SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 333-88157
CONSOLIDATED CONTAINER COMPANY LLC
(Exact name of registrant as specified in its charter)
| Delaware | 75-2825338 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
3101 Towercreek Parkway, Suite 300,
Atlanta, Georgia 30339
(Address of principal executive offices)
Telephone number: (678) 742-4600
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 twelve 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Acts).
Yes ¨ No x
As of May 3, 2004, there were 1,000 of the registrant’s member units outstanding.
CONSOLIDATED CONTAINER COMPANY LLC
INDEX
2
Item 1. Condensed Consolidated Financial Statements
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
| March 31, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 11,471 | $ | 31,635 | ||||
| Investment securities |
95 | 97 | ||||||
| Accounts receivable (net of allowance for doubtful accounts of $1,458 in 2004 and $1,293 in 2003) |
92,267 | 86,477 | ||||||
| Inventories |
50,251 | 50,227 | ||||||
| Other current assets |
7,893 | 24,588 | ||||||
| Total current assets |
161,977 | 193,024 | ||||||
| PROPERTY AND EQUIPMENT, Net |
269,924 | 276,064 | ||||||
| GOODWILL |
209,859 | 209,859 | ||||||
| INTANGIBLES AND OTHER ASSETS |
17,344 | 18,200 | ||||||
| $ | 659,104 | $ | 697,147 | |||||
| LIABILITIES AND MEMBER’S DEFICIT |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 79,053 | $ | 85,626 | ||||
| Accrued liabilities |
37,267 | 41,522 | ||||||
| Revolving credit facility |
5,000 | 29,500 | ||||||
| Current portion of long-term debt |
16,510 | 11,587 | ||||||
| Total current liabilities |
137,830 | 168,235 | ||||||
| LONG-TERM DEBT |
554,333 | 561,333 | ||||||
| OTHER LIABILITIES |
65,381 | 62,952 | ||||||
| COMMITMENTS AND CONTINGENCIES |
||||||||
| MEMBER’S DEFICIT: |
||||||||
| Member’s deficit |
(70,302 | ) | (67,292 | ) | ||||
| Foreign currency translation adjustment |
(451 | ) | (394 | ) | ||||
| Minimum pension liability adjustment |
(27,687 | ) | (27,687 | ) | ||||
| Total member’s deficit |
(98,440 | ) | (95,373 | ) | ||||
| $ | 659,104 | $ | 697,147 | |||||
See notes to condensed consolidated financial statements.
3
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(Amounts in thousands)
| Three Months Ended |
||||||||
| March 31, 2004 |
March 31, 2003 |
|||||||
| Net sales |
$ | 185,428 | $ | 184,504 | ||||
| Cost of sales |
162,448 | 162,957 | ||||||
| Gross profit |
22,980 | 21,547 | ||||||
| Selling, general and administrative expense |
(11,255 | ) | (12,445 | ) | ||||
| Amortization expense |
(9 | ) | (325 | ) | ||||
| Stock based compensation expense |
(110 | ) | (200 | ) | ||||
| (Loss) gain on disposal of assets |
(705 | ) | 135 | |||||
| Operating income |
10,901 | 8,712 | ||||||
| Interest expense |
(13,997 | ) | (14,607 | ) | ||||
| Net loss |
(3,096 | ) | (5,895 | ) | ||||
| Other comprehensive (loss) income: |
||||||||
| Foreign currency translation adjustment |
(57 | ) | 116 | |||||
| Comprehensive loss |
$ | (3,153 | ) | $ | (5,779 | ) | ||
See notes to condensed consolidated financial statements.
