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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 31, 2004
[ ] 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 North Denton Tap Road (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 31, 2004 (unaudited) and July 2, 2004............. 3
Consolidated Statements of Operations for the six months and three months ended December 31,
2004 and December 26, 2003............................................................ 4
Consolidated Statements of Comprehensive Income (Loss) for the six months and
three months ended December 31, 2004 and December 26, 2003............................ 4
Consolidated Statements of Cash Flows for the six months ended December 31,2004 and
December 26, 2003..................................................................... 5
Notes to Consolidated Financial Statements................................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......... 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..................................... 17
ITEM 4. CONTROLS AND PROCEDURES........................................................................ 17
PART II. OTHER INFORMATION
Item 1. Legal proceedings............................................................................ 19
Item 2. Changes in securities....................................................................... 19
Item 3. Defaults upon senior securities.............................................................. 19
Item 4. Submission of matters to a vote of securities holders........................................ 19
Item 5. Subsequent events............................................................................ 19
Item 6. Exhibits..................................................................................... 19
2
TEKNI-PLEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
DECEMBER 31, JULY 2,
2004 2004
(UNAUDITED) (AUDITED)
----------- ---------
ASSETS
CURRENT:
Cash $ 12,463 $ 29,735
Accounts receivable, net of allowances of $8,855 and
$8,408 respectively 86,750 138,109
Inventories 201,663 153,807
Prepaid expenses and other current assets 7,811 6,355
----------- ---------
TOTAL CURRENT ASSETS 308,687 328,006
PROPERTY, PLANT AND EQUIPMENT, NET 184,458 182,749
GOODWILL 198,532 198,532
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION
OF $3,908 AND $2,900 RESPECTIVELY 7,508 8,746
DEFERRED CHARGES, NET OF ACCUMULATED
AMORTIZATION OF $10,147 AND $9,122 RESPECTIVELY 9,127 9,652
DEFERRED INCOME TAXES 18,825 18,793
OTHER ASSETS 1,240 1,204
----------- ---------
$ 728,377 $ 747,682
=========== =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,743 $ 2,121
Accounts payable - trade 35,212 54,312
Accrued payroll and benefits 12,762 10,945
Accrued interest 5,975 6,763
Accrued liabilities - other 21,753 22,136
Income taxes payable 818 1,853
----------- ---------
TOTAL CURRENT LIABILITIES 78,263 98,130
LONG-TERM DEBT 750,133 731,886
OTHER LIABILITIES 14,394 18,701
----------- ---------
TOTAL LIABILITIES 842,790 848,717
----------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock -- --
Additional paid-in capital 210,518 210,518
Accumulated other comprehensive income (loss) 369 (6,000)
Retained deficit (104,777) (85,030)
Less: Treasury stock (220,523) (220,523)
----------- ---------
TOTAL STOCKHOLDERS' DEFICIT (114,413) (101,035)
----------- ---------
$ 728,377 $ 747,682
=========== =========
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 31, DECEMBER 26, DECEMBER 31, DECEMBER 26,
2004 2003 2004 2003
---------- ---------- ---------- ----------
NET SALES $ 138,247 $ 122,712 $ 281,708 $ 258,770
COST OF SALES 112,225 93,682 226,311 199,912
---------- ---------- ---------- ----------
GROSS PROFIT 26,022 29,030 55,397 58,858
OPERATING EXPENSES:
Selling, general and administrative 14,200 14,434 30,043 29,799
Integration expense 2,219 1,090 4,822 2,264
---------- ---------- ---------- ----------
OPERATING PROFIT 9,603 13,506 20,532 26,795
OTHER EXPENSES:
Interest expense 20,354 23,800 42,157 41,326
Unrealized (gain) loss on derivative
Contracts (1,008) (1,744) (4,184) (4,198)
Other expenses 420 602 782 720
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (10,163) (9,152) (18,223) (11,053)
PROVISION (benefit) FOR INCOME TAXES 660 (3,640) 1,524 (4,400)
---------- ---------- ---------- ----------
NET (LOSS) $ (10,823) $ (5,512) $ (19,747) $ (6,653)
========== ========== ========== ==========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
NET LOSS $ (10,823) $ (5,512) $ (19,747) $ (6,653)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment 4,087 6,175 5,726 6,049
---------- ---------- ---------- ----------
COMPREHENSIVE INCOME (LOSS) $ (6,736) $ 663 $ (14,021) $ (604)
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
4
TEKNI-PLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
SIX MONTHS ENDED
DECEMBER 31, DECEMBER 26,
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (19,747) $ (6,653)
Adjustment to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 15,253 17,149
Unrealized (gain) loss on derivative contracts (4,184) (4,198)
Deferred income taxes 32 (4,227)
Loss on sale of assets -- 131
Changes in operating assets and liabilities:
Accounts receivable 52,800 49,431
Inventories (46,678) (34,724)
Prepaid expenses and other current assets 1,645 1,249
Income taxes (1,035) (6,036)
Accounts payable-trade (18,320) (24,409)
Accrued interest (788) 276
Accrued expenses and other liabilities 1,739 2,806
----------- -----------
Net cash used in operating activities (19,283 (9,205)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,357) (15,087)
Acquisition costs (39) --
Additions to intangibles (1,078) (886)
Cash proceeds from sale of assets -- 1,392
Deposits and other assets (36) (191)
----------- -----------
Net cash used in investing activities (14,510) (14,772)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayments) borrowings of long-term debt 17,336 (265,990)
Proceeds from senior secured notes -- 267,438
Debt financing costs (500) (1,738)
----------- -----------
Net cash provided by (used in) financing activities 16,836 (290)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (315) (659)
----------- -----------
Net decrease in cash (17,272) (24,926)
Cash, beginning of period 29,735 48,062
----------- -----------
Cash, end of period $ 12,463 $ 23,136
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest $ 42,225 $ 37,292
Income taxes 2,502 2,551
See accompanying notes to consolidated financial statements.
