-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LO9NU07UdzreUer/PsVXF1NdSV0dsm6kAcPVSDDuxgCTyFKtaVGJj2pDaNIFFKcn I/5Ic58WyVaWo0bqg7F7ng== 0000927946-99-000105.txt : 19990713 0000927946-99-000105.hdr.sgml : 19990713 ACCESSION NUMBER: 0000927946-99-000105 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990712 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLTRISTA CORP CENTRAL INDEX KEY: 0000895655 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351828377 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-13665 FILM NUMBER: 99662921 BUSINESS ADDRESS: STREET 1: 5875 CASTLE CREEK PARKWAY, NORTH DRIVE STREET 2: SUITE 440 CITY: INDIANAPOLIS STATE: IN ZIP: 46250-4330 BUSINESS PHONE: 3175775000 MAIL ADDRESS: STREET 1: 5875 CASTLE CREEK PARKWAY, NORTH DRIVE STREET 2: SUITE 440 CITY: INDIANAPOLIS STATE: IN ZIP: 46250-4330 8-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K/A AMENDMENT TO APPLICATION or REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: July 12, 1999 Alltrista Corporation Indiana 0-21052 35-1828377 State of Incorporation Commission File Number IRS Identification Number 5875 Castle Creek Parkway, North Drive, Suite 440 Indianapolis, Indiana 46250-4330 Registrant's telephone number, including area code: (317) 577-5000 1 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS Effective April 25, 1999 Alltrista Corporation (the "Company") acquired the net assets of Triangle Plastics, Inc. and its TriEnda subsidiary ("Triangle Plastics") for $148.0 million in cash. Effective May 24, 1999, Alltrista Plastics Corporation ("Alltrista Plastics"), a wholly owned subsidiary of the Company, sold the assets of its plastic packaging operation to Spartech Plastics, Inc. ("Spartech Plastics"), a subsidiary of Spartech Corporation, for $28.7 million cash plus assumption by Spartech Plastics of certain liabilities of Alltrista Plastics. The sale to Spartech Plastics is reflected in the Company's unaudited pro forma financial statements filed as part of this report. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial statements of business acquired. The audited consolidated balance sheets of Triangle Plastics as of December 31, 1998 and 1997 and consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1998 and Reports of Independent Accountants thereon, and unaudited condensed consolidated balance sheet as of March 31, 1999 and condensed consolidated statements of income and cash flows for the three months ended March 31, 1999 and 1998 are attached hereto as Exhibit 99.1 (b) Pro Forma Financial Information. The following unaudited pro forma financial information has been prepared to reflect the adjustments to the Company's historical results of operations and financial positions and to give effect to the acquisition of Triangle Plastics using the purchase method of accounting and the disposal of the Company's plastic packaging operation. Effective April 25, 1999 the Company acquired the net assets of Triangle Plastics for $148.0 million in cash. The purchase price is subject to post-closing adjustments based upon actual working capital as of the closing date. The excess of the purchase price plus acquisition costs over the estimated fair values of the net assets acquired will be amortized on a straight-line basis over a twenty-year period. The Company financed the acquisition with a new $250 million credit facility consisting of a six year $150 million term loan and a revolving credit facility whereby the Company can borrow up to $100 million through March 31, 2005, when all borrowings mature. The term loan requires quarterly payments of principal escalating from an annual aggregate amount of $15.0 million in the first year to $30.0 million in the fifth and sixth year. Interest on the borrowings is based upon fixed increments over the adjusted London Interbank Offered Rate or the agent bank's alternate borrowing rate as defined in the agreement. Effective May 24, 1999, Alltrista Plastics sold the assets of its plastic packaging operation to Spartech Plastics for $28.7 million cash plus the assumption by Spartech Plastics of certain liabilities of Alltrista Plastics. The purchase price is subject to post-closing adjustments based upon actual net working capital as of the closing date. The proceeds from the sale were used to pay down short-term debt. 2 The unaudited pro forma combined statements of income for the year ended December 31, 1998 and for the three months ended March 28, 1999 are based on the combined historical results of operations adjusted to give effect to the noted transactions as if they had occurred on January 1, 1998. The unaudited pro forma combined statements of income do not reflect any benefits from operational synergies that may result from the acquisition of Triangle Plastics. The unaudited pro forma combined balance sheet gives effect to the transactions as if they had occurred on March 28, 1999. The unaudited pro forma combined balance sheet includes the adjustments necessary to reflect the allocation of the Triangle Plastics acquisition cost to the fair values of the assets acquired and liabilities assumed. The allocation is based on preliminary estimates of the fair value of the related assets and liabilities. The actual allocation of such consideration may differ from that reflected in the pro forma financial information after certain valuations and other procedures have been performed. The Company does not expect that the final allocation of the aggregate purchase price will differ materially from the preliminary allocations. The unaudited pro forma combined balance sheet also includes adjustments necessary to remove the Alltrista Plastics' assets purchased and liabilities assumed by Spartech Plastics. The unaudited pro forma combined financial information is not necessarily indicative of the Company's results of operations or financial position had the Triangle Plastics acquisition or the plastic packaging sale reflected therein actually been consummated at the assumed dates, nor is it necessarily indicative of the Company's results of operations or financial position for any future period. The unaudited pro forma combined financial information should be read in conjunction with the Company's consolidated Financial Statements and notes thereto incorporated by reference in the Company's Annual Report on Form 10-K for the year ended December 31, 1998 and its Quarterly Report on Form 10-Q for the quarter ended March 28, 1999. 3
