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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 000-23855
U.S. PLASTIC LUMBER CORP.
(Name of issuer in its charter)
---------------
NEVADA 87-0404343
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
---------------
2300 W. GLADES ROAD, SUITE 440 W, BOCA RATON, FLORIDA 33431
(561) 394-3511
(Address and telephone number of principal
executive offices and place of business)
Check here whether the issuer: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer
as defined in Rule 12b-2 YES [ ] NO [X]
The number of shares outstanding of the registrant's common stock as
of April 30, 2003 is 64,429,216 shares.
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U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
FORM 10-Q
INDEX
PAGE
----
PART I. UNAUDITED FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 2003
and December 31, 2002 ................................................................ 2
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2003 and 2002 ........................................... 3
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March
31, 2003 and 2002 ...................................................................... 4
Notes to Condensed Consolidated Financial Statements ................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................................. 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk ..................... 13
Item 4. Controls and Procedures ........................................................ 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................................. 14
Item 2. Changes in Securities and Use of Proceeds ..................................... 14
Item 3. Defaults Upon Senior Securities ............................................... 14
Item 4. Submission of Matters to a Vote of Security
Holders .............................................................................. 14
Item 6. Exhibits and Reports on Form 8-K .............................................. 14
SIGNATURES ............................................................................. 15
Section 302 Certifications ............................................................. 16
Section 906 Certifications ............................................................. 18
FORWARD LOOKING STATEMENTS
When used in this Form 10-Q, the words or phrases "will likely
result", "are expected to", "will continue", "is anticipated", "estimate",
"projected", "intends to" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including but not limited to risks associated with our credit
facilities and liquidity, the ability to obtain adequate financing on
commercially acceptable terms, economic conditions, demand for products and
services of the Company, newly developing technologies, the Company's ability
to compete, regulatory matters, protection of the Company's proprietary
technology, the effects of competition from entities with greater financial
resources than that possessed by the Company and shareholder dilution. Such
factors, which are discussed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the notes to consolidated
financial statements, could affect the Company's financial performance and
could cause the Company's actual results for future periods to differ
materially from any opinions or statements expressed with undue reliance on any
such forward-looking statements, which speak only as of the date made. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
U. S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 2003 AND DECEMBER 31, 2002
DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA
ASSETS
UNAUDITED
CURRENT ASSETS 2003 2002
--------- ---------
Cash and cash equivalents $ 74 $ 563
Accounts receivable, net of allowance for doubtful accounts of $3,636 and
$3,725, respectively 6,598 4,908
Inventories 6,324 5,107
Prepaid insurance 1,506 1,945
Other current assets 805 760
--------- ---------
Total current assets 15,307 13,283
Property, plant and equipment (net) 56,348 57,048
Assets held for sale 638 638
Goodwill (net) 12,650 12,650
Other intangibles (net) 521 529
Other assets 1,877 1,902
--------- ---------
Total assets $ 87,341 $ 86,050
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 8,802 $ 8,593
Notes and capital leases payable, current portion 14,777 6,386
Accrued expenses 5,106 5,878
Restructuring accrual 64 64
Other current liabilities 1,437 2,091
--------- ---------
Total current liabilities 30,186 23,012
Notes and capital leases payable, net of current portion 9,861 13,385
Other liabilities 4,304 4,495
Subordinated notes and convertible debentures 10,362 10,248
--------- ---------
Total liabilities 54,713 51,140
--------- ---------
STOCKHOLDERS' EQUITY
Common stock par value $.0001, authorized 100,000,000 shares;
issued and outstanding 64,429,216 and 64,427,416 shares, respectively 6 6
Additional paid-in capital 111,924 111,924
Accumulated deficit (79,302) (77,020)
--------- ---------
Total stockholders' equity 32,628 34,910
--------- ---------
Total liabilities and stockholders' equity $ 87,341 $ 86,050
========= =========
See accompanying notes to condensed unaudited consolidated financial
statements.
2
U. S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
2003 2002
------------ ------------
Sales, net $ 11,216 $ 14,204
Cost of goods sold 10,526 11,047
------------ ------------
Gross profit 690 3,157
Selling, general and administrative expenses 2,474 3,203
------------ ------------
Operating loss (1,784) (46)
Interest and other income 87 66
Interest expense 586 3,314
------------ ------------
Loss from continuing operations before income taxes (2,283) (3,294)
Income tax provision -- --
------------ ------------
Loss from continuing operations (2,283) (3,294)
Discontinued Operations:
Income from operations of discontinued environmental recycling segment -- 484
------------ ------------
Net loss (2,283) (2,810)
Preferred stock dividend earned -- 177
------------ ------------
Net loss attributable to common stockholders $ (2,283) $ (2,987)
============ ============
Net loss per common share - Basic:
Loss from continuing operations $ (0.04) $ (0.08)
Income from discontinued operations $ -- $ 0.01
------------ ------------
Net loss per common share $ (0.04) $ (0.07)
============ ============
Net loss per common share - Diluted:
Loss from continuing operations $ (0.04) $ (0.08)
Income from discontinued operations $ -- $ 0.01
------------ ------------
Net loss per common share $ (0.04) $ (0.07)
============ ============
Weighted average common shares outstanding:
Basic 64,428,676 41,028,479
Diluted 64,428,676 41,028,479
See accompanying notes to condensed unaudited consolidated financial
statements.
