Tekni Plex Inc – ‘10QSB’ for 9/26/97

As of:  Monday, 11/10/97   ·   For:  9/26/97   ·   Accession #:  950123-97-9317   ·   File #:  333-28157

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Quarterly Report — Small Business   —   Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB       Quarterly Report -- Small Business                     9     38K 
 2: EX-27       Financial Data Schedule                                1      8K 

10QSB   —   Quarterly Report — Small Business
Document Table of Contents

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Securities and Exchange Commission
Washington, D.C. 20549
 Form 10-Q

(Mark One)                                                                      

|X|   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 
OF 1934                                                             
For the quarterly period ended September 26, 1997                   

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT     
     For the transition period from  __________________ to ___________________

Commission file number 333-28157          

TEKNI PLEX, INC.
--------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter) 

Delaware                                  22-3286312  
---------------------------------         ------------------------------------  
(State or other jurisdiction            (IRS Employer Identification Number)
of incorporation or organization)                                               

201 Industrial Parkway, Somerville NJ 08876                                     
--------------------------------------------------------------------------------
(Address of principal executive office)                                         

Issuer's telephone number: 908-722-4800                                       

  Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 |_|                                                                  

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TEKNI-PLEX, INC.

                                                                      Page #
PART I.  FINANCIAL INFORMATION                                                  
ITEM 1.  Financial Statements                                           

       Balance Sheet as of September 26, 1997 and June 27, 1997............. 3

Statements of operations for the three months ended             
         September 26, 1997 and September 27, 1996.......................... 4

Statements of cash flows for the three months ended             
         September 26, 1997 and September 27, 1996.......................... 5

       Notes to consolidated financial statements......................... 6-7

ITEM 2.  Management's Discussion and Analysis of financial Condition    
            and Results of Operations....................................... 8

PART II. OTHER INFORMATION                                                      

   ITEM 1. Legal proceedings................................................ 9

   ITEM 2. Changes in securities............................................ 9

   ITEM 3. Defaults upon senior securities.................................. 9

   ITEM 4. Submission of matters to a vote of securities holders............ 9

   ITEM 5. Other information................................................ 9

   ITEM 6. Exhibits and reports on Form 8-K................................. 9

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TEKNI-PLEX, INC.
BALANCE SHEETS

                            September 26, 1997
                                                (Unaudited)      June 27, 1997
                                            ------------------   -------------
Assets                                                                          
Current:                                                                        
 Cash                                            $  12,956,000   $  11,095,000
 Accounts receivable                                15,089,000      12,688,000
 Inventories                                        13,363,000      13,315,000
 Refundable income taxes                                             1,083,000
 Deferred income taxes                               1,500,000       1,500,000
 Prepaid expenses and other current assets           2,432,000       2,030,000
                                                 -------------   -------------
        Total current assets                        45,340,000      41,711,000
Property, plant and equipment, net                   42,409,000      42,389,000 
Intangible assets                                    37,953,000      36,967,000 
Deferred charges                                      4,849,000       5,205,000 
Other assets                                            518,000       2,757,000 
                                                 -------------   -------------
                                                 $ 131,069,000   $ 129,029,000
                                                 =============   =============
Liabilities and Stockholders' Equity                                            
Current liabilities:                                                            
 Line of credit                                  $     276,000   $          --
 Current portion of long term debt                      51,000              --
 Accounts payable trade                              7,241,000       6,139,000
 Accrued payroll and benefits                          805,000       5,189,000
 Accrued interest                                    4,189,000              --
 Accrued liabilities - other                         3,053,000       4,433,000
                                                 -------------   -------------
        Total current liabilities                   15,615,000      15,761,000
 Long-term debt                                     75,058,000      75,000,000
 Deferred income taxes                               7,084,000       7,255,000
 Other liabilities                                     610,000         616,000
                                                 -------------   -------------
        Total liabilities                           98,367,000      98,632,000
Commitments and contingencies                                                   
Stockholders' equity:                                                           
Common stock, $.01 par value, authorized                                    
20,000 shares, issued and outstanding                                   
   1,707 shares                                             --              --
 Additional paid-in capital                         41,473,000      41,473,000
  Retained deficit                                   (8,771,000)    (11,076,000)
                                                 -------------   -------------
        Total stockholders' equity                  32,702,000      30,397,000
                                                 -------------   -------------
                                                 $ 131,069,000   $ 129,029,000
                                                 =============   =============

 See accompanying notes to financial statements.

