10-Q 1 y42429e10-q.txt TEKNI-PLEX, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 29, 2000 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) 201 Industrial Parkway (908) 722-4800 Somerville, New Jersey 08876 (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 / / 2 TEKNI-PLEX, INC.

Page # ------ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of September 29, 2000 and June 30, 2000.........................................................................3 Consolidated Statements of Operations for the three months ended September 29, 2000 and October 1,1999................................................4 Consolidated Statements of Comprehensive Income for the three months ended September 29, 2000 and October 1, 1999...............................................4 Consolidated Statements of Cash Flows for the three months ended September 29, 2000 and October 1, 1999...............................................5 Notes to Consolidated Financial Statements..............................................6-14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........................................................15-17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK................................17 PART II. OTHER INFORMATION Item 1. Legal proceedings.............................................................18 Item 2. Changes in securities.........................................................18 Item 3. Defaults upon senior securities...............................................18 Item 4. Submission of matters to a vote of securities holders.........................18 Item 5. Subsequent events.............................................................18 Item 6. Exhibits and reports on Form 8-K..............................................18

3 TEKNI-PLEX, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)

SEPTEMBER 29, June 30, 2000 2000 (UNAUDITED) (Audited) --------- --------- ASSETS CURRENT: Cash $ 12,296 $ 12,525 Accounts receivable, net of an allowance of $1,662 and $1,642 for possible losses 65,432 96,039 Inventories 99,799 91,233 Refundable income taxes 10,811 14,883 Deferred taxes 4,997 4,997 Prepaid expenses and other current assets 4,140 2,171 --------- --------- Total current assets 197,475 221,848 PROPERTY, PLANT AND EQUIPMENT, NET 135,867 135,926 INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $49,420 AND $45,480 RESPECTIVELY 186,602 190,492 DEFERRED FINANCING COSTS, NET OF ACCUMULATED AMORTIZATION OF $614 AND $ 0 RESPECTIVELY 18,344 18,897 DEFERRED INCOME TAXES 11,243 5,398 OTHER ASSETS 2,154 2,228 --------- --------- $ 551,685 $ 574,789 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 8,643 $ 8,401 Accounts payable - trade 26,694 30,026 Accrued payroll and benefits 4,583 11,662 Accrued interest 9,890 2,359 Accrued liabilities - other 14,528 23,521 --------- --------- TOTAL CURRENT LIABILITIES 64,338 75,969 LONG-TERM DEBT 638,915 643,192 OTHER LIABILITIES 4,724 4,778 --------- --------- TOTAL LIABILITIES 707,977 723,939 --------- --------- STOCKHOLDER'S EQUITY: Common stock -- -- Additional paid-in capital 84,176 84,176 Cumulative currency translation adjustment (5,889) (4,486) Retained earnings (deficit) (14,117) (8,378) Less: Treasury stock (220,462) (220,462) --------- --------- TOTAL STOCKHOLDER'S EQUITY (156,292) (149,150) --------- --------- $ 551,685 $ 574,789 ========= =========

See accompanying notes to consolidated financial statements. 3 4 TEKNI-PLEX, INC. AND SUBSIDIARIES (Unaudited -- in thousands) CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended ------------------------------- SEPTEMBER 29, 2000 October 1, 1999 --------- --------- NET SALES $ 107,617 $ 109,926 COST OF GOODS SOLD 85,195 80,921 --------- --------- GROSS PROFIT 22,422 29,005 OPERATING EXPENSES: Selling, general and administrative 15,111 14,142 --------- --------- Operating profit 7,311 14,863 Interest expense (18,220) (9,625) Other income (expenses) (530) (182) --------- --------- Income (loss) before income taxes (11,439) 5,056 Provision for income taxes (5,700) 2,500 --------- --------- NET INCOME (LOSS) $ (5,739) $ 2,556 ========= ========= CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME NET INCOME (LOSS) $ (5,739) $ 2,556 OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES Foreign currency translation adjustment (1,403) (643) --------- --------- COMPREHENSIVE INCOME (LOSS) $ (7,142) $ 1,913 ========= =========

See accompanying notes to consolidated financial statements. 4 5 TEKNI-PLEX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited -- in thousands)