4
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
| Three Months Ended |
||||||||
| March 31, 2004 |
March 31, 2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (3,096 | ) | $ | (5,895 | ) | ||
| Adjustment to reconcile net loss to net cash from operating activities: |
||||||||
| Depreciation and amortization |
9,629 | 10,491 | ||||||
| Debt and refinancing cost amortization |
1,407 | 1,722 | ||||||
| Stock based compensation |
110 | 200 | ||||||
| Currency translation |
(57 | ) | 116 | |||||
| Loss (gain) on disposal of assets |
705 | (135 | ) | |||||
| Changes in operating assets and liabilities |
||||||||
| Accounts receivable |
(5,790 | ) | (13,226 | ) | ||||
| Inventories |
(24 | ) | (1,917 | ) | ||||
| Other current assets |
16,695 | 7,880 | ||||||
| Other long term assets |
(874 | ) | (752 | ) | ||||
| Accounts payable |
(6,573 | ) | 1,141 | |||||
| Accrued liabilities |
(4,147 | ) | (4,667 | ) | ||||
| Other liabilities |
2,429 | 3,015 | ||||||
| Net cash from operating activities |
10,414 | (2,027 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Capital expenditures |
(5,446 | ) | (4,244 | ) | ||||
| Net change in investments |
2 | 2 | ||||||
| Proceeds from disposal of property and equipment |
1,575 | 424 | ||||||
| Cash paid for acquisitions |
(108 | ) | (48 | ) | ||||
| Net cash from investing activities |
(3,977 | ) | (3,866 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Net payments on revolving lines of credit |
(24,500 | ) | (9,000 | ) | ||||
| Proceeds on notes payable |
— | 35,000 | ||||||
| Payments on notes payable to banks and capital leases |
(2,077 | ) | (1,090 | ) | ||||
| Debt issuance cost |
— | (3,748 | ) | |||||
| Tax (distribution) receipt to the benefit of the member |
(24 | ) | 911 | |||||
| Net cash from financing activities |
(26,601 | ) | 22,073 | |||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(20,164 | ) | 16,180 | |||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
31,635 | 24,382 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 11,471 | $ | 40,562 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||
| Cash paid during the period for interest |
$ | 15,132 | $ | 15,511 | ||||
See notes to condensed consolidated financial statements.
5
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Consolidated Container Company LLC (the “Company”) have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission and accounting principles generally accepted in the United States of America applicable to interim financial statements. In the opinion of management, all adjustments (consisting only of usual recurring adjustments considered necessary for a fair presentation) are reflected in the accompanying unaudited condensed consolidated financial statements. The condensed consolidated balance sheet as of December 31, 2003 is derived from audited financial statements. The condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. Results of operations and cash flows for the three months ended March 31, 2004 and the corresponding balance sheet as of March 31, 2004 are not necessarily indicative of the results to be expected for the full year ending December 31, 2004.
The Company is wholly owned by Consolidated Container Holdings LLC, a Delaware limited liability company (“Holdings”). Holdings is 24.7% owned by Reid Plastics Holdings Inc., 16.6% owned by Vestar Packaging LLC, 13.5% owned by Vestar CCH LLC, and 45.0% owned by subsidiaries of Dean Foods Company. Each of Reid Plastics Holdings Inc., Vestar CCH LLC, and Vestar Packaging LLC are controlled by Vestar Capital Partners, III L.P. and its affiliates.
Certain amounts in the 2003 financial statements have been reclassified to conform to the 2004 presentation.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2003, the FASB issued Revised Statement of Accounting Standard (“SFAS”) No. 132 “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” Under Revised SFAS No. 132 interim period disclosures are required regarding the amount of net periodic benefit costs recognized for each period for which a statement of income is presented, showing separately the various components of net periodic pension cost, and the total amount of employer’s contributions paid, and expected to be paid during the fiscal year. The disclosures required by this statement are effective for interim periods beginning after December 15, 2003. We have adopted SFAS No. 132 Revised and included the additional disclosures in note 9 to these consolidated financial statements.
3. INVENTORIES
Inventories consisted of the following at March 31, 2004, and December 31, 2003:
| March 31, 2004 |
December 31, 2003 | |||||
| (Amounts in thousands) | ||||||
| Raw materials |
$ | 18,766 | $ | 21,077 | ||
| Parts and supplies |
7,501 | 7,505 | ||||
| Finished goods |
23,984 | 21,645 | ||||
| $ | 50,251 | $ | 50,227 | |||
6
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT
Long-term debt consisted of the following at March 31, 2004, and December 31, 2003:
| March 31, 2004 |
December 31, 2003 |
|||||||
| (Amounts in thousands) | ||||||||
| Senior credit facility—term loans |
$ | 385,843 | $ | 387,833 | ||||
| Senior subordinated notes |
185,000 | 185,000 | ||||||
| Capital lease obligations |
— | 87 | ||||||
| 570,843 | 572,920 | |||||||
| Less current portion |
(16,510 | ) | (11,587 | ) | ||||
| $ | 554,333 | $ | 561,333 | |||||
In connection with its formation in 1999, the Company issued notes in a private placement under Rule 144A of the Securities Act of 1933, as amended, and entered into a Senior Credit Facility providing for various term loans, revolving loans and letters of credit.