                                                                               3

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TEKNI-PLEX, INC.
STATEMENTS OF OPERATIONS

                                 Quarter ended
                                                   September     Quarter ended
                                                  26, 1997       September
                                                (unaudited)       27, 1996
                                                -------------  -------------
Net sales                                          $37,791,000    $35,167,000   

Cost of sales                                       27,857,000     26,546,000   
                                                -----------    -----------
      Gross profit                                9,934,000      8,621,000

Operating expenses:                                                             

Selling, general and administrative                4,048,000      4,414,000 
                                                -----------    -----------
      Income from operations                      5,886,000      4,207,000

Other expenses:                                                                 

Interest, net                                      2,109,000      1,901,000 

Other                                                 72,000        249,000 
                                                -----------    -----------
      Income before provision for income taxes    3,705,000      2,057,000

Provision for income taxes                           1,400,000        780,000   
                                                -----------    -----------
Net (loss) income                                  $ 2,305,000    $ 1,277,000   
                                                ===========    ===========

 See accompanying notes to financial statements.

                                                                               4

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TEKNI-PLEX, INC.
STATEMENTS OF CASH FLOWS

                                 Quarter ended
                                                   September     Quarter ended
                                                  26, 1997       September
                                                (unaudited)       27, 1996
                                                -------------  -------------
Cash flows from operating activities:                                           
 Net income                                         $  2,305,000   $ 1,277,000
Adjustments to reconcile net income                                         
to net cash provided by operating                                       
activities:                                                             
     Depreciation and amortization                     2,423,000     2,568,000
      Deferred income taxes                              (170,000)     (171,000)
Changes in operating assets and liabilities:                                
    Accounts receivable                                (1,489,000)   (1,273,000)
    Inventories                                           304,000      (711,000)
   Prepaid expenses and other current assets             619,000       794,000
   Income taxes                                               --     1,117,000
   Accounts payable                                    1,102,000     5,794,000
   Accrued interest                                    2,151,000       337,000
    Accrued expenses                                   (3,910,000)     (420,000)
                                                    ------------   -----------
Net cash provided by                                          
           operating activities                        3,335,000     9,312,000
                                                    ------------   -----------
Cash flows from investing activities:                                           
  Capital expenditures                                 (1,221,000)     (892,000)
 Acquisitions                                         (2,292,000)           --
 Deposits                                              2,240,000       127,000
                                                    ------------   -----------
Net cash used in investing                                    
            activities                                 (1,273,000)     (765,000)
                                                    ------------   -----------
Cash flows from financing activities:                                           
Net borrowings (repayments) under                                           
    line of credit                                             --    (3,319,000)
  Repayments of long-term debt                           (201,000)     (599,000)
                                                    ------------   -----------
Net cash used in                                              
           financing activities                          (201,000)   (3,918,000)
                                                    ------------   -----------
Net increase in cash                                    1,861.000     4,629,000 
Cash, beginning of period                              11,095,000     1,048,000 
                                                    ------------   -----------
Cash, end of period                                  $ 12,956,000   $ 5,677,000 
                                                    ============   ===========
Supplemental cash flow information:                                             
Cash paid for:                                                              
   Interest                                         $         --   $ 1,390,000
   Income taxes                                          529,000        56,000
                                                    ============   ===========
Investing activities:                                                           
The Company purchased certain assets                                        
and assumed certain liabilities of                              
PurePlast, Inc. effective July 3,                               
1997, for approximately $2,292,000                              
in cash. In conjunction with the                                
acquisition, liabilities were assumed                           
as follows:                                                     
Fair value of assets acquired                  $ 1,802,000          
Goodwill                                         1,734,000          
Cash paid                                       (2,292,000)         
                                     -----------
Liabilities assumed                         $ 1,244,000       
                                     ===========

 See accompanying notes to financial statements.