3
U. S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE DATA
(UNAUDITED)
2003 2002
------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,283) $ (2,810)
------- -----------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 874 943
Amortization 18 17
Income from discontinued operations -- (484)
Amortization of deferred financing costs 30 863
Reduction of discounts on convertible subordinated debentures -- 271
Interest expense paid in kind 114 64
Beneficial conversion feature of convertible subordinated debentures -- 250
(Gain) loss on sale of property, plant & equipment (84) --
Changes in operating assets and liabilities, net of divestitures:
Accounts receivable (1,690) (4,219)
Inventories (1,217) 223
Prepaid expenses and other current assets 394 (400)
Other assets 10 (200)
Accounts payable 208 3,072
Other liabilities (844) 87
Accrued expenses (772) 1,044
------- -----------
Net cash used in operating activities - continuing operations (5,242) (1,279)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment (273) (1,094)
Divestitures of property, plant and equipment 150 12
------- -----------
Net cash used in investing activities - continuing operations (123) (1,082)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock, net of issuance costs -- 376
Net borrowings on lines of credit 4,983 500
Payments of notes payable (107) (66)
------- -----------
Net cash provided by financing activities - continuing operations 4,876 810
------- -----------
Net change in cash and cash equivalents - continuing operations (489) (1,551)
Cash from discontinued operations -- 1,701
Cash and cash equivalents, beginning of period, including cash of discontinued operations 563 912
------- -----------
Cash and cash equivalents, end of period $ 74 $ 1,062
======= ===========
Supplemental disclosure of cash flow information - continuing operations:
Cash paid during the period for:
Interest $ 462 $ 670
Income taxes $ 9 $ 4
Number of shares issued during the period for non-cash transactions:
Compensation - employees and directors 1,800 4,400
Conversion of debenture and preferred stock -- 3,903,494
See accompanying notes to condensed unaudited consolidated financial
statements.
4
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
NATURE OF OPERATIONS
U.S. Plastic Lumber Corp. and its subsidiaries (collectively the
"Company") are engaged in the manufacturing of alternative wood and other
specialty products made primarily from recycled plastic. Prior to September 9,
2002, the Company also provided environmental remediation services, including
recycling of soils that had been exposed to hydrocarbons and the beneficial
reuse of dredge materials. The Company's customers are located primarily
throughout the United States, however the Company does have a small number of
international customers. The Company's environmental remediation, dredge and
soil recycling customers were located primarily in the Northeastern United
States.
BASIS OF PRESENTATION
The Company's consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting and the regulations of the Securities and Exchange Commission ("SEC")
for quarterly reporting. The interim condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-K as filed with the SEC for the year ended December 31, 2002. Management
acknowledges its responsibility for the preparation of the accompanying interim
condensed consolidated financial statements which reflect all adjustments
considered necessary, in the opinion of management, for a fair statement of the
results of interim periods presented. The results of operations for the interim
periods are not necessarily indicative of the results of operations for the
entire year. Where appropriate, certain amounts for 2003 have been reclassified
to conform to the 2002 presentation.
The Company completed the sale of its environmental recycling and
remediation business on September 9, 2002. The results of operations and
statement of cash flows for the three months ended March 31, 2002 presented in
this Form 10-Q have been restated to reflect the environmental recycling and
remediation business as a discontinued operation.
2. LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and ability to meet its financial obligations
and maintain its current operations in 2003 and beyond will be dependent on its
ability to meet the payment obligations under and maintain compliance with the
financial covenants in its various debt agreements and provide financing for
working capital. The Company's senior secured credit facility with Guaranty
Business Credit Corporation (the "GBCC Credit Facility") and its Master Credit
Facility equipment term loans both contain significant financial covenants,
including but not limited to the requirement to achieve specified levels of
earnings before interest, taxes, depreciation and amortization ("EBITDA"),
which is measured periodically throughout the term of these agreements. The
Company did not achieve sufficient EBITDA to meet the financial covenant
requirements under the GBCC Credit Facility for each of the first three months
of 2003. On May 13, 2003 the GBCC Credit Facility was amended to waive all past
covenant violations and to reset the parameters of some of the financial
covenants for the remainder of 2003. The amended terms of the GBCC Credit
Facility continue to require that financial covenants be measured on a monthly
basis beginning in May 2003. In addition, the Company was not in compliance
with the EBITDA covenant contained in its Master Credit Facility during the
first three months of 2003. As of May 15, 2003 neither GE Capital Corporation
nor any of the other lenders that participate in the Master Credit Facility
(the "GE Lending Group") have taken any action against the Company. The Company
will be entering into negotiations with the GE Lending Group for a waiver of
this covenant violation, however no assurance can be given as to whether or
what form this waiver will be obtained. If the Company is unsuccessful in
obtaining such a waiver, the GE Lending Group can demand immediate repayment
from the Company of the outstanding balance of the Master Credit Facility,
which is approximately $11,348,000 as of March 31, 2003. The Company has a
history of operating losses and past inability to comply with similar financial
covenant requirements. In the absence of a written waiver, any failure to
comply with the covenants under the Company's GBCC Credit Facility and Master
Credit Facility in 2003 could lead to a demand for immediate repayment of the
outstanding balance due under the facility. Such an occurrence would have a
material adverse effect upon the Company as it does not have the resources to
repay these amounts should they become immediately due without obtaining
additional debt and/or equity financing.
