10-Q 1 y83308e10vq.txt TEKNI-PLEX, INC. 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 December 27, 2002 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 registrant as specified in its charter) Delaware 22-3286312 --------------------------------- ------------------------------------ (State or other jurisdiction (IRS Employer Identification Number) of incorporation or organization) 260 N. Denton Tap Road, Suite 150 (972) 304-5077 Coppell, TX 75019 ------------------------------- --------------------------------------- (Registrant's telephone number) (Address of principal executive office) 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 / / TEKNI-PLEX, INC.
Page # PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of December 27, 2002 and June 28, 2002 3 Consolidated Statements of Operations for the six months and three months ended December 27, 2002 and December 28, 2001 4 Consolidated Statements of Other Comprehensive Income for the six months and three months ended December 27, 2002 and December 28, 2001 4 Consolidated Statements of Cash Flows for the six months ended December 27, 2002 and December 28, 2001 5 Notes to Consolidated Financial Statements 6-18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19-21 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 21 PART II. OTHER INFORMATION Item 1. Legal proceedings 22 Item 2. Changes in securities 22 Item 3. Defaults upon senior securities 22 Item 4. Submission of matters to a vote of securities holders 22 Item 5. Other information 22 Item 6. Exhibits and reports on Form 8-K 22 Item 7. Certifications 23-26
TEKNI-PLEX, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
DECEMBER 27, 2002 June 28, 2002 (UNAUDITED) ----------- --------- ASSETS CURRENT: Cash $ 16,208 $ 28,199 Accounts receivable, net of allowance for doubtful accounts of $2,903 and $1,671 respectively 102,285 147,198 Inventories 157,857 117,632 Deferred income taxes 7,472 7,472 Prepaid and other current assets 9,336 5,583 ---------- ---------- TOTAL CURRENT ASSETS 293,158 306,084 PROPERTY, PLANT AND EQUIPMENT, NET 172,208 158,118 INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $78,852 AND $78,399 RESPECTIVELY 215,214 204,252 DEFERRED CHARGES, NET OF ACCUMULATED AMORTIZATION OF $6,271 AND $5,030 RESPECTIVELY 13,102 14,343 DEFERRED INCOME TAXES 20,687 16,278 OTHER ASSETS 982 1,078 ---------- ---------- $ 715,351 $ 700,153 ========== ========== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Current portion of long-term debt $ 13,269 $ 13,407 Accounts payable - trade 24,887 32,643 Accrued payroll and benefits 6,997 8,965 Accrued interest 6,490 4,789 Accrued liabilities - other 34,430 28,846 Income taxes payable 1,648 515 ---------- ---------- TOTAL CURRENT LIABILITIES 87,721 89,165 LONG-TERM DEBT 694,030 679,414 OTHER LIABILITIES 26,737 22,685 ---------- ---------- TOTAL LIABILITIES 808,488 791,264 ========== ========== STOCKHOLDERS' DEFICIT: Common stock -- -- Additional paid-in capital 170,568 170,176 Accumulated other comprehensive Loss (5,985) (6,805) Accumulated deficit (37,198) (33,959) Less: Treasury stock (220,522) (220,523) ---------- ---------- TOTAL STOCKHOLDERS' DEFICIT (93,137) (91,111) ---------- ---------- $ 715,351 $ 700,153 ========== ==========
See accompanying notes to consolidated financial statements. 3 TEKNI-PLEX, INC. AND SUBSIDIARIES (Unaudited -- in thousands) CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Six months ended DECEMBER 27, December 28, DECEMBER 27, December 28, 2002 2001 2002 2001 NET SALES $ 118,584 $ 113,740 $ 259,167 $ 228,904 COST OF SALES 87,214 86,056 197,905 174,206 --------- --------- --------- --------- GROSS PROFIT 31,370 27,684 61,262 54,698 OPERATING EXPENSES: Selling, general and administrative 14,573 16,609 28,484 31,785 --------- --------- --------- --------- OPERATING PROFIT 16,797 11,075 32,778 22,913 OTHER EXPENSES: Interest expense 17,587 16,590 35,249 34,375 Unrealized (gain) loss on derivative contracts (3,208) (5,724) 2,136 2,590 Other expenses 79 42 382 334 --------- --------- --------- --------- INCOME (LOSS) BEFORE INCOME TAXES 2,339 167 (4,989) (14,386) PROVISION (benefit) FOR INCOME TAXES 810 100 (1,750) (5,000) --------- --------- --------- --------- NET INCOME (LOSS) $ 1,529 $ 67 $ (3,239) $ (9,386) ========= ========= ========= ========= CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME NET INCOME (LOSS) $ 1,529 $ 67 $ (3,239) $ (9,386) COMPREHENSIVE INCOME (LOSS), NET OF TAXES Foreign currency translation adjustment 1,112 (993) 820 (292) --------- --------- --------- --------- COMPREHENSIVE INCOME (LOSS) $ 2,641 $ (926) $ (2,419) $ (9,678) ========= ========= ========= =========
See accompanying notes to consolidated financial statements. 4 TEKNI-PLEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited -- in thousands)