                                                                               5

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TEKNI-PLEX, INC.
 NOTES TO FINANCIAL STATEMENTS

NOTE 1 - GENERAL                                                                

Tekni-Plex, Inc. is a New Jersey based manufacturer of primary packaging        
materials for the pharmaceutical, food, foodservice disposables and             
telecommunications industries. The Company is organized into two operating      
groups. The Flexible Packaging Group produces printed and unprinted multi-layer 
constructions of plastic, paper and metal films and sheets, with emphasis on    
pharmaceutical applications. The Foam Products Group primarily produces         
polystyrene foam packaging products for the food and foodservice disposables    
industries.                                                                     

The results for the three months ended September 26, 1997 are not necessarily   
indicative of the results to be expected for the full fiscal year and have not  
been audited. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments, consisting only of normal recurring         
accruals, necessary for a fair presentation of the results of operations for the
period presented and the consolidated balance sheet at September 26, 1997.      
Certain information and footnote disclosure normally included in financial      
statements prepared in accordance with generally accepted accounting principles 
have been condensed or omitted pursuant to the SEC rules and regulations. These 
financial statements should be read in conjunction with the audited financial   
statements and footnotes thereto included in the Company's Annual Report on form
S-4 for the year ended June 27, 1997.                                           

NOTE 2 - INVENTORIES                                                            

Inventories as of June 27, 1997 and June 28, 1996 are summarized as follows:    

                     September 26, 1997  June 27, 1997
                     ------------------  -------------
Raw materials                          $5,736,000       $5,943,000              
Work-in-process                         3,486,000        3,362,000              
Finished goods                          4,141,000        4,010,000              
                     ------------------  -------------
                        $13,363,000      $13,315,000
                     ==================  =============

NOTE 3 - DEBT                                                                   

Debt consists of the following:                                                 

                     September 26, 1997  June 27, 1997
                     ------------------  -------------
Senior subordinated notes (a)          $75,000,000      $75,000,000             
Other (b)                                  385,000                -             
                     ------------------  -------------
                           75,385,000       75,000,000
Less: Current maturities                   327,000                -             
                     ------------------  -------------
                          $75,058,000      $75,000,000
                     ==================  =============

(a)  On April 4, 1997, the Company issued $75,000,000 of 11 1/4% ten year notes.
     Interest on the notes is payable semi-annually. These proceeds along with a
capital contribution of $18,373,000 were used to repay the balance of 
    $36,800,000 on the credit facility, repay the senior subordinated notes of
  $25,200,000, including a prepayment penalty of $1,200,000 and repurchase
    the redeemable warrants for $20,000,000. These transactions resulted in an
     extraordinary loss of approximately $20,666,000. The extraordinary loss was
    comprised of (i) the prepayment penalty of $1,200,000 and the write-off of
deferred financing costs and debt discount of $3,449,000 net of the   
   combined tax benefit of $1,757,000 and (ii) the loss of the repurchase of
   the warrant of $17,773,000. The fair value of the warrants was determined
pursuant to the contractually agreed value among the relevant parties.

(b)  PurePlast has loan facilities as follows:                                  

    o     Line of credit for $722,000 at the prime rate, plus 1/4%. The line
           is due on demand and is unsecured. There is $276,000 outstanding at
September 26, 1997.                                     

 o     Term loan in the amount of $109,000. The loan is due in monthly
payments of $4,000, plus interest at prime, plus 1 1/4% 

NOTE 4 - CONTINGENCIES                                                          

The Company is a party to various legal proceedings arising in the normal       
conduct of business. Management believes that the final outcome of these        
proceedings will not have a material adverse effect on the Company's financial  
position or results of operations.                                              

                                                                               6

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TEKNI-PLEX, INC.
 NOTES TO FINANCIAL STATEMENTS

      TEKNI-PLEX, INC.

ITEM 2: Management's Discussion and Analysis of Financial Condition and Results 
of Operations                                                   

Forward-Looking Statements                                                      

In additon to historical information, this Quarterly Report contains            
forward-looking statements relating to such matters as anticipated financial    
performance, business propects, new products, and similar matters. The Private  
Securities Litigation Reform Act of 1995 provides a safe harbor for             
forward-looking statements. In order to comply with the terms of the safe       
harbor, the Company notes that a variety of factors could cause the Company's   
actual results and experience to differ materially from the anticipated results 
or other expectations expressed in the Company's forward-looking statements. The
risks and uncertainties that may affect the operation, performance, development 
and results of the Company's business include, but are not limited to, those    
matters discussed herein in the sections entitled Part I, Item 1-Management's   
Discussion and Analysis of Financial Condition and Results of operations and    
Part II, Item 1-Legal Proceedings. The words "believe", "expect", "anticipate", 
"project" and similar expressions identify forward-looking statements, which    
reflect management's analysis only as of the date hereof. The Company undertakes
no obligation to publicly revise these forward-looking statemtns to reflect     
events or circumstances that arise after the date hereof. Readers should        
carefully review the risk factors described in other documents the Company files
from time to time with Securities and Exchange Commission, including without    
limitation, the Company's Form S-4 for the year ended June 27, 1997.            

