-----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, M/2Xfb32K5JnvbbFCagkJ4xUeh6HMQAY09r3pt/p0oEsQKRH69Hwl+62Fr64aXtu pe1rOGQToYatVJ7n0Tcftw== 0000950123-03-012945.txt : 20031119 0000950123-03-012945.hdr.sgml : 20031119 20031119171138 ACCESSION NUMBER: 0000950123-03-012945 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PVC CONTAINER CORP CENTRAL INDEX KEY: 0000081288 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PLASTIC PRODUCTS [3080] IRS NUMBER: 132616435 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08791 FILM NUMBER: 031013604 BUSINESS ADDRESS: STREET 1: 2 INDUSTRIAL WAY WEST CITY: EATONTOWN STATE: NJ ZIP: 07724 BUSINESS PHONE: 9085420060 MAIL ADDRESS: STREET 1: 401 INDUSTRIAL WAY WEST CITY: EATONTOWN STATE: NJ ZIP: 07724 10-Q 1 y91801e10vq.txt FORM 10-Q Part I SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2003 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from_________________ to ________________ COMMISSION FILE NUMBER 0-08791 PVC CONTAINER CORPORATION ---------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-2616435 -------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2 Industrial Way West, Eatontown, New Jersey 07724 ---------------------------------------------------------- (Address of principal executive offices and zip code) Registrant's telephone number, including area code (732) 542-0060 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Indicate by check mark by the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes ( ) No (X) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Class Outstanding at September 30, 2003 - --------------------- --------------------------------- Common $.01 par value 7,042,393 shares Part I CONTENTS
PAGE NO. ---- PART I. FINANCIAL INFORMATION Consolidated Balance Sheets-September 30, 2003 and June 30, 2003 3 Consolidated Statements of Operations-Three Months Ended September 30, 2003 and 2002 (Unaudited) 4 Consolidated Statements of Cash Flows-Three Months Ended September 30, 2003 and 2002 (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6-12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13-14 Item 3. Quantitative and Qualitative Disclosure About Market Risk 15 PART II. OTHER INFORMATION Item 4. Controls and Procedures 15 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17 Certification 18-19 Additional Exhibits 20
Part I PVC Container Corporation Consolidated Balance Sheets (Unaudited)
SEPTEMBER JUNE 30, 2003 30, 2003 ----------------------------- ASSETS Current assets: Cash and cash equivalents $ 483,689 $ 673,055 Accounts receivable, net 11,269,473 12,398,916 Inventories, net 13,243,613 12,525,741 Prepaid expenses and other current assets 1,846,061 1,255,440 Deferred income taxes 1,658,154 1,658,154 ----------------------------- Total current assets 28,500,990 28,511,306 Properties, plant and equipment at cost, net 30,790,295 30,297,375 Goodwill, net of accumulated amortization 3,296,298 3,296,298 Other assets 310,659 339,212 ----------------------------- $ 62,898,242 $ 62,444,191 ============================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,008,169 $ 8,132,728 Accrued expenses 2,317,247 2,675,908 Current portion of long-term debt 3,643,762 3,351,266 ----------------------------- Total current liabilities 13,969,178 14,159,902 Long-term debt 27,296,809 26,480,888 Interest rate swap 452,908 543,436 Deferred income taxes 2,460,828 2,423,711 Stockholders' equity: Preferred stock, par value $1.00, authorized 1,000,000 shares, none issued Common stock, par value $.01, authorized 10,000,000 shares, 7,044,655 shares issued and outstanding as of September 30, 2003 and June 30, 2003, respectively 70,446 70,446 Capital in excess of par value 3,810,981 3,810,981 Retained earnings 15,109,103 15,280,249 Accumulated other comprehensive loss (267,216) (320,627) Treasury stock, at cost (2,262 shares at September 30, 2003 and June 30, 2003) (4,795) (4,795) ----------------------------- Total stockholders' equity 18,718,519 18,836,254 ----------------------------- $ 62,898,242 $ 62,444,191 =============================
See accompanying notes. 3 Part I PVC Container Corporation Consolidated Statements of Operations (Unaudited)
THREE MONTHS ENDED SEPTEMBER 30 --------------------------------- 2003 2002 --------------------------------- Net sales $ 21,229,348 $ 21,336,996 Cost and expenses: Cost of goods sold (exclusive of depreciation and amortization expense shown separately below) 16,963,730 17,543,569 Selling, general and administrative expenses 2,436,857 2,277,619 Depreciation and amortization 1,514,336 1,461,242 Provision for restructuring 116,271 --------------------------------- 21,031,194 21,282,430 --------------------------------- Income from operations 198,154 54,566 Other income (expense): Interest expense (488,232) (482,795) Other income 86,830 --------------------------------- (488,232) (395,965) --------------------------------- Loss before benefit for income taxes (290,078) (341,399) Benefit for income taxes 118,932 139,974 --------------------------------- Net loss $ (171,146) $ (201,425) ================================= Loss per share Basic and Diluted ($ 0.02) ($ 0.03)