Alltrista Corporation and Triangle Plastics, Inc. Unaudited Pro Forma Combined Statement of Income Three Months Ended March 28, 1999 (In thousands except per share amounts) Alltrista Triangle Corporation Plastics Pro Forma Pro Forma Historical Historical Adjustments Combined ------------- ------------ ------------- ----------- Net sales $ 51,634 $ 29,608 $ (7,727) (1) $ 73,515 Costs and expenses Cost of sales 39,341 23,677 (5,860) (1) 57,294 136 (2) Selling, general and administrative expenses 8,556 3,192 (585) (1) 12,151 1,182 (3) (194) (4) ------------- ------------ ------------- ----------- Operating earnings 3,737 2,739 (2,406) 4,070 Interest expense, net (568) (901) (1,439) (5) (2,908) ------------- ------------ ------------- ----------- Income from continuing operations before taxes 3,169 1,838 (3,845) 1,162 Provision for income taxes (1,206) - 762 (6) (444) ------------- ------------ ------------- ----------- Income from continuing operations $ 1,963 $ 1,838 $ (3,083) $ 718 ============= ============ ============= =========== Income from continuing operations per share: Basic $ 0.29 $ 0.11 Dilutive $ 0.29 $ 0.10 Weighted average shares outstanding: Basic 6,749 6,749 Dilutive 6,844 6,844 See accompanying Notes to Unaudited Pro Forma Combined Financial Information
4
Alltrista Corporation and Triangle Plastics, Inc. Unaudited Pro Forma Combined Statement of Income Twelve Months Ended December 31, 1998 (in thousands except per share amounts) Alltrista Triangle Corporation Plastics Pro Forma Pro Forma Historical Historical Adjustments Combined ------------- ------------ ------------- ----------- Net sales $ 244,046 $ 114,055 $ (28,100) (1) $ 330,001 Costs and expenses Cost of sales 174,333 87,040 (23,454) (1) 238,533 614 (2) Selling, general and administrative expenses 38,249 16,924 (2,117) (1) 53,660 98 (2) 4,727 (3) (4,221) (4) Cost to exit facility 1,260 - - 1,260 ------------- ------------ ------------- ----------- Operating earnings 30,204 10,091 (3,747) 36,548 Interest expense, net (1,822) (3,975) (4,667) (5) (10,464) ------------- ------------ ------------- ----------- Income from continuing operations before taxes 28,382 6,116 (8,414) 26,084 Provision for income taxes (10,785) (36) 909 (6) (9,912) ------------- ------------ ------------- ----------- Income from continuing operations $ 17,597 $ 6,080 $ (7,505) $ 16,172 ============= ============ ============= =========== Income from continuing operations per share: Basic $ 2.48 $ 2.28 Dilutive $ 2.45 $ 2.25 Weighted average shares outstanding: Basic 7,079 7,079 Dilutive 7,195 7,195 See accompanying Notes to Unaudited Pro Forma Combined Financial Information
5
Alltrista Corporation and Triangle Plastics, Inc. Unaudited Pro Forma Balance Sheet March 28, 1999 (In thousands of dollars) Alltrista Triangle Corporation Plastics Pro Forma Pro Forma Historical Historical Adjustments Combined ------------- ------------ ------------- ----------- ASSETS Current assets Cash and cash equivalents $ 2,264 $ 2 $ - $ 2,266 Accounts receivable, net 31,329 19,120 (1,952) (7) 48,497 Inventories 53,332 13,421 (1,550) (7) 65,203 Deferred taxes on income 4,512 - - 4,512 Prepaid expenses 1,857 774 (16) (7) 2,615 ------------- ------------ ------------- ----------- Total current assets 93,294 33,317 (3,518) 123,093 Property, plant and equipment, at cost 151,067 38,266 (33,386) (7) 163,776 7,829 (8) Accumulated depreciation (103,565) (11,353) 27,364 (7) (76,201) 11,353 (8) ------------- ------------ ------------- ----------- 47,502 26,913 13,160 87,575 Goodwill, net 24,199 1,961 95,355 (9) 119,554 (1,961) (10) Other assets 8,291 634 (44) (7) 11,113 2,232 (11) ------------- ------------ ------------- ----------- Total assets $ 173,286 $ 62,825 $ 105,224 $ 341,335 ============= ============ ============= =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current portion of long-term debt $ 4,286 $ 7,107 $ 3,607 (12) $ 15,000 Notes payable 2,900 23,240 (21,940) (12) 4,200 Accounts payable 25,281 7,216 (1,639) (7) 30,858 Other current liabilities 13,018 2,646 (945) (7) 23,357 8,638 (13) ------------- ------------ ------------- ----------- Total current liabilities 45,485 40,209 (12,279) 73,415 ------------- ------------ ------------- ----------- Noncurrent liabilities Long-term debt 21,429 19,582 94,496 (12) 135,507 Other noncurrent liabilities 9,920 381 13,500 (14) 23,801 ------------- ------------ ------------- ----------- Total noncurrent liabilities 31,349 19,963 107,996 159,308 ------------- ------------ ------------- ----------- Contigencies Shareholders' equity: Common stock 40,446 217 (217) (15) 40,446 Retained earnings 86,138 4,109 (4,109) (15) 98,298 12,160 (16) Accumulated other comprehensive income - cumulative translation adjustment (509) - (509) ------------- ------------ ------------- ----------- 126,075 4,326 7,834 138,235 Less treasury stock (29,623) (1,673) 1,673 (15) (29,623) ------------- ------------ ------------- ----------- Total shareholders' equity 96,452 2,653 9,507 108,612 ------------- ------------ ------------- ----------- Total liabilities and shareholders' equity $ 173,286 $ 62,825 $ 105,224 $ 341,335 ============= ============ ============= =========== See accompanying Notes to Unaudited Pro Forma Combined Financial Information
6 Alltrista Corporation and Triangle Plastics, Inc. Notes to Unaudited Pro Forma Combined Financial Information Following is a description of pro forma adjustments reflected in the Unaudited Pro Forma Combined Statements of Income and Balance Sheet: (1) Represents the removal of the plastic packaging product line operating results. (2) Represents the increase in depreciation expense due to recording the fixed assets of Triangle Plastics at fair value. (3) Represents the amortization of the goodwill recorded in the acquisition and the elimination of goodwill amortization recorded by Triangle Plastics from former acquisitions. (4) Represents the elimination of expenses specifically related to the former owners of Triangle Plastics. These expenses consist primarily of compensation and acquisition costs. (5) Represents the incremental interest expense and fees relating to the financing of the transactions. Interest on the borrowings is based upon fixed increments over the adjusted London Interbank Offered Rate or the agent bank's alternate borrowing rate as defined in the agreement. The average borrowing rate for three months ended March 31, 1999 and the twelve months ended December 31, 1998 was 7.0%. If the average borrowing rate had fluctuated 1/8% for the three months ended March 31, 1999, the pro forma interest expense would have changed by $47,000. If the average borrowing rate had fluctuated by 1/8% in 1998, the pro forma interest expense would have changed by $189,000. (6) Assuming an effective tax rate of 38.2% and 38.0% for the three months ended March 31, 1999 and the twelve months ended December 31, 1998, respectively. The adjustment represents the estimated tax related to the pro forma adjustments and the taxation of Triangle Plastics historical earnings as though they were treated as a C Corporation under the provisions of the Internal Revenue Code. (7) Represents the removal of assets purchased and liabilities assumed by Spartech Plastics. (8) Represents the adjustment of Triangle Plastics' fixed assets to fair value. (9) Represents the goodwill recorded in the acquisition of Triangle Plastics. (10) Represents the removal of goodwill recorded on the historical balance sheet of Triangle Plastics. (11) Represents debt issuance costs incurred in connection with the financing of the Triangle Plastics acquisition. (12) Represents the debt incurred for the Triangle Plastics acquisition less the debt not assumed offset by the proceeds from the sale of the plastic packaging operation. (13) Represents the liabilities resulting from the acquisition of Triangle Plastics and the sale of the plastic packaging operation including the income taxes payable on the gain from the sale. (14) Represents the deferred tax effect of estimated differences between the book and tax basis of assets and liabilties assumed in the acquisition of Triangle Plastics. (15) Represents the elimination of Triangle Plastics shareholders' equity. (16) Represents the gain on sale of the plastic packaging operation, net of income taxes. 