption of an existing five-year note payable to
a financial institution with a principal balance of approximately $4.7 million,
bearing interest at 8.5% per annum. At the closing of the transaction, the
Company paid $1 million to the financial institution to reduce the
4
6
amount outstanding on the five-year note to $3.7 million. The note is payable in
monthly installments of $39,000, including interest, plus a one time payment of
approximately $3.1 million in December 1997.
Financing activities provided $1.9 million in 1995 as proceeds from new
long-term debt were only partially offset by debt principal payments. Such
activities consumed $3.8 million in 1994 as a result of debt principal payments
in excess of borrowing. Financing activities provided $16.5 million in 1993 as
the net proceeds from the public offering were partially offset by repayments of
both lines of credit and principal on long-term debt and by S Corporation
distributions to shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial statement schedules required by
Item 8 of this Report are set forth in the index on page F-1, included elsewhere
herein.
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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.
SEDA SPECIALTY PACKAGING CORP.
By /s/ Shawn Sedaghat
-----------------------------------------
Shawn Sedaghat
Chairman of the Board, President and
Chief Executive Officer
Date: June 11, 1996
Power of Attorney
Each person whose signature below hereby authorizes and appoints Shawn
Sedaghat and Ronald W. Johnson, each with full power of substitution and full
power to act as his true and lawful attorney-in-fact and agent to act in his
name, place and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file, any and all
amendments to this Annual Report on Form 10-K, including any and all
post-effective amendments hereto, with exhibits thereto and other documents in
connection therewith.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Shawn Sedaghat Chairman of the Board, President, June 11, 1996
- ----------------------------------- and Chief Executive Officer
Shawn Sedaghat (Principal Executive Officer)
/s/ Ronald W. Johnson Vice President of Finance and Secretary June 11, 1996
- ----------------------------------- (Principal Financial Officer and Principal
Ronald W. Johnson Accounting Officer) and Director
Director June 11, 1996
- -----------------------------------
* Dann V. Angeloff
Director June __, 1996
- ----------------------------------
Robert H. King
Director June 11, 1996
- ----------------------------------
* Alfred E. Osborne, Jr
/s/ Shawn Sedaghat
- ----------------------------------
* Shawn Sedaghat under power
of attorney dated March 25, 1996
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SEDA SPECIALTY PACKAGING CORP.
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS:
Report of Independent Accountants F-2
Consolidated Balance Sheet at December 31, 1995 and 1994 F-3
Consolidated Statement of Income for the three years ended December 31, 1995 F-4
Consolidated Statement of Stockholders' Equity for the three years ended December 31, 1995 F-5
Consolidated Statement of Cash Flows for the three years ended December 31, 1995 F-6
Notes to Consolidated Financial Statements F-7
FINANCIAL STATEMENT SCHEDULES:
For the three years ended December 31, 1995
II - Valuation and Qualifying Accounts F-15
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
F-1
9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
SEDA Specialty Packaging Corp.
In our opinion, the consolidated financial statements listed in the accompanying
index on page F-1 present fairly, in all material respects, the financial
position of SEDA Specialty Packaging Corp. and its subsidiaries at December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Costa Mesa, California
February 21, 1996
F-2
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SEDA SPECIALTY PACKAGING CORP. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31,
---------------------
(In thousands except share data) 1995 1994
- ----------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 3,508 $ 5,585
Accounts receivable, less allowance for doubtful accounts
of $424 and $200 at December 31, 1995 and 1994 9,022 5,369
Inventories (Note 4) 7,158 3,852
Prepaid expenses and other current assets 743 1,085
Deferred income taxes (Note 7) 1,120 1,030
-------- --------
Total current assets 21,551 16,921
Property, plant and equipment, net (Note 5) 43,342 32,463
Other assets (Note 6) 989 1,375
-------- --------
$65,882 $50,759
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,838 $ 1,538
Income taxes payable (Note 7) 650 -
Accrued liabilities 1,718 734
Note payable to principal stockholder (Note 11) - 1,600
Current portion of long-term debt (Note 8) 3,582 1,704