5
At March 31, 2003 the Company has a working capital deficit and
accumulated deficit of $14.9 million and $79.3 million respectively. Capital
requirements relating to the implementation of the Company's business plan have
been and will continue to be significant. As a result of the Company's past
financial performance, and because substantially all of its assets have been
pledged as collateral under its current debt agreements, the Company may not be
able to obtain additional external debt and/or equity financing to fund its
operations in 2003 and beyond should it become necessary, which raises
substantial doubt about the Company's ability to continue as a going concern.
On May 13, 2003 the Company completed the sale of its cornerboard
packaging division to a unit of Illinois Tool Works, Inc. (see note 10). The
net proceeds of approximately $8.2 million from this transaction will be used
for general corporate purposes and to pay down certain indebtedness. Although
there can be no assurances, the Company believes that the proceeds received
from the sale transaction, combined with expected cash to be available under
the GBCC Credit Facility, will provide sufficient working capital for at least
one year.
3. STOCK BASED COMPENSATION
The Company has granted stock options to key employees and directors
under previously approved stock option plans. The Company accounts for those
plans under the recognition and measurement principles of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees." There is no
stock-based employee compensation cost reflected in net income as no grants
were issued during the three months ended March 31, 2003 and substantially all
options previously granted under those plans had an exercise price greater than
or equal to the market value of the underlying common stock on the date of
grant. The following table illustrates the effect on net loss and loss per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation", to stock-based employee
compensation:
FOR THE THREE MONTHS
ENDED MARCH 31,
-------------------------
IN THOUSANDS 2003 2002
------- -------
Net loss, as reported $(2,283) $(2,810)
Net loss attributable to common
Stockholders, as reported (2,283) (2,987)
Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects 45 130
------- -------
Pro forma net loss $(2,328) $(2,940)
Pro forma net loss attributable to common $(2,328) $(3,117)
stockholders
Basic and diluted loss per share as
reported $ (0.04) $ (0.07)
Basic and diluted loss per share - pro forma $ (0.04) $ (0.08)
4. NOTES AND CAPITAL LEASES PAYABLE
The Company was not in compliance with the financial covenants
contained in the GBCC Credit Facility during the first three months of 2003. On
May 13, 2003 the GBCC Credit Facility was amended whereby all past covenant
violations were waived and the financial covenant terms were adjusted through
December of 2003. The terms of the amendment also include an amendment fee of
$63,000 to be paid over a twelve month period, consent by the lender for the
asset sale described in note 10, a prepayment of $750,000 on the GBCC term loan
using a portion of the proceeds from the sale transaction as described in note
10 and additional limitations on the availability of the GBCC revolving credit
line. Approximately $8.0 million and $3.2 million was outstanding on the GBCC
Credit Facility as of March 31, 2003 and December 31, 2002 respectively.
Approximately $649,000 remained available under the facility as of March 31,
2003.
The Company was not in compliance with the EBITDA covenant contained in
its Master Credit Facility during the first three months of 2003. As of May 15,
2003 neither GE Capital Corporation or any of the other lenders that participate
in the Master Credit Facility (the "GE Lending Group") have taken any action
against the Company. The Company will be entering into negotiations with the GE
Lending Group for a waiver of this covenant violation, however no assurance can
be given as to whether or what form this waiver would be obtained. If the
Company is unsuccessful in obtaining such a waiver, the GE Lending Group can
demand immediate repayment from the Company of the outstanding balance of the
Master Credit Facility, which is approximately $11,348,000 as of March 31, 2003.
The Company currently does not have
6
the resources to pay this obligation if it becomes currently due. On May 13,
2003 a principal payment of approximately $655,000 was made on the Master
Credit Facility using some of the proceeds from the sale transaction as
described in note 10.
In addition, the facility as currently amended gives the GE Lending
Group a first priority lien on the Company's option to purchase the land and
buildings in Chicago, Illinois ("the Chicago Property") currently leased by the
Company, and required the Company to exercise this purchase option no later
than May 1, 2003. This option was not exercised prior to May 1, 2003. As a
result, the GE Lending Group currently has the right to exercise this purchase
option on its own behalf.
Notes payable and capital leases consist of the following (in thousands):
MARCH 31, 2003 DECEMBER 31, 2002
-------------- -----------------
Term loan under the GBCC Credit Facility $ 2,893 $ 3,000
Revolving credit line under the GBCC Credit Facility 5,144 161
Quakertown notes 1,000 1,000
Equipment term loans under the Master Credit Facility 11,348 11,356
Capital lease payable on the Chicago Property 3,000 3,000
Other notes payable 1,253 1,254
-------- --------
Total notes payable and capital leases 24,638 19,771
Less current portion: (14,777) (6,386)
-------- --------
$ 9,861 $ 13,385
======== ========
5. SUBORDINATED NOTES AND CONVERTIBLE DEBENTURES
On September 24, 2002 the Company entered into an Exchange and
Repurchase Agreement with Halifax Fund, L.P. ("Halifax") whereby all of the
Company's previously existing obligations to Halifax, including but not limited
to convertible debentures and related accrued interest, penalties and default
charges were exchanged for $2.5 million in cash, a 10% convertible subordinated
debenture in the principal amount of $2,831,558 and a 10% subordinated note
with a principal amount of $5.6 million. Interest on the subordinated note and
convertible subordinated debenture is payable in kind for the first two years
of each instrument. During the first three months of 2003 the Company incurred
$114,000 of interest expense in kind and the carrying amount of the
subordinated notes and convertible debentures increased from $10,248,000 at
December 31, 2002 to $10,362,000 at March 31, 2003.