First three months of 1998 Compared with the first three months of 1997         

Net Sales increased to $37.8 million for the three months ended September 26,   
1997 from $35.2 million for the three months ended September 26, 1996. This     
represents an increase of $2.6 million or 6.9%. The increased sales are         
primarily attributed to the acquisition of PurePlast and the intensive efforts  
to expand our market in the flexible packaging division.                        

Cost of Goods Sold increased to $27.9 million for the three months ended        
September 26, 1996. Expressed as a percentage of net sales, cost of goods sold  
improved to 73.7% for the three months ended September 26, 1997 from 75.5% for  
the three months ended September 27, 1996. The decline in cost of goods sold as 
a percentage of net sales was due primarily to a decline in raw material costs, 
continued reductions in overhead costs and improved fixed cost absorption from  
higher sales volumes.                                                           

Gross Profit as a result, increased to $9.9 million or 26.2% of net sales for   
the three months ended September 26, 1997, from $8.6 million or 24.5% of net    
sales for the same period in 1996.                                              

Selling, general and administrative expenses decreased to $4.0 million or 10.7% 
from $4.4 million or 12.6% due primarily to decreased administrative expense.   

Operating profit increased to $5.9 million or 15.6% of net sales for the three  
months ended September 26, 1997, from $4.2 or 12.0% for the same period in 1996,
for the reasons stated above.                                                   

Interest expense increased to $2.1 million or 5.6% of net sales for the three   
months ended September 26, 1997, from $1.9 million or 5.4% of net sales for the 
same period in 1996 due primarily to a restructuring of our debt from notes to  
bonds.                                                                          

Provision for income taxes increased to $1.4 million or 3.7% of net sales for   
the three months ended September 26, 1997, from $.8 million or 2.2% for the same
period in 1996. The Company's effective tax rate was 38% for the three months   
ended September 26, 1997. The increase between periods is due primarily to the  
utilization of certain state tax carryover losses and credits in the first      
quarter of fiscal year 1997.                                                    

Net income increased to $2.3 million or 6.1% of net sales for the three months  
ended September 26, 1997, from $1.3 million or 3.6% of net sales for the same   
period in 1996, for the same reasons discussed above.                           

New Accounting Pronouncements                                                   

In June 1997, SFAS 130, "Reporting Comprehensive Income," and SFAS 131,         
"Disclosures about Segments of an Enterprise and Related Information," were     
issued. SFAS 130 addresses standards for reporting and display of comprehensive 
income and its components and SFAS 131 requires disclosure of reportable        
operating segments. Both statements are effective for the Company's 1999 fiscal 
year. The Company will be reviewing these pronouncements to determine their     
applicability to the Company, if any.                                           

                                                                               7

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TEKNI-PLEX, INC.
 NOTES TO FINANCIAL STATEMENTS

TEKNI-PLEX, INC.

PART II.  Other Information                                                     

Item 1. Legal Proceedings                                             

            The Company is a party to various legal proceedings arising in the
       normal conduct of business. Managment believes that the final
       outcome of these proceedings will not have a material adverse
  effect on the Company's financial position or results of
operations.                                           

Item 2. Changes in Securities                                         

none                                                  

Item 3. Defaults Upon Senior Securities                               

none                                                  

Item 4. Submission of Matters to a Vote of Securities holders         

not applicable                                        

Item 5. Other Information                                             

none                                                  

Item 6. Exhibits and Reports on Form 8-K                              

none                                                  

                                                                               8

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TEKNI-PLEX, INC.
 NOTES TO FINANCIAL STATEMENTS
TEKNI-PLEX, INC.

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.                           

              TEKNI-PLEX, INC.

November 10, 1997                                                               

                      By: /s/ F. Patrick Smith
                                        ----------------------------------
                      F. Patrick Smith
                           Chairman of the Board

                         By: /s/ Kenneth W. R. Baker
                                           -------------------------------------
                         Kenneth W. R. Baker
                                           President and Chief Operating Officer
                                 Principal Financial Officer

                                                                               9

Dates Referenced Herein

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This ‘10QSB’ Filing		Date		First		Last			Other Filings
Filed on:		11/10/97		9					None on these Dates
For Period End:		9/26/97		1		7
		7/3/97		5
		6/27/97		2		7
		4/4/97		6
		9/27/96		2		7
		9/26/96		7
		6/28/96		6
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