Current portion of obligations under capital leases (Note 9) 493 275
-------- --------
Total current liabilities 10,281 5,851
Line of credit (Note 8) 1,520 -
Long-term debt (Note 8) 12,453 8,508
Obligations under capital leases (Note 9) 805 553
Deferred income taxes (Note 7) 3,708 3,677
-------- --------
Total liabilities 28,767 18,589
-------- -------
Commitments and contingencies (Note 9)
Minority interest in consolidated subsidiary (Note 3) 301 -
Stockholders' equity (Note 10):
Preferred stock, $0.001 par value, 10,000,000 shares authorized
none outstanding - -
Common stock, $0.001 par value, 30,000,000 shares authorized,
5,097,500 and 5,015,000 shares issued and outstanding at
December 31, 1995 and 1994 5 5
Capital in excess of par value 26,983 26,333
Retained earnings 9,967 5,832
Treasury stock, at cost, 13,000 shares (141) -
-------- --------
Total stockholders' equity 36,814 32,170
-------- --------
$65,882 $50,759
======= =======
See accompanying notes to consolidated financial statements
F-3
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SEDA SPECIALTY PACKAGING CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31,
---------------------------------
(In thousands, except per share data) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
Net sales $41,676 $30,400 $25,298
Cost of sales 28,895 18,441 14,748
---------------------------------
Gross profit 12,781 11,959 10,550
Selling expenses (Note 11) 2,675 2,164 1,650
General and administrative expenses 2,795 1,893 1,260
---------------------------------
Income from operations 7,311 7,902 7,640
Interest expense 1,422 987 983
Interest income (167) (273) (50)
Other (income) expense (30) 80 23
---------------------------------
Income before income taxes 6,086 7,108 6,684
Provision for income taxes 1,951 2,266 1,886
---------------------------------
Net income $ 4,135 $ 4,842 $ 4,798
=================================
Earnings per common and common equivalent share $ 0.82 $ 0.94
====================
Weighted average number of common and common equivalent shares 5,061 5,147
====================
Pro forma data (Note 7):
Income before income taxes $ 6,684
Pro forma provision for income taxes 2,399
-------
Pro forma net income $ 4,285
=======
Pro forma earnings per common and common equivalent share $ 1.20
=======
Weighted average number of common and common equivalent shares 3,556
=======
See accompanying notes to consolidated financial statements
F-4
12
SEDA SPECIALTY PACKAGING CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Preferred Stock Common Stock
---------------- --------------- Capital in
Excess of Retained Treasury
(In thousands) Shares Amount Shares Amount Par Value Earnings Stock Total
- ------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 - - 3,160 $ 3 $ 749 $ 3,473 - $ 4,225
Proceeds from public offering
of common stock - - 1,840 2 23,088 - - 23,090
Distributions to shareholders - - - - - (5,033) - (5,033)
Reclassification of S Corporation
retained earnings - - - - 2,248 (2,248) - -
Net income - - - - - 4,798 - 4,798
-----------------------------------------------------------------------------
Balance at December 31, 1993 - - 5,000 5 26,085 990 - 27,080
Exercise of stock options - - 15 - 150 - - 150
Tax benefit from stock option plan - - - - 98 - - 98
Net income - - - - - 4,842 - 4,842
-----------------------------------------------------------------------------
Balance at December 31, 1994 - - 5,015 5 26,333 5,832 - 32,170
Common stock issued for ASC acquisition - - 83 - 650 - - 650
Purchase of 13,000 treasury shares - - - - - - $ (141) (141)
Net income - - - - - 4,135 - 4,135
-----------------------------------------------------------------------------
Balance at December 31, 1995 - - 5,098 $ 5 $26,983 $ 9,967 $ (141) $36,814
=============================================================================
See accompanying notes to consolidated financial statements
F-5
13
SEDA SPECIALTY PACKAGING CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
----------------------------------
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 4,135 $ 4,842 $ 4,798
----------------------------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,757 2,281 1,427
Change in provision for losses on accounts receivable 112 (50) 162
Deferred income taxes 578 933 1,639
Change in assets and liabilities before effect of ASC acquisition:
Accounts receivable (2,412) (921) (1,694)
Inventory (1,716) (1,591) (945)
Prepaid expenses and other current assets 482 (706) (301)
Other assets 474 (388) (387)
Accounts payable 993 (620) 1,441
Income taxes payable 650 - -
Accrued liabilities 10 (246) 151
----------------------------------
Total adjustments 2,928 (1,308) 1,493
----------------------------------
Net cash provided by operating activities 7,063 3,534 6,291
----------------------------------