7 (c) Exhibits. Exhibit No. Description 23.1 Consent of Independent Auditors 23.2 Consent of Independent Public Accountants 99.1 Financial Statements of Business Acquired. 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 hereunto duly authorized ALLTRISTA CORPORATION (Registrant) /s/ Kevin D. Bower Kevin D. Bower Senior Vice President and Chief Financial Officer July 12, 1999 8 EXHIBIT INDEX Exhibit No. 23.1 Consent of Independent Auditors 23.2 Consent of Independent Public Accountants 99.1 Financial Statements of Business Acquired. EX-23.1 2 Consent of Independent Auditors We consent to the incorporation by reference in the Form S-8 Registration Statements of Alltrista Corporation pertaining to Alltrista Corporation 1998 Long-Term Equity Incentive Plan (No. 333-67033), Alltrista Corporation 1996 Employee Stock Purchase Plan (No. 333-27459), Alltrista Corporation 1996 Stock Option Plan for Nonemployee Directors (No. 333-27461), Employee Stock Purchase Plan of Alltrista Corporation (No. 33-60624), 1993 Restricted Stock Plan and 1993 Stock Option Plan (No. 33-60730), and 1993 stock Option Plan for Nonemployer Directors of Alltrista Corporation (No. 33-60622), of our report dated January 29, 1999, with respect to the consolidated financial statements of Triangle Plastics, Inc. included in this Current Report on Form 8-KA of Alltrista Corporation dated July 12, 1999. /s/ Ernst & Young LLP Des Moines, Iowa July 8, 1999 EX-23.2 3 ARTHUR ANDERSEN LLP Consent of Independent Public Accountants As independent public accountants, we hereby consent to the inclusion in this Form S-8 Registration Statements of Alltrista Corporation pertaining to Alltrista Corporation 1998 Long-Term Equity Incentive Plan (No. 333-67033), Alltrista Corporation 1996 Employee Stock Purchase Plan (No. 333-27459), Alltrista Corporation 1996 Stock Option Plan for Nonemployee Directors (No. 333-27461, Employee Stock Purchase Plan of Altrista Corporation (No. 33-60624), 1993 Restricted Stock Plan and 1993 Stock Option Plan (No. 33-60730), and 1993 Stock Option Plan for Nonemployer Directors of Alltrista Corporation (No. 33-60622), of our report dated January 17, 1997 with respect to the financial statements of Triangle Plastics, Inc. included in this Current Report on Form 8-KA of Alltrista Corporation dated July 12, 1999. It should be noted that we have not audited any financial statements of the Company subsequent to December 31, 1996 or performed any audit procedures subsequent to the date of our report. /s/ARTHUR ANDERSEN LLP Milwaukee Wisconsin July 8, 1999 EX-99.1 4 Report of Independent Auditors The Board of Directors and Stockholders Triangle Plastics, Inc. We have audited the accompanying consolidated balance sheets of Triangle Plastics, Inc. as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the years then ended. 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. The consolidated financial statements of Triangle Plastics, Inc. for the year ended December 31, 1996, were audited by other auditors whose report dated January 17, 1997, expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the 1998 and 1997 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Triangle Plastics, Inc. at December 31, 1998 and 1997, and the consolidated results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/Ernst & Young LLP Des Moines, Iowa January 29, 1999, except for Note 9, as to which the date is April 25, 1999 ARTHUR ANDERSEN LLP Report of Independent Public Accountants The Board of Directors and Stockholders of Triangle Plastics, Inc.: We have audited the accompanying statements of operations, stockholders' investment and cash flows of Triangle Plastics, Inc. (an Iowa S Corporation) for the year ended December 31, 1996. 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 audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, Triangle Plastics, Inc.'s results of operations and cash flows for the year ended December 31, 1996 in conformity with generally accepted accounting principles. /s/ARTHUR ANDERSEN LLP Milwaukee Wisconsin January 17, 1997
Triangle Plastics, Inc. Consolidated Balance Sheets December 31 1998 1997 ------------- ------------ Assets Current assets: Cash and cash equivalents $ 440,037 $ 7,036 Accounts receivable, less allowance for doubtful accounts of $45,000 in 1998 and $50,000 in 1997 17,023,271 9,609,339 Inventories 12,975,464 8,151,744 Other receivable 857,443 1,587,000 Other current assets 585,233 114,312 ------------- ------------ Total current assets 31,881,448 19,469,431 Property, plant and equipment: Land, building and improvements 8,314,592 2,960,187 Office equipment 1,946,689 1,374,455 Machinery and equipment 25,621,023 10,841,751 Construction in progress 902,343 - ------------- ------------ 36,784,647 15,176,393 Less allowances for depreciation (9,074,814) (5,164,514) ------------- ------------ 27,709,833 10,011,879 Intangibles: Non-compete agreements, less accumulated amortization of $450,000 in 1998 and $225,000 in 1997 425,000 650,000 Goodwill, less accumulated amortization of $139,370 in 1998 and $38,952 in 1997 1,986,328 1,627,786 Other 9,867 - ------------- ------------ 2,421,195 2,277,786 ------------- ------------ Total assets $ 62,012,476 $31,759,096 ============= ============
December 31 1998 1997 ------------- ------------ Liabilities and stockholders' equity Current liabilities: Notes payable $ 18,956,325 $ 3,462,500 Accounts payable 5,281,784 4,836,434 Accrued liabilities 4,199,364 3,709,626 Current portion of long-term debt 7,538,490 3,027,425 ------------- ------------ Total current liabilities 35,975,963 15,035,985 Long-term debt, less current portion 23,358,261 12,530,211 Non-compete agreements 425,000 600,000 Commitments and contingencies (Notes 5 and 9) Stockholders' equity: Common stock, par value $.02 per share - authorized 25,000,000 shares, issued 1,032,000 shares in 1998 and 1997, outstanding 302,000 shares in 1998 and 1997 20,640 20,640 Additional paid-in capital 196,120 196,120 Retained earnings 3,709,813 5,049,461 Treasury stock, at cost (1,673,321) (1,673,321) ------------- ------------ Total stockholders' equity 2,253,252 3,592,900 ------------- ------------ Total liabilities and stockholders' equity $ 62,012,476 $31,759,096 ============= ============ See accompanying notes.