5
TEKNI-PLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
NOTE 1 - GENERAL
Nature of Business
Tekni-Plex, Inc. and its subsidiaries ("Tekni-Plex" or the "Company") is a
global, diversified manufacturer of packaging, packaging products, and
materials as well as tubing products. The Company primarily serves the
food, healthcare and consumer markets. 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 primary business groups: Packaging and Tubing Products.
The results for the second quarter and first six months of fiscal 2005 are
not necessarily indicative of the results to be expected for the full
fiscal year and have not been audited. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting primarily of normal recurring accruals, necessary
for a fair statement of the results of operations for the period presented
and the consolidated balance sheet at December 31, 2004. Certain
information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the SEC rules and
regulations. These financial statements should be read in conjunction with
the financial statements and notes thereto that were included in the
Company's latest annual report on Form 10-K for the fiscal year ended July
2, 2004.
NOTE 2 Stock Based Compensation
The Company applies the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for
Stock Based Compensation - Transition and Disclosure," which allows the
Company to apply APB Opinion 25 and related interpretations in accounting
for its stock options and present pro forma effects of the fair value of
such options. Had compensation cost been determined based on the fair
value at the grant dates for these awards consistent with the method of
SFAS No. 123, the Company's income (loss) would have been reduced
(increased) to the pro forma amounts indicated below. The calculations
were based on a risk yield of zero, and expected lives of 8 years.
Three Months Ended Six Months Ended
December 31, December 26, December 31, December 26,
2004 2003 2004 2003
----------- ------------ ----------- ------------
Net income (loss)
As reported $ (10,823) $ (5,512) $ (19,747) $ (6,653)
Adjustments for
Fair value of
Stock options,
Net of tax (10) (22) (13) ( 45)
----------- ----------- ----------- ------------
Pro forma $ (10,833) $ (5,534) $ (19,760) $ (6,698)
6
TEKNI-PLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
NOTE 3 - INVENTORIES
Inventories as of December 31, 2004 and July 2, 2004 are summarized as follows:
DECEMBER 31, 2004 JULY 2, 2004
----------------- ------------
Raw materials $ 68,424 $ 58,881
Work-in-process 16,010 12,668
Finished goods 117,229 82,258
---------- -----------
$ 201,663 $ 153,807
---------- -----------
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 31, 2004 JULY 2, 2004
----------------- ------------
Senior Subordinated Notes issued June 21, 2000 at 12-3/4% due June
15, 2010 (less unamortized discount of $2,072
and $2,260) $ 272,929 $ 272,740
Senior Subordinated Notes issued May 2002 at 12-3/4% due
June 15, 2010 (plus unamortized premium of $399 and $437) 40,399 40,437
Senior Debt:
Senior Secured Notes issued November 21, 2003 at 8-3/4% due
November 15, 2013 (less unamortized discount of $6,743 and 268,257 267,879
$7,121)
Revolving line of credit, expiring June, 2006. At
December 31, 2004, the interest rates ranged from
6.37% and 8.25% 94,000 76,000
Term notes due June, 2006 and June, 2008, with an interest
rate at December 31, 2004 was 6.54% and 6.63% 70,892 71,263
Other, primarily foreign term loans, with interest rates
ranging from 4.44% to 5.44% and maturities from 2005 to 2010 5,399 5,688
---------- -----------
751,876 734,007
Less: Current maturities 1,743 2,121
---------- -----------
$ 750,133 $ 731,886
========== ===========
Our Senior debt and our Senior Subordinated Notes include various covenants, the
most restrictive of which require a minimum consolidated EBITDA, as defined in
the debt agreement, minimum fixed charge coverage ratio and a minimum leverage
ratio. As of December 31, 2004 we were in violation of the minimum EBITDA and
minimum fixed charge coverage ratio covenants contained in our revolving and
term loan credit agreement. Our lenders have waived compliance with these
covenants through March 31, 2004 at which time we will be required to have
raised a minimum of $18 million of new equity capital.
NOTE 5 - CONTINGENCIES
The Company is in the process of applying for proceeds of $3,000,000 of key man
life insurance. When the issues surrounding these policies are resolved, the
Company will record the net proceeds as income.
The Company is a party to various 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.
