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 September 30, 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 November 2, 2004, there were 1,000 of the registrant’s member units outstanding.
CONSOLIDATED CONTAINER COMPANY LLC
| Page | ||||
| PART I. FINANCIAL INFORMATION | ||||
| ITEM 1. |
Condensed Consolidated Financial Statements | 3 | ||
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
3 | |||
| 4 | ||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
5 | |||
| 6 | ||||
| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 | ||
| ITEM 3. |
Quantitative and Qualitative Disclosures about Market Risk | 22 | ||
| ITEM 4. |
Controls and Procedures | 23 | ||
| PART II. OTHER INFORMATION | ||||
| ITEM 1. |
Legal Proceedings | 24 | ||
| ITEM 6. |
Exhibits and Reports on Form 8-K | 24 | ||
| 25 | ||||
2
| ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 9,421 | $ | 31,635 | ||||
| Investment securities |
90 | 97 | ||||||
| Accounts receivable (net of allowance for doubtful accounts of $1,398 in 2004 and $1,293 in 2003) |
91,239 | 86,477 | ||||||
| Inventories |
54,405 | 50,227 | ||||||
| Other current assets |
14,360 | 24,588 | ||||||
| Total current assets |
169,515 | 193,024 | ||||||
| PROPERTY AND EQUIPMENT, Net |
269,063 | 276,064 | ||||||
| GOODWILL |
209,859 | 209,859 | ||||||
| INTANGIBLES AND OTHER ASSETS, Net |
19,656 | 18,200 | ||||||
| $ | 668,093 | $ | 697,147 | |||||
| LIABILITIES AND MEMBER’S DEFICIT |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 84,326 | $ | 85,626 | ||||
| Accrued liabilities |
39,028 | 41,522 | ||||||
| Revolving credit facility |
— | 29,500 | ||||||
| Current portion of long-term debt |
2,200 | 11,587 | ||||||
| Total current liabilities |
125,554 | 168,235 | ||||||
| LONG-TERM DEBT |
558,136 | 561,333 | ||||||
| OTHER LIABILITIES |
42,731 | 62,952 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 5) |
||||||||
| MEMBER’S DEFICIT: |
||||||||
| Member’s deficit |
(30,361 | ) | (67,292 | ) | ||||
| Foreign currency translation adjustment |
(280 | ) | (394 | ) | ||||
| Minimum pension liability adjustment |
(27,687 | ) | (27,687 | ) | ||||
| Total member’s deficit |
(58,328 | ) | (95,373 | ) | ||||
| $ | 668,093 | $ | 697,147 | |||||
See notes to condensed consolidated financial statements.
3
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Amounts in thousands)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, 2004 |
September 30, 2003 |
September 30, 2004 |
September 30, 2003 |
|||||||||||||
| Net sales |
$ | 198,153 | $ | 188,318 | $ | 573,874 | $ | 560,955 | ||||||||
| Cost of sales |
175,150 | 164,370 | 501,779 | 494,116 | ||||||||||||
| Gross profit |
23,003 | 23,948 | 72,095 | 66,839 | ||||||||||||
| Selling, general and administrative expense |
(7,001 | ) | (10,362 | ) | (30,007 | ) | (35,044 | ) | ||||||||
| Amortization expense |
(8 | ) | (325 | ) | (25 | ) | (975 | ) | ||||||||
| Stock based compensation expense |
(169 | ) | (201 | ) | (432 | ) | (600 | ) | ||||||||
| Loss on disposal of assets |
(1,559 | ) | (1,670 | ) | (2,638 | ) | (1,316 | ) | ||||||||
| Operating income |
14,266 | 11,390 | 38,993 | 28,904 | ||||||||||||
| Interest expense |
(12,709 | ) | (14,122 | ) | (46,785 | ) | (42,681 | ) | ||||||||
| Net income (loss) |
1,557 | (2,732 | ) | (7,792 | ) | (13,777 | ) | |||||||||
| Other comprehensive income (loss) : |
||||||||||||||||
| Foreign currency translation adjustment |
215 | (1 | ) | 114 | 339 | |||||||||||
| Comprehensive income (loss) |
$ | 1,772 | $ | (2,733 | ) | $ | (7,678 | ) | $ | (13,438 | ) | |||||
See notes to condensed consolidated financial statements.