Triangle Plastics, Inc. Consolidated Statements of Income Year ended December 31 1998 1997 1996 -------------- ------------ ------------ Net sales $ 114,054,737 $73,377,734 $55,288,956 Cost of sales 87,040,141 57,627,751 40,948,093 -------------- ------------ ------------ Gross profit 27,014,596 15,749,983 14,340,863 Operating expenses 17,982,574 11,282,710 9,918,024 -------------- ------------ ------------ Income from operations 9,032,022 4,467,273 4,422,839 Other income (expense): Interest expense (3,986,418) (1,629,603) (1,374,945) Interest income 11,723 1,357 14,729 Non-operating income, net 1,058,914 624,611 150,470 -------------- ------------ ------------ Income before state income taxes 6,116,241 3,463,638 3,213,093 State and foreign income taxes 36,027 26,671 21,200 -------------- ------------ ------------ Net income $ 6,080,214 $ 3,436,967 $ 3,191,893 ============== ============ ============ See accompanying notes.
Triangle Plastics, Inc. Consolidated Statements of Changes in Stockholders' Equity Additional Treasury Total Common Paid-in Retained Stock, Stockholders' Stock Capital Earnings at Cost Equity ------- ----------- ------------ ------------ --------------- Balance at January 1, 1996 $20,600 $ 114,900 $ 5,058,238 $(1,063,959) $ 4,129,779 Dividends and distributions to stockholders - - (3,636,389) - (3,636,389) Purchase of 15,000 shares of common stock pursuant to stock option - - - (609,362) (609,362) Net income for 1996 - - 3,191,893 - 3,191,893 ------- ----------- ------------ ------------ --------------- Balance at December 31, 1996 20,600 114,900 4,613,742 (1,673,321) 3,075,921 Dividends and distributions to stockholders - - (3,001,248) - (3,001,248) Issuance of 2,000 shares of common stock pursuant to stock option 40 81,220 - - 81,260 Net income for 1997 - - 3,436,967 - 3,436,967 ------- ----------- ------------ ------------ --------------- Balance at December 31, 1997 20,640 196,120 5,049,461 (1,673,321) 3,592,900 Dividends and distributions to stockholders - - (7,419,862) - (7,419,862) Net income for 1998 - - 6,080,214 - 6,080,214 ------- ----------- ------------ ------------ --------------- Balance at December 31, 1998 $20,640 $ 196,120 $ 3,709,813 $(1,673,321) $ 2,253,252 ======= =========== ============ ============ =============== See accompanying notes.
Triangle Plastics, Inc. Consolidated Statements of Cash Flows Year ended December 31 1998 1997 1996 ---------------- ------------- ------------- Operating activities Net income for year $ 6,080,214 $ 3,436,967 $ 3,191,893 Adjustments to reconcile net income to net cash provided by operating activities: Share of losses of limited liability company - - 47,452 Depreciation and amortization 4,439,263 1,527,404 1,290,599 Gain on sale of property, plant and equipment (83,400) (607,120) (214,548) Payments pursuant to non-compete agreements (175,000) (175,000) (100,000) Changes in operating assets and liabilities: Accounts receivable (4,097,328) (2,064,870) (17,522) Other receivables 1,110,333 - - Inventories 108,281 (1,749,086) 81,202 Other current assets 2,913 79,737 (48,297) Accounts payable (1,723,480) 2,303,575 (1,375,235) Accrued liabilities (556,800) 2,347,796 (1,056,697) ---------------- ------------- ------------- Net cash provided by operating activities 5,104,996 5,099,403 1,798,847 Investing activities Purchases of property, plant and equipment (3,050,531) (2,165,940) (506,086) Proceeds from sale of property, plant and equipment 179,104 138,775 390,105 Acquisition of TriEnda Corporation, net of cash acquired (8,116,818) - - Acquisitions of Solar Plastics, Inc. and Bigelow Packaging Division (202,312) (4,461,336) - ---------------- ------------- ------------- Net cash used in investing activities (11,190,557) (6,488,501) (115,981) Financing activities Proceeds from notes payable 47,753,625 38,590,500 17,779,200 Repayments of notes payable (37,859,800) (36,061,900) (18,915,202) Proceeds from issuance of long-term debt 18,223,862 7,640,655 5,909,458 Payments for long-term debt (14,179,263) (5,860,164) (2,212,550) Dividends and distributions to stockholders (7,419,862) (3,001,248) (3,636,389) Issuance of common stock - 81,260 - Purchase of common stock for treasury - - (609,362) ---------------- ------------- ------------- Net cash provided by (used in) financing activities 6,518,562 1,389,103 (1,684,845) ---------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents 433,001 5 (1,979) Cash and cash equivalents at beginning of year 7,036 7,031 9,010 ---------------- ------------- ------------- Cash and cash equivalents at end of year $ 440,037 $ 7,036 $ 7,031 ================ ============= ============= Supplemental disclosures of cash flow information Cash paid during the year for: Interest $ 3,176,435 $ 1,623,383 $ 1,327,520 State and foreign income taxes 36,616 17,614 26,635 Noncash investing and financing activities: Issuance of other receivable for sale of extrusion equipment - 1,587,000 - Non-compete agreement in conjunction with Solar Plastics, Inc. acquisition - 375,000 - Long-term debt issued to sellers in connection with acquisition of TriEnda Corporation 9,020,844 - - Noncash consideration (inventory) paid for acquisition of Bigelow Packaging Division 236,662 - - See accompanying notes.