7
TEKNI-PLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
NOTE 6 - SEGMENT INFORMATION
Tekni-Plex management reviews its operating plants to evaluate performance and
allocate resources. As a result, Tekni-Plex has aggregated its operating plants
into two industry segments: Packaging and Tubing Products. The Packaging segment
principally produces foam egg cartons, pharmaceutical blister films, poultry and
meat processor trays, closure liners, aerosol and pump packaging components and
foam plates. The Tubing Products segment principally produces garden and
irrigation hose, medical tubing and pool hose. Products that do not fit in
either of these segments, including recycled PET, vinyl compounds and specialty
resins have been reflected in Other. The Packaging and Tubing Products segments
have operations in the United States, Europe and Canada. Other products not
included in either segment are produced in the United States. Financial
information concerning the Company's business segments and the geographic areas
in which it operates are as follows:
TUBING
PACKAGING PRODUCTS OTHER TOTAL
--------- ---------- ---------- ----------
Three Months Ended
December 31, 2004
Revenues from external customers $ 83,310 $ 25,322 $ 29,615 $ 138,247
Interest expense 6,476 9,551 4,327 20,354
Depreciation and amortization 3,619 2,123 1,677 7,419
Segment income (loss) from operations 12,339 2,158 (873) 13,624
Expenditures for segment assets 4,811 726 1,749 7,286
--------- ---------- --------- -----------
Three Months Ended
December 26, 2003
Revenues from external customers $ 72,002 $ 24,851 $ 25,859 $ 122,712
Interest expense 7,586 11,166 5,048 23,800
Depreciation and amortization 4,388 3,322 2,104 9,814
Segment income (loss) from operations 12,213 6,248 (177) 18,284
Expenditures for segment assets 4,660 846 1,563 7,069
--------- ---------- ---------- ----------
TUBING
PACKAGING PRODUCTS OTHER TOTAL
--------- ---------- ---------- ----------
Six months ended
December 31, 2004
Revenues from external
Customers $ 165,072 $ 56,358 $ 60,278 $ 281,708
Interest expense 13,427 19,782 8,948 42,157
Depreciation and
Amortization 7,276 4,196 3,269 14,741
Income (loss) from operations 25,941 4,571 (509) 30,003
Expenditures for segment
Assets 8,153 1,829 2,993 12,975
--------- ---------- ---------- ----------
Six months ended
December 26, 2003
Revenues from external
Customers $ 140,661 $ 64,244 $ 53,865 $ 258,770
Interest expense 13,169 19,382 8,775 41,326
Depreciation and
Amortization 7,776 5,276 3,585 16,637
Segment income (loss) from operations 22,242 14,530 (109) 36,663
Expenditures for segment
Assets 9,477 1,179 4,022 14,678
--------- ---------- ---------- ----------
8
TEKNI-PLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- ---------------------------
DECEMBER 31, DECEMBER 26, DECEMBER 31 DECEMBER 26
2004 2003 2004 2003
----------- ------------ ---------- -----------
PROFIT OR LOSS
Total operating profit for reportable segments $ 13,624 $ 18,284 $ 30,003 $ 36,663
Corporate and eliminations (4,021) (4,778) (9,471) (9,868)
---------- ---------- ---------- -----------
Consolidated total $ 9,603 $ 13,506 $ 20,532 $ 26,795
========== ========== ========== ===========
DEPRECIATION AND AMORTIZATION
Segment totals $ 7,419 $ 9,814 $ 14,741 $ 16,637
Corporate 256 256 512 512
---------- ---------- ---------- -----------
Consolidated total $ 7,675 $ 10,070 $ 15,253 $ 17,149
========== ========== ========== ===========
EXPENDITURES FOR SEGMENT ASSETS
Total reportable-segment expenditures $ 7,286 $ 7,069 $ 12,975 $ 14,678
Other unallocated expenditures 153 177 382 409
---------- ---------- ---------- -----------
Consolidated total $ 7,439 $ 7,246 $ 13,357 $ 15,087
========== ========== ========== ===========
SEGMENT ASSETS
TUBING
PACKAGING PRODUCTS OTHER TOTAL
--------- --------- --------- ---------
December 31, 2004 $ 281,631 $ 303,500 $ 133,819 $ 718,950
--------- --------- --------- ---------
July 2, 2004 271,432 326,882 138,705 737,019
--------- --------- --------- ---------
DECEMBER 31, 2004 JULY 2, 2004
----------------- ------------
TOTAL ASSETS
Total assets from reportable segments $ 718,950 $ 737,019
Other unallocated amounts 9,427 10,663
----------- -----------
Consolidated total $ 728,377 $ 747,682
=========== ===========
GEOGRAPHIC INFORMATION
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
DECEMBER 31, DECEMBER 26, DECEMBER 31, DECEMBER 26,
2004 2003 2004 2003
---------- ----------- ---------- -----------
REVENUES
United States $ 117,728 $ 105,589 $ 239,838 $ 223,763
International 20,519 17,123 41,870 35,007
---------- ----------- ---------- -----------
Total $ 138,247 $ 122,712 $ 281,708 $ 258,770
========== =========== ========== ===========
DECEMBER 31, 2004 JULY 2, 2004
----------------- ------------
LONG-LIVED ASSETS
United States $ 382,906 $ 385,120
International 36,784 34,556
----------- -----------
Total $ 419,690 $ 419,676
=========== ===========
9
TEKNI-PLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
NOTE 7 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Tekni-Plex, Inc. issued 12 3/4% Senior Subordinated Notes in June 2000 and
May 2002 and 8 3/4% Senior Secured Notes in November 2003. These notes are
guaranteed by all domestic subsidiaries of Tekni-Plex. The guarantor
subsidiaries are 100% owned by the issuer. The guarantees are full and
unconditional and joint and several. There are no restrictions on the transfer
of funds from guarantor subsidiaries to the issuer. The following condensed
consolidating financial statements present separate information for Tekni-Plex
(the "Issuer") and its domestic subsidiaries (the "Guarantors") and the foreign
subsidiaries (the "Non-Guarantors"). The following condensed consolidation
financial statements do not have debt and interest expense allocated to
guarantors and non-guarantors.