Three months ended ----------------------------- SEPTEMBER 29, 2000 October 1, 1999 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (5,739) $ 2,556 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 9,141 8,497 Deferred income taxes (5,876) 596 Changes in operating assets and liabilities: Accounts receivable 30,101 32,171 Inventories (8,590) (5,072) Prepaid expenses and other current assets 2,051 (5,289) Income taxes -- (46) Accounts payable (3,656) (1,664) Accrued interest 7,492 (5,415) Accrued expenses and other liabilities (16,446) (20,783) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 8,478 5,551 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (4,434) (3,087) Acquisition costs (50) (274) Deposits and other assets 72 (91) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (4,412) (3,452) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments/borrowings of long-term debt (4,088) (2,982) Repayments/borrowings of line of credit (135) (544) Debt financing costs (61) (23) -------- -------- NET CASH USED IN FINANCING ACTIVITIES (4,284) (3,549) -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (11) (37) -------- -------- NET DECREASE IN CASH (229) (1,487) CASH, BEGINNING OF PERIOD 12,525 22,117 -------- -------- CASH, END OF PERIOD $ 12,296 $ 20,630 -------- -------- SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for: Interest $ 10,143 $ 16,120 -------- -------- Income taxes 39 2,546 -------- --------

See accompanying notes to consolidated financial statements. 5 6 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 1 - GENERAL Tekni-Plex is a global, diversified manufacturer of packaging, products, and materials for the healthcare, consumer, and food packaging 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 four primary business groups: Healthcare Packaging, Products, and Materials; Consumer Packaging and Products; Food Packaging; and Specialty Resins and Compounds. 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 30, 2000. NOTE 2 - INVENTORIES Inventories as of September 29, 2000 and June 30, 2000 are summarized as follows:

SEPTEMBER 29, 2000 June 30, 2000 ----------------------- ----------------------- Raw materials $ 42,453 $ 44,002 Work-in-process 7,049 7,024 Finished goods 50,297 40,207 ----------------------- ----------------------- $ 99,799 $ 91,233 ----------------------- -----------------------

6 7 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 3 - LONG-TERM DEBT Long-term debt consists of the following:

SEPTEMBER 29,2000 June 30, 2000 ------------------------ ----------------------- Senior Subordinated Notes issued June 21,2000 at 12-3/4% due June 15, 2010. (less unamortized discount $ 271,327 $ 271,232 of $ 3,673 and $3,768) Senior Debt: Revolving line of credit, expiring June, 2006. At September 29, 2000, the interest rate was 28,000 30,000 9.625% and 11.5%. Term notes due June, 2006 and June, 2008, with interest rates at September 29, 2000 of 9.6875% 342,140 344,000 and 10.1875%. Other, primarily foreign term loans, with interest rates ranging from 4 -1/4% to 8.4% and maturities 6,091 6,361 from 2000 to 2004 ------------------------ ----------------------- 647,558 651,593 Less: Current maturities 8,643 8,401 ------------------------ ----------------------- $ 638,915 $ 643,192 ------------------------ -----------------------

7 8 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 4 - CONTINGENCIES (a) In January 1993 and 1994, the Company's Belgian subsidiary received income tax assessments aggregating approximately $1,640 (75,247 Belgian Francs) for the disallowance of certain foreign tax credits and investment losses claimed for the years ended July 31, 1990 and 1991. Additionally, in January 1995, the subsidiary received an income tax assessment of approximately $699 (32,083 Belgian francs) for the year ended July 31, 1992. By Belgian law, these assessments are capped at the values above and do not continue to accrue additional penalties or interest. Although the future outcome of these matters is uncertain, the Company believes that its tax position was appropriate and that the assessments are without merit. Therefore, the Company has appealed the assessments. Based on advice of legal counsel in Belgium, the Company believes that the assessment appeals will be accepted by the tax authorities in Belgium, although there can be no assurance whether or when such appeals will be accepted. (b) The Company is a party to various other legal proceedings arising in the normal conduct of business. Management believes that the final outcome of these proceedings will not have a material adverse effect on the Company's financial position. 8 9 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 5 - SEGMENT INFORMATION The Company operates in four industry segments: healthcare packaging, products, and materials; consumer packaging and products; food packaging; and specialty resins and compounds. The healthcare packaging, products, and materials segment principally produces pharmaceutical packaging, medical tubing and medical device materials. The consumer packaging and products segment principally produces precision tubing and gaskets, and garden and irrigation hose products. The food packaging segment produces foamed polystyrene packaging products for the poultry, meat and egg industries. The specialty resins and compounds segment produces specialty PVC resins. The healthcare packaging, products, and materials and consumer packaging and products segments have operations in the United States, Europe and Canada. Prior to 1998, the Company operated principally in the food packaging segment. Financial information concerning the Company's business segments and the geographic areas in which it operates are as follows:

Healthcare Packaging, Consumer Specialty Products, Packaging Food Resins and and Materials and Products Packaging Compounds TOTAL -------- -------- -------- -------- -------- September 29, 2000 Revenues from external customers $ 35,916 $ 31,632 $ 27,831 $ 12,238 $107,617 Interest expense 5,501 5,939 4,122 2,658 18,220 Depreciation and amortization 2,746 2,880 2,140 1,120 8,886 Segment income (loss) from operations 2,963 3,837 5,750 (1,754) 10,796 Expenditures for segment assets 1,281 1,129 1,364 638 4,412 Segment assets 167,527 209,671 73,646 80,962 531,806 -------- -------- -------- -------- -------- October 1, 1999 Revenues from external customers $ 37,270 $ 32,426 $ 25,116 $ 15,114 $109,926 Interest expense 2,857 3,212 2,101 1,455 9,625 Depreciation and amortization 2,583 2,726 1,889 1,127 8,325 Segment income from operations 7,102 4,513 4,673 1,469 17,757 Expenditures for segment assets 879 904 1,178 180 3,141 -------- -------- -------- -------- -------- June 30, 2000 Segment assets 171,764 220,576 77,642 83,900 553,882 -------- -------- -------- -------- --------

9 10 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands)

SEPTEMBER 29, 2000 October 1, 1999 --------- --------- PROFIT OR LOSS Total operating profit for reportable segments before income taxes $ 10,796 $ 17,757 Corporate and eliminations (3,485) (2,894) --------- --------- $ 7,311 $ 14,863 ========= ========= DEPRECIATION AND AMORTIZATION Segment totals $ 8,886 $ 8,325 Corporate 255 107 --------- --------- Consolidated total $ 9,141 $ 8,432 ========= ========= EXPENDITURES FOR SEGMENT ASSETS Total expenditures from reportable segments $ 4,412 $ 3,141 Other unallocated expenditures 22 49 --------- --------- Consolidated total $ 4,434 $ 3,190 ========= =========

SEPTEMBER 29, 2000 June 30, 2000 --------- --------- ASSETS Total assets from reportable segments $ 531,806 $ 553,882 Other unallocated amounts 19,879 20,907 --------- --------- Consolidated total $ 551,685 $ 574,789 ========= =========

GEOGRAPHIC INFORMATION SEPTEMBER 29, 2000 October 1, 1999 --------- --------- REVENUES United States $ 96,781 $ 100,039 International 10,836 9,887 --------- --------- Total $ 107,617 $ 109,926 ========= =========

SEPTEMBER 29, 2000 June 30, 2000 --------- --------- LONG-LIVED ASSETS United States $ 318,182 $ 323,691 International 36,028 29,250 --------- --------- Total $ 354,210 $ 352,941 ========= =========

10 11 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) NOTE 6 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Consolidated Statement of Earnings (Unaudited) For the three months ended September 29, 2000

Non- TOTAL Issuer Guarantors Guarantors --------- --------- --------- --------- Net sales $ 107,617 $ 36,701 $ 60,080 $ 10,836 Cost of sales 85,195 27,245 50,275 7,675 --------- --------- --------- --------- Gross profit 22,422 9,456 9,805 3,161 Operating expenses: Selling, General and administrative 15,111 9,461 4,544 1,106 --------- --------- --------- --------- Income from operations 7,311 (5) 5,261 2,055 Interest expense, net 18,220 18,548 (107) (221) Other expense (income) 530 74 (63) 519 --------- --------- --------- --------- Income (loss) before provision for income taxes (11,439) (18,627) 5,431 1,757 Provision for income taxes (5,700) (9,125) 2,700 725 --------- --------- --------- --------- Net income(loss) $ (5,739) $ (9,502) $ 2,731 $ 1,032 ========= ========= ========= =========

11 12 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) For the three months ended October 1, 1999

Non- TOTAL Issuer Guarantors Guarantors -------- -------- -------- -------- Net sales $109,926 $ 40,614 $ 59,425 $ 9,887 Cost of sales 80,921 27,879 46,334 6,708 -------- -------- -------- -------- Gross profit 29,005 12,735 13,091 3,179 Operating expenses: Selling, General and administrative 14,142 9,065 3,954 1,123 -------- -------- -------- -------- Income from operations 14,863 3,670 9,137 2,056 Interest expense, net 9,625 9,704 (84) 5 Other expense (income) 182 94 (286) 374 -------- -------- -------- -------- Income (loss) before provision for income taxes 5,056 (6,128) 9,507 1,677 Provision for income taxes 2,500 (3,035) 4,705 830 -------- -------- -------- -------- Net income(loss) $ 2,556 $ (3,093) $ 4,802 $ 847 ======== ======== ======== ========