Cash flows from investing activities:
Acquisition of majority interest in ASC (Note 3) (3,449) - -
Capital expenditures (7,616) (8,720) (8,510)
----------------------------------
Net cash used in investing activities (11,065) (8,720) (8,510)
----------------------------------
Cash flows from financing activities:
Proceeds from lines of credit and demand notes 1,520 - 1,090
Repayments of lines of credit and demand notes (1,480) (1,000) (3,315)
Proceeds from public offering of common stock - - 23,090
Exercise of stock options - 248 -
Purchase of treasury stock (141) - -
Proceeds from issuance of long-term debt 6,700 5,494 2,953
Payment of note payable to principal stockholder (Note 11) (1,600) - -
Principal payments of long-term debt and capital lease obligations (3,074) (8,545) (2,295)
Distributions of income - - (5,033)
----------------------------------
Net cash provided by (used in) financing activities 1,925 (3,803) 16,490
----------------------------------
Net increase (decrease) in cash and cash equivalents (2,077) (8,989) 14,271
Cash and cash equivalents at beginning of year 5,585 14,574 303
----------------------------------
Cash and cash equivalents at end of year $ 3,508 $ 5,585 $14,574
==================================
Other cash flow information:
Cash paid during the year for interest $ 1,380 $ 1,004 $ 985
Cash paid during the year for taxes on income $ 607 $ 1,512 $ 163
Non cash investing and financing activities:
Common stock issued for the acquisition of ASC $ 650 $ - $ -
Facility acquired through financing agreements $ - $ 6,328 $ -
Machinery and equipment obtained through capital lease $ - $ - $ 831
See accompanying notes to consolidated financial statements
F-6
14
SEDA SPECIALTY PACKAGING CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
SEDA Specialty Packaging Corp. ("SEDA") manufactures plastic closures
and containers using injection molding, extrusion and stretch-blow molding
processes; decorates many of those products using offset printing, hot stamping
and labeling processes; and sells those products at wholesale prices to
customers primarily in the personal care, pharmaceutical, food and beverage, and
household and industrial chemical industries. On June 22, 1995, SEDA acquired a
majority interest in American Safety Closure Corp. (Note 3).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of SEDA and
its majority-owned subsidiaries (Note 3). The consolidated entity is referred to
as "the Company" in the accompanying consolidated financial statements. All
material intercompany transactions and balances are eliminated in consolidation.
The consolidated financial statements include amounts that are based on
management's best estimates and judgments. 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 and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Certain reclassifications have been made for consistent presentation.
Revenue Recognition
Revenue is recognized as product is shipped to customers.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined on the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for
major renewals and betterments that extend the useful lives of property, plant
and equipment are capitalized. Expenditures for maintenance and repairs are
charged to expense as incurred. When assets are sold or otherwise disposed of,
the cost and related accumulated depreciation are relieved, and any resulting
gain or loss is recognized.
Depreciation is computed on the straight-line method over the estimated
useful lives of the assets. The useful life for buildings is 40 years and the
useful lives range from 7 to 15 years for machinery and equipment, 3 to 7 years
for molds and transportation equipment and 5 to 7 years for furniture and office
equipment. Leasehold improvements are amortized over the lesser of the useful
life of the related asset or the remaining lease term.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of trade receivables. This risk
is limited by the Company's large number of customers and their dispersion, both
geographically and across many industry lines. Sales to one customer amounted to
$3,396,000 (11% of net sales) in the year ended December 31, 1994. There were no
individual customers that represented over 10% of net sales for the years ended
December 31, 1995 and 1993. One customer represented 16% of trade accounts
receivable at December 31, 1995.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term, highly liquid investments with original maturities of three months
or less to be cash equivalents. The Company's investment portfolio at December
31, 1995 consisted of short-term investment funds which are included in the
Company's cash and cash equivalents. The cost and fair market value of such
securities at December 31, 1995 and 1994 was $3,156,000 and $5,299,000,
respectively.