On May 13, 2003 the Company paid down $300,000 of the convertible
subordinated debenture using the proceeds received from the sale transaction
described in note 10.
6. INTANGIBLE ASSETS
The following table summarizes the carrying value of the Company's
amortizable intangible assets as of March 31, 2003 and December 31, 2002:
(Dollar amounts in thousands:)
2003 2002
----- -----
Patents $ 821 $ 811
Accumulated amortization (300) (282)
----- -----
Carrying amounts, net $ 521 $ 529
===== =====
During the three months ended March 31, 2003, aggregate amortization
expense from continuing operations for the Company's intangible assets was
approximately $18,000. As of March 31, 2003, estimated aggregate annual
amortization expense for the Company's intangible assets are as follows (in
thousands):
7
YEAR ENDING AMOUNTS
- ----------- ------
2003........................................ $ 52
2004........................................ 70
2005........................................ 70
2006........................................ 70
2007........................................ 70
2008........................................ 70
-------
$ 402
=======
7. COMMITMENTS AND CONTINGENCIES
CHICAGO PURCHASE OPTION
In January of 1999 the Company acquired Eaglebrook Plastics, Inc. and
Eaglebrook Products, Inc. (collectively "Eaglebrook"), a plastic recycling and
plastic lumber manufacturing company located in Chicago, IL. In accordance with
the terms of the acquisition agreement, the Company entered into a ten year
lease on the Chicago Property, which now encompasses approximately 400,000
square feet of manufacturing and office space and is the Company's primary
manufacturing location. The Company has an option to purchase the Chicago
Property for $3 million at anytime prior to January 28, 2004, at which time the
option expires, by providing the property's owner with 60 days notice of the
Company's intent to exercise the option. At the date that Eaglebrook was
acquired, the then-appraised value of the Chicago Property of approximately
$11.6 million was recorded in Property, Plant and Equipment on the Company's
balance sheet and the $3 million purchase option was recorded as a capital
lease obligation.
At March 31, 2003 the net book value of the Chicago Property, after
giving effect to additional improvements and construction on the leased
property undertaken by the Company subsequent to the Eaglebrook acquisition,
was approximately $13.6 million. While the Company intends to exercise the
purchase option on the Chicago Property prior to the option's expiration date,
there can be no assurance that the Company will have access to adequate funds
necessary to do so. If the Company does not exercise the purchase option prior
to January 1, 2004, the Company may be required to record an impairment charge
for the net book value of the land and buildings originally acquired, and
adjust the depreciable life of the building improvements to the length of the
remaining lease term.
LEGAL PROCEEDINGS
In December 1998, the Company purchased Clean Earth of North Jersey
("CENJ", then known as S&W Waste, Inc.) in a stock purchase transaction.
Pursuant to such purchase, the Company could be responsible for liabilities
resulting from matters wherein CENJ has been named as a potentially responsible
party ("PRP") in matters involving the possible disposal of hazardous waste at
certain disposal sites. At March 31, 2003, the Company has accrued
approximately $282,000 for estimated liabilities related to these matters.
While the Company believes this accrual is sufficient to cover the aggregate
liability that may be incurred in these matters, there can be no assurances
that the accrual will be sufficient.
On April 15, 2002, the Company filed a Complaint, entitled Integrated
Technical Services, Inc. v Pennsylvania Department of Environmental Protection,
Board of Claims, Commonwealth of Pennsylvania, Civil Action No. 3484, seeking
$7.5 million in a contract claim arising from the Quakertown foundry site
clean-up. This litigation was assumed as part of the Clean Earth sale. The
PADEP has offered approximately $980,000 retroactive to September 7, 2001 to
settle this claim. The Company rejected this offer and is proceeding with
discovery. A dispute resolution hearing is currently scheduled for November
2003.
A dispute has arisen between the Company and the purchaser of Clean
Earth regarding the final audited closing date balance sheet as the purchaser
and Clean Earth have sought an adjustment to the purchase price in the amount
of approximately $4,000,000 due to various closing adjustments to the final
audited balance sheet. The Company filed litigation against the purchaser and
Clean Earth on January 2, 2003, in a case entitled U.S. Plastic Lumber Corp. v.
CEI Holding Corporation and Clean Earth, Inc., in the United States District
Court for the District of Delaware, Civil Action No. 03-0001, alleging that the
audit process had been subverted through fraud as it related to certain
adjustments to the closing balance sheet claimed by the purchaser and Clean
Earth. If the Company is unsuccessful in its litigation, the purchase price
received at the closing of the Clean Earth sale could be reduced by up to
$4,000,000, including the loss of the $1,000,000 in cash escrow, a reduction of
the principal amount of the $3.5 million Promissory Note or reimbursement in
the form of cash to Clean Earth equal to the amount of the adjustment in the
purchase price.
