-----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, WIsCg0pIiKivPP6VY0fFtuP5GYsxyv1JfE/wyRtiDBE8QycCqEkEnWavPzjqwdDm c6jzr50YB+i68FAMAt8t6g== 0000897101-96-000907.txt : 19961104 0000897101-96-000907.hdr.sgml : 19961104 ACCESSION NUMBER: 0000897101-96-000907 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961101 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAGLE PACIFIC INDUSTRIES INC/MN CENTRAL INDEX KEY: 0000852426 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PLASTIC PRODUCTS [3080] IRS NUMBER: 411642846 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18050 FILM NUMBER: 96652011 BUSINESS ADDRESS: STREET 1: 2430 METROPOLITAN CENTRE STREET 2: 333 S SEVENTH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123719650 MAIL ADDRESS: STREET 1: 2430 METROPOLITAN CENTRE STREET 2: 333 S SEVENTH STREET CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: BLACK HAWK HOLDINGS INC /MN/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BHH INC DATE OF NAME CHANGE: 19891019 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: SEPTEMBER 30, 1996 Commission File Number: 0-18050 EAGLE PACIFIC INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) MINNESOTA 41-1642846 (State of Incorporation) (IRS Employer ID No.) 2430 METROPOLITAN CENTRE 333 S. SEVENTH STREET MINNEAPOLIS, MINNESOTA 55402 (Address of principal executive offices) Registrant's telephone number, including area code: (612) 371-9650 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 the number of shares outstanding of each of the issuer's classes of common stock, as of October 25, 1996: 6,409,190 shares of Common Stock, $.01 par value per share. EAGLE PACIFIC INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page ---- PART I - FINANCIAL INFORMATION Item 1 - Consolidated Condensed Balance Sheets - September 30, 1996 and December 31, 1995 (Unaudited) 3 Consolidated Condensed Statements of Operations - Three and Nine Months Ended September 30, 1996 and 1995 (Unaudited) 4 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 1996 and 1995 (Unaudited) 5 Notes to Consolidated Condensed Financial Statements (Unaudited) 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION 9 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements EAGLE PACIFIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 1996 1995 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 641,290 $ 303,043 Restricted cash -- 500,000 Accounts receivable, less allowance for doubtful accounts and sale discounts of $285,900 and $157,900, respectively 9,035,894 6,322,387 Inventories 6,999,595 8,174,957 Other 361,269 153,118 ------------ ------------ Total current assets 17,038,048 15,453,505 PROPERTY AND EQUIPMENT, net 10,461,057 9,354,748 OTHER ASSETS: Prepaid interest 1,477,698 2,907,880 Goodwill, less accumulated amortization of $238,261 and $172,092, respectively 3,599,545 3,202,631 Other 964,701 999,018 ------------ ------------ 6,041,944 7,109,529 ------------ ------------ $ 33,541,049 $ 31,917,782 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 5,087,913 $ 5,521,505 Accounts payable 5,633,519 5,252,683 Accrued liabilities 1,473,063 1,209,321 Current maturities of long-term debt 1,934,004 3,019,064 ------------ ------------ Total current liabilities 14,128,499 15,002,573 ------------ ------------ LONG-TERM DEBT, less current maturities 7,530,278 5,356,762 SUBORDINATED DEBT 3,937,350 6,386,750 OTHER LONG-TERM LIABILITIES 413,221 596,622 STOCKHOLDERS' EQUITY: Series A preferred stock, 7% cumulative dividend; convertible; $2 liquidation preference, no par value; authorized 2,000,000 shares; issued and outstanding 18,750 and 1,383,500 shares, respectively 37,500 2,767,000 Undesignated stock, par value $.01 per share, authorized 18,000,000 shares; none issued and outstanding -- -- Common stock, par value $.01 per share; authorized 30,000,000 shares; issued and outstanding 6,401,690 and 4,152,940 shares, respectively 64,017 41,529 Additional paid-in capital 36,970,331 32,757,381 Unearned compensation on stock options (125,086) (204,232) Accumulated deficit (29,415,061) (30,786,603) ------------ ------------ Total stockholders' equity 7,531,701 4,575,075 ------------ ------------ $ 33,541,049 $ 31,917,782 ============ ============ See accompanying notes to consolidated condensed financial statements.