Triangle Plastics, Inc. Notes to Consolidated Financial Statements December 31, 1998 1. Significant Accounting Policies Nature of Business Triangle Plastics, Inc. (Triangle) and its wholly-owned subsidiary, TriEnda Corporation (TriEnda, see Note 2) are engaged in extruding and thermoforming various plastic products for the U. S. government and the transportation, agricultural and recreational industries throughout North America. Principles of Consolidation The consolidated financial statements include the accounts of the parent company, Triangle, and its wholly-owned subsidiary, TriEnda, collectively, the "Company". Significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Accounts Receivable and Concentrations of Credit Risk The Company's customer base is tied to the transportation, agricultural and recreational industries and, as such, may be affected by cyclical trends in those industries. The credit risk associated with trade receivables is minimized due to the Company's large customer base and their geographic dispersion. The Company performs ongoing credit evaluations of its customers, generally does not require collateral, and maintains allowances for potential credit losses. In 1998, 1997 and 1996, the Company's sales are concentrated among eight customers that make up 60%, 52% and 61% of total sales, respectively. In addition, of these amounts, four customers comprised more than 10% of net sales in either 1998, 1997 or 1996 as follows:
Year ended December 31 1998 1997 1996 ------------------------------------ Customer A - Trucking Industry $ 15,190,000 $9,775,000 $5,237,000 Customer B - Packaging/Delivery Industry 12,251,000 - - Customer C - Trucking Industry 10,096,000 7,323,000 5,762,000 Customer D - Automotive Industry 5,109,000 6,722,000 5,641,000
Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued) 1. Significant Accounting Policies (continued) Inventories Inventories are stated at the lower of cost using the last-in, first-out (LIFO) method of accounting, or market.
The components of inventories are as follows: December 31 1998 1997 ------------ ----------- At current costs: Raw materials $ 4,565,075 $4,055,668 Work-in-progress 2,648,821 1,491,280 Finished goods 5,761,568 2,803,174 ------------ ----------- Current cost 12,975,464 8,350,122 Excess of current cost over LIFO cost - (198,378) ------------ ----------- $ 12,975,464 $8,151,744 ============ ===========
During 1998, raw material prices decreased substantially, which resulted in an excess of LIFO cost over current cost at December 31, 1998 aggregating $886,000. The Company has established a matching valuation allowance against this excess amount so as to state the inventory at market. Property, Plant and Equipment Property, plant and equipment are stated at cost, less allowances for depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the assets, generally 10-40 years for building and improvements, 3-7 years for machinery and equipment, and 3-7 years for office equipment. Intangibles The non-compete agreements are being amortized on a straight-line basis over the period of the related agreements (five years). Goodwill represents the excess of purchase price over the fair value of identifiable net assets acquired of two companies. Goodwill is amortized on a straight-line basis over a period of 15 - 25 years. The carrying amount of goodwill is regularly reviewed for indicators of impairment, which in the view of management are other than temporary. If facts and circumstances suggest that goodwill is impaired, the Company reduces goodwill to an amount that results in the carrying amount of the underlying business approximating fair value. The Company has not recorded any such writedowns during the periods presented. Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued) 1. Significant Accounting Policies (continued) Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Other Income The Company receives royalty income related to patents owned by TriEnda. The patents are scheduled to expire in 2001. Royalty income received during the year ended December 31, 1998 totaled approximately $732,000, of which approximately $480,000 is in other receivables at December 31, 1998. No royalty income was recorded by the Company in 1997 or 1996 (see Notes 2 and 5). Research and Development Costs The Company's research and development costs incurred and charged to expense during the years ended December 31, 1998, 1997 and 1996 totaled $5,557,839, $1,737,232 and $1,049,671, respectively. Tax Status The Company and its stockholders have elected to be treated as an S Corporation under the provisions of the Internal Revenue Code for periods beginning after December 1986. The Company's taxable income is included in the individual tax returns of its stockholders for federal and, when allowed, state income tax purposes. No tax provision for federal income taxes is included in the financial statements. However, a provision for income taxes in states which do not recognize S Corporation status is provided. In the event the S Corporation election is terminated, any liability or benefit for deferred income taxes would be reflected in the Company's financial statements. Reclassifications Certain amounts in the 1996 financial statements have been reclassified to conform to presentation in the 1998 and 1997 financial statements. The reclassifications have no effect on net income for 1996. 2. Acquisitions TriEnda Corporation Acquisition In January 1998, Triangle purchased all of the outstanding common stock of TriEnda of Portage, Wisconsin for $17,220,844. The transaction was accounted for as a purchase. In addition, Triangle has agreed to pay the former owners of TriEnda 50% of the fair value (as determined by an arms-length sale or a business appraisal) of TriEnda in excess of twice the purchase price as of January 1, 2000. Such amounts, if any, payable under this provision are not yet determinable. Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued) 2. Acquisitions (continued) Under the terms of the agreement, $8,200,000 of the purchase price was paid at closing, with the remaining amount due in two equal annual installments, in January of 1999 and 2000, plus interest at rates adjusted annually (see Note 3). In connection with the agreement, Triangle transferred certain lines of manufacturing to TriEnda. The purchase price was allocated based on fair value as follows:
Cash and cash equivalents $ 83,182 Accounts receivable 3,316,604 Other receivables 380,776 Inventories 5,167,150 Other current assets 485,845 Property, plant and equipment 18,855,554 Other intangibles 11,854 Notes payable (5,600,000) Accounts payable (2,159,911) Accrued liabilities (1,046,538) Long-term debt (2,273,672) ------------ $17,220,844 ============
Solar Plastics, Inc. Acquisition Effective January 1, 1997, Triangle purchased certain assets of Solar Plastics, Inc. of Tampa, Florida (Solar) for cash in the amount of $2,761,336. The acquisition has been accounted for as a purchase and the operating results of Solar have been included in the statement of income since the date of acquisition. The purchase price has been allocated based on fair value as follows:
Accounts receivable $ 871,108 Inventories 452,000 Other current assets 31,242 Equipment 817,950 Goodwill 589,036 Covenant not to compete (asset) 375,000 Covenant not to compete (liability) (375,000) ----------- $2,761,336 ===========
In connection with the Solar purchase, Triangle entered into a non-compete/consulting agreement with Solar's President and Chief Executive Officer. The agreement requires quarterly payments of $25,000 through December 31, 2001 (see Note 7). Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued) 2. Acquisitions (continued) Bigelow Packaging Division Acquisition On December 19, 1997, Triangle purchased certain assets of the Bigelow Packaging Division of Fieldcrest Cannon, Inc. (Bigelow) for cash in the amount of $1,700,000, subject to certain post-closing adjustments. Subsequent to December 31, 1997, the Company paid $202,312 in consideration for the post-closing adjustments. In addition, the Company wrote off Triangle inventory which was required to be maintained (per the Bigelow Manufacturing agreement) of $236,662, net of regrind value, representing inventory on-hand at the purchase date which was obsolete at the time of purchase. The acquisition has been accounted for as a purchase and the operating results of Bigelow included in the statement of income since the date of acquisition. The purchase price has been allocated based on fair value as follows:
Allocation as of December 31 Subsequent Final 1997 Adjustments Allocation ------------------ ------------- ------------ Accounts receivable $ 617,132 $ - $ 617,132 Inventories 119,959 1,513 121,472 Other current assets 12,011 (12,011) - Equipment 21,069 (569) 20,500 Goodwill 1,077,702 458,960 1,536,662 Accounts payable (147,873) (8,919) (156,792) ------------------ ------------- ------------ $ 1,700,000 $ 438,974 $ 2,138,974 ================== ============= ============
Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued) 3. Credit Arrangements
Notes payable consist of the following: December 31 1998 1997 ------------ ---------- Line of credit payable to Union Planters Bank, formerly Magna Bank, N.A., maximum borrowing of $25,000,000; expires in June, 1999; variable interest rate (6.75% at December 31, 1998); secured by real property, a general security agreement covering substantially all assets, and a personal guarantee by the majority stockholder. $ 18,655,025 $ - Line of credit payable to Union Planters Bank; maximum borrowing of $11,000,000; expired in May, 1998; variable interest rate (8.50% at December 31, 1997); secured by a general security agreement covering substantially all assets. - 3,058,000 Unsecured notes with related parties; due on demand at variable interest rates (7.75% and 8.50% at December 31, 1998 and 1997, respectively). 301,300 404,500 ------------ ---------- $ 18,956,325 $3,462,500 ============ ==========
Long-term debt consists of the following: December 31 1998 1997 ------------ ---------- Unsecured notes payable to majority stockholder; interest payable monthly at variable rates (7.75% and 8.50% at December 31, 1998 and 1997, respectively); notes are subordinated to the bank debt and due on demand; however, stockholder has agreed not to demand payment during the next year. $ 6,000,000 $6,300,000 Term loan payable to Union Planters Bank, 8.00%; payable in monthly principal installments of $157,262 plus interest with final payment due October, 2001; secured by real property, a general security agreement covering substantially all assets and a personal guaranty by the majority shareholder. 12,809,338 - Term loan payable to Union Planters Bank, 8.50%; agreement refinanced during 1998. - 4,231,643 Note payable to Union Planters Bank, 8.50%; agreement refinanced during 1998. - 2,393,617
Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued)
3. Credit Arrangements (continued) December 31 1998 1997 ------------- ------------ Term loan payable to former owners of TriEnda; interest rates adjusted annually (8.50% at December 31, 1998); payable in two equal annual installments in January of 1999 and 2000 plus interest; secured by a stock pledge agreement. $ 9,020,844 $ - Mortgage payable to South Trust Bank; 7.60%; payable in monthly principal and interest installments of $10,799 with final payment due June 2004; collateralized by certain land, buildings and land improvements; guaranteed by majority stockholder of the Company. 1,203,295 1,237,707 Term loan payable, assumed in acquisition, to a former owner of TriEnda; 8.00%; payable in semiannual principal installments of $383,750 plus interest payable monthly with final payment due September, 1999; secured by a stock pledge agreement. 767,500 - Term loan payable to Union Planters Bank; 8.50%, with final payment in October 1998. - 709,677 Term loans payable to Wisconsin Power and Light; 3.00%; payable in various monthly principal and interest installments totaling $15,183 with final payments due December, 2002; secured by specified machinery and equipment. 576,414 - Unsecured note payable to a former officer of the Company; variable interest rate at 2% under prime (6.50% at December 31, 1998 and 1997); payable in quarterly principal installments of $12,187 plus interest, with final payment due December 2005. 341,243 389,992 Term loan payable to South Trust Bank; 7.60%; payable in monthly principal installments of $9,833 plus interest, with final payment due June 2000; collateralized by a general security agreement covering substantially all assets; guaranteed by majority stockholder of the Company. 178,117 295,000 ------------- ------------ 30,896,751 15,557,636 Less current portion (7,538,490) (3,027,425) ------------- ------------ $ 23,358,261 $12,530,211 ============= ============
Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued) 3. Credit Arrangements (continued) The Company paid interest to its majority stockholder and other related parties totaling $1,471,492, $572,724 and $509,142 during the years ended December 31, 1998, 1997 and 1996, respectively. Included in accrued expenses at December 31, 1998 is $771,888 of interest payable to former owners. There was no accrued interest to a related party at December 31, 1997. Certain of the above credit arrangements contain various restrictive covenants including, among others, the maintenance of certain financial ratios, tangible net worth, as defined and including subordinated stockholder debt, of not less than $2,200,000 and certain working capital requirements. The Company was in violation of its working capital and debt service ratios at December 31, 1998. The Company has obtained a waiver of these covenants through January 1, 2000. The annual maturities of long-term debt during the next five years and thereafter are as follows:
Year ending December 31: 1999 $ 7,538,490 2000 6,721,310 2001 9,307,267 2002 157,757 2003 102,221 Thereafter, through December 2005 1,069,706 Maturities not scheduled (unsecured notes payable to majority stockholder) 6,000,000 ----------- $30,896,751 ===========