4
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
| Nine Months Ended |
||||||||
| September 30, 2004 |
September 30, 2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (7,792 | ) | $ | (13,777 | ) | ||
| Adjustment to reconcile net loss to net cash from operating activities: |
||||||||
| Depreciation and amortization |
28,500 | 30,828 | ||||||
| Amortization of debt issuance costs |
9,729 | 4,773 | ||||||
| Stock based compensation |
432 | 600 | ||||||
| Currency translation |
114 | 339 | ||||||
| Loss on disposal of assets |
2,638 | 1,316 | ||||||
| Accretion of senior secured discount notes |
5,784 | — | ||||||
| Changes in operating assets and liabilities |
||||||||
| Accounts receivable |
(4,762 | ) | (17,486 | ) | ||||
| Inventories |
(4,178 | ) | (2,265 | ) | ||||
| Other current assets |
10,228 | 3,095 | ||||||
| Intangibles and other assets |
(1,762 | ) | (2,398 | ) | ||||
| Accounts payable |
(1,300 | ) | (4,296 | ) | ||||
| Accrued liabilities |
(2,345 | ) | (5,562 | ) | ||||
| Other long term liabilities |
(20,221 | ) | 6,360 | |||||
| Net cash from operating activities |
15,065 | 1,527 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Capital expenditures |
(27,452 | ) | (23,630 | ) | ||||
| Net change in investments |
7 | 7 | ||||||
| Proceeds from disposal of property and equipment |
4,511 | 2,726 | ||||||
| Cash paid for acquisitions |
(149 | ) | (48 | ) | ||||
| Net cash from investing activities |
(23,083 | ) | (20,945 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Net payments on revolving lines of credit |
(29,500 | ) | (6,000 | ) | ||||
| Issuance of notes payable |
220,000 | 35,000 | ||||||
| Issuance of senior secured discount notes |
150,102 | — | ||||||
| Payments on notes payable to banks and capital leases |
(388,470 | ) | (4,624 | ) | ||||
| Payment of debt issuance costs |
(10,619 | ) | (4,596 | ) | ||||
| Member’s contribution net of related costs (Note 6) |
44,374 | — | ||||||
| Tax (distribution) receipt to the benefit of the member |
(83 | ) | 890 | |||||
| Net cash from financing activities |
(14,196 | ) | 20,670 | |||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(22,214 | ) | 1,252 | |||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
31,635 | 24,382 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 9,421 | $ | 25,634 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||
| Cash paid during the period for interest |
$ | 44,212 | $ | 37,230 | ||||
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 nine months ended September 30, 2004 and the corresponding balance sheet as of September 30, 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 a holding company with no assets, operations, or cash flow separate from its investment in the Company and its subsidiaries. The common units of Holdings are 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 Franklin Plastics Inc., a subsidiary 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. Additionally, as discussed more fully below, Holdings recently issued Series B Convertible Preferred Units, which are 73.4% owned by Vestar CCH Preferred LLC and 26.6% owned by Franklin Plastics Inc. Upon conversion of the Series B Convertible Preferred Units, the holders of such converted units would own in the aggregate in excess of approximately 95% (before management options) of the then outstanding units of Holdings.
Certain amounts in the 2003 financial statements have been reclassified to conform to the 2004 presentation.
2. INVENTORIES
Inventories consisted of the following at September 30, 2004, and December 31, 2003:
| September 30, 2004 |
December 31, 2003 | |||||
| (Amounts in thousands) | ||||||
| Raw materials |
$ | 23,524 | $ | 21,077 | ||
| Parts and supplies |
7,302 | 7,505 | ||||
| Finished goods |
23,579 | 21,645 | ||||
| $ | 54,405 | $ | 50,227 | |||
6
CONSOLIDATED CONTAINER COMPANY LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
3. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT
Long-term debt consisted of the following at September 30, 2004, and December 31, 2003:
| September 30, 2004 |
December 31, 2003 |
|||||||
| (Amounts in thousands) | ||||||||
| Senior credit facility—term loans |
$ | 219,450 | $ | 387,833 | ||||
| Senior secured discount notes |
155,886 | — | ||||||
| Senior subordinated notes |
185,000 | 185,000 | ||||||
| Capital lease obligations |
— | 87 | ||||||
| 560,336 | 572,920 | |||||||
| Less current portion |
(2,200 | ) | (11,587 | ) | ||||
| $ | 558,136 | $ | 561,333 | |||||
In connection with its formation in 1999, the Company issued senior subordinated notes in a private placement under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”), and entered into a senior credit facility providing for various term loans, revolving loans and letters of credit.
On May 20, 2004, the Company entered into a new senior credit facility (the “Senior Credit Facility”) that included a $220.0 million term loan and a $45.0 million revolving credit facility (the “Revolver”), of which $10.0 million was drawn on the transaction date. On the same date, the Company issued $207.0 million aggregate principal amount due at maturity of 10 3/4% senior secured discount notes which generated proceeds of approximately $150.1 million in a private placement under Rule 144A of the Securities Act. Additionally, the Company’s parent, Holdings, made a $45.0 million capital contribution from the proceeds of its sale of Series B Convertible Preferred Units. The proceeds from the new term loan, the senior secured discount notes and the capital contribution were used to permanently repay outstanding borrowings, accrued interest, and deferred interest and deferred fees of $13.0 million under the Company