F7
15
Earnings Per Common and Common Equivalent Share
Earnings per common and common equivalent share is calculated using the
weighted average number of common shares outstanding and equivalent common
shares derived from the inclusion of dilutive stock options and warrants. Prior
to the October 1993 initial public offering, common stock equivalents included
all options granted at prices below the expected offering price of $12 in the
twelve months prior to the offering.
Accounting for Stock-Based Compensation
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), effective for years beginning after December 15, 1995.
For purposes of recording expense associated with stock-based compensation, the
Company intends to continue to apply the provisions of APB Opinion 25 and
related interpretations. The effect of adoption of SFAS 123 in the year ending
December 31, 1996 will be immaterial.
NOTE 3 - ACQUISITION OF AMERICAN SAFETY CLOSURE CORP.
On January 5, 1995, SEDA and American Safety Closure Corp., a New York
corporation ("ASC") entered into a "Merger Agreement", pursuant to which each
stockholder of ASC would receive one share of the Company's common stock for
every eight shares of ASC common stock owned by such stockholders. In lieu of
receiving SEDA's common stock, each such stockholder would have the option of
receiving $1.50 in cash for each share of ASC common stock so held.
Approximately 3,064,000 shares of ASC were outstanding as of that date
(including 30,000 warrants). This agreement was subsequently amended on June 22,
1995, and August 21, 1995, as discussed below.
On January 5, 1995, in connection with the proposed merger, SEDA
acquired an irrevocable proxy (the "Management Proxy") with respect to an
aggregate of 1,656,127 shares of ASC common stock, or approximately 54% of ASC's
then outstanding common stock, from ASC Managing Partners, a general
partnership. The Management proxy and the ASC shares were placed into escrow
together with $1,050,000 cash from SEDA and 82,500 shares of SEDA's common
stock, pursuant to the terms of an escrow agreement, which provided in part that
the Management Proxy and shares would not be released until the earlier of the
date of a vote by ASC's stockholders on the merger or July 5, 1995. On the same
date, SEDA acquired irrevocable proxies with respect to an aggregate of 339,000
additional shares of ASC common stock (the "Employee Proxies") from certain
employees of ASC.
On January 5, 1995, SEDA also entered into a "Management Agreement"
with ASC. The Management Agreement gave SEDA the authority to manage ASC with
the objective of using SEDA's good faith best efforts to maximize the profits of
ASC. The Management Agreement also provides that in consideration for said
management services, SEDA shall be entitled to receive an amount equal to the
profits, if any, (determined by reference to net income determined in accordance
with generally accepted accounting principles) generated during the term of the
Management Agreement. The Management Agreement continues in effect until the
closing of the contemplated merger. Prior to June 22, 1995, the date at which
the Company began consolidating the operations of ASC, the management fee under
this agreement was insignificant.
On January 5, 1995, SEDA also acquired certain equipment formerly
leased to ASC by KGE Leasing Associates, Inc. (KGE), a corporation controlled by
certain principal stockholders of ASC. The equipment was acquired for an
aggregate cash purchase price of $1,525,000. From January 5, 1995 to June 22,
1995, SEDA made loans to ASC aggregating $625,000. On June 22, 1995, ASC issued
6,192,000 new shares of ASC common stock to SEDA in exchange for the
cancellation of $497,000 in indebtedness owed by ASC to SEDA and for the
contribution to ASC of the equipment that SEDA had acquired from KGE and that
ASC had been leasing from SEDA. These shares, together with 102,000 shares that
SEDA acquired on the open market, gave SEDA approximately 68% of the outstanding
shares of ASC at June 22, 1995.
On June 22, 1995, the Merger Agreement was amended to modify the
consideration that each ASC shareholder would receive to one share of the SEDA's
common stock for each 24.512 shares of ASC common stock. On June 23, 1995, SEDA
filed an action in the U.S. District Court for the Southern District of New York
against ASC and other defendants seeking a recision of the merger agreement and,
in the alternative, a declaration by the Court that the Merger Agreement be
amended with the consent of both Boards of Directors without the consent of any
other parties. The stock and cash in escrow were distributed in accordance with
the escrow instructions on July 5, 1995, but were still subject to the court
proceedings as SEDA continued to dispute the legal rights of ASC Managing
Partners to cause the disbursal of the cash and stock in said escrow.