8
From time to time, the Company is involved as plaintiff or defendant
in various other legal proceedings arising in the usual course of business.
While the ultimate outcome of these various legal proceedings cannot be
predicted with certainty, it is the opinion of the Company's management that
the resolution of these legal actions should not have a material effect on the
financial position, results of operations or liquidity of the Company.
8. RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". That standard requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. When the liability is initially recorded, the entity will
capitalize a cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.
The standard is effective for fiscal years beginning after June 15, 2002, with
earlier adoption permitted. The adoption of SFAS No. 143 did not have an effect
on the Company's consolidated results of operation and financial position.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 will rescind SFAS No. 4, which required all gains and
losses from extinguishment of debt to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect. As a
result of SFAS No.145, the criteria in APB No. 30 will now be used to classify
those gains and losses. The Company elected early application of the provisions
of the Statement related to the rescission of Statement 4 during 2002.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." The standard requires companies
to recognize costs associated with exit (including restructuring) or disposal
activities at fair value when the related liability is incurred rather than at
the date of a commitment to an exit or disposal plan under current practice.
Costs covered by the standard include certain contract termination costs,
certain employee termination benefits and other costs to consolidate or close
facilities and relocate employees that are associated with an exit activity or
disposal of long-lived assets. The new requirements are effective prospectively
for exit or disposal activities initiated after December 31, 2002 and were
adopted by the Company effective January 1, 2003. The adoption of SFAS No. 146
is expected to impact the timing of recognition of costs associated with future
exit and disposal activities, and did not impact the Company's results of
operations or financial position.
In December 2002 the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure." The Statement amends
the transition provisions of SFAS No. 123 for companies that choose to adopt
the fair value based method of accounting for stock based employee
compensation. The Statement does not amend the provisions of SFAS No. 123 which
allow for entities to continue to apply the intrinsic value-based method as
prescribed in APB No. 25, "Accounting for Stock Issued to Employees", however
it does amend some of the disclosure requirements regardless of the method used
to account for stock-based employee compensation. See note 4, "STOCK-BASED
COMPENSATION."
9. SEGMENT REPORTING
On September 9, 2002 the Company completed the sale Clean Earth, whose
subsidiaries comprised the Company's Environmental recycling division. As a
result the Company has determined that it has only one operating segment. This
determination is based primarily on the similar nature of the Company's
remaining products and production processes utilized.
10. SUBSEQUENT EVENT
On May 13, 2003 the Company completed the sale of it's cornerboard
packaging business to a unit of Illinois Tool Works, Inc. ("ITW") for a net
purchase price of approximately $8.2 million, after giving effect to various
purchase price adjustments. This sale transaction was structured as an asset
purchase, primarily for accounts receivable, inventory and property, plant and
equipment. The proceeds realized in the transaction will be used to pay down
certain indebtedness and for general corporate purposes.
9
U.S. PLASTIC LUMBER CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and ability to meet its financial obligations
and maintain its current operations in 2003 and beyond will be dependent on its
ability to meet the payment obligations under and maintain compliance with the
financial covenants in its various debt agreements and provide financing for
working capital. Our senior secured credit facility with Guaranty Business
Credit Corporation (the "GBCC Credit Facility") and Master Credit Facility
equipment term loans both contain significant financial covenants, including
but not limited to the requirement to achieve specified levels of earnings
before interest, taxes, depreciation and amortization ("EBITDA"), which is
measured periodically throughout the term of these agreements. The Company did
not achieve sufficient EBITDA to meet the financial covenant requirements under
the GBCC Credit Facility for each of the first three months of 2003. On May 13,
2003 the GBCC Credit Facility was amended to waive all past covenant violations
and to reset the parameters of some of the financial covenants for the
remainder of 2003. The amended terms of the GBCC Credit Facility continue to
require that financial covenants be measured on a monthly basis beginning with
the month of May 2003. At March 31, 2003 the outstanding balance on the GBCC
Credit Facility was approximately $8,037,000 and approximately $649,000 was
available under the facility.
In addition, we were not in compliance with the EBITDA covenant
contained in our Master Credit Facility during the first three months of 2003.
As of May 15, 2003 neither GE Capital Corporation nor any of the other lenders
that participate in the Master Credit Facility (the "GE Lending Group") have
taken any action against the Company. We will be entering into negotiations with
the GE Lending Group for a waiver of this covenant violation, however no
assurance can be given as to whether or in what form this waiver will be
obtained. If we are unsuccessful in obtaining such a waiver, the GE Lending
Group can demand immediate repayment from the Company of the outstanding balance
of the Master Credit Facility, which is approximately $11,348,000 as of March
31, 2003. We have a history of operating losses and past inability to comply
with similar financial covenant requirements. In the absence of a written
waiver, any failure to comply with the covenants under our GBCC Credit Facility
and Master Credit Facility in 2003 could lead to a demand for immediate
repayment of the outstanding balance due under the facility. Such an occurrence
would have a material adverse effect upon the Company as we do not have the
resources to repay these amounts should they become immediately due without
obtaining additional debt and/or equity financing.