4. Stockholders' Agreement Under the terms of an agreement with its minority stockholders, the Company is required to purchase the shares of a minority stockholder upon their death or in the event a minority stockholder desires to sell his or her interest as a stockholder. Under the agreement, the Company is required to pay stockholders 20% of the purchase price (determined by management of the Company) at the time of purchase with the balance paid over a ten-year period. Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued) 5. Commitments and Contingencies The Company has various operating leases for buildings and equipment. Rent expense under these leases, including lease payments to related parties, in 1998, 1997 and 1996 was $913,019, $856,480 and $504,452, respectively. Minimum future rental payments under noncancelable operating leases having remaining terms in excess of one year as of December 31, 1998, for each of the following years are as follows:
Year ending December 31: 1999 $ 760,026 2000 553,442 2001 425,394 2002 8,147 ---------- $1,747,009 ==========
Certain of the leases described above relate to buildings the Company leases from The Blin Corporation, owned by James L. Blin, the majority stockholder of the Company, and his relatives. Total payments under these agreements were $468,000 for each of the years ended December 31, 1998 and 1997 and were $414,000 for the year ended December 31, 1996. The Company has been named a defendant in a lawsuit with respect to a royalty agreement, whereby the licensee believes the Company is obliged to extend a paid-up royalty-free license to the plaintiff. The plaintiff alleges damages in excess of $500,000. In addition, at December 31, 1998, the Company has a receivable of approximately $480,000 recorded in its consolidated balance sheet from this licensee. The Company is prepared to vigorously defend the action and pursue collection of its receivable; however, collection of the receivable is dependent upon the ultimate outcome of the lawsuit. The Company is involved in various other pending or threatened legal proceedings arising from the normal course of its business operations. In management's opinion, these proceedings will be ultimately resolved without materially affecting the financial condition of the Company. 6. Retirement Plans Triangle has a defined contribution plan under the provisions of Section 401(k) of the Internal Revenue Code covering all employees represented for collective bargaining purposes by a bargaining unit. Under this plan, Triangle provides a matching contribution equal to 50% of each participant's contribution up to a maximum of 2% of their salary. Triangle also has a 401(k) and profit sharing plan covering employees not represented for collective bargaining purposes. Under this plan, Triangle matches 50% of each participant's contribution up to a maximum of 2% of their salary. Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued) 6. Retirement Plans (continued) TriEnda also has a defined contribution plan under the provisions of Section 401(k) of the Internal Revenue Code covering substantially all employees. Under this plan, TriEnda provides a matching contribution equal to 50% of each participant's contribution up to a maximum of $250. Additional contributions to these plans are at the discretion of the Company's Board of Directors. During the years ended December 31, 1998, 1997 and 1996, Company contributions to the plans were approximately $439,000, $385,000 and $365,000, respectively. 7. Non-Compete Agreements On March 1, 1996, the Company entered into a five year non-compete agreement with a former officer and stockholder of the Company. The agreement requires 60 monthly payments of $8,333 beginning retroactively to January 1, 1996. In January 1997, as discussed in Note 2, another non-compete agreement was entered into in conjunction with the Solar Plastics, Inc. acquisition. In that regard, the Company will treat quarterly payments of $18,750 as related to the non-compete portion of the non-compete/consulting agreement, with the remainder related to the consulting portion that will be expensed as incurred. 8. Disposal of Certain Assets Disposal of Extrusion Equipment In December 1997, Triangle disposed of extrusion equipment at its Oelwein plant in anticipation of the acquisition of TriEnda, whose primary business consists of the manufacture of plastics through the extrusion process. The extrusion equipment was sold for $1,587,000, resulting in a gain of $518,218, which has been classified as non-operating income in the 1997 statement of income. The entire amount of $1,587,000 was recorded as an other receivable at December 31, 1997 and was collected in 1998. Disposal of Buchanan Aviation, L.C. Prior to December 31, 1996, the Company had a 45% interest in a limited liability company, Buchanan Aviation, L.C. (Buchanan), that was accounted for using the equity method. As such, the Company included 45% of Buchanan's losses of $47,452 for the year ended December 31, 1996, in operating expenses in the statements of operations. During the year ended December 31, 1996, the Company purchased $119,423 of flight services from Buchanan. Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued) 8. Disposal of Certain Assets (continued) Effective December 31, 1996, Buchanan was dissolved and the related aircraft sold at a loss of $114,000. The Company recorded their 45% share of this loss in non-operating income (expense). The Company has recorded its 45% share of Buchanan's remaining net worth of $73,991 on December 31, 1996 in other current assets in the accompanying 1996 balance sheet. The Company received cash of substantially this amount during the year ended December 31, 1997. 9. Subsequent Event Effective April 25, 1999, Alltrista Corporation acquired substantially all of the consolidated net assets of Triangle Plastics, Inc. and its TriEnda subsidiary ("Triangle Plastics") for $148.0 million in cash. 10. Impact of Year 2000 (Unaudited) Some of the Company's older computer programs were written using two digits rather than four to define the applicable year. As a result, those computer programs have time-sensitive software that recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter. The total Year 2000 project cost is expensed as incurred and is considered immaterial to the consolidated financial statements of the Company. Triangle Plastics, Inc. Notes to Consolidated Financial Statements (continued) 10. Impact of Year 2000 (Unaudited) (continued) The project is estimated to be completed not later than September 30, 1999, which is prior to any anticipated impact on its operating systems. The Company believes that with modifications to existing software and conversions to new software, the Year 2000 Issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Company. Residual testing will continue through 1999 and into 2000 to ensure subsequent changes do not cause Year 2000 problems. The Company has initiated formal communications with its significant suppliers and large customers to determine the extent to which the Company's interface systems are vulnerable to those third parties' failure to remediate their own Year 2000 Issues. There is no guarantee that the systems of other companies on which the Company's systems rely will be timely converted and would not have an adverse effect on the Company's systems. The costs of the project and the date on which the Company believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, and similar uncertainties.