F-8
16
On August 21, 1995, the Merger Agreement was again amended to modify
the consideration that each ASC shareholder would receive back to one share of
SEDA's common stock for each eight shares of ASC common stock, as originally
contemplated, in anticipation of a settlement of the litigation stemming from
this acquisition. The cash option of $1.50 per share, however, was not
reinstated. On October 24, 1995, all litigation related to the ASC acquisition
was, with the consent of all parties, dismissed with prejudice. As a result of
these transactions, the Company's ownership has increased to approximately 86%
of the outstanding ASC common stock, and it is proceeding with the required
steps to acquire the remaining outstanding shares of ASC.
This transaction has been accounted in the accompanying financial
statements using the purchase method of accounting; accordingly, the cost of the
acquisition to date of $3,551,000 in cash plus $650,000 for 82,500 shares of
SEDA common stock (valued at $7 7/8, the fair value at July 5, 1995) was
allocated to the assets acquired and the liabilities assumed based on their
estimated fair values. ASC's results of operations have been included in the
Company's consolidated results since June 22, 1995.
A summary of the purchase price allocation as reflected in the
accompanying consolidated financial statements is as follows:
(In thousands)
Net working capital deficit $(1,943)
Property, plant and equipment 6,989
Deferred income taxes 637
Other assets 222
Long-term debt (1,403)
Minority interest in consolidated subsidiary (301)
--------
Total investment (including $102 invested in 1994) $ 4,201
========
The following table presents the unaudited pro forma results of
operations as if SEDA had acquired approximately 86% of ASC at the beginning of
each respective year presented. The pro forma information for the year ended
December 31, 1995, combines the Company's consolidated results of operations for
that period with the unaudited results of ASC for the period January 1, 1995 to
June 22, 1995, since ASC results for the period June 22, 1995 to December 31,
1995, are already reflected in the Company's consolidated results. The pro forma
information for the year ended December 31, 1994, combines SEDA's results of
operations with the unaudited ASC results of operations for that period. The pro
forma information gives effect to certain pro forma adjustments, such as
additional depreciation and amortization and the elimination of $2.2 million of
certain non-recurring charges included in ASC's 1994 results that would have
been recorded prior to the merger and that are directly related to the merger,
including executive employment agreement termination costs, incentive awards
related to the merger agreement, non-compete agreements and consulting fees
related to the merger. These pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of what would have
occurred had the acquisition actually been made as of those dates or of results
which may occur in the future.
December 31,
-----------------
(In thousands except per share data) 1995 1994
-----------------
(Unaudited)
Net sales $45,748 $39,887
Net income 3,971 3,925
Earnings per common and common equivalent share 0.78 0.75
F-9
17
NOTE 4 - INVENTORIES
December 31,
-------------------
(In thousands) 1995 1994
-------------------
Finished goods $2,771 $1,102
Work-in-process 1,845 1,223
Raw materials 2,542 1,527
-------------------
$7,158 $3,852
===================
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
December 31,
---------------------
(In thousands) 1995 1994
---------------------
Land $ 2,727 $ 2,555
Buildings and improvements 6,071 4,734
Machinery and equipment 38,427 29,322
Molds 6,492 2,790
Furniture and office equipment 484 252
Transportation equipment 185 137
---------------------
54,386 39,790
Less accumulated depreciation (11,044) (7,327)
---------------------
$ 43,342 $32,463
=====================
Property under capital lease, primarily machinery and equipment
included above, aggregated $2,499,000 at December 31, 1995 and $2,022,000 at
December 31, 1994. Included in accumulated depreciation are amounts related to
property under capital lease of $706,000 and $535,000 at December 31, 1995 and
1994, respectively. Depreciation expense charged to operations was $3,726,000,
$2,281,000 and $1,427,000 in 1995, 1994 and 1993, respectively, which included
$171,000, $152,000 and $111,000, respectively, pertaining to property under
capital lease.