At March 31, 2003 we had a working capital deficit and accumulated
deficit of $14.9 million and $79.3 million respectively. Capital requirements
relating to the implementation of our business plan have been and will continue
to be significant. As a result of our past financial performance, and because
substantially all of our assets have been pledged as collateral under our
current debt agreements, we may not be able to obtain additional external debt
and/or equity financing to fund its operations in 2003 and beyond should it
become necessary, which raises substantial doubt about our ability to continue
as a going concern.
On May 13, 2003 we completed the sale of our cornerboard packaging
division to a unit of Illinois Tool Works, Inc. (see note 10). The net proceeds
of approximately $8.2 million from this transaction will be used for general
corporate purposes and to pay down certain indebtedness. Although there can be
no assurances, we believe that the proceeds received from the sale transaction,
combined with expected available credit under the GBCC Credit Facility, will
provide sufficient working capital for at least one year. The principal and
interest obligations of our outstanding indebtedness for the remainder of 2003
will be approximately $200,000 per month. Capital expenditures for the
remainder of the year are expected to be approximately $500,000.
Our working capital deficit increased from $9.7 million at December
31, 2002 to $14.9 million at March 31, 2003 as the entire outstanding balance
on the Master Credit Facility was reclassified to a current liability due to
the financial covenant violation at March 31, 2003. Cash and cash equivalents
totaled $74,000 at March 31, 2003, a decrease of $489,000 from the $563,000 at
December 31, 2002. Cash used in operating activities from continuing operations
amounted to $5,242,000 for the first three months of 2003, as compared to
$1,279,000 for the comparable period in 2002. The following table summarizes
the different components of cash provided by operating activities from
continuing operations for the three months ended March 31, 2003 and 2002.
10
Dollar amounts in thousands:
2003 2002
------- -------
Loss from continuing operations $(2,283) $(3,294)
Non-cash charges 952 2,408
Increase in accounts receivable (1,690) (4,219)
(Increase) decrease in inventories (1,217) 223
Increase in accounts payable 208 3,072
Changes in other working capital and other assets (1,212) 531
------- -------
Net cash used in operating activities $(5,242) $(1,279)
======= =======
Non cash charges consist primarily of depreciation expense,
amortization of intangibles, deferred financing costs and discounts on
convertible debentures, beneficial conversion features of convertible
debentures and interest expense paid in kind.
Cash used in investing activities from continuing operations was
$123,000 in the first quarter of 2003, as compared to $1,082,000 in the
comparable period of a year ago. The decrease is mainly due to lower capital
expenditures in 2003.
Cash provided by financing activities from continuing operations
totaled $4,876,000 for the three months ending March 31, 2003, as compared to
$810,000 during the first three months of 2002. The increase is due primarily
to additional availability under our revolving line of credit in 2003, which
resulted in net borrowings of $4,983,000 in 2003, compared to $500,000 in 2002.
During 2002 we received $376,000 in net cash proceeds from a common stock
private placement, with no comparable amount in 2003.
Cash provided by our discontinued environmental recycling and
remediation business segment, which we sold on September 9, 2002, amounted to
$1,701,000 in the first three months of 2002.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The accounting policies that we have identified as critical to our
business operations and to an understanding of our results of operations are
described in detail in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2002. In many cases, the accounting treatment of a particular
transaction is specifically dictated by accounting principles generally
accepted in the United States of America, with no need for management's
judgement in their application. In other cases, preparation of our unaudited
condensed consolidated financial statements for interim periods requires us to
make estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. There can be no assurance that the actual results will
not differ from those estimates.
On September 9, 2002 we completed the sale of our Clean Earth
subsidiary, thereby exiting the environmental recycling and remediation
business. As such, the results of Clean Earth have been accounted for as a
discontinued operation for the three months ending March 31, 2002 as presented
in this Form 10-Q. In addition, the discussion of our results of operations
below is confined to our continuing plastic lumber operations.
INTERIM RESULTS OF CONTINUING OPERATIONS
Comparison of the three months ended March 31, 2003 and 2002
Net sales in the first quarter of 2003 were $11,216,000, as compared
to $14,204,000 in the first quarter of 2002, a decrease of $2,988,000, or
21.0%. The decrease was mainly due to the decline in sales of our building
products. Part of this decrease is a result of not having sufficient inventory
to meet the demands for our building products during the first three months of
2003, mainly due to cash constraints and slower production rates of our newly
formulated decking products. In addition, we implemented a price increase in
the first quarter of 2003, which resulted in our distributors deciding not to
stock inventory in advance of the spring deck building season as they had in
2002. Building products revenues in the first quarter of 2003 were also
negatively impacted by our commitment to accept an additional $250,000 of
returns of deck product containing the older formulation from some of our key
distributors.
11
Gross profit in the first quarter decreased from $3,157,000 in 2002 to
$690,000 in 2003, mainly due to significantly lower sales of the decking
products. Gross margin, as percentage of net sales, was 6.2% in the first
quarter of 2003 as compared to 22.2% in the prior year. Gross margin was also
negatively impacted in 2003 by higher raw material prices throughout all our
product lines and higher than normal scrap rates during initial production runs
of the newly formulated decking products and the under-absorption of fixed
manufacturing overhead due to the lower sales volume.