EAGLE PACIFIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ NET SALES $ 18,395,181 $ 19,038,421 $ 52,511,981 $ 37,315,159 COST OF GOODS SOLD 14,226,118 16,494,901 39,349,613 30,655,564 ------------ ------------ ------------ ------------ Gross profit 4,169,063 2,543,520 13,162,368 6,659,595 OPERATING EXPENSES: Selling expenses 1,939,443 1,789,828 5,561,434 3,786,709 General and administrative expenses 703,475 499,657 2,111,063 1,559,853 ------------ ------------ ------------ ------------ 2,642,918 2,289,485 7,672,497 5,346,562 ------------ ------------ ------------ ------------ OPERATING INCOME 1,526,145 254,035 5,489,871 1,313,033 NON-OPERATING EXPENSE 636,918 774,027 2,156,741 2,027,075 ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY LOSS 889,227 (519,992) 3,333,130 (714,042) INCOME TAX EXPENSE 39,600 12,600 152,600 -- ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE EXTRAORDINARY LOSS 849,627 (532,592) 3,180,530 (714,042) EXTRAORDINARY LOSS ON DEBT PREPAYMENTS, less income tax benefit of $90,000 -- -- 1,718,854 -- ------------ ------------ ------------ ------------ NET INCOME (LOSS) 849,627 (532,592) 1,461,676 (714,042) PREFERRED STOCK DIVIDENDS (1,291) (48,421) (90,135) (145,266) ------------ ------------ ------------ ------------ NET INCOME (LOSS ) APPLICABLE TO COMMON STOCK $ 848,336 $ (581,013) $ 1,371,541 $ (859,308) ============ ============ ============ ============ NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE: Primary Income (loss) before extraordinary loss .11 (.14) .50 (.22) Extraordinary loss on debt prepayments -- -- (.27) -- ------------ ------------ ------------ ------------ Net income (loss) $ .11 $ (.14) $ .23 $ (.22) ============ ============ ============ ============ Fully diluted Income (loss) before extraordinary loss $ .11 $ (.14) $ .44 $ (.22) Extraordinary loss on debt prepayments -- -- (.24) -- ------------ ------------ ------------ ------------ Net income (loss) $ .11 $ (.14) $ .20 $ (.22) ============ ============ ============ ============ AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING Primary 7,544,367 4,054,788 6,255,037 3,835,722 ============ ============ ============ ============ Fully diluted 7,606,121 4,054,788 7,259,968 3,835,722 ============ ============ ============ ============ See accompanying notes to consolidated condensed financial statements.