NOTE 6 - OTHER ASSETS
December 31,
---------------------
(In thousands) 1995 1994
---------------------
Equipment deposits $ 448 $1,173
Patents and other intangibles, net of $31,000
accumulated amortization 187 -
Deferred acquisition costs (Note 3) 175 102
Investment in Tube Tech (Note 11) 105 105
Other 74 (5)
--------------------
$ 989 $1,375
====================
Deferred acquisition costs represent direct incremental costs
associated with the acquisition of the remaining minority interest in ASC (Note
3).
NOTE 7 - INCOME TAXES
Prior to its initial public offering (Note 10), SEDA elected to be
taxed as an S Corporation for both federal and state income tax purposes, and,
as a result, was not subject to federal taxation and was subject to state
taxation on income at a reduced rate (2.5%). Therefore, no asset or liability
for federal income taxes was included in the historical
F-10
18
financial statements for the period prior to the offering because the individual
shareholders were liable for federal and state income taxes on their allocated
portions of SEDA's taxable income. Upon completion of the offering, the
Company's S Corporation status for income tax purposes terminated. The
termination of the Company's S Corporation election resulted in the
establishment of a net deferred tax liability calculated at normal federal and
state income tax rates, causing a one-time, non-cash charge against earnings of
$1,563,000 for additional income tax expense. The accompanying statement of
income also includes a pro forma income tax provision, using a tax rate of 35.9%
for 1993, to reflect the estimated income tax expense of SEDA as if it had been
subject to normal federal and state income taxes for all of 1993.
The Company's historical provision for income taxes for the three years
ended December 31, 1995 is comprised of the following:
(In thousands) 1995 1994 1993
--------------------------------
Current tax expense:
Federal $1,127 $1,233 $ 158
State 253 24 143
--------------------------------
Total current 1,380 1,257 301
--------------------------------
Deferred tax expense:
Federal 1,005 1,105 238
State (434) (194) (216)
Deferred tax provision resulting from
termination of S Corporation status - - 1,563
--------------------------------
Total deferred 571 911 1,585
--------------------------------
Tax benefit from stock option plan - 98 -
--------------------------------
Total provision for income taxes $1,951 $2,266 $1,886
================================
Deferred tax liabilities (assets) are comprised of the following at
December 31:
(In thousands) 1995 1994 1993
--------------------------------
Property, plant & equipment $4,472 $3,677 $2,285
Revitalization Zone tax credits (1,264) (643) (239)
Inventory valuation (383) (352) (136)
Accounts receivable valuation (120) (80) (100)
Other (117) 45 (96)
--------------------------------
$2,588 $2,647 $1,714
================================
The Company records the benefit of Revitalization Zone tax credits in
the year earned; such credits begin expiring in the years 2009 and 2010.
The provision for income taxes (pro forma provision in 1993) differs
from the amount of income tax determined by applying the applicable US statutory
income tax rate to income before income taxes as a result of the following
differences:
(In thousands) 1995 1994 1993
--------------------------------
Federal tax computed at statutory rate $2,069 $2,417 $2,272
State taxes, net of federal benefit 374 437 409
Revitalization Zone tax credits (923) (764) (282)
Other 431 176 -
--------------------------------
Total provision for income taxes (pro $1,951 $2,266 $2,399
forma in 1993) ================================
F-11
19
NOTE 8 - DEBT
Bank Credit Agreement
On June 21, 1995, the Company modified its credit agreement with a bank
which provides financing of up to $24.5 million, consisting of a $17.5 million
term loan commitment for equipment financing ("equipment term loans bank") and a
$7 million revolving line of credit. The agreement expires June 30, 1997. All
amounts borrowed under the revolving line of credit are due and payable upon
expiration; as of December 31, 1995 $1,520,000 was outstanding under the
revolving line of credit. Term loans are to be repaid over periods of up to five
years. The term loans and line of credit are collateralized by a general first
priority lien on all the assets of the Company except certain property, plant
and equipment where the bank's security interest is subordinated to the holders
of the Company's building and equipment notes payable. The term loan amount
available to the Company at December 31, 1995, for additional borrowing was
$6,300,000.
Interest on the revolving line of credit is payable monthly at an
annual rate equal to the bank's prime rate or, at the Company's option, 1.2%
above the London Interbank Offered Rate (LIBOR). At December 31, 1995, the
interest rate in effect was 8.5%. Interest on the term loans is at varying
rates, at the Company's option, of from 1.5% to 1.75% above the bank's
certificate of deposit rate or LIBOR for an agreed-upon time period.