See accompanying notes. 4 Part I PVC Container Corporation Consolidated Statements of Cash Flows (Unaudited)
THREE MONTHS ENDED SEPTEMBER 30 2003 2002 ------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (171,146) $ (201,425) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,514,336 1,461,242 Amortization of deferred financing costs 44,125 39,127 Deferred income taxes 445,899 Changes in assets and liabilities: Accounts receivable, net 1,129,443 1,401,727 Inventories (717,872) (401,955) Prepaid expenses and other current assets (590,621) (503,056) Other assets 4,428 4,424 Accounts payable and accrued expenses (483,220) 600,922 Income taxes payable (775,900) ------------------------------- Net cash provided by operating activities 729,473 2,071,005 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (2,007,256) (1,429,141) ------------------------------- Net cash used in investing activities (2,007,256) (1,429,141) ------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from revolving credit line 434,624 Proceeds from long-term debt 1,519,670 1,736,000 Payment on indebtedness (845,877) (2,761,822) Deferred financing costs (20,000) (20,000) ------------------------------- Net cash provided by (used in) financing activities 1,088,417 (1,045,822) ------------------------------- Net decrease in cash and cash equivalents (189,366) (403,958) Cash and cash equivalents at beginning of period 673,055 657,123 ------------------------------- Cash and cash equivalents at end of period $ 483,689 $ 253,165 =============================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 488,916 $ 480,653 =============================== Income taxes paid $ 250,825 $ 635,925 ===============================
See accompanying notes. 5 Part I PVC Container Corporation Notes to Consolidated Financial Statements Note 1 Description of Business General PVC Container Corporation (the "Company") was incorporated in Delaware in 1968. The Company's major business activity consists of the manufacture and sale of a line of plastic bottles ("bottles") made from polyvinyl chloride ("PVC") compounds, high-density Polyethylene ("HDPE") and polyethylene terephthalate ("PET") resins. The Company sells these bottles through Novapak Corporation, which is a wholly-owned subsidiary. Another wholly-owned subsidiary, Airopak Corporation, produces bottles that are fluorinated to improve the chemical resistance and barrier properties. All of these bottles are used primarily for the packaging of cosmetics, toiletries, foods, household chemicals, lawn and garden and industrial chemical products. The Company produces and sells PVC compounds through its wholly-owned subsidiary, Novatec Plastics Corporation, Inc. These compounds are used by the Company or sold to other plastic bottle manufacturers whose products compete with those produced by the Company. During the last several years, the Company has endeavored to diversify its PVC compound business. For example, the Company has developed and begun to sell several categories of specialty PVC compounds for non-bottle applications including extruded profiles and accessories, furniture, molding and other indoor fixtures, and a variety of injection molded electrical and electronic housings. Note 2 Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2003, and the results of operations and cash flows for the three month periods ended September 30, 2003 and 2002. 6 While the Company believes that the disclosures presented are adequate to make the information not misleading, these consolidated financial statements should be read in conjunction with the financial statements and the notes included in the Company's annual report on Form 10-K for the fiscal year ended June 30, 2003. Diluted earnings per share are based on the average number of common shares outstanding during each period, assuming exercise of all stock options having exercise prices less than the average market price of the common stock using the treasury stock method. The weighted average number of shares of Common Stock used in computing basic and diluted earnings (loss) per share were as follows:
THREE MONTHS ENDED SEPTEMBER 30 --------------------- 2003 2002 --------------------- Weighed average common shares outstanding used to calculate basic earnings (loss) per share 7,042,393 7,042,393 Net effect of dilutive securities based upon the treasury stock method using an average market price - - --------------------- Weighed average common and dilutive securities outstanding used to calculate diluted earnings (loss) per share 7,042,393 7,042,393 =====================