Consolidated Statement of Operations
(in thousands)
(Unaudited)
For the three months ended December 31,2004
NON-
TOTAL ISSUER GUARANTORS GUARANTORS
----------- ----------- ---------- ----------
Net sales $ 138,247 $ 44,726 $ 73,002 $ 20,519
Cost of goods sold 112,225 33,659 61,490 17,076
----------- ----------- ---------- ----------
Gross profit 26,022 11,067 11,512 3,443
Operating expenses:
Selling, General and administrative 14,200 6,118 5,830 2,252
Integration expense 2,219 611 1,608 --
----------- ----------- ---------- ----------
Operating profit 9,603 4,338 4,074 1,191
Interest expense (income), net 20,354 20,340 (17) 31
Unrealized gain on derivative contracts (1,008) (1,008) -- --
Other expense (income) 420 (224) (666) 1,310
----------- ----------- ----------- ----------
Income (loss) before income taxes (10,163) (14,770) 4,757 (150)
Provision (benefit) for income taxes 660 (1,700) 1,700 660
----------- ----------- ---------- ----------
Net income (loss) $ (10,823) $ (13,070) $ 3,057 $ (810)
=========== =========== ========== ==========
Consolidated Statement of Operations
(in thousands)
For the six months ended December 31, 2004
NON-
TOTAL ISSUER GUARANTORS GUARANTORS
----------- ----------- ---------- ----------
Net sales $ 281,708 $ 86,961 $ 152,877 $ 41,870
Cost of sales 226,311 64,567 128,655 33,089
----------- ----------- ---------- ----------
Gross profit 55,397 22,394 24,222 8,781
Operating expenses:
Selling, General and administrative 30,043 13,681 12,058 4,304
Integration expense 4,822 1,166 3,656 --
----------- ----------- ---------- ----------
Operating profit 20,532 7,547 8,508 4,477
Interest expense (income) net 42,157 42,123 (33) 67
Unrealized gain on derivative contracts (4,184) (4,184) -- --
Other expense (income) 782 (459) (869) 2,110
----------- ------------ ---------- ----------
Income (loss) before income taxes (18,223) (29,933) 9,410 2,300
Provision (benefit) for income taxes 1,524 (3,300) 3,300 1,524
----------- ----------- ---------- ----------
Net income(loss) $ (19,747) $ (26,633) $ 6,110 $ 776
=========== =========== ========== ==========
10
TEKNI-PLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
Consolidated Statement of Operations
(in thousands)
(Unaudited)
For the three months ended December 26, 2003
NON-
TOTAL ISSUER GUARANTORS GUARANTORS
----- ------ ---------- ----------
Net sales $ 122,712 $ 36,225 $ 69,364 $17,123
Cost of goods sold 93,682 26,547 54,272 12,863
--------- -------- -------- -------
Gross profit 29,030 9,678 15,092 4,260
Operating expenses:
Selling, General and administrative 14,434 7,039 5,403 1,992
Integration expense 1,090 -- 1,090 --
--------- -------- -------- -------
Operating profit 13,506 2,639 8,599 2,268
Interest expense (income), net 23,800 23,766 (8) 42
Unrealized gain on derivative contracts (1,744) (1,744) -- --
Other expense (income) 602 (552) 22 1,132
--------- -------- -------- -------
Income (loss) before income taxes (9,152) (18,831) 8,585 1,094
Provision (benefit) for income taxes (3,640) (7,680) 3,411 629
--------- -------- -------- -------
Net income (loss) $ (5,512) $(11,151) $ 5,174 $ 465
========= ======== ======== =======
Consolidated Statement of Operations
(in thousands)
For the six months ended December 26, 2003
NON-
TOTAL ISSUER GUARANTORS GUARANTORS
----- ------ ---------- ----------
Net sales $ 258,770 $ 69,873 $ 153,890 $35,007
Cost of sales 199,912 52,657 120,343 26,912
--------- -------- --------- -------
Gross profit 58,858 17,216 33,547 8,095
Operating expenses:
Selling, General and administrative 29,799 13,731 12,308 3,760
Integration expense 2,264 -- 2,264 --
--------- -------- --------- -------
Operating profit 26,795 3,485 18,975 4,335
Interest expense (income) net 41,326 41,264 (24) 86
Unrealized gain on derivative contracts (4,198) (4,198) -- --
Other expense (income) 720 (746) (293) 1,759
--------- -------- --------- -------
Income (loss) before income taxes (11,053) (32,835) 19,292 2,490
Provision (benefit) for income taxes (4,400) (13,280) 7,700 1,180
--------- -------- --------- -------
Net income(loss) $ (6,653) $(19,555) $ 11,592 $ 1,310
========= ======== ========= =======
11
TEKNI-PLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
Condensed Consolidated Balance Sheet - at December 31, 2004
NON-
TOTAL ELIMINATIONS ISSUER GUARANTORS GUARANTORS
----- ------------ ------ ---------- ----------
Current assets $ 308,687 $ -- $ 42,093 $ 212,311 $ 54,283
Property, plant and equipment, net 184,458 -- 43,494 113,414 27,550
Intangible assets, net 206,040 -- 15,252 179,601 11,187
Investment in subsidiaries -- (567,524) 567,524 -- --
Deferred income taxes 18,825 -- 30,032 (9,068) (2,139)
Deferred charges, net 9,127 -- 9,011 116 --
Other assets 1,240 (595,693) 320,249 276,498 186
--------- ----------- ----------- --------- --------
Total assets $ 728,377 $(1,163,217) $ 1,027,655 $ 772,872 $ 91,067
========= =========== =========== ========= ========
Current liabilities $ 78,263 $ -- $ 25,680 $ 30,551 $ 22,032
Long-term debt 750,133 -- 745,735 -- 4,398
Other long-term liabilities 14,394 (595,693) 372,408 234,640 3,039
--------- ----------- ----------- --------- --------
Total liabilities 842,790 (595,693) 1,143,823 265,191 29,469
--------- ----------- ----------- --------- --------
Additional paid-in capital 210,518 (313,529) 210,499 296,783 16,765