The Company must comply with covenants set forth in the agreement which
require, among other restrictions, that the Company maintain minimum levels of
tangible net worth (which effectively limited the amount available for the
payment of dividends at December 31, 1995 to $235,000), working capital and net
income and certain minimum financial ratios and that the Company restrict the
incurrence of additional debt without the bank's consent.
Long-Term Debt
Long-term debt is comprised of the following (average rate refers to
the weighted average interest rate in effect for each debt category at December
31, 1995):
December 31,
--------------------
(In thousands) 1995 1994
--------------------
Building mortgages (average rate - 8.4%) $ 4,550 $ 3,624
Equipment term loans - bank (average rate - 7.3%) 9,816 5,085
Equipment notes - other (average rate - 7.7%) 1,355 1,503
Other long-term debt (average rate - 7.0%) 314 -
--------------------
16,035 10,212
Less current portion (3,582) (1,704)
--------------------
$12,453 $ 8,508
====================
The mortgages, notes and other long-term debt are payable to banks,
other financial companies and government agencies in monthly installments
through October 2003, currently approximating $371,000 plus a payment in
December 1997 of $3.1 million on one of the building mortgages. The building
mortgages are secured by land and buildings with a net book value at December
31, 1995 of $8,413,000; the equipment term loans - bank are secured as discussed
above; and the equipment notes - other are secured by equipment with a net book
value of $1,932,000 at December 31, 1995.
Aggregate maturities of long-term debt over the next five years are
as follows:
(In thousands)
1996 $ 3,582
1997 6,498
1998 2,632
1999 2,163
2000 684
After 2000 476
--------
$16,035
========
20
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Leases
The Company leases certain machinery and equipment under capital and
operating leases expiring in various years through 1999. The Company incurred
$96,000, $222,000, and $1,138,000 in operating lease expense during the years
ended December 31, 1995, 1994 and 1993, respectively. Generally, the Company's
capital leases include purchase options at the end of the lease term.
Minimum lease commitments under non-cancelable leases at December 31,
1995, are as follows:
Capital Operating
(In thousands) Leases Leases
--------------------
1996 $ 568 $ 96
1997 497 87
1998 314 9
1999 54 -
--------------------
Total minimum lease payments 1,433 $192
====
Less amount representing interest (135)
------
Present value of minimum lease payments 1,298
Less current portion (493)
------
$ 805
======
NOTE 10 - STOCKHOLDERS' EQUITY
Initial Public Offering
Effective October 26, 1993, SEDA sold 1,840,000 shares of its common
stock to the public at a price of $14 per share. Net proceeds to SEDA were
$23,090,000 after deduction of the underwriting discount of $1,803,000 and
expenses related to the offering of $886,000. SEDA also issued warrants to the
underwriters of its public offering, exercisable for three years, to purchase
150,000 shares of common stock at an exercise price equal to the greater of
$16.80 or the closing price of SEDA's common stock on the date of exercise, less
$10.
Reincorporation
On July 19, 1994, SEDA's stockholders approved the reincorporation of
SEDA in the state of Delaware. Such reincorporation was effected on August 1,
1994. As a result of the reincorporation, each outstanding share of SEDA's no
par value common stock was exchanged for 1 share of $0.001 par value common
stock of the Delaware corporation. Stockholders' equity amounts related to
common stock, contributed capital and capital in excess of par value were
adjusted to give retroactive effect to the reincorporation.
Stock Options
In September 1993, the Company adopted its 1993 Incentive and
Nonstatutory Stock Option Plan ("the Plan") and subsequently amended it in July
1994. The Plan will terminate after 10 years. A total of 1,000,000 shares of the
Company's Common Stock have been reserved for issuance under the Plan. The Plan
provides for the grant of incentive stock options to employees of the Company
and non-qualified stock options to employees, officers, directors and
consultants of the Company. The plan is administered by a committee appointed by
the Board, which determines the terms of the options granted, including the
exercise price, the number of shares subject to option, and the option's vesting
period.