Triangle Plastics, Inc. Unaudited Condensed Consolidated Balance Sheets March 31, December 31, 1999 1998 ------------- -------------- Assets Current assets: Cash and cash equivalents $ 2,300 $ 440,037 Accounts receivable, net 19,120,452 17,023,271 Inventories 13,421,377 12,975,464 Other current assets 774,422 1,442,676 ------------- -------------- Total current assets 33,318,551 31,881,448 ------------- -------------- Property, plant and equipment, at cost 38,266,430 36,784,647 Accumulated depreciation (11,353,094) (9,074,814) ------------- -------------- 26,913,336 27,709,833 Goodwill, net 1,961,225 1,986,328 Other intangibles 633,764 434,867 ------------- -------------- Total assets $ 62,826,876 $ 62,012,476 ============= ============== Liabilities and Stockholders' Equity Current liabilities: Notes payable $ 23,240,000 $ 18,956,325 Accounts payable 7,217,072 5,281,784 Accrued liabilities 2,646,382 4,199,364 Current portion of long-term debt 7,107,097 7,538,490 ------------- -------------- Total current liabilities 40,210,551 35,975,963 ------------- -------------- Long-term debt, less current portion 19,581,980 23,358,261 Non-compete agreements 381,251 425,000 Commitments and Contingencies (see Note 3) Stockholders' equity: Common stock 20,640 20,640 Additional paid-in capital 196,120 196,120 Retained earnings 4,109,655 3,709,813 Treasury stock, at cost (1,673,321) (1,673,321) ------------- -------------- Total stockholders' equity 2,653,094 2,253,252 ------------- -------------- Total liabilities and stockholders' equity $ 62,826,876 $ 62,012,476 ============= ============== See accompanying notes to unaudited condensed consolidated financial statements.
Triangle Plastics, Inc. Unaudited Condensed Consolidated Statements of Income Three Months Ended March 31, 1999 1998 ------------ ----------- Net sales $ 29,607,897 $25,608,781 Cost of sales 23,676,681 19,347,584 ------------ ----------- Gross Profit 5,931,216 6,261,197 Operating expenses 3,191,901 3,596,986 ------------ ----------- Income from operations 2,739,315 2,664,211 Interest expense 900,840 986,786 ------------ ----------- Income before state income taxes 1,838,475 1,677,425 State and foreign income taxes - - Net income $ 1,838,475 $ 1,677,425 ============ =========== See accompanying notes to unaudited condensed consolidated financial statements.
Triangle Plastics, Inc. Unaudited Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, ------------------------------- 1999 1998 ----------------- ------------ Operating activities Net income $ 1,838,475 $ 1,677,425 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,000,663 1,040,444 Gain on sale of property, plant and equipment (18,214) (2,996) Changes in operating assets and liabilities: Accounts receivable (1,239,738) (1,614,664) Inventories (445,913) (850,458) Other current assets (202,134) (76,545) Accounts payable 1,935,290 (661,918) Accrued liabilities (1,552,984) (2,246,467) ----------------- ------------ Net cash provided by (used in) operating activities 1,315,445 (2,735,179) Investing activities Purchases of property, plant and equipment (410,548) (327,364) Proceeds from the sale of property, plant and equipment 20,000 33,367 Acquisition of TriEnda Corporation, net of cash acquired - (8,116,818) Acquisition of Bigelow Packaging Division - (202,312) ----------------- ------------ Net cash used in investing activities (390,548) (8,613,127) Financing activities Proceeds from notes payable 11,594,245 13,881,092 Repayments of notes payable (7,310,570) (8,566,000) Proceeds from issuance of long-term debt 1,700,000 9,800,000 Payments for long-term debt (5,907,676) (1,652,233) Dividends and distributions to stockholders (1,438,633) (2,107,576) ----------------- ------------ Net cash (used in) provided by financing activities (1,362,634) 11,355,283 ----------------- ------------ Net (decrease) increase in cash and cash equivalents (437,737) 6,977 Cash and cash equivalents, beginning of period 440,037 7,036 ----------------- ------------ Cash and cash equivalents, end of period $ 2,300 $ 14,013 ================= ============ See accompanying notes to unaudited condensed consolidated financial statements.
Triangle Plastics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements 1. Presentation of Condensed Consolidated Financial Statements Certain information and footnote disclosures, including significant accounting policies normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted. In the opinion of management, the accompanying condensed financial statements include all adjustments necessary for a fair presentation of the results for the interim periods presented. Results of operations for the periods shown are not necessarily indicative of results for the year. The accompanying unaudited condensed financial statements should be read in conjunction with the latest annual Consolidated Financial Statements and Notes to Consolidated Financial Statements of Triangle Plastics, Inc. (the "Company"). 2. Inventories Inventories are stated at the lower of cost using the last in, first out (LIFO) method of accounting, or market.
The components of inventories are as follows: March 31, December 31, 1999 1998 ----------- ------------- At current costs: Raw Materials $ 4,630,307 $ 4,565,075 Work-in-progress 2,853,546 2,648,821 Finished goods 5,937,524 5,761,568 ----------- ------------- $13,421,377 $ 12,975,464 =========== =============
3. Commitments and Contingencies The Company has been named a defendant in a lawsuit with respect to a royalty agreement, whereby the licensee believes the Company is obligated to extend a paid-up royalty-free license to the plaintiff. The plaintiff alleges damages in excess of $500,000. In addition, at March 31, 1999, the Company has a receivable of approximately $558,209 recorded in its consolidated balance sheet from this licensee. The Company is prepared to vigorously defend the action and pursue collection of its receivable; however, collection of the receivable is dependent upon the ultimate outcome of the lawsuit. The Company is involved in various other pending or threatened legal proceedings arising from the normal course of its business operations. In management's opinion, these proceedings will be ultimately resolved without materially affecting the financial condition of the Company. 4. Subsequent Event Effective April 25, 1999, Alltrista Corporation acquired substantially all of the consolidated net assets of Triangle Plastics, Inc. and its TriEnda subsidiary ("Triangle Plastics") for $148.0 million in cash. Triangle Plastics, Inc. Notes to Unaudited Condensed Consolidated Financial Statements (Continued) 5. Impact of Year 2000 Some of the Company's older computer programs were written using two digits rather than four to define the applicable year. As a result, those computer programs have time-sensitive software that recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter. The total Year 2000 project cost is expensed as incurred and is considered immaterial to the consolidated financial statements of the Company. The project is estimated to be completed no later than September 30, 1999, which is prior to any anticipated impact on its operating systems. The Company believes that with modifications to existing software and conversions to new software, the Year 2000 Issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Company. Residual testing will continue through 1999 and into 2000 to ensure subsequent changes do not cause Year 2000 problems. The Company has initiated formal communications with its significant suppliers and large customers to determine the extent to which the Company's interface systems are vulnerable to those third parties' failure to remediate their own Year 2000 Issues. There is no guarantee that the systems of other companies on which the Company's systems rely will be timely converted and would not have an adverse effect on the Company's systems. The costs of the project and the date on which the Company believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, and similar uncertainties. -----END PRIVACY-ENHANCED MESSAGE-----