Retained earnings (deficit) (104,777) (253,995) (104,777) 217,679 36,316
Other comprehensive income (loss) 369 -- (1,367) (6,781) 8,517
Less: Treasury stock (220,523) -- (220,523) -- --
--------- ----------- ----------- --------- --------
Total stockholders' equity(deficit) (114,413) (567,524) (116,168) 507,681 61,598
--------- ----------- ----------- --------- --------
$ 728,377 $(1,163,217) $ 1,027,655 $ 772,872 $ 91,067
========= =========== =========== ========= ========
Condensed Consolidated Balance Sheet - at July 2, 2004
NON-
TOTAL ELIMINATIONS ISSUER GUARANTORS GUARANTORS
----- ------------ ------ ---------- ----------
Current assets $ 328,006 $ -- $ 38,357 $ 218,542 $ 71,107
Property, plant and equipment, net 182,749 -- 43,178 113,335 26,236
Intangible assets, net 207,278 -- 16,471 179,997 10,810
Investment in subsidiaries -- (560,638) 560,638 -- --
Deferred income taxes 9,652 -- 9,536 116 --
Deferred charges, net 18,793 -- 30,032 (9,205) (2,034)
Other assets 1,204 (594,961) 339,165 257,456 (456)
--------- ------------ ----------- ----------- ---------
Total assets $ 747,682 $ (1,155,599) $ 1,037,377 $ 760,241 $ 105,663
========= ============ =========== =========== =========
Current liabilities 98,130 -- 26,277 47,577 24,276
Long-term debt 731,886 -- 727,577 -- 4,309
Other long-term liabilities 18,701 (594,961) 379,944 211,540 22,178
--------- ------------ ----------- ----------- ---------
Total liabilities 848,717 (594,961) 1,133,798 259,117 50,763
--------- ------------ ----------- ----------- ---------
Additional paid-in capital 210,518 (313,529) 210,499 296,783 16,765
Retained earnings (deficit) (85,030) (247,109) (85,030) 211,569 35,540
Other comprehensive income ( loss) (6,000) -- (1,367) (7,228) 2,595
Less: Treasury stock (220,523) -- (220,523) -- --
--------- ------------ ----------- ----------- ---------
Total Stockholders' equity (deficit) (101,035) (560,638) (96,421) 501,124 54,900
--------- ------------ ----------- ----------- ---------
Total liabilities and deficit $ 747,682 $ (1,155,599) $ 1,037,377 $ 760,241 $ 105,663
========= ============ =========== =========== =========
12
TEKNI-PLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Condensed Consolidated Cash Flows
(Unaudited)
For the six months ended December 31, 2004
NON-
TOTAL ISSUER GUARANTORS GUARANTORS
----- ------ ---------- ----------
Net cash provided by (used in) operating activities $(19,283) $(41,338) $ 10,662 $ 11,393
-------- -------- -------- --------
Cash flows from Investing activities:
Capital expenditures (13,357) (2,209) (8,032) (3,116)
Acquisition costs (39) (39) -- --
Cash proceeds from sale of assets -- -- -- --
Additions to intangibles (1,078) (173) (44) (861)
Deposits and other assets (36) (36) -- --
-------- -------- -------- --------
Net cash used in investing activities $(14,510) $ (2,457) $ (8,076) $ (3,977)
-------- -------- -------- --------
Cash flows from financing activities
(Repayments) borrowings of long term debt 17,336 17,629 -- (293)
Debt financing costs (500) (500) -- --
Change in intercompany accounts -- 18,917 (8,715) (10,202)
-------- -------- -------- --------
Net cash flows provided by (used in) financing
activities 16,836 36,046 (8,715) (10,495)
-------- -------- -------- --------
Effect of exchange rate changes on cash (315) -- -- (315)
-------- -------- -------- --------
Net decrease in cash (17,272) (7,749) (6,129) (3,394)
Cash, beginning of period 29,735 11,890 8,923 8,922
-------- -------- -------- --------
Cash, end of period $ 12,463 $ 4,141 $ 2,794 $ 5,528
======== ======== ======== ========
For the six months ended December 26, 2003
NON-
TOTAL ISSUER GUARANTORS GUARANTORS
----- ------ ---------- ----------
Net cash provided by (used in) operating activities $ (9,205) $(40,477) $ 21,352 $ 9,920
-------- -------- -------- --------
Cash flows from Investing activities:
Capital expenditures (15,087) (5,470) (6,425) (3,192)
Acquisition costs 1,392 -- 1,392 --
Additions to intangibles (886) (144) (225) (517)
Deposits and other assets (191) (8) -- (183)
-------- -------- -------- --------
Net cash used in investing activities $(14,772) $ (5,622) $ (5,258) $ (3,892)
-------- -------- -------- --------
Cash flows from financing activities
(Repayment) borrowings of long term debt 1,448 1,468 -- (20)
Receipt of additional paid-in capital (1,738) (1,738) -- --
Change in intercompany accounts -- 27,507 (31,002) 3,495
-------- -------- -------- --------
Net cash flows provided by financing activities (290) 27,237 (31,002) 3,475
-------- -------- -------- --------
Effect of exchange rate changes on cash (659) -- -- (659)
-------- -------- -------- --------
Net increase (decrease) in cash (24,926) (18,862) (14,908) 8,844
Cash, beginning of period 48,062 20,900 19,650 7,512
-------- -------- -------- --------
Cash, end of period $ 23,136 $ 2,038 $ 4,742 $ 16,356
======== ======== ======== ========
13
TEKNI-PLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
NOTE 7- ACQUISITIONS
In July 2002, the Company purchased certain assets and assumed certain
liabilities of ELM Packaging "ELM" for approximately $16,806. The acquisition
was recorded under the purchase method, whereby Elm's net assets were recorded
at estimated fair value and its operations have been reflected in the statement
of operations since that date.