The accompanying consolidated financial statements include the accounts of PVC Container Corporation and its wholly-owned subsidiaries Novapac Corporation, Novatec Plastics Corporation, Marpac Industries, Inc., Airopak Corporation, and PVC Container International Sales Corporation, a foreign sales company incorporated in the U.S. Virgin Islands in 1993. All inter-company accounts have been eliminated. Note 3 Stock-Based Compensation In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based Compensation -- Transition and Disclosure." SFAS 148 amends Statement No. 123, "Stock-Based Compensation" (SFAS 123), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS 123 to require prominent disclosures in both 7 annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure provisions of SFAS 148 are effective for periods ending after December 15, 2002 and have been incorporated as below. As permitted by SFAS 123, the Company has elected to follow the intrinsic value method under Accounting Principle Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related interpretations in accounting for its employee stock option plans. Under APB 25, no compensation expense is recognized at the time of option grant when the exercise price of the Company's employee stock options equals the fair market value of the underlying common stock on the date of grant. The following table illustrates the effect on net loss and net loss per common share as if the Company had applied the fair value method to measure stock-based compensation, required under the disclosure provisions of SFAS 123:
THREE MONTHS ENDED SEPTEMBER 30 ----------------------- 2003 2002 ----------------------- Net loss, as reported $(171,146) $(201,423) Add: Stock-based compensation Included in reported net loss, net of tax -- -- Deduct: Stock-based compensation expense under fair value reporting, net of tax (6,507) (10,159) ---------------------- Pro forma net loss $(177,653) $(211,582) Loss per share: Net loss, as reported: Basic $ (0.02) $ (0.03) Diluted $ (0.02) $ (0.03) Pro forma net loss: Basic $ (0.03) $ (0.03) Diluted $ (0.03) $ (0.03)
Note 4 Impact of Recently Issued Accounting Standards In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). FIN 46 is the interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements", which addresses consolidation by business enterprises of variable interest entities. FIN 46 is effective immediately for all variable interest entities created after January 31, 2003 and becomes effective for the Company on October 1, 2003 for variable interest entities in which it holds a variable interest that it acquired before February 1, 2003. The Company does not expect the adoption of FIN 46 to have an impact on its financial position, results of operations and cash flows. 8 In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" (SFAS 149). This statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 149 is effective for contracts entered into or modified after June 30, 2003 and hedging relationships designated after June 30, 2003. Certain provisions of SFAS 149 relating to SFAS 133 implementation issues that have been effective for prior fiscal quarters will continue to be applied in accordance with their respective effective dates. The Company's financial position, results of operations and cash flows were not impacted by the adoption of SFAS 149. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" (SFAS 150). SFAS 150 establishes standards for classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS 150 was effective for all financial instruments created or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003; SFAS 150 has been deferred indefinitely with respect to mandatorily redeemable non-controlling interests. 9 Note 5 Inventories consist of:
SEPTEMBER JUNE 30, 2003 30, 2003 ---------------------------- Raw materials $ 5,359,244 $ 6,023,810 Finished goods 7,292,569 6,264,247 Reserves (969,995) (1,036,762) ---------------------------- Total FIFO inventories 11,681,818 11,251,295 Molds for resale, in production 1,067,412 840,605 Supplies 494,383 433,841 ---------------------------- $ 13,243,615 $ 12,525,741 ============================
Note 6 PNC Bank Agreement The Company entered into a senior secured credit facility up to $43,750,000 ("PNC Bank Agreement") with PNC Bank in August 2000. The credit facility is structured as a five year $25,000,000 senior revolving credit facility, a five year $12,183,000 senior term loan, a five year $4,192,000 standby letter of credit and a $2,000,000 capital expenditure line. The credit facility contains annual minimum equity and fixed charge coverage covenants with which the Company was in compliance at September 30, 2003. The term loan bears interest at LIBOR plus 300 basis points and the revolving line bears interest at LIBOR plus 250 basis points. The Company entered into interest-rate swap agreements to effectively convert a portion of the floating term loan debt interest to a fixed rate. The $2 million capital expenditure line of credit bears interest at LIBOR plus 300 basis points. Borrowings under the PNC Bank Agreement totaled approximately $17.4 million at September 30, 2003. 