12 13 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) Condensed Consolidated Balance Sheet - at September 29, 2000 (Unaudited)

Non- TOTAL Eliminations Issuer Guarantors Guarantors --------- --------- --------- --------- --------- Current assets $ 197,475 $ -- $ 53,962 $ 117,749 $ 25,764 Property, plant and equipment, net 135,867 -- 41,176 79,433 15,258 Intangible assets 186,602 -- 24,286 154,038 8,278 Investment in subsidiaries -- (402,642) 402,642 -- -- Deferred charges 18,344 -- 18,344 -- -- Other assets 13,397 (301,515) 48,989 253,431 12,492 --------- --------- --------- --------- --------- Total assets $ 551,685 $(704,157) $ 589,399 $ 604,651 $ 61,792 ========= ========= ========= ========= ========= Current liabilities $ 64,338 $ -- $ 28,798 $ 21,652 $ 13,888 Long-term debt 638,915 -- 634,027 -- 4,888 Other long-term liabilities 4,724 (301,515) 74,555 210,300 21,384 --------- --------- --------- --------- --------- Total liabilities 707,977 (301,515) 737,380 231,952 40,160 --------- --------- --------- --------- --------- Additional paid-in capital 84,176 (312,408) 84,156 296,787 15,641 Retained earnings (14,117) (90,234) (11,675) 75,912 11,880 Cumulative currency translation adjustment (5,889) -- -- -- (5,889) Less: Treasury stock (220,462) -- (220,462) -- -- --------- --------- --------- --------- --------- Total equity (156,292) (402,642) (147,981) 372,699 21,632 --------- --------- --------- --------- --------- Total liabilities and equity $ 551,685 $(704,157) $ 589,399 $ 604,651 $ 61,792 ========= ========= ========= ========= =========

13 14 TEKNI-PLEX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) Condensed Consolidated Balance Sheet - at June 30, 2000

Non- TOTAL Eliminations Issuer Guarantors Guarantors --------- --------- --------- --------- --------- Current assets $ 221,848 $ -- $ 61,275 $ 134,456 $ 26,117 Property, plant and equipment, net 135,926 -- 41,852 78,957 15,117 Intangible assets 190,492 -- 31,519 150,476 8,497 Investment in subsidiaries -- (398,879) 398,879 -- -- Deferred financing costs, net 18,897 -- 18,897 -- -- Deferred taxes 5,398 -- 5,398 -- -- Other long-term assets 2,228 (301,702) 50,471 240,823 12,636 --------- --------- --------- --------- --------- Total assets $ 574,789 $(700,581) $ 608,291 $ 604,712 $ 62,367 ========= ========= ========= ========= ========= Current liabilities $ 75,969 $ -- $ 37,296 $ 24,390 $ 14,283 Long-term debt 643,192 -- 637,793 -- 5,399 Other long-term liabilities 4,778 (300,410) 72,660 211,846 20,682 --------- --------- --------- --------- --------- Total liabilities 723,939 (300,410) 747,749 236,236 40,364 --------- --------- --------- --------- --------- Additional paid-in capital 84,176 (313,700) 85,355 296,880 15,641 Retained earnings (deficit) (8,378) (86,471) (4,351) 71,596 10,848 Cumulative currency translation adjustment (4,486) -- -- -- (4,486) Treasury stock (220,462) -- (220,462) -- -- --------- --------- --------- --------- --------- Total equity (149,150) (400,171) (139,458) 368,476 22,003 --------- --------- --------- --------- --------- Total liabilities and equity $ 574,789 $(700,581) $ 608,291 $ 604,712 $ 62,367 ========= ========= ========= ========= =========