In connection with the acquisition, a reserve of $4,500 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 31, 2004 are as follows:
BALANCE COSTS CHARGED TO BALANCE
JULY 2004 RESERVE DECEMBER 31, 2004
--------- ---------------- -----------------
Legal, environmental and other $ 1,161 $ 15 $ 1,146
--------- ---------- --------
$ 1,161 $ 15 $ 1,146
========= ========== ========
The remaining legal, environmental and other costs are expected to be paid over
the next four years.
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 26, 2003 are as follows:
BALANCE COSTS CHARGED BALANCE
JULY 2004 TO RESERVE DECEMBER 31, 2004
--------- ------------- -----------------
Legal and environmental $ 1,281 $ 168 $ 1,113
-------- ------ --------
$ 1,281 $ 168 $ 1,113
======== ====== ========
The remaining legal and environmental costs are expected to extend over the next
four years.
In July 2004, the Company acquired substantially all the net assets of the egg
carton business of Genpak ("Genpak") for $5,850. Genpak produces a variety of
foam products, including foam egg cartons. The financial results of the Genpak
transaction are included in the Packaging Segment. The proforma results of
operation of the Genpak assets as though the acquisition occurred on June 29,
2003 are immaterial. The acquisition was recorded under the purchase method,
whereby the acquired Genpak net assets were recorded at estimated fair value,
and its operations have been reflected in the statement of operations since that
date. The allocation of purchase price is as follows:
Assets:
Inventory $ 282
Plant property and equipment 1,044
Customer list and covenant not to compete 4,524
----------
Total Assets 5,850
Liabilities --
----------
Net Investment $ 5,850
==========
14
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SECOND QUARTER OF FISCAL 2005 COMPARED WITH THE SECOND QUARTER OF FISCAL 2004
Net sales increased by $15.5 million or 12.7% to $138.2 million for the three
months ended December 31, 2004 from $122.7 million for the three months ended
December 26, 2003. The increase in net sales was largely attributable to higher
selling prices across all of our businesses, except garden hose where prices are
contractually set annually and typically go into effect in January. Net sales
for our Packaging Segment increased $11.3 million or 15.7% to $83.3 million in
the current period from $72.0 million in the prior period. Net sales for our
Tubing Segment increased $0.5 million or 1.9% to $25.3 million in the current
period from $24.9 million in the prior period as strong sales in medical tubing
offset a decline in garden hose revenue. Other net sales increased 14.5% to
$29.6 million in the current period compared to $25.9 million in the prior
period.
Cost of sales increased $18.5 million or 19.8% to $112.2 million for the three
months ended December 31, 2004 from $93.7 million for the three months ended
December 26, 2003, largely due to significantly higher raw material costs.
Expressed as a percentage of net sales, cost of sales increased to 81.2% for the
three months ended December 31, 2004 from 76.3% for the three months ended
December 26, 2003.
As a result, gross profit declined to $26.0 million for the three months ended
December 31, 2004 from $29.0 million for the three months ending December 26,
2003. Expressed as a percentage of net sales, gross profit declined to 18.8% in
the current period from 23.7% in the previous year. Gross profit at our
Packaging Segment increased to $20.3 million in the most recent period from
$18.8 million in the comparable period of last year as we were able to pass
through higher raw material costs at these operations. Measured as a percentage
of net sales, however, gross profit declined to 24.4% in the current period
compared to 26.1% in the comparable period of the previous year. Our Tubing
Segment gross profit decreased to $5.0 million or 19.8% of net sales in the
second quarter of fiscal 2005 compared to $8.9 million or 35.9% in the second
quarter of the previous year due to weaker margins at our garden hose business
where we were unable to pass through significantly higher raw material costs.
Other gross profit decreased to $0.7 million in the current period from $1.3
million in the comparable period of the previous year. Measured as a percentage
of net sales, other gross profit decreased to 2.4% in the second quarter of
fiscal 2004 compared to 5.1% in the same period of the previous year largely due
to higher cost raw materials.
Selling, general and administrative expense decreased slightly to $14.2 million
in the current period compared to $14.4 million in the comparable period of the
previous year. The ratio of selling, general and administrative expense to net
sales decreased to 10.3% for the three months ending December 31, 2004 from
11.8% in the comparable period of last year.
Integration expense increased to $2.2 million for the three months ended
December 31, 2004 from $1.1 million in the previous year as the Company
continued to reconfigure and realign the Elm production facilities to conform to
our current production and product standards and consolidated the operations of
our former Rockaway, NJ facility into our Clayton, North Carolina and our
Clinton, Illinois facilities.
Operating profit, as a result of the foregoing, decreased to $9.6 million or
7.0% of net sales for the three months ended December 31, 2004 from $13.5
million or 11.0% of net sales for the three months ended December 26, 2003.