Six months ended DECEMBER 27 2002 December 28 2001 ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,239) $ (9,386) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 13,851 19,054 Unrealized loss on derivative contracts 2,136 2,590 Deferred income taxes 156 (4,591) Changes in operating assets and liabilities: Accounts receivable 48,722 28,449 Inventories (40,441) (16,021) Prepaid expenses and other current assets (3,366) (1,749) Income taxes 1,133 (2,369) Accounts payable (15,643) (9,552) Accrued interest 1,702 3,277 Accrued expenses and other liabilities (905) (5,386) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 4,106 4,316 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (13,609) (9,142) Acquisition costs (16,806) (65,757) Additions to intangibles (503) (222) Deposits and other assets 98 894 -------- -------- NET CASH USED IN INVESTING ACTIVITIES (30,820) (74,227) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings (repayments) of long-term debt 14,370 (8,813) Payment for treasury stock -- (60) Receipt of additional paid-in capital 392 50,000 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 14,762 41,127 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (39) (39) -------- -------- NET DECREASE IN CASH (11,991) (28,823) CASH, BEGINNING OF PERIOD 28,199 44,645 -------- -------- CASH, END OF PERIOD $ 16,208 $ 15,822 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for: Interest $ 32,513 $ 31,207 Income taxes 2,325 1,543
See accompanying notes to consolidated financial statements. 5 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ( in thousands) NOTE 1 - GENERAL Tekni-Plex and Subsidiaries (''Tekni-Plex'' or the ''Company'') is a global, diversified manufacturer of packaging, products, and materials primarily for the healthcare, food and consumer industries. The Company has built a leadership position in its core markets, and focuses on vertically integrated production of highly specialized products. The Company's operations are aligned under two business groups: Industrial Packaging, Products, and Materials and Consumer Packaging and Products. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. For further information please refer to the audited financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended June 28, 2002. NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS a) In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141) and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141, requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that the companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. The Company's previous business combinations were accounted for using the purchase method. As of December 27, 2002, the net carrying amount of goodwill is $211,268 and other intangible assets are $3,946. The Company has completed its transitional analysis of goodwill and has determined no adjustments are necessary. 6 If SFAS 142 had been adopted June 30, 2001, the Company's net loss for the six months ended December 28, 2001 wild have been reduced because of lower amounts of amortization as follows:
Three Months Ended Six Months Ended Net (loss), as reported $ (4,693) $ (9,386) Add amortization, net of tax 3,458 6,915 ---------- ----------- Adjusted net (loss) $ (1,235) $ (2,471) ---------- -----------
b) In August 2001, the FASB issued FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). The new guidance resolves significant implementation issues related to FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"). SFAS 144 supersedes SFAS 121, but it retains its fundamental provisions. It also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidate a subsidiary for which control is likely to be temporary. SFAS 144 retains the requirement of SFAS 121 to recognize an impairment loss only if the carrying amount of a long-lived asset within the scope of SFAS 144 is not recoverable from its undiscounted cash flows and exceeds its fair value. SFAS 144 is effective for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, with early application encouraged. The provisions of SFAS 144 generally are to be applied prospectively. The adoption of SFAS 144 did not have a material impact on the Company's financial position or results of operations. c) In July 2002, the FASB issued SFAS No. 146, Accounting for Restructuring Costs. SFAS 146 applies to costs associated with an exit activity (including restructuring) or with a disposal of long-lived assets. Those activities can include eliminating or reducing product lines, terminating employees and contracts and relocating plant facilities or personnel. Under SFAS 146, a company will record a liability for a cost associated with an exit or disposal activity when that liability is incurred and can be measured at fair value. SFAS 146 will require a company to disclose information about its exit and disposal activities, the related costs, and changes in those costs in the notes to the interim and financial statements that include the period in which an exit activity is initiated and in any subsequent period until the activity is completed. SFAS 146 is effective prospectively for exit or disposal activities initiated after December 31, 2002, with earlier adoption encouraged. Under SFAS 146, a company cannot restate its previously issued financial statements and the new statement grandfathers the accounting for liabilities that a company had previously recorded under Emerging Issues Task Force Issue 94-3. NOTE 3 - INVENTORIES Inventories as of December 27, 2002 and June 28, 2002 are summarized as follows:
DECEMBER 27, 2002 June 28, 2002 ----------------- ------------- Raw materials $ 46,237 $ 37,727 Work-in-process 9,942 8,621 Finished goods 101,678 71,284 --------- --------- $ 157,857 $ 117,632 ========= =========