14 15 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER OF FISCAL 2001 COMPARED WITH THE FIRST QUARTER OF FISCAL 2000 Net Sales decreased to $107.6 million for the three months ended September 29, 2000 from $109.9 million for the three months ended October 1, 1999. This represents a decrease of $2.3 million or 2.1%. Declines in the Consumer, Healthcare and Specialty Resins segments were partially offset by gains in Food Packaging sales. In the Consumer Packaging and Products business segment, sales were affected by continued wet weather in the Northeast and a decision by the unit's major customer to minimize customer-held inventories during the off-season. The latter factor is a timing issue, because normal customer inventories will be required to meet demand in the heavy selling season, requiring a re-filling of the distribution pipeline prior to that time. In the Healthcare Packaging, Products and Materials business segment, sales were affected by contracting customer inventories in anticipation of lower pricing as a result of falling resin costs. In the Specialty Resins and Compounds business segment, comparative sales were affected by the precipitous loss of one of the unit's traditional markets during the fiscal first quarter of 2000, when a large resin producer began to offer competitive products below the unit's costs. To offset this loss, the Company has already developed several new premium specialty products, primarily for medical device markets, but it will take a number of quarters before the full amount of lost sales can be replaced. Cost of Sales rose to $85.2 million for the three months ended September 29, 2000 from $80.9 million for the three months ended October 1, 1999, an increase of $4.3 million. Expressed as a percentage of net sales, cost of sales increased to 79.2% for the three months ended September 29, 2000 from 73.6% for the three months ended October 1, 1999. Higher resin costs, which appear to have peaked in the fiscal first quarter of 2001, accounted for the increase. Aggressive selling in the Medical Plastics business unit to fill its recent capacity expansion precluded passing the last round of resin increases through to its customers. Overhead absorption issues in the Healthcare Packaging, Products and Materials and Specialty Resins and Compounds segments as a result of lower sales, also contributed to higher cost of sales for the period. Gross Profit as a result, decreased to $22.4 million or 20.8% of net sales for the three months ended September 29, 2000, from $29.0 million or 26.4% of net sales for the three months ended October 1, 1999. Selling, general and administrative expense was $15.1 million or 14.0% of net sales in the three months ended September 29, 2000 compared to $14.1 million or 12.9% of net sales in the three months ended October 1, 1999. The increase is a timing issue due to a change in senior executive compensation structure in connection with the recapitalization of the Company on June 21, 2000. For fiscal 2001, total senior executive compensation is expected to be less than for fiscal 2000. Operating profit, as a result of the foregoing, declined to $7.3 million or 6.8% of net sales for the three months ended September 29, 2000, from $14.9 million or 13.5% of net sales for the three months ended October 1, 1999. Interest expense increased to $18.2 million or 16.9% of net sales in the three months ended September 29, 2000 from $9.6 million or 8.8% of net sales in the three months ended October 1, 1999. The increase was due to higher debt levels as a result of the recapitalization of the Company on June 21, 2000, and higher interest rates. 15 16 Income (loss) before income taxes, as a result, was a loss of $11.4 million for the three months ended September 29, 2000 compared to a gain of $5.1 million for the three months ended October 1, 1999. Provision for income taxes was a credit of $5.7 million for the three months ended September 29, 2000, compared to a provision of $2.5 million for the three months ended October 1, 1999. The Company's effective tax rate was 49.8% for the three months ended September 29, 2000. This was about the same as the effective tax rate of 49.5% for the three months ended October 1, 1999. Net income, as a result, was a loss of $5.7 million for the three months ended September 29, 2000 compared with a gain of $2.6 million for the three months ended October 1, 1999. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations for the three months ended September 29, 2000 was $8.5 million compared with $5.6 million in the same period in the prior year. The increase of $2.9 million was due primarily to the timing of interest payments. Working capital on September 29, 2000 was $133.1 million compared to $145.9 million on June 30, 2000. The decrease was due primarily to a seasonal reduction in accounts receivable offset by a normal seasonal increase in inventories. As of September 29, 2000, the Company had an outstanding balance of $28.0 million under the $100.0 million revolving credit line. This represents a reduction of $2.0 million from the outstanding balance as of June 30, 2000. The Company's capital expenditures for the three months ended September 29, 2000 and October 1, 1999 were $4.4 million compared with $3.1 million for the three months ended October 1, 1999. 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 probability exists that the Company may need additional financing to take advantage of all the acquisition opportunities that might arise in the next several quarters. There can be no assurance that such financing will be available in the amounts and 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 September 29, 2000, the principal amount of the Company's aggregate outstanding variable rate indebtedness was $376.3 million. A hypothetical 10% adverse change in interest rates would have an annualized unfavorable impact of approximately $1.9 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. 16 17 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. Subsequent Events On October 25, 2000, the Company acquired substantially all of the assets of Super Plastics, Inc. from RCR International, Inc. for approximately $9.3 million to be adjusted for actual inventory to be acquired. Super Plastics is located in Mississauga, Canada, where it manufactures garden hose, air hose, carpet runners, and flex tube products primarily for the U.S. and Canadian markets. It will become part of the Company's Consumer Packaging and Products business segment. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K None 17 18 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. November 13, 2000 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 and Principal Accounting and Financial Officer 18