Operating Profit for our Packaging Segment increased to $12.3 million in the
current period from $12.2 million in the prior period. Measured as a percent of
net sales, operating profit for our Packaging Segment decreased to 14.8% in the
current period from 17.0% in the prior period. Operating profit for our Tubing
Segment decreased to $2.2 million in the current period from $6.2 million in the
prior period. Measured as a percentage of net sales, operating profit decreased
to 8.5% in the current period from 25.1% in the prior period due to weaker
margins at our hose operations where we were unable to pass through
significantly higher raw material costs. Other operating profit decreased to a
($0.9) million loss in the current period compared to ($0.2) million loss in the
previous year.
Interest expense decreased to $20.4 million in the three months ended December
31, 2004 from $23.8 million in the three months ended December 26, 2003. The
Second Quarter of Fiscal 2004 contained a $4.5 million a write off of deferred
financing costs and bank fees. Measured as a percentage of net sales, interest
expense decreased to 14.7% in the current period compared to 19.4% in the
previous year. The unrealized gain on derivative contracts decreased to $1.0
million in the current period compared to $1.7 million in the previous year.
Income (loss) before income taxes, as a result, was a loss of ($10.2) million or
(7.4%) of net sales for the three months ended December 31, 2004 compared to a
loss of ($9.2) million or (7.5%) of net sales in the previous year.
Income tax expense (benefit) was an expense of $0.7 million for the three months
ended December 31, 2004, compared to a benefit of ($3.6) million for the three
months ended December 26, 2003, primarily attributable to reserving losses
generated in the three months ended December 31, 2004.
15
Net loss, as a result, was a loss of ($10.8) million for the three months ended
December 31, 2004 or (7.8%) of net sales compared with a loss of ($5.5) million
or (4.5%) of net sales for the three months ended December 26, 2003.
FIRST HALF OF FISCAL 2004 COMPARED WITH THE FIRST HALF OF FISCAL 2003
Net sales increased $22.9 million or 8.9% to $281.7 million for the six months
ended December 31, 2004 from $258.8 million for the six months ended December
26, 2003. The increase in net sales was largely attributable to higher selling
prices across all of our businesses, except garden hose where prices are set
annually. Net sales for our Packaging Segment increased $24.4 million or 17.4%
to $165.1 million in the current period from $140.7 million in the prior period.
Net sales for our Tubing Segment decreased $7.9 million or 12.3% to $56.4
million in the current period from $64.2 million in the prior period due to weak
garden hose sales caused by cool and wet weather in the western United States.
Other net sales increased to $60.3 million in the current period compared to
$53.9 million last year.
Cost of sales increased to $226.3 million for the six months ended December 31,
2004 from $199.9 million for the six months ended December 26, 2003. Expressed
as a percentage of net sales, cost of sales increased to 80.3% for the six
months ended December 31, 2004 from 77.3% for the six months ended December 26,
2003. The increase in cost of goods sold was primarily due to a significant
increase in raw material costs.
As a result, gross profit declined to $55.4 million for the six months ended
December 31, 2004 from $58.9 million for the six months ending December 26,
2003. Expressed as a percentage of net sales, gross profit declined to 19.7% in
the current period from 22.8% in the previous year. Gross profit at our
Packaging Segment increased to $42.0 million or 25.5% of net sales in the most
recent period from $35.3 million or 25.1% of net sales in the comparable period
of last year, as we were able to largely pass through higher raw material costs.
In addition, our food packaging business benefited from an improved product mix
as egg cartons accounted for a larger proportion of our food packaging sales.
Our Tubing Segment gross profit decreased to $10.7 million or 19.0% of net sales
in the first half of fiscal 2005 compared to $20.6 million or 32.0% of net sales
in the first half of the previous year due to higher raw material costs that
could not be passed through to our garden hose customers. Other gross profit
decreased slightly to $2.6 million in the current period from $2.9 million in
the comparable period of the previous year. Measured as a percentage of net
sales, Other gross profit increased to 4.4% in the first half of fiscal 2004
compared to 5.5% in the same period of the previous year..
Selling, general and administrative expense increased slightly to $30.0 million
in the six months ended December 31, 2004 compared to $29.8 million in the six
months ended December 26, 2003. The ratio of selling, general and administrative
expense to net sales decreased to 10.7% for the six months ending December 31,
2004 from 11.5% in the comparable period of last year.
Integration expense was $4.8 million or 1.7% of net sales for the six months
ended December 31, 2004 compared to $2.3 million or 0.9% of net sales in the
comparable period of the previous year. This increase was due to the inclusion
of expenses associated with closing our Rockaway, NJ facility.
Operating profit, as a result of the foregoing, decreased to $20.5 million or
7.3% of net sales for the six months ended December 31, 2004 from $26.8 million
or 10.4% of net sales for the six months ended December 26, 2003. Operating
Profit for our Packaging Segment increased to $25.9 million in the current
period from $22.2 million in the prior period. Measured as a percent of net
sales, operating profit for our Packaging Segment decreased slightly to 15.7% in
the current period from 15.8% in the prior period. Operating profit for our
Tubing Segment decreased to $4.6 million in the current period from $14.5
million in the prior period. Measured as a percentage of net sales, operating
profit decreased to 8.1% in the current period from 22.6% in the prior period
due to higher raw material costs which we were unable to pass through to our
garden hose customers. Other operating profit decreased to a ($0.5) million loss
in the current period compared to a ($0.1) million loss in the previous year.
Interest expense increased to $42.2 million in the six months ended December 31,
2004 from $41.3 million in the six months ended December 26, 2003 primarily due
to higher interest rates. Measured as a percentage of net sales, interest
expense decreased to 15.0% in the current period compared to 16.0% in the
previous period. The unrealized loss (gain) in derivative contracts remained at
a ($4.2) million.