EAGLE PACIFIC PLASTICS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 1,461,676 $ (714,042) Adjustments necessary to reconcile net income (loss) to net cash used in operating activities: Extraordinary loss on debt prepayments 1,718,854 -- Minority interest 120,089 (16,865) Depreciation and amortization 1,212,361 909,737 Loan discount amortization 260,088 365,039 Prepaid interest amortization 346,150 452,895 Change in operating assets and liabilities (1,011,718) 475,482 Other 105 (28,244) ------------ ------------ Net cash provided by operating activities 4,107,605 1,444,002 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Pacific Plastics, Inc., net of cash acquired -- (4,195,035) Purchase of property and equipment (2,139,070) (321,416) Payment under noncompete agreement -- (750,000) Purchase of minority interest (519,749) -- Proceeds from restricted cash 500,000 -- Decrease in other assets -- 100,000 Proceeds from sale of property and equipment 36,484 14,700 ------------ ------------ Net cash used in investing activities (2,122,335) (5,151,751) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 1,422,500 43,750 Proceeds from exercise of stock options 24,063 -- Payment of preferred stock dividend (90,135) (145,266) Proceeds from long-term debt 8,029,950 1,961,624 Repayment of long-term debt (10,001,552) (939,877) Payment for prepaid interest -- (1,500,000) Payment for debt issuance costs (598,257) -- Net borrowings under note payable (433,592) 4,561,117 ------------ ------------ Net cash (used in) provided by financing activities (1,647,023) 3,981,348 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 338,247 273,599 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 303,043 -- ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 641,290 $ 273,599 ============ ============ See accompanying notes to consolidated condensed financial statements
EAGLE PACIFIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED) 1. PRESENTATION In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of Eagle Pacific Industries, Inc. and subsidiaries at September 30, 1996 and the results of its operations for the three and nine month periods ended September 30, 1996 and 1995 and its cash flows for the nine month periods ended September 30, 1996 and 1995. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Although the Company's management believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements of the Company included with its annual report on Form 10-KSB for the year ended December 31, 1995. 2. ACQUISITION OF PACIFIC PLASTICS, INC. On July 10, 1995, the Company acquired all of the outstanding common stock of Pacific Plastics, Inc. (Pacific). The following unaudited pro forma condensed combined statements of operations reflect the combined operations of the Company and Pacific during the nine months ended September 30, 1995 as if the acquisition had occurred at the beginning of 1995. The unaudited pro forma condensed combined statements of operations may not necessarily reflect the actual results of operations of the Company which would have resulted had the acquisition occurred as of the dates presented. The unaudited pro forma information is not necessarily indicative of future results of operations for the combined companies. NINE MONTHS ENDED SEPTEMBER 30, 1995 ------------------ Revenues $55,480,000 Gross profit 9,570,000 Net loss (622,000) Net loss applicable to common stock (768,000) Net loss per common share $ (.19) 3. INVENTORY SEPTEMBER 30, DECEMBER 31, 1996 1995 ------------- ------------ Raw materials $ 2,056,317 $ 2,485,546 Finished goods 4,943,278 5,689,411 ------------- ------------ $ 6,999,595 $ 8,174,957 ------------- ------------ 4. STOCKHOLDERS' EQUITY During the second and third quarters of fiscal 1996, the Company issued 600,000, 19,000, 1,559,750, and 70,000 shares of common stock for a new private equity offering, the acquisition of additional shares of Eagle Plastics, Inc. stock, the conversion of 1,364,750 shares of preferred stock, and the exercise of stock options, respectively. 5. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NON-CASH FINANCING ACTIVITIES A summary of supplemental cash flow information and non-cash financing activities for the nine months ended September 30, is as follows:
1996 1995 ---------- ---------- Interest paid, including prepaid interest to fix the contingent interest $1,413,764 $2,773,181 Issuance of notes payable in connection with the agreement to fix the contingent interest -- 1,985,325 Issuance of common stock in connection with the agreement to fix the contingent interest -- 642,600 Value of warrants issued in connection with the agreement to fix the contingent interest -- 6,000 Issuance of common stock in connection with the acquisition of Pacific -- 700,000 Issuance of notes payable in connection with the acquisition of Pacific -- 1,700,000 Issuance of common stock in exchange for Preferred stock 2,729,500 -- Issuance of common stock in exchange for Eagle stock 59,375 --