10 Note 7 The Company currently has two reportable segments identified by product type: Plastic Containers and Compound. The Plastic Containers segment manufactures custom designed PET, HDPE and PVC containers mainly for cosmetics, toiletries, foods, household chemicals, lawn and garden and industrial chemical products. The Compound segment manufactures PVC compound for use by the Company and sale to external customers. The reportable segments are each managed separately due to their different manufacturing processes and the different strategic markets in which each operates. The Company evaluates each segment's performance based on profit or loss from operations before income taxes. The accounting policies for the reportable segments are the same as those for the Company. Intersegment sales and transfers are recorded at market prices. Information on segments and a reconciliation to consolidated totals are as follows:
THREE MONTHS ENDED SEPTEMBER 30 --------------------------------- 2003 2002 --------------------------------- Net revenues: Company total $ 5,191,125 $ 6,300,844 Intersegment revenue - Compound (1,528,975) (1,872,711) -------------------------------- Revenues from external customers - Compound 3,662,150 4,428,133 Plastic containers 17,567,198 16,908,863 -------------------------------- Total consolidated net revenues $ 21,229,348 $ 21,336,996 ================================ Net income (loss): Compound $ 201,467 $ 80,033 Plastic containers (372,613) (281,458) -------------------------------- Total consolidated net loss $ (171,146) $ (201,425) ================================ Total assets: Compound $ 5,725,725 $ 6,175,064 Plastic containers 57,172,518 53,677,771 -------------------------------- Total consolidated assets $ 62,898,243 $ 59,852,835 ================================
11 Note 8 Comprehensive Loss The following table sets forth comprehensive income (loss) for the three month periods ended September 30, 2003 and 2002:
THREE MONTHS ENDED SEPTEMBER 30 ------------------------- 2003 2002 ------------------------- Net loss $(171,146) $(201,425) Unrealized gain (loss) on interest rate swap, net of taxes 53,411 (105,451) --------- --------- Comprehensive loss $(117,735) $(306,876) ========= =========
Note 9 Provision for Restructuring During the quarter ending September 30, 2003, the Company recorded a $116,000 pre-tax charge for restructuring related to the transfer of some of the personnel and most of the equipment at its Marpac Industries subsidiary located in Kingston, NY to its Philmont, NY plant. The Kingston facility will be converted to a warehouse. While successful at broadening our customer and product mix at our technical blow molding business at Marpac, we continue to see a consolidation in sales for our larger EBM customers. As a result, we have initiated this plan to rationalize some of EBM and Marpac capacity. When completed, we expect to improve capacity utilization significantly at Philmont, while reducing the combined headcount which will result in a significant profit improvement during this current fiscal year. The workforce reduction includes 58 employees of which 29 are direct labor, 27 indirect labor and 2 administrative. The total restructuring cost is estimated to be $250,000, of which $116,000 has been incurred and recognized during quarter ended September 30, 2003, which includes $43,000 for severance, and other personnel related costs for 38 employees and $73,000 for equipment relocation and other transfer costs. We expect this restructuring to be substantially completed by the end of the second quarter of our fiscal year. These costs are reflected in our plastic container segment of our business. In addition, the plastic container segment experienced manufacturing inefficiencies related to the move. These additional costs are reflected in cost of goods sold. 12 PVC CONTAINER CORPORATION Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Net sales for the three-month period ended September 30, 2003, were $21,229,000, compared to $21,337,000 for the three-month period ended September 30, 2002. Although total sales volume remained level, our plastic container segment showed continued growth. General line HDPE and PVC extrusion blown bottle sales were 12.3% lower than last year. Strong growth was reflected in PET bottles by 51.3% as compared to last year, a line of business that the Company continues to expand its market share. However, the Company's technical and specialty bottle group experienced an 8.6% decline during the three month period ended September 30, 2003, as compared to the same period a year ago. Our Novatec plastic compound segment experienced a decrease of 17.3% in sales volume from the same period last year, due to an overall weaker demand for rigid PVC compounds during this first quarter of our fiscal year. Cost of goods sold for the three months