Loss before income taxes, as a result, was a loss of ($18.2) million or (6.5%)
of net sales for the six months ended December 31, 2004 compared to a loss of
($11.1) million or (4.3%) of net sales for the six months ended December 26,
2003.
Income tax expense (Benefit) was on expense of $1.5 million for the six months
ended December 31, 2004, compared to a benefit of ($4.4) million for the six
months ended December 26, 2003. The change in income tax expense was primarily
attributable to reserving losses generated in the three months ended December
31, 2004. The Company's effective tax rate was (8.4%) for the six months ended
December 31, 2004 compared to 39.8% for the six months ending December 26, 2003.
Net loss, as a result, was a loss of ($19.7) million for the six months ended
December 31, 2004 or (7.0%) of net sales compared with a loss of ($6.7) million
or (2.6%) of net sales for the six months ended December 26, 2003.
16
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations for the six months ended December 31, 2004 was $19.3
million compared with $9.2 million in the same period of the prior year. The
$10.1 million decrease was primarily due to a reduction in accounts payable as
well as a seasonal increase in inventories offset by a seasonal reduction in
accounts receivable.
Working capital on December 31, 2004 was $230.4 million compared to $229.9
million on July 2, 2004. During the first half of fiscal 2005, a normal seasonal
reduction in accounts receivable was partially offset by a normal seasonal
increase in inventories.
As of December 31, 2004, the Company had an outstanding balance of $94.0 million
under the $100.0 million revolving credit line.
The Company's capital expenditures for the six months ended December 31, 2004
and December 26, 2003 were $13.4 million and $15.1 million respectively.
Our Senior debt and our Senior Subordinated Notes include various covenants, the
most restrictive of which require a minimum consolidated EBITDA, as defined in
the debt agreement, minimum fixed charge coverage ratio and a minimum leverage
ratio. As of December 31, 2004 we were in violation of the minimum EBITDA and
minimum fixed charge coverage ratio covenants contained in our revolving and
term loan credit agreement. Our lenders have waived compliance with these
covenants through March 31, 2005 by which time we will be required to have
raised a minimum of $18 million of new equity capital or we will be in violation
of certain covenants under this agreement. We have reached an agreement in
principle with one of our existing investors to provide the required equity
investment. This agreement is subject to customary terms and conditions
including execution of definitive documentation. If, as expected, we are
successful in finalizing our agreement, we believe we will have sufficient
liquidity to meet our financial commitments. However, if we are unsuccessful in
finalizing our agreement with this equity investor and are unable to secure
alternate financing or obtain another waiver from our lenders, we maybe unable
to meet our financial obligations.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk inherent in certain debt instruments. At
December 31, 2004, the principal amount of the Company's aggregate outstanding
variable rate indebtedness was $164.9 million. A hypothetical 1% adverse change
in interest rates would have an annualized unfavorable impact of approximately
$0.6 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.
17
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure that
information required to be disclosed in its Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to the Company's management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
In connection with the completion of its audit of and the issuance of an
unqualified report on the Company's consolidated financial statements for the
fiscal year ended July 2, 2004, the Company's independent auditors, BDO Seidman,
LLP ("BDO"), communicated to the Company's Audit Committee that the following
matters involving the Company's internal controls and operations were considered
to be "reportable conditions", as defined under standards established by the
American Institute of Certified Public Accountants or AICPA:
- Lack of quantity of staff which led to issues related to timeliness
of financial reporting and year end closing process.
- Lack of quantity of staff which led to issues related to process
related to estimating chargeback reserves and inventory lower of
cost or market analysis, including preparation and review of
analysis.
Reportable conditions are matters coming to the attention of the independent
auditors that in their judgment, relate to significant deficiencies in the
design or operation of internal controls and could adversely affect the
Company's ability to record, process, summarize and report financial data
consistent with the assertions of management in the financial statements. In
addition, BDO has advised the Company that they consider these matters, which
are listed above, to be "material weaknesses" that, by themselves or in a
combination, may increase the possibility that a material misstatement in our
financial statements might not be prevented or detected by our employees in the
normal course of performing their assigned functions.
As required by SEC Rule 13a-15(b), the Company carried out an evaluation under
the supervision and with the participation of its management, including its
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operations of the Company's disclosure controls and procedures as of
December 31, 2004. Because of the foregoing material weakness identified by BDO
in conjunction with our annual audit for fiscal year ending July 2, 2004, the
Company's Chief Executive Officer and Chief Financial Officer determined that
the Company's disclosure controls and procedures are not effective. However, the
Chief Executive Officer and Chief Financial Officer noted that the Company is
actively seeking to remedy the deficiencies identified herein including hiring
additional staff to assure timeliness of financial reporting as well as
reviewing our estimates of chargeback reserves and inventory on a more frequent
basis. The Company's Chief Executive Officer and Chief Financial Officer did not
note any other material weakness or significant deficiencies in the Company's
disclosure controls and procedures during their evaluation. The Company
continues to improve and refine its internal controls. This process is ongoing.
In the second quarter of fiscal 2005, there were no significant changes in the
Company's internal control over financial reporting or in other factors that
materially affected, or are reasonably likely to materially affect, the
Company's internal controls over financial reporting.
18
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
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31.1 Certification of Chairman and Principal Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Principal Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chairman and Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
None
19
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 14, 2005
By:/s/ F. Patrick Smith
------------------------
F. Patrick Smith
Chairman of the Board and
Chief Executive Officer
By:/s/ James E .Condon
------------------------
James E. Condon
Vice President and Chief Financial Officer
20