7 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 4 - LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 27, 2002 June 28, 2002 ----------------- ------------- Senior Subordinated Notes issued June 21, 2000 at 12-3/4% due June 15, 2010. (Less unamortized discount of $2,827 and $3,015) $272,174 $271,985 Senior Subordinated Notes issued May 2002 at 12-3/4% due June 15, 2010 (plus unamortized premium at $550 and $588) 40,550 40,588 Senior Debt: Revolving line of credit, expiring June, 2006. At December 27, 2002, the interest rates ranged from 4.44 % to 6.25%. 63,000 46,000 Term notes due June, 2006 and June, 2008, with interest rates at December 27, 2002 of 4.38% and 4.88%. 326,010 329,120 Other, primarily international term loans, with interest rates ranging from 4.44% to 5.44% and maturities ranging from 2003 to 2010 5,565 5,128 -------- -------- 707,299 692,821 Less: Current maturities 13,269 13,407 -------- -------- $694,030 $679,414 -------- --------
8 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 5 - SEGMENT INFORMATION Tekni-plex has organized its business into two industry segments: Industrial Packaging, Products, and Materials and Consumer Packaging and Products. The Industrial Packaging, Products, and Materials segment principally produces pharmaceutical packaging, medical tubing, medical device materials, foamed polystyrene packaging products for the poultry, meat and egg industries and vinyl resins and compounds. The Consumer Packaging and Products Segment principally produces precision tubing and gaskets, and garden and irrigation hose products. Both segments have operations in the United States, Europe and Canada. Financial information concerning the Company's business segments and the geographic areas in which they operate are as follows:
Industrial Packaging, Consumer Products, Packaging and Materials and Products TOTAL ------------- ------------ ----- Three months ended December 27,2002 Revenues from external Customers $ 83,230 $ 35,354 $118,584 Interest expense 12,056 5,531 17,587 Depreciation and Amortization 3,988 2,132 6,120 Income from operations 14,896 6,666 21,562 Expenditures for segment Assets 3,784 3,566 7,350 -------- -------- -------- Three months ended December 28,2001 Revenues from external Customers $ 77,283 $ 36,457 $113,740 Interest expense 11,321 5,269 16,590 Depreciation and Amortization 6,142 3,353 9,495 Income from operations 11,372 3,550 14,922 Expenditures for segment Assets 2,942 1,049 3,991 -------- -------- --------
9 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands)
Industrial Packaging, Consumer Products, Packaging and Materials and Products TOTAL ------------- ------------ ----- Six months ended December 27, 2002 Revenues from external Customers $169,114 $ 90,053 $259,167 Interest expense 24,111 11,138 35,249 Depreciation and Amortization 9,151 4,188 13,339 Income from operations 24,894 16,677 41,571 Expenditures for segment Assets 4,828 8,392 13,220 ----- ----- ----- Six months ended December 28, 2001 Revenues from external Customers $153,733 $ 75,171 $228,904 Interest expense 23,441 10,934 34,375 Depreciation and Amortization 12,068 6,474 18,542 Income from operations 19,923 10,566 30,489 Expenditures for segment Assets 4,528 4,323 8,851 ----- ----- -----
Three months ended Six months ended DECEMBER 27, December 28, DECEMBER 27 December 28 2002 2001 2002 2001 ---- ---- ---- ---- PROFIT OR LOSS Total operating profit for reportable segments before income taxes $ 21,562 $ 14,922 $ 41,571 $ 30,489 Corporate and eliminations (4,765) (3,847) (8,793) (7,576) -------- -------- -------- -------- $ 16,797 $ 11,075 $ 32,778 $ 22,913 ======== ======== ======== ======== DEPRECIATION AND AMORTIZATION Segment totals $ 6,120 $ 9,495 $ 13,339 $ 18,542 Corporate 256 256 512 512 -------- -------- -------- -------- Consolidated total $ 6,376 $ 9,751 $ 13,851 $ 19,054 ======== ======== ======== ======== EXPENDITURES FOR SEGMENT ASSETS Total reportable-segment expenditures $ 7,350 $ 3,991 $ 13,220 $ 8,851 Other unallocated expenditures 226 121 389 291 -------- -------- -------- -------- Consolidated total $ 7,576 $ 4,112 $ 13,609 $ 9,142 ======== ======== ======== ========
10 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) SEGMENT ASSETS
Industrial Packaging, Consumer Products, Packaging and Materials and Products TOTAL ------------- ------------ ----- December 27, 2002 332,957 357,735 690,692 June 28, 2002 314,967 372,591 687,558 --- ---- ------- ------- -------
DECEMBER 27, 2002 June 28, 2002 ----------------- ------------- TOTAL ASSETS Total assets from reportable segments $ 690,692 $ 687,558 Other unallocated amounts 24,659 12,595 --------- --------- Consolidated total $ 715,351 $ 700,153 ========= =========
GEOGRAPHIC INFORMATION
Three months ended Six months ended ------------------ ---------------- DECEMBER 27, December 28, DECEMBER 27, December 28, 2002 2001 2002 2001 ---- ---- ---- ---- REVENUES United States $103,615 $101,649 $ 228,154 $203,681 International 14,969 12,091 31,013 25,223 -------- -------- ---------- -------- Total $118,584 $113,740 $ 259,167 $228,904 ======== ======== ========== ========
DECEMBER 27, 2002 June 28, 2002 ----------------- ------------- LONG-LIVED ASSETS United States $ 377,260 $ 352,365 International 44,933 41,704 --------- --------- Total $ 422,193 $ 394,069 ========= =========
11 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Consolidated Statement of Earnings For the three months ended December 27, 2002