ended September 30, 2003, was $16,964,000, or 79.9% of net sales, compared to $17,544,000, or 82.2% of net sales, for the three months ended September 30, 2002. This decrease is mainly attributed to improved product mix, higher margins resulting from increased emphasis on cost containment, continued reductions in manufacturing overhead, and decreased raw material costs. Also, the addition of new capacity for our new PET bottle line was substantially completed during the latter part of the fiscal year ended June 30, 2003, so the Company was not burdened with the related start-up expenses during the three months ended September 30, 2003. Selling, general and administrative ("SG&A") expenses increased by $159,000 in the first quarter of fiscal 2004 compared to the same period last year. For the quarter ended September 30, 2003, SG&A expenses were $2,437,000, or 11.5% of net sales, compared to $2,278,000 or 10.7% of net sales for the quarter ended September 30, 2002. This increase is mainly attributable to increased personnel costs and related benefits in both our marketing and administrative functions to support the execution of a marketing strategy designed to grow the Company's business. Depreciation and amortization expense increased to $1,514,000 for the three months ended September 30, 2003, compared to $1,461,000 for the three months ended September 30, 2002. The primary cause for the increase is the additional depreciation associated with the new capacity in our PET bottle line. The Company recorded a $116,000 pre-tax charge for restructuring related to the transfer of some of the personnel and most equipment from its Kingston, New York facility to its Philmont, New York plant and the conversion of the Kingston facility to a warehouse. Management expects the restructuring to be completed by the end of the second quarter of our fiscal year. 13 Income from operations increased $143,000 during the three-month period ended September 30, 2003, compared to the same period a year ago. For the three-month period ended September 30, 2003, income from operations was $198,000, or 0.9% of net sales, compared to $55,000, or 0.3% of net sales, for the three months ended September 30, 2002. This increase in operating income is principally due to the same factors that enabled the Company to reduce cost of goods sold during the first quarter. For the three months ended September 30, 2003, net interest expense was $488,000, compared to $483,000 for the three months ended September 30, 2002. This $5,000 increase is attributable to increased borrowings for working capital requirements. Net loss for the quarter ended September 30, 2003, decreased to $171,000, or $.02 on a diluted earnings per share basis, compared to a net loss of $201,000, or $.03 on a diluted earnings per share basis, for the same period a year ago. LIQUIDITY AND CAPITAL RESOURCES Because Management generally does not monitor liquidity and capital resources on a segment basis, this discussion is presented on a consolidated basis. The Company's liquidity position and working capital remained adequate for the three-month period ended September 30, 2003. Net working capital as at September 30, 2003, increased by $181,000 to $14,532,000 since June 30, 2003. The current ratio of assets to liabilities was 2.0 at both September 30, 2003, and June 30, 2003. There is no major factor causing this minimal change in working capital. During the three month period ended September 30, 2003, the Company generated net cash from operating activities of $729,000, and proceeds from our revolving credit line and additional long term debt of $1,954,000. These funds were primarily used to acquire capital assets of $2,007,000 and reduce long term debt by $846,000. Cash used for capital assets increased $578,000 as compared to the same period a year ago. This increase attributed to additional capacity to support our PET bottle line. Cash used for accounts payable and accrued expenses during the three month period ended September 30, 2003, was $483,000, a decrease of $1,084,000 from the corresponding period of the prior year. This decrease is primarily related to the payment of pre-purchased raw material inventories for price protection at June 30, 2003 for future use payable within terms during this quarter. Assets held for sale, consisting of the Company's Ardmore, Oklahoma facility, totaled approximately $262,000 at September 30, 2003. During fiscal 2003, the Company reduced the carrying value of such assets to reflect the estimated fair value, less disposition costs. Management expects to sell these assets and receive proceeds that will approximate fair value during fiscal 2004. 