Selling, general and administrative expenses ("SG&A") from continuing
operations decreased by $729,000, or 23%, to $2,474,000 in the first quarter of
2003 as compared to $3,203,000 in the first quarter of 2002, primarily due to
the cost reduction initiatives implemented in 2002. These cost saving efforts
have resulted in lower marketing, selling and commission expenses, as well as
significant reductions in corporate overhead expenses, and were driven mainly
by headcount reductions and reduced discretionary spending in the sales and
marketing areas. We have also begun to integrate our sales efforts by cross
selling our different product lines throughout our sales force.
The first quarter of 2003 produced an operating loss of $1,784,000, as
compared to an operating loss of $46,000 for the same quarter in 2002. The
change is due mainly to reduced sales volume and lower gross margins.
Interest expense from continuing operations in the first quarter of
2003 was $586,000, as compared to $3,314,000 in the first quarter of 2002, a
decrease of $2,728,000, or 82%. In addition to the substantially higher debt
levels we had in the prior year, interest expense in 2002 was negatively
impacted by $1,134,000 in amortization of deferred financing costs and
discounts on convertible debentures, recognition of a $250,000 beneficial
conversion feature related to the partial conversion of a convertible
debenture, and the accrual of $345,000 in penalties for our failure to file a
registration statement for our common stock.
SEASONALITY
Sales of certain plastic lumber products tend to slow significantly in
the winter months, as adverse whether conditions negatively impact outdoor
building projects in most of the continental United States.
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". That standard requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. When the liability is initially recorded, the entity will
capitalize a cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.
The standard is effective for fiscal years beginning after June 15, 2002, with
earlier adoption permitted. The adoption of SFAS No. 143 did not have an effect
on the Company's consolidated results of operation and financial position.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 will rescind SFAS No. 4, which required all gains and
losses from extinguishment of debt to be aggregated and, if material,
classified as an extraordinary item, net of related income tax effect. As a
result of SFAS No.145, the criteria in APB No. 30 will now be used to classify
those gains and losses. The Company elected early application of the provisions
of the Statement related to the rescission of Statement 4 during 2002.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." The standard requires companies
to recognize costs associated with exit (including restructuring) or disposal
activities at fair value when the related liability is incurred rather than at
the date of a commitment to an exit or disposal plan under current practice.
Costs covered by the standard include certain contract termination costs,
certain employee termination benefits and other costs to consolidate or close
facilities and relocate employees that are associated with an exit activity or
disposal of long-lived assets. The new requirements are effective prospectively
for exit or disposal activities initiated after December 31, 2002 and were
adopted by the Company effective January 1, 2003. The adoption of SFAS No. 146
is expected to impact the timing of recognition of costs associated with future
exit and disposal activities, and did not impact the Company's results of
operations or financial position.
12
In December 2002 the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure." The Statement amends
the transition provisions of SFAS No. 123 for companies that choose to adopt
the fair value based method of accounting for stock based employee
compensation. The Statement does not amend the provisions of SFAS No. 123 which
allow for entities to continue to apply the intrinsic value-based method as
prescribed in APB No. 25, "Accounting for Stock Issued to Employees", however
it does amend some of the disclosure requirements regardless of the method used
to account for stock-based employee compensation. See note 4, "STOCK-BASED
COMPENSATION."
NASDAQ DELISTING NOTICE
Our common stock currently trades on the Nasdaq SmallCap Market under
the trading symbol "USPL." On March 14, 2003, we received a letter from the
Staff of Nasdaq SmallCap Market advising us that we have not regained compliance
with the minimum $1.00 closing bid price per share requirement. Nasdaq had
previously provided the Company with several extensions in order to achieve
compliance, the last such extension ending on May 12, 2003. In accordance with
the Nasdaq notification, our common stock will be delisted from The Nasdaq
SmallCap Market at the opening of business on May 22, 2003. We may appeal the
Nasdaq Staff's decision to a Nasdaq Listing Qualifications Panel (the "Panel"),
however we have made no decision to date on whether to seek an appeal. No
assurance can be given that we will appeal the delisting to the Panel, and if
such an appeal is filed no assurance can be given that the appeal would be
successful in resulting with our common stock being able to maintain listing on
The Nasdaq SmallCap Market.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A discussion of the Company's market risks is contained in Part I Item
7A "Quantitative and Qualitative Disclosures About Market Risks" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002. There have been no significant developments with respect to exposure to
market risk.
ITEM 4. DISCLOSURES AND CONTROLS
(a) Within 90 days of filing this report on Form 10-Q ("the
Evaluation Date"), our Chief Financial Officer and Chief
Executive Officer evaluated our disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c)
promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")). Based on that evaluation,
these officers have concluded that as of the Evaluation Date,
our disclosure controls and procedures were effective in
timely alerting them to material information relating to our
company (including our consolidated subsidiaries) required to
be included in our reports filed or submitted by us under the
Exchange Act.
(b) There have been no significant changes in our internal
controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation.
13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In December 1998, the Company purchased Clean Earth of North Jersey
("CENJ", then known as S&W Waste, Inc.) in a stock purchase transaction.
Pursuant to such purchase, the Company could be responsible for liabilities
resulting from matters wherein CENJ has been named as a potentially responsible
party ("PRP") in matters involving the possible disposal of hazardous waste at
certain disposal sites. At March 31, 2003, the Company has accrued
approximately $282,000 for estimated liabilities related to these matters.
While the Company believes this accrual is sufficient to cover the aggregate
liability that may be incurred in these matters, there can be no assurances
that the accrual will be sufficient.
On April 15, 2002, the Company filed a Complaint, entitled Integrated
Technical Services, Inc. v Pennsylvania Department of Environmental Protection,
Board of Claims, Commonwealth of Pennsylvania, Civil Action No. 3484, seeking
$7.5 million in a contract claim arising from the Quakertown foundry site
clean-up. This litigation was assumed as part of the Clean Earth sale. The
PADEP has offered approximately $980,000 retroactive to September 7, 2001 to
settle this claim (see note 4). The Company rejected this offer and is
proceeding with discovery. A dispute resolution hearing is currently scheduled
for November 2003.
A dispute has arisen between the Company and the purchaser of Clean
Earth regarding the final audited closing date balance sheet as the purchaser
and Clean Earth have sought an adjustment to the purchase price in the amount
of approximately $4,000,000 due to various closing adjustments to the final
audited balance sheet. The Company filed litigation against the purchaser and
Clean Earth on January 2, 2003, in a case entitled U.S. Plastic Lumber Corp. v.
CEI Holding Corporation and Clean Earth, Inc., in the United States District
Court for the District of Delaware, Civil Action No. 03-0001, alleging that the
audit process had been subverted through fraud as it related to certain
adjustments to the closing balance sheet claimed by the purchaser and Clean
Earth. If the Company is unsuccessful in its litigation, the purchase price
received at the closing of the Clean Earth sale could be reduced by up to
$4,000,000, including the loss of the $1,000,000 in cash escrow, a reduction of
the principal amount of the $3.5 million Promissory Note or reimbursement in
the form of cash to Clean Earth equal to the amount of the adjustment in the
purchase price.
From time to time, the Company is involved as plaintiff or defendant
in various other legal proceedings arising in the usual course of business.
While the ultimate outcome of these various legal proceedings cannot be
predicted with certainty, it is the opinion of the Company's management that
the resolution of these legal actions should not have a material effect on the
financial position, results of operations or liquidity of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the first three months of 2003 1,800 shares of common stock
were issued as annual compensation to the Company's non-employee directors.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Events of default are discussed in Notes 2 and 4 to the Condensed
Unaudited Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Amendment to Loan and Security Agreement and Limited
Waiver of Defaults dated May 13, 2003 between
Guaranty Business Credit Corporation and U.S.
Plastic Lumber Ltd.
14
(b) Reports on Form 8-K
On January 7, 2003 the Company filed a Report on
Form 8-K to report that the Company had secured a new senior
secured credit facility with Guaranty Business Credit Corp.
and had terminated its previously existing credit facility
with a group of lenders led by Bank of America, N.A.
On April 2, 2003 the Company filed a Report on Form
8-K to report the Company's results of operations for the
three and twelve months ended December 31, 2003.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
May 15, 2003 /s/ Michael D. Schmidt
Date -------------------------------------------
Michael D. Schmidt,
Chief Financial Officer
15
CERTIFICATION REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark S. Alsentzer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of U.S. Plastic
Lumber Corp.;
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 statements 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: May 15, 2003
/s/ Mark S. Alsentzer
- -------------------------------
Mark S. Alsentzer
Chief Executive Officer
16
CERTIFICATION REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael D. Schmidt, certify that:
1. I have reviewed this quarterly report on Form 10-Q of U.S. Plastic
Lumber Corp.;
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 statements 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: May 15, 2003
/s/ Michael D. Schmidt
- -----------------------------
Michael D. Schmidt
Chief Financial Officer
17
CERTIFICATION PURSUANT TO
18 U.S.C. SS. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
This certification is intended to accompany U.S. Plastic Lumber Corp.'s (the
"Company") Quarterly Report on Form 10-Q for the period ended March 31, 2003
with the Securities and Exchange Commission on the date hereof (the "Report"),
and is given solely for the purpose of satisfying the requirements of 18 U.S.C.
ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
To the best of my knowledge, I, Mark S. Alsentzer, hereby certify in my capacity
as the Chief Executive Officer of the Company, 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 result of
operations of the Company.
/s/ Mark S. Alsentzer
-------------------------------------------
Mark S. Alsentzer
Chief Executive Officer
Date: May 15, 2003
18
CERTIFICATION PURSUANT TO
18 U.S.C. SS. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
This certification is intended to accompany U.S. Plastic Lumber Corp.'s (the
"Company") Quarterly Report on Form 10-Q for the period ended March 31, 2003
with the Securities and Exchange Commission on the date hereof (the "Report"),
and is given solely for the purpose of satisfying the requirements of 18 U.S.C.
ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
To the best of my knowledge, I, Michael D. Schmidt, hereby certify in my
capacity as the Chief Financial Officer of the Company, that:
(2) 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 result of
operations of the Company.
/s/ Michael D. Schmidt
-------------------------------------------
Michael D. Schmidt
Chief Financial Officer
Date: May 15, 2003
19