Non- TOTAL Issuer Guarantors Guarantors ----- ------ ---------- ---------- Net sales $ 118,584 $ 35,163 $ 68,452 $ 14,969 Cost of sales 87,214 24,864 51,044 11,306 --------- -------- -------- -------- Gross profit 31,370 10,299 17,408 3,663 Operating expenses: Selling, General and administrative 14,573 6,634 6,256 1,683 --------- -------- -------- -------- Operating profit 16,797 3,665 11,152 1,980 Interest expense 17,587 17,568 (20) 39 Unrealized gain on derivative contracts (3,208) (3,208) -- -- Other expense (income) 79 (93) (321) 493 --------- -------- -------- -------- Income (loss) before income taxes 2,339 (10,602) 11,493 1,448 Provision (benefit) for income taxes 810 (3,768) 4,020 558 --------- -------- --------- --------- Net income (loss) $ 1,529 $ (6,834) $ 7,473 $ 890 ========= ======== ========= =========
For the six months ended December 27, 2002
Non- TOTAL Issuer Guarantors Guarantors ----- ------ ---------- ---------- Net sales $ 259,167 $ 74,360 $ 153,794 $ 31,013 Cost of sales 197,905 52,299 122,767 22,839 --------- --------- --------- --------- Gross profit 61,262 22,061 31,027 8,174 Operating expenses: Selling, General and administrative 28,484 12,728 12,633 3,123 --------- --------- --------- --------- Operating profit 32,778 9,333 18,394 5,051 Interest expense 35,249 35,233 (43) 59 Unrealized loss on derivative contracts 2,136 2,136 -- -- Other expense (income) 382 (24) (600) 1,006 --------- --------- --------- --------- Income (loss) before income taxes (4,989) (28,012) 19,037 3,986 Provision (benefit) for income taxes (1,750) (9,858) 6,660 1,448 --------- --------- --------- --------- Net income (loss) $ (3,239) $ (18,154) $ 12,377 $ 2,538 ========= ========= ========= =========
12 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Consolidated Statement of Earnings For the three months ended December 28, 2001
Non- TOTAL Issuer Guarantors Guarantors Net sales $ 113,740 $ 41,876 $ 59,773 $ 12,091 Cost of sales 86,056 30,186 46,854 9,016 --------- --------- --------- --------- Gross profit 27,684 11,690 12,919 3,075 Operating expenses: Selling, General and administrative 16,609 8,816 6,220 1,573 --------- --------- --------- --------- Operating profit 11,075 2,874 6,699 1,502 Interest expense 16,590 16,559 (30) 61 Unrealized gain on derivative contracts (5,724) (5,724) -- -- Other expense (income) 42 (543) (125) 710 --------- --------- --------- --------- Income (loss) before income taxes 167 (7,418) 6,854 731 Provision (benefit) for income taxes 100 (3,266) 3,450 (84) --------- --------- --------- --------- Net income (loss) $ 67 $ (4,152) $ 3,404 $ 815 ========= ========= ========= =========
For the six months ended December 28, 2001
Non- TOTAL Issuer Guarantors Guarantors ----- ------ ---------- ---------- Net sales $ 228,904 $ 81,306 $ 122,375 $ 25,223 Cost of sales 174,206 60,087 94,997 19,122 --------- --------- --------- --------- Gross profit 54,698 21,219 27,378 6,101 Operating expenses: Selling, General and administrative 31,785 18,883 9,877 3,025 --------- --------- --------- --------- Operating profit 22,913 2,336 17,501 3,076 Interest expense 34,375 34,354 (76) 97 Unrealized loss on derivative contracts 2,590 2,590 -- -- Other expense (income) 334 (490) (264) 1,088 --------- --------- --------- --------- Income (loss) before income taxes (14,386) (34,118) 17,841 1,891 Provision (benefit) for income taxes (5,000) (11,910) 6,250 660 --------- --------- --------- --------- Net income (loss) $ (9,386) $ (22,208) $ 11,591 $ 1,231 ========= ========= ========= =========
13 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Condensed Consolidated Balance Sheet - at December 27, 2002
Non- TOTAL Eliminations Issuer Guarantors Guarantors ----- ------------ ------ ---------- ---------- Current assets $ 293,158 $ -- $ 40,002 $ 201,858 $ 51,298 Property, plant and equipment, net 172,208 -- 39,535 110,392 22,281 Intangible assets, net 215,214 -- 8,329 194,782 12,103 Investment in subsidiaries -- (513,433) 513,433 -- -- Deferred income taxes 20,687 -- 21,940 470 (1,723) Deferred charges, net 13,102 -- 12,986 (86) 202 Other assets 982 (345,557) 79,804 254,665 12,070 --------- --------- --------- --------- --------- Total assets $ 715,351 $(858,990) $ 716,029 $ 762,081 $ 96,231 ========= ========= ========= ========= ========= Current liabilities $ 87,721 $ -- $ 30,281 $ 42,592 $ 14,848 Long-term debt 694,030 -- 689,294 -- 4,736 Other liabilities 26,737 (345,557) 84,996 247,290 40,008 --------- --------- --------- --------- --------- Total liabilities 808,488 (345,557) 804,571 289,882 59,592 --------- --------- --------- --------- --------- Additional paid-in capital 170,568 (312,420) 170,549 296,783 15,656 Retained earnings,accumulated (deficit) (37,198) (201,013) (38,569) 178,501 23,883 Accumulated other comprehensive Loss (5,985) -- -- (3,085) (2,900) Less: Treasury stock (220,522) -- (220,522) -- -- --------- --------- --------- --------- --------- Total stockholders' deficit (93,137) (513,433) (88,542) 472,199 36,639 --------- --------- --------- --------- --------- Total liabilities and deficit $ 715,351 $(858,990) $ 716,029 $ 762,081 $ 96,231 ========= ========= ========= ========= =========
14 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Condensed Consolidated Balance Sheet - at June 28, 2002