14 The Company's short term liquidity and short term capital resources are projected to be adequate to allow the Company to continue to meet its financial obligations. The Company believes the financial resources available to it, including internally generated funds and borrowing under our revolving credit facility, will be sufficient to meet foreseeable working capital requirements. At September 30, 2003, the Company had unused sources of liquidity consisting of cash and cash equivalents of $484,000 and unused credit (available to borrow) under a revolving credit facility of $5,630,000. The Company utilizes its revolving loan facilities for seasonal working capital needs and for other general corporate purposes. Amounts available under the Company's revolving loan facilities in excess of seasonal working capital needs may be used to pursue the Company's growth strategy and for other permitted purposes. SFAS No. 133 Effective July 1, 2000, the Company was required to adopt SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." At September 30, 2003, the Company recorded an interest swap liability for $452,908 and equity was reduced by $267,216 (net of tax). This was a non-cash event and has no impact on the Company's bank covenants. Item 3: Quantitative and Qualitative Disclosures About Market Risk Market risks relating to our operations result primarily from changes in interest rates. Interest rate pricing transactions are used only to the extent considered necessary to meet our objectives. We do not utilize derivative financial instruments for trading or other speculative purposes. Our interest rate risk management objective is to limit the impact of interest rate changes on our net income and cash flow and to reduce our overall borrowing cost. We use variable rate swap agreements to manage our exposure to interest rate fluctuations. These agreements effectively convert variable interest rates to fixed rates, enabling the Company to predict interest expense and avoid the risk of dramatic rate fluctuations. We have entered into these agreements with banks under our senior secured credit facility. PART II - OTHER INFORMATION Item 4: Controls and Procedures Evaluation of Disclosure Controls and Procedures The Company has evaluated the effectiveness of its disclosure controls and procedures, as defined in Rule 13a-14 under the Securities Exchange Act of 1934, as of a date (the "evaluation date") within ninety (90) days prior to the filing date of this report. Based upon that evaluation, the Company, as of the evaluation date, believes disclosure controls and procedures were effective in ensuring that all 15 material information relating to the Company, including its consolidated subsidiaries, required to be filed in this quarterly report has been made known in a timely manner. Changes in Internal Controls There have been no significant changes made in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation date. Item 6: Exhibits and Reports on Form 8-K (a) Exhibits 31.1 Certification of Phillip L. Friedman, President, Chief Executive Officer, s Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Jeffrey A. Shapiro, Senior Vice President, Chief Financial Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certification of Pillip L. Friedman, Chief Executive Officer, and Jeffrey A. Shapiro, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K Report on Form 8-K was filed by the Registrant during the three months ended September 30, 2002: Certification of the Chief Executive Officer and the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 96 of the Sarbanes-Oxley Act of 2002. 16 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 thereunto duly authorized. Date: November 19, 2003 PVC Container Corporation /s/Phillip L. Friedman Phillip L. Friedman President and Chief Executive Officer 17 EX-31.1 3 y91801exv31w1.txt SECTION 302 CERTIFICATION EXHIBIT 31.1 PRINCIPAL EXECUTIVE OFFICER'S CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Phillip L. Friedman, certify that: 1. I have reviewed this Form 10-Q of PVC Container Corporation 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 19, 2003 s/Phillip L. Friedman -------------------------------------------- Name: Phillip L. Friedman Title: President and Chief Executive Officer EX-31.2 4 y91801exv31w2.txt SECTION 302 CERTIFICATION EXHIBIT 31.2 PRINCIPAL FINANCIAL OFFICER'S CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Jeffrey Shapiro, certify that: 1. I have reviewed this Form 10Q of PVC Container Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 19, 2003 s/Jeffrey Shapiro ---------------------------- Name: Jeffrey Shapiro Title: Senior Vice President and Chief Financial Officer EX-32 5 y91801exv32.txt SECTION 906 CERTIFICATION Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with PVC Container Corporation (the "Company") Form 10-Q for the quarter ended September 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report. Date: November 19, 2003 s/Phillip L. Friedman ----------------------------- Name: Phillip L. Friedman Title: Chief Executive Officer s/Jeffrey Shapiro ----------------------------- Name: Jeffrey Shapiro Title: Chief Financial Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----