6. FINANCIAL RESTRUCTURING In May 1996, the Company repurchased $3.0 million of it's subordinated debt which generated an extraordinary loss of $1,718,854, net of income taxes. The Company issued a three year warrant to purchase 215,000 shares of the Company's common stock in consideration for the subordinated debt repurchase. In conjunction with the repurchase, the Company obtained $1.5 million of new common equity and an additional $3.4 million of term notes, and the Company repurchased approximately one-half of the Eagle minority interest. The additional term notes were obtained through a bank refinancing which consolidated the Eagle and Pacific term notes and revolving credit loans into a $8.0 million term note and a $16.5 million revolving credit loan. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION: On July 10, 1995, the Company acquired all of the outstanding common stock of Pacific Plastics, Inc. (Pacific). Pacific, and its wholly-owned subsidiary, Arrow Pacific Plastics, Inc., extrude polyvinyl chloride pipe and polyethylene tubing products which are marketed primarily in the Northwestern United States. As Pacific was not acquired by the Company until July 1995, the Company's operating results are not comparable with prior years. RESULTS OF OPERATIONS: NET SALES - Net sales for the three months ended September 30, 1996, were $18,395,000, a decrease of $643,000 from net sales of $19,038,000 for the three months ended September 30, 1995. Net sales for the nine months ended September 30, 1996, were $52,512,000, an increase of $15,197,000 over net sales of $37,315,000 for the nine months ended September 30, 1995. Net sales for 1996 decreased $2,968,000, when compared to the nine months 1995 pro forma net sales. The decrease in the three month and proforma net sales is entirely due to lower selling prices as pounds sold during the three and nine months of 1996 are approximately 5% higher than the 1995 three month actual results and nine month 1995 pro forma results. The increase in the nine month actual net sales is due to the acquisition of Pacific and is partially offset by the lower selling prices. GROSS PROFIT - Gross profit as a percentage of net sales was 22.7% and 25.1% for the three and nine months ended September 30, 1996, respectively, compared to 13.4% and 17.8% for the three and nine months ended September 30, 1995, respectively. The increase in the gross profit is primarily due to the stabilization of polyvinyl chloride (PVC) and polyethylene (PE) raw material costs and selling prices during 1996. OPERATING EXPENSES - Total operating expenses for the three and nine months ended September 30, 1996 increased $353,000 and $2,326,000, respectively, compared to the same periods in 1995. The increase in the three month results is due to higher selling expenses as a result of the higher sales volume. The increase in the nine month results is primarily due to the acquisition of Pacific as well as the higher sales volume. Operating expenses decreased $49,000 for the nine months ended September 30, 1996 compared to the same period 1995 pro forma operating expenses. The decrease is primarily due to salary and wage savings from consolidation of administrative staff after the Pacific acquisition, partially offset by higher selling expenses as a result of higher sales volume. INTEREST EXPENSE - Interest expense decreased $237,000 and $81,000 during the three and nine months ended September 30, 1996, respectively, compared to the same periods in 1995. Interest expense decreased $493,000 during the nine months ended September 30, 1996 compared to the same period 1995 pro forma results. The decrease is due to the financial restructuring in the second quarter of 1996, lower borrowings on the revolving credit loans and lower interest rates. INCOME TAXES - The income tax provisions for the three and nine months ended September 30, 1996 and 1995, were calculated based upon management's estimate of the annual effective rates. The effective income tax rate for fiscal 1996 is lower than the statutory rate as a result of a decrease in the deferred income tax valuation primarily due to utilizing federal net operating loss carryforwards to offset current federal taxable income. The effective income tax rate for fiscal 1995 is lower than the statutory rate because the Company's net operating losses could not be carried back and realization of any benefits from the 1995 loss were uncertain. NET INCOME (LOSS) - The Company generated net income of $850,000 and $1,462,000 for the three and nine months ended September 30, 1996, respectively, compared to