The exercise price of all options granted under the Plan must be at
least equal to the fair market value of such shares on the date of grant. The
maximum term of options granted under the Plan is 10 years. With respect to any
participant who owns stock representing more than 10% of the voting rights of
the Company's outstanding capital stock, the exercise price of any option must
be at least equal to 110% of the fair market value on the date of grant.
F-13
21
Option Price Available
per Share Outstanding Exercisable for Grant
------------------------------------------------------
Plan creation - 1993 - - - 700,000
Options granted $10.00 - $14.00 333,500 - (333,500)
Became exercisable $10.00 - $14.00 - 272,125 -
------------------------------------------------------
Balance at December 31, 1993 $10.00 - $14.00 333,500 272,125 366,500
Plan amendment - - - 300,000
Options granted $12.50 - $13.75 96,000 - (96,000)
Became exercisable $12.50 - $14.00 - 61,125 -
Exercised $10.00 (15,000) (15,000) -
------------------------------------------------------
Balance at December 31, 1994 $10.00 - $14.00 414,500 318,250 570,500
Options granted $10.00 - $12.31 377,000 - (377,000)
Became exercisable $10.00 - $14.00 - 342,875 -
------------------------------------------------------
Balance at December 31, 1995 $10.00 - $14.00 791,500 661,125 193,500
======================================================
NOTE 11 - RELATED PARTY TRANSACTIONS
The Company, 2501 West Rosecrans, Inc., Tube Tech Corporation of
Delaware and Pacific Atlantic Brokerage, Inc. are related parties because a
common stockholder holds or held a substantial ownership interest in each of the
companies, and Shapour Sedaghat, former Chairman of the Company, is a related
party because of his ownership interest in the Company.
2501 West Rosecrans, Inc. was 100% owned by one of the Company's
principal stockholders. On April 20, 1994, the Company acquired from 2501 West
Rosecrans, Inc. the building and real estate comprising its manufacturing
facilities and corporate headquarters, at a cost of approximately $6.3 million,
which approximated fair market value, in exchange for a promissory note in the
principal amount of $1.6 million, bearing interest at 6% per annum, and the
Company's assumption of the existing five-year note due to a financial
institution in the principal amount of approximately $4.7 million, bearing
interest at 8.5% per annum. At the closing of the transaction, the Company paid
$1 million to the financial institution to reduce the amount outstanding on the
five-year note. Prior to this transaction, the Company leased the facility from
2501 West Rosecrans, Inc. and paid rent to 2501 West Rosecrans, Inc. of $219,000
in 1994 and $656,000 in 1993.
Tube Tech Corporation of Delaware (Tube Tech) was 50% owned by one of
the Company's principal stockholders until the Company acquired his 50% interest
in July 1993 for $90,000. Tube Tech became an exclusive sales representative of
the Company in 1992 for selected plastic tube products customers. Total
commissions paid by the Company to Tube Tech for the years ended December 31,
1995, 1994 and 1993 were $294,000, $496,000 and $292,000, respectively. The
Company's investment in Tube Tech is accounted for using the equity method of
accounting for investments.
Pacific Atlantic Brokerage, a corporation majority owned by one of the
Company's principal stockholders, provides freight forwarding services to the
Company. The cost of these services provided by Pacific Atlantic Brokerage to
the Company and charged to operations amounted to $911,000 in 1995, $636,000 in
1994 and $396,000 in 1993.
In 1995, the Company paid $70,000 to Shapour Sedaghat for consulting
services after his retirement from the Company.
As of December 31, 1995 and 1994, in the aggregate the Company owed
$136,000 and $1,704,000, respectively, to these related parties, which at
December 31, 1994 included $1.6 million owed to 2501 West Rosecrans, Inc.
related to the Company's facility.
F-14
22
SEDA SPECIALTY PACKAGING CORP.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at charged to Balance at
beginning of costs and ASC end of
Description period expenses Acquisition Deductions period
- ----------- ------------ ----------- ----------- ---------- ------
Allowance for Doubtful Accounts
Receivable:
Year ended December 31, 1995 $200,000 $375,000 $112,000 $263,000(1) $424,000
Year ended December 31, 1994 250,000 22,000 - 72,000(1) 200,000
Year ended December 31, 1993 88,000 182,000 - 20,000(1) 250,000
- -----------------------
(1) Represents write-offs of bad debts
F-15