Non- Total Eliminations Issuer Guarantors Guarantors ----- ------------ ------ ---------- ---------- Current assets $ 306,084 $ -- $ 44,828 $ 209,798 $ 51,458 Property, plant and equipment, net 158,118 -- 41,704 95,366 21,048 Intangible assets, net 204,252 -- 7,907 184,093 12,252 Investment in subsidiaries -- (498,518) 498,518 -- -- Deferred charges, net 14,343 -- 14,134 -- 209 Deferred taxes 16,278 -- 20,177 -- (3,899) Other income assets 1,078 (321,468) 74,008 236,444 12,094 --------- --------- ----------- --------- --------- Total assets $ 700,153 $(819,986) $ 701,276 $ 725,701 $ 93,162 ========= ========= =========== ========= ========= Current liabilities $ 89,165 $ -- $ 29,889 $ 42,563 $ 16,713 Long-term debt 679,414 -- 675,253 -- 4,161 Other liabilities 22,685 (321,468) 80,460 229,752 33,941 --------- --------- ----------- --------- --------- Total liabilities 791,264 (321,468) 785,602 272,315 54,815 --------- --------- ----------- --------- --------- Additional paid-in capital 170,176 (312,420) 170,156 296,784 15,656 Retained earnings, Accumulated (deficit) (33,959) (186,098) (33,959) 159,960 26,138 Accumulated other comprehensive income (6,805) -- -- (3,358) (3,447) Treasury stock (220,523) -- (220,523) -- -- --------- --------- ----------- --------- --------- Total deficit (91,111) (498,518) (84,326) 453,386 38,347 --------- --------- ----------- --------- --------- Total liabilities and deficit $ 700,153 $(819,986) $ 701,276 $ 725,701 $ 93,162 ========= ========= =========== ========= =========
15 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Condensed Consolidated Cash Flows For the six months ended December 27, 2002
Non- TOTAL Issuer Guarantors Guarantors ----- ------ ---------- ---------- Net cash provided by (used in) operating activities $ 4,106 $ (7,765) $ 10,272 $ 1,599 -------- -------- -------- -------- Cash flows from investing activities: Capital expenditures (13,609) (1,873) (9,161) (2,575) Acquisition costs (16,806) -- (16,806) -- Additions to intangibles (503) (267) -- (236) Deposits and other assets 98 74 -- 24 -------- -------- -------- -------- Net cash used in investing activities (30,820) (2,066) (25,967) (2,787) -------- -------- -------- -------- Cash flows from financing activities Repayment of long term debt 14,370 13,933 -- 437 Receipt of additional paid-in capital 392 392 -- -- Change in intercompany accounts -- (5,011) 3,625 1,386 -------- -------- -------- -------- Net cash flows provided by financing activities 14,762 9,314 3,625 1,823 -------- -------- -------- -------- Effect of exchange rate changes on cash (39) -- -- (39) -------- -------- -------- -------- Net increase (decrease) in cash (11,991) (517) (12,070) 596 Cash, beginning of period 28,199 9,035 10,660 8,504 -------- -------- -------- -------- Cash, end of period $ 16,208 $ 8,518 $ (1,410) $ 9,100 ======== ======== ======== ========
For the six months ended December 28, 2001
Non- TOTAL Issuer Guarantors Guarantors ----- ------ ---------- ---------- Net cash provided by (used in) operating activities $ 4,316 $(105,959) $ 106,824 $ 3,451 --------- --------- --------- --------- Cash flows from Investing activities: Capital expenditures (9,142) (3,103) (3,941) (2,098) Acquisition costs (65,757) -- (65,757) -- Additions to intangibles (222) (140) -- (82) Deposits and other assets 894 (1,909) 3,331 (528) --------- --------- --------- --------- Net cash used in investing activities (74,227) (5,152) (66,367) (2,708) --------- --------- --------- --------- Cash flows from financing activities Repayment of long term debt (8,813) (8,863) -- 50 Receipt of additional paid in capital 50,000 50,000 -- -- Payment for treasury stock (60) (60) -- -- Change in intercompany accounts -- 48,322 (48,586) 264 --------- --------- --------- --------- Net cash flows provided by (used in) financing activities 41,127 89,399 (48,586) 314 --------- --------- --------- --------- Effect of exchange rate changes on cash (39) -- -- (39) --------- --------- --------- --------- Net increase (decrease) in cash (28,823) (21,712) (8,129) 1,018 Cash, beginning of period 44,645 32,890 5,321 6,434 --------- --------- --------- --------- Cash, end of period $ 15,822 $ 11,178 $ (2,808) $ 7,452 ========= ========= ========= =========
16 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 7- ACQUISITIONS The Company purchased certain assets and assumed certain liabilities of ELM Packaging "ELM" on July 10, 2002, for approximately $16,806, including acquisition costs, in cash. The allocation of the purchase is as follows: Assets: Accounts receivable $ 3,449 Inventories 1,829 Prepaid expenses 334 Deferred Taxes 2,280 Property, Plant and Equipment 12,487 Intangibles, including goodwill 10,912 ------- Total Assets 31,291 ------- Accounts payable and accrued liabilities 8,485 Integration reserve 6,000 ------- Net Investment $16,806 =======
The Company has utilized preliminary estimates and assumptions in determining the allocation of purchase price to assets acquired and liabilities assumed of ELM. While management believes such estimates and assumptions are reasonable, the final allocation of the purchase price may differ from that reflected in the December 27, 2002 consolidated balance sheet after a more extensive review of fair values of the assets and liabilities is completed. In connection with the acquisition, a reserve of $6,000 has been established for the costs to integrate ELM's operations with the Company. The reserve is included in accrued expenses. The components of the integration reserve and activity through December 27, 2002, is as follows:
BALANCE COSTS CHARGED BALANCE JULY 10, 2002 TO RESERVE DECEMBER 27, 2002 Manufacturing Reconfiguration $2,500 $ 873 $1,627 Reduction in personnel and related costs 1,000 528 472 Legal, environmental and other 2,500 122 2,378 ------ ------ ------ $6,000 $1,523 $4,477 ====== ====== ======
The remaining costs are expected to be paid over the next six to nine months. 17 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) The proforma results of operations for the quarter and six months ended December 28, 2001, assuming ELM was acquired on June 30, 2001, would not be materially different from the historical presentation. In October 2001, the Company purchased certain assets and assumed certain liabilities of Swan Hose for approximately $63,600. The acquisition was recorded under the purchase method, whereby Swan's net assets were recorded at estimated fair value and its operations have been reflected in the statement of operations since that date. The components of the Integration reserve and activity through December 27, 2002 is as follows:
BALANCE COSTS CHARGED BALANCE OCTOBER 2001 TO RESERVE DECEMBER 27, 2002 ------------ ------------- ----------------- Cost to close duplicate facilities $ 3,500 $ 2,305 $ 1,195 Reduction in personnel and related costs 2,100 1,082 1,018 Legal and environmental 1,275 280 995 Manufacturing reconfiguration 1,455 1,303 152 Other 1,670 1,166 504 ------- ------- ------- $10,000 $ 6,136 $ 3,864 ======= ======= =======
The remaining personnel related costs will be paid over the next four-six months, lease payments on duplicate warehouse facilities will extend over the next two years and the manufacturing reconfiguration is expected to be completed during the next year. The following table represents the unaudited proforma results of operations as though the acquisition of Swan occurred on July 1, 2001. Since Swan was purchased subsequent to June 30, 2001, no amortization of goodwill has been reflected in accordance with SFAS 142.
SIX MONTHS ENDED DECEMBER 28,2001 ---------------- Net sales $ 239,016 Operating profit 22,230 Loss before income taxes (15,169) =======
18 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SECOND QUARTER OF FISCAL 2003 COMPARED WITH THE SECOND QUARTER OF FISCAL 2002 Net Sales increased to $118.6 million for the three months ended December 27, 2002 from $113.7 million for the three months ended December 28, 2001, representing a 4.3% increase. Net sales in our Industrial Segment grew 7.7%, primarily due to our Elm acquisition which closed in July 2002. Net sales in our Consumer Segment fell 3.0% or approximately $1.1 million primarily due to slightly weaker garden hose sales in late December. Cost of Sales increased to $87.2 million for the three months ended December 27, 2002 from $86.1 million for the three months ended December 28, 2001, an increase of $1.1 million. Expressed as a percentage of net sales, cost of sales decreased to 73.5% for the three months ended December 27, 2002 from 75.7% for the three months ended December 28, 2001. Continuous cost improvements coupled with the realization of synergies from our Swan and Elm acquisitions accounted for this improvement. Gross Profit, as a result of the above, increased to $31.4 million or 26.5% of net sales for the three months ended December 27, 2002 from $27.7 million or 24.3% of net sales for the three months ended December 28, 2001. Selling, general and administrative expense decreased to $14.6 million in the three months ended December 27, 2002 compared to $16.6 million in the three months ended December 28, 2001. The $2 million decrease is primarily due to a $4.0 million decrease in amortization expense as required by a change in the accounting for goodwill, partially offset by an increase in selling, general and administrative expense associated with our Elm acquisition. The ratio of selling, general and administrative expense to net sales decreased to 12.3% for the three months ending December 27, 2002 from 14.6% in the comparable period of last year. Operating profit, as a result of the foregoing, increased to $16.8 million or 14.2% of net sales for the three months ended December 27, 2002 from $11.1 million or 9.7% of net sales for the three months ended December 28, 2001. Operating profit for our Industrial Segment increased to $14.9 million for the three months ending December 27, 2002 compared to $11.4 million for the three months ending December 28, 2001. Expressed as a percentage of net sales, operating profit grew to 17.9% in the most recent period from 14.7% in the previous year's period due to continuous cost improvement and the realization of synergies from our Elm acquisition. A decrease in amortization expense also contributed to this improvement. Operating profit for our Consumer Segment increased to $6.7 million for the three months ending December 27, 2002 compared to $3.5 million for the three months ending December 28, 2001. Expressed as a percentage of net sales, operating profit grew to 18.9% in the most recent period from 9.7% in the comparable period of the previous year due to continuous cost improvement and the realization of synergies at from our Swan acquisition. A decrease in amortization expense also contributed to this improvement. Interest expense increased to $17.6 million or 14.8% of net sales in the three months ended December 27, 2002 from $16.6 million or 14.6% of net sales in the three months ended December 28, 2001. The increase was due to higher average interest rates and debt levels resulting from our issuance of $40 million of senior subordinated notes in May 2002. Unrealized (gain) loss on derivative transactions was a ($3.2) million gain or 2.7% of net sales for the three months ending December 27, 2002 compared to a ($5.7) million gain or 5.0% of net sales for the three months ending December 28, 2001. The gains were due to changes in the market interest rates underlying our derivatives. Income (loss) before income taxes, as a result, was $2.3 million for the three months ended December 27, 2002 compared to $0.2 million for the three months ended December 28, 2001. Income tax was $0.8 million for the three months ended December 27, 2002, compared to $0.1 million for the three months ended December 28, 2001. The Company's effective tax rate was 34.6% for the three months ended December 27, 2002 compared to 59.9% for the three months ending December 28, 2001, primarily as a result of discontinuing the amortization of goodwill, which was previously not deductible, in 2002. Net income, as a result, was $1.5 million for the three months ended December 27, 2002 compared with $0.1 million for the three months ended December 28, 2001. 19 FIRST SIX MONTHS OF FISCAL 2003 COMPARED WITH THE FIRST SIX MONTHS OF FISCAL 2002 Net Sales increased to $259.2 million for the six months ended December 27, 2002 from $228.9 million for the six months ended December 28, 2001, representing a 13.2% increase. The Swan and Elm acquisitions combined with strong garden hose sales in the first quarter of fiscal 2003 were the primary factors contributing to this gain. Cost of Sales increased to $197.9 million for the six months ended December 27, 2002 from $174.2 million for the six months ended December 28, 2001. Expressed as a percentage of net sales, cost of sales increased slightly to 76.4% for the six months ended December 27, 2002 from 76.1% for the six months ended December 28, 2001 primarily due to the inclusion of lower-margin business from our Elm acquisition that closed during the first quarter of the current fiscal year. Gross Profit, as a result of the above, increased to $61.3 million for the six months ended December 27, 2002 from $54.7 million for the six months ended December 28, 2001. Expressed as a percentage of net sales, gross profit decreased slightly to 23.6% in the most recent period from 23.9% in the previous year's first half. Selling, general and administrative expense decreased to $28.5 million in the six months ended December 27, 2002 compared to $31.8 million in the six months ended December 28, 2001 due to the reasons previously discussed. The ratio of selling, general and administrative expense to net sales decreased to 11.0% for the six months ending December 27, 2002 from 13.9% in the comparable period of last year. Operating profit, as a result of the foregoing, increased 43.1% to $32.8 million or 12.6% of net sales for the six months ended December 27, 2002 from $22.9 million or 10.0% of net sales for the six months ended December 28, 2001. Operating profit for our Industrial Segment increased to $24.9 million for the six months ending December 27, 2002 compared to $19.9 million for the six months ending December 28, 2001. Expressed as a percentage of net sales, operating profit grew to 14.7% in the most recent period from 13.0% in the comparable period of the previous year due to continuous cost improvement and the realization of synergies from our Elm acquisition. A decrease in amortization expense also contributed to this improvement. Operating profit for our Consumer Segment increased to $16.7 million for the six months ending December 27, 2002 compared to $10.6 million for the six months ending December 28, 2001. Expressed as a percentage of net sales, operating profit grew to 18.5% in the most recent period from 14.1% in the previous year's period due to continuous cost improvement and the realization of synergies from our Swan acquisition. A decrease in amortization expense also contributed to this improvement. Interest expense increased slightly to $35.2 in the six months ended December 27, 2002 from $34.4 million in the six months ended December 28, 2001 primarily due to higher average interest rates and debt levels resulting from our issuance of $40 million of senior subordinated notes in May 2002. Expressed as a percentage of net sales, interest expense decreased to 13.6% in the current period compared to 15.0% in the comparable period of last year. Unrealized (gain) loss on derivative transactions was a $2.1 million loss or 0.8% of net sales for the six months ending December 27, 2002 compared to a $2.6 million loss or 1.1% of net sales for the six months ending December 28, 2001. The loss was due to changes in the market interest rates underlying our derivatives. Income (loss) before income taxes, as a result, was a loss of ($5.0) million for the six months ended December 27, 2002 compared to a loss of ($14.4) million for the six months ended December 28, 2001. Income tax (benefit) was a credit of ($1.8) million for the six months ended December 27, 2002, compared to a credit of ($5.0) million for the six months ended December 28, 2001. The Company's effective tax rate was 35.1% for the six months ended December 27, 2002 compared to 34.8% for the six months ending December 28, 2001. Net income (loss), as a result, was a loss of ($3.2) million for the six months ended December 27, 2002 compared with a loss of ($9.4) million for the six months ended December 28, 2001. 20 LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations for the six months ended December 27, 2002 was $4.1 million compared with $4.3 million in the same period of the prior year. The decrease of $0.2 million was primarily due to a larger seasonal inventory build-up offset by a larger seasonal reduction in accounts receivable at our garden hose unit compared to last year resulting from our Swan acquisition. Working capital on December 27, 2002 was $205.4 million compared to $216.9 million on June 28, 2002. The decrease was due primarily to a seasonal reduction in accounts receivable offset by a normal seasonal increase in inventories. During the period the Company also reduced the accounts payable at our Elm acquisition by approximately $4.0 million. As of December 27, 2002, the Company had an outstanding balance of $63.0 million under the $100.0 million revolving credit line. This represents an increase of $17.0 million from the outstanding balance as of June 28, 2002. The Company's capital expenditures for the six months ended December 27, 2002 and December 28, 2001 were $13.6 million and $9.1 million respectively. In addition, the Company paid $16.8 million for acquisitions in the six months ending December 27, 2002 compared to $65.8 million in the comparable period of the previous year. The Company continues to expect that its principal uses of cash for the next several years will be acquisitions, debt service, capital expenditures and working capital requirements. Management believes that cash generated from operations plus funds available in the Company's credit facility will be sufficient to meet its needs and to provide it with the flexibility to make capital expenditures and acquisitions which management believes will provide an attractive return on investment. However, the Company may need additional financing to take advantage of acquisition opportunities that may arise in the next several quarters. There can be no assurance that such financing will be available in the amounts required for such acquisitions and on terms acceptable to the Company. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to market risk inherent in certain debt instruments. At December 27, 2002, the principal amount of the Company's aggregate outstanding variable rate indebtedness was $389.0 million. A hypothetical 10% adverse change in interest rates would have an annualized unfavorable impact of approximately $1.3 million on the Company's after-tax earnings and cash flows, assuming the Company's current effective tax rate and assuming no change in the principal amount. Conversely, a reduction in interest rates would favorably impact the Company's after-tax earnings and cash flows in a similar proportion. ITEM 4. Controls and Procedures (a) Evaluation of disclosure controls and procedures. Our chief executive officer and our chief financial officer, after evaluating the effectiveness of the Company's "disclosure controls and procedures" (as defined in Exchange Act Rules 13a-14(C) and 15-d-14(C)) as of a date (the "Evaluation Date") within 90 days of the filing date of this quarterly report, have concluded that as of the Evaluation Date, our disclosure controls and procedures were adequate and designed to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities. To ameliorate those risks, in June 2000, the Company entered into interest rate Swap and Cap Agreements for a notional amount of $344,000. (b) Changes in internal controls. There were no significant changes in our internal controls or to our knowledge, in other factors that could significantly affect our internal controls subsequent to the Evaluation Date. 21 PART II. OTHER INFORMATION Item 1 Legal Proceedings The Company is party to certain litigation in the ordinary course of business, none of which the Company believes is likely to have a material adverse effect on its consolidated 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 Item 6. Exhibits and Reports on Form 8-K (a) Reports on Form 8-K None 22 CERTIFICATION I, Dr. F. Patrick Smith, Chairman of the Board and Chief Executive Officer of Tekni-Plex, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Tekni-Plex, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 10,2003 By:/s/ Dr. F. Patrick Smith --------------------------- Dr. F. Patrick Smith Chairman and Chief Executive Officer 23 CERTIFICATION I, James E. Condon, Chief Financial Officer of Tekni-Plex, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Tekni-Plex, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 10, 2003 By:/s/ James E. Condon ---------------------- James E. Condon Chief Financial Officer 24 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 the Quarterly Report of Tekni-Plex, Inc. (the "Company") on Form 10-Q for the period ending December 27, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dr. F. Patrick Smith, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (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. BY: /S/ DR. F. PATRICK SMITH Dr. F. Patrick Smith Chairman and Chief Executive Officer February 10, 2003 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 the Quarterly Report of Tekni-Plex, Inc. (the "Company") on Form 10-Q for the period ending December 27, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James E. Condon, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (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. BY: /S/ JAMES E. CONDON James E. Condon Chief Financial Officer February 10, 2003 25 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. TEKNI-PLEX, INC. February 10, 2003 By: /s/ F. Patrick Smith -------------------- F. Patrick Smith Chairman of the Board and Chief Executive Officer By: /s/ Kenneth W.R. Baker -------------------- Kenneth W. R. Baker President and Chief Operating Officer By: /s/ James E.Condon -------------------- James E.Condon Vice President and Chief Financial Officer 26