ITEM 1. BUSINESS
THE COMPANY
Atlantis Plastics, Inc. ("Atlantis" or the "Company"), is a leading U.S. plastics manufacturer comprised of two operating segments: (i) Atlantis Plastic Films, which produces polyethylene stretch and custom films used in a variety of industrial and consumer applications, and (ii) Atlantis Molded Plastics, which produces molded plastic products for a variety of applications, including products and components for the appliance, automotive, recreational vehicle, and dairy industries.
Atlantis Plastic Films accounts for approximately two-thirds of the Company's net sales and produces (i) stretch films (multi-layer plastic films that are used principally to wrap pallets of materials for shipping or storage), (ii) custom film products (high-grade laminating films, embossed films and specialty film products targeted primarily to industrial and agricultural markets), and (iii) institutional products such as aprons, gloves, and tablecloths which are converted from polyethylene films.
Atlantis Molded Plastics accounts for approximately one-third of the Company's net sales and consists of three principal technologies, serving a wide variety of specific market segments, described as follows: (i) injection molded thermoplastic parts that are sold primarily to original equipment manufacturers and used in major household appliances, agricultural and automotive products, (ii) a variety of extruded plastic trim and channel systems (profile extrusion) that are incorporated into a broad range of consumer and commercial products such as recreational vehicles, residential windows and doors, office furniture and retail store fixtures, and (iii) blow molded milk, juice, water and industrial containers in a variety of shapes and sizes.
The Company's fourteen plastics manufacturing facilities produce a wide spectrum of products for industrial, commercial and consumer markets. Management believes that the Company's diversification and broad range of capabilities reduce the Company's exposure to economic downturns in specific industries and permit the Company to react efficiently to specific market opportunities.
The Company was founded in 1984 and initially grew primarily through acquisitions in the plastics, insurance and furniture manufacturing industries. In recent years the Company has concentrated its resources in the plastics industry, and, as part of this strategic focus, on August 31, 1995 the Company sold Western Pioneer Insurance Company ("Western Pioneer"), its property-casualty insurance subsidiary which had been classified as a discontinued operation, for $12.0 million to a Massachusetts-based property casualty insurer. The Company also holds for sale a 9% WinsLoew Furniture, Inc. stock investment.
In May, 1994 the Company changed its state of incorporation from Delaware to Florida in order to reduce its state franchise taxes. Profiles of the Company's businesses are outlined within the "Market Capabilities" section below. Descriptions of the Company's facilities are set forth within Item 2, "Properties". The Company's executive offices are located at 1870 The Exchange, Suite 200, Atlanta, Georgia 30339, and its telephone number is (800) 497-7659.
During early 1995, the Company installed a new senior management group and a new strategic operating plan was developed which, as further described below, outlined the following strategic objectives to be accomplished during 1995 and 1996: (i) simplifying the organizational structure with a corresponding decrease in salaried headcount, (ii) the implementation of a cost reduction program targeting both fixed and variable costs throughout the Company, (iii) the reconfiguration of its stretch film sales organization to better service its customer base at a lower cost, (iv) the identification and disposal of non-strategic businesses, and (v) the implementation of an asset management program directed at reducing inventories, accounts receivable, outstanding indebtedness and interest expense.
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The Company's growth and profit improvement strategies seek to capitalize on the Company's existing manufacturing capabilities and reputation for product quality and customer service. The Company's specific strategies include (i) ongoing efforts to reduce cost of sales, control the Company's fixed costs and realize manufacturing efficiencies, (ii) concentrated efforts to continually improve product quality and customer satisfaction by training employees in and applying Total Quality Management and Statistical Process Control systems, and (iii) developing new products to increase sales to new and existing customers, to improve profit margins and to enhance the Company's position as a provider of value-added products and services.
STRATEGIC OPERATING PLAN
The strategic operating plan developed by the Company during 1995 focuses on achieving the following objectives:
Simplifying the Organizational Structure and Reducing Salaried Headcount. During the first quarter of 1995, the Company's organizational structure was analyzed and simplified, resulting in the removal of one layer of management. Salaried headcount was reduced by approximately 16% in total during the second, third and fourth quarters of 1995. This reduction resulted in an annualized reduction in salaried personnel costs of approximately $2.2 million by December 31, 1995 compared to salaried personnel costs on an annual basis for the Company prior to the restructuring, excluding one-time severance and other personnel-related costs associated with the restructuring.