a net loss of $533,000 and $714,000 for same periods in 1995. The Company had a pro forma net loss of $622,000 for the nine month period ended September 30, 1995. The 1996 nine month results include a $1,719,000 one-time extraordinary loss on debt prepayments. The improved profitability is primarily attributable to the recent stabilization of the plastic resin market, which contributed to higher gross profit margins. LIQUIDITY AND CAPITAL RESOURCES: Working capital at September 30, 1996, was $2,910,000, an increase of $2,459,000 from working capital of $451,000 at December 31, 1995. The increase in working capital is primarily due to a reduction in the current maturities of long-term debt as a result of the financial restructuring and a return to profitable results in 1996 versus the losses incurred in 1995. Net cash flows provided by operating activities was $4,108,000 and $1,444,000 for the nine months ended September 30, 1996 and 1995, respectively. The improved operating cashflows is primarily due to increased profits prior to the extraordinary loss, partially offset by a change in operating assets and liabilities. Net cash flows used in investing activities totaled $2,122,000 and $5,152,000 for the nine months ended September 30, 1996 and 1995, respectively. The primary use of cash in 1996 relates to capital expenditures for the plant expansion at Eagle. The primary use of cash in 1995 relates to the acquisition of Pacific Plastics, Inc. Net cash flows used in financing activities total $1,647,000 compared to net cashflows provided by financing activities of $3,981,000 for the nine months ended September 30, 1996 and 1995, respectively. The primary use of cash in 1996 was payments on long-term debt, which was partially offset by additional borrowings on the Company's line of credit, proceeds from long-term debt, and issuance of common stock. The primary source of cash in 1995 was additional borrowings on the Company's line of credit. The Company believes that the funds to be generated from its operations, together with funds available under its $16.5 million line of credit will be sufficient to satisfy its liquidity and capital resource requirements for the next twelve months. The Company's principal commitments at September 30, 1996 consisted of obligations under operating leases for facilities and an agreement to purchase land in Utah for approximately $450,000. INFLATION: The Company does not believe that inflation has had a significant impact on the results of its operations. PART II - OTHER INFORMATION ITEM 1 - Legal Proceedings None ITEM 2 - Changes in Securities None ITEM 3 - Defaults Upon Senior Securities None ITEM 4 - Submission of Matter to a Vote of Security Holders None ITEM 5 - Other Information None ITEM 6 - Exhibits and Reports on Form 8-K (a) Exhibits. See "Exhibit Index" immediately following the signature page of this form 10-Q. (b) Reports on Form 8-K. None 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. EAGLE PACIFIC INDUSTRIES, INC. By /s/ William H. Spell ------------------------------------- William H. Spell President By /s/ Patrick M. Mertens ------------------------------------- Patrick M. Mertens Chief Financial Officer Dated: November 1, 1996 EXHIBIT INDEX Exhibit Number Description ------ ----------- 11 Earnings Per Share Schedule 27 Financial Data Schedule EX-11 2 COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11. Earnings Per Share Schedule Calculation of net income under the modified treasury stock method:
THREE NINE MONTHS MONTHS ---------- ---------- Primary Average common stock outstanding 6,395,867 5,106,537 Common stock equivalents 1,148,500 1,148,500 ---------- ---------- 7,544,367 6,255,037 ========== ========== Net income applicable to common stock $ 848,336 $1,371,541 Assumed interest expense reduction 18 61,671 ---------- ---------- $ 848,354 $1,433,212 ========== ========== Net income per share $ .11 $ .23 ========== ========== Fully diluted Average common stock outstanding 6,401,690 6,055,537 Preferred stock 18,750 18,750 Common stock equivalents 1,185,681 1,185,681 ---------- ---------- 7,606,121 7,259,968 ========== ========== Net income applicable to common stock $ 848,336 $1,371,541 Preferred stock dividends 1,291 90,135 Assumed interest expense reduction -- -- ---------- ---------- $ 849,627 $1,461,676 ========== ========== Net income per share $ .11 $ .20 ========== ==========
EX-27 3 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1996 SEP-30-1996 641,290 0 9,321,794 285,900 6,999,595 17,038,048 13,263,448 2,802,391 33,541,049 14,128,499 13,401,632 37,500 0 64,017 7,430,184 33,541,049 52,511,981 52,511,981 39,349,613 39,349,613 7,685,781 (13,284) 2,066,486 3,333,130 152,600 3,180,530 0 (1,718,854) 0 1,461,676 .23 .20
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