In January 2003, the Company entered into an amendment to its Senior Credit Facility. Terms of the amendment included eliminating certain covenants and amending others, permanently reducing the revolver commitment to $43.5 million, changing the term loan amortization schedule such that a total of $25.8 million will be due in installments from March 31, 2003 until June 29, 2005, adding a tranche C term loan in the amount of $35.0 million, incurring an additional fee of 1% to be paid on the unpaid principal balance of each loan payable on June 30, 2005, an additional fee of 2% to be charged on all deferred principal payments, less any voluntary or mandatory prepayments, which is payable on June 30, 2005, and a fee on the tranche C term loan equal to 4% of the principal amount to be paid upon the repayment of tranche C term loan. Other less significant terms were also amended. A description of terms of the Senior Credit Facility, as amended, follows.
Senior Credit Facility—The Senior Credit Facility, as amended, consists of four tranches of term loans with a total original principal amount of $521.5 million and a $43.5 million revolving credit facility (the “Revolver”). The term loan facilities and Revolver are summarized below:
Term Loans
| • | Tranche A—The tranche A term loan was originally $150.0 million in principal, of which $93.4 million was outstanding at March 31, 2004. The Company is required to repay the tranche A term loan in quarterly installments through June 2005, including an $83.9 million payment on June 30, 2005. |
| • | Tranche B—The tranche B term loan was originally $235.0 million in principal, of which $225.3 million was outstanding at March 31, 2004. Of the outstanding balance, the Company is required to repay $3.7 million of the tranche B term loan in quarterly installments which range from $0.8 million to $1.5 million through 2004, seven quarterly payments of $27.8 million beginning September 30, 2005, and a final payment of $27.3 million on June 30, 2007. |
7
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT (Continued)
| • | Tranche C—The available tranche C term loan totals $100.0 million in principal, of which $35.0 million was outstanding at March 31, 2004. The Company is required to repay the tranche C term loan at the earlier of December 31, 2007 or after all other outstanding senior loans have been repaid. Under certain circumstances the lenders may, but are not required, to make additional tranche C term loans to the Company. |
| • | Tranche 2 Converted Term Loan—The tranche 2 converted term loan originally totaled $36.5 million in principal, of which $32.1 million was outstanding at March 31, 2004. This loan is the result of the conversion, effective February 27, 2002, of the tranche 2 revolver to a term loan as provided in the Senior Credit Facility, as amended. The Company is required to repay the tranche 2 converted term loan in quarterly installments through June 2005, including a $28.8 million payment on June 30, 2005. |
Revolver
The commitment amount under the Revolver was $43.5 million as of March 31, 2004, of which $5.0 million in principal amount was outstanding at March 31, 2004. Additionally, the Company had approximately $13.9 million of outstanding letters of credit under the Revolver. The Revolver will terminate on June 30, 2005 and all outstanding revolving loans will be due and payable on that date.
Borrowings under the Senior Credit Facility bear interest, at the Company’s option, at either:
| • | a base rate, which will be the higher of 1/2 of 1% in excess of the overnight federal funds rate and the prime lending rate of Deutsche Bank Trust Company Americas, plus an interest margin; or |
| • | a Eurodollar rate on deposits for one, two, three or six month periods or, if and when available to all of the relevant lenders, nine or twelve month periods, which are offered to Deutsche Bank Trust Company Americas in the interbank Eurodollar market, plus an interest margin. |
The applicable interest margin on base rate and Eurodollar loans is a fixed amount depending on the loan tranche. Those margins are as follows:
| • | 2.75% for base rate loans and 3.75% for Eurodollar rate loans for tranche A term loans, tranche 2 converted term loans, and revolving credit loans; |
| • | 3.25% for base rate loans and 4.25% for Eurodollar rate loans for tranche B term loans; |
| • | 2.25% for base rate loans and 3.25% for Eurodollar rate loans for committed tranche C term loans; and |
| • | a rate to be determined for uncommitted tranche C term loans, based on the agreement between the Company and the lender or lenders providing that loan. |
Additional interest accrues on the outstanding balance under the tranche C term loan at a rate of 11.3% per annum, which will be paid at the earlier of December 31, 2007, or after the repayment of all other outstanding senior loans. The lenders of the tranche C term loan also received units of common equity in Holdings. In connection with the January 2003 amendment, the majority owners of Holdings purchased a 100% participation in the $35.0 million tranche C term loan and received all of the units of common equity in Holdings that were issued with the tranche C term loan.
8
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT (Continued)
Depending on their maturity dates, the various borrowing types bore interest at the following rates as of March 31, 2004:
| < |