Implementation of Cost Reduction Program Targeting both Fixed and Variable Costs. During the fourth quarter of 1995, in order to reduce fixed overhead and variable costs and increase the custom film unit's profitability, the Company downsized its Tulsa, Oklahoma custom film facility, making it a satellite of the Cartersville, Georgia custom film facility and transferring certain of its production volume to the Mankato, Minnesota and the Cartersville custom film facilities. The Tulsa restructuring reduced headcount, removed older equipment from service at that facility, and allowed Atlantis to more effectively utilize its total custom film capacity.
Also during the fourth quarter of 1995, the Company's injection molding unit significantly reduced overtime and salaried headcount, initiated continuous operations at its Henderson, Kentucky facility (this change is scheduled for implementation at the remaining injection molding facilities during the first half of 1996), and initiated the decentralization of its engineering and administrative functions which were formerly conducted only at the Henderson facility. As these changes become fully integrated, they are expected to lower operating costs, improve operating efficiency and control, and increase throughput.
The Reconfiguration of the Stretch Film Sales Organization to Better Service its Customer Base at a Lower Cost. During the fourth quarter of 1995, the Company reconfigured its stretch film sales organization, converting from an independent sales representative structure to one consisting primarily of direct sales personnel. This change was made in order to improve customer service, account/pricing control, market intelligence, and relationships with key customers, and also to reduce the Company's marketing costs. The Company incurred approximately $800,000 in one-time expenses during the third and fourth quarters of 1995 associated with this change, and expects to realize annual savings significantly in excess of this one-time expense beginning in 1996.
The Identification and Disposal of Non-Strategic Businesses. On August 31, 1995, the Company sold Western Pioneer to a Massachusetts-based property casualty insurance company for $12.0 million. During September 1995, as the Company's planned first step in exiting its blow molding business, the Company sold its 50% interest in the CKS/Rigal blow molding joint venture to CKS Packaging, Inc., its joint venture partner, for approximately $870,000. The net cash proceeds after expenses from these sales were applied to the Company's revolving credit facility. During January 1996, the Company announced plans to sell Plastic Containers, Inc., its remaining manufacturer of blow molded plastic containers.
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Implementation of an Asset Management Program to Reduce Inventories, Accounts Receivable, Outstanding Indebtedness and Interest Expense. During the second quarter of 1995, as film demand began to soften and resin price decreases appeared imminent (see discussion of "Raw Materials" below), the Company focused on the reduction of inventories, accounts receivable and outstanding indebtedness. As a result, and also due to the declines in resin prices experienced during 1995, significant declines were posted in each of these areas from the levels maintained during late 1994 and early 1995. Outstanding indebtedness was also reduced by the net proceeds from the 1995 sales of Western Pioneer and the Company's 50% interest in the CKS/Rigal blow molding joint venture. Total debt was reduced from $129.2 million at year-end 1994 and a 1995 high of $142.8 million (May, 1995) to $116.5 million at year-end 1995.
BUSINESS GROWTH AND PROFIT IMPROVEMENT STRATEGIES
The Company's general business strategy emphasizes the following elements:
Improved Cost Controls and Manufacturing Efficiencies. The Company continues to focus its efforts on reducing operating costs and improving manufacturing efficiencies with a strong emphasis on reducing scrap rates and overtime, increasing plant and equipment yields, reducing equipment downtime, and improving the purchasing cycle in order to reduce material costs. As part of these efforts, cost control goals are continually set and improvements measured in the areas described above, compared to performance levels previously obtained. Strong emphasis is also placed on managing and reducing the total number of stock keeping units ("SKU") maintained within each business unit, while still effectively servicing customer needs. SKU reductions have resulted in longer run times between changeovers and lower required inventory levels.
Emphasis on Quality and Customer Satisfaction. Quality is an integral part of the products and services provided to customers. As a result, the Company has made extensive efforts to train its employees in Total Quality Management Systems. Many of the Company's employees have also been trained in Statistical Process Control ("SPC") methods, and two of the Company's three stretch film manufacturing facilities have been ISO 9002 certified, with the third plant expected to be certified during the first half of 1996. The Company's efforts to improve customer satisfaction also include developing stronger relationships with major customers to enhance communications and develop long-term relationships, assuring the production of products which closely match customer specifications, and maximizing on-time delivery rates.
Development of New Products. Historically, the Company has enhanced its competitive position and operating profitability by developing and introducing products that permit the penetration of new markets, including new lines of thinner gauge polyethylene films. The Company intends to continue to work with its suppliers and customers to develop new products that complement the Company's current product lines and can be produced using the Company's existing manufacturing capabilities. The Company's Customer Applications and Training Laboratory for product development, evaluation and training in its stretch and custom film operating units permits focused research and development efforts. Management believes that the Company's extensive manufacturing capabilities and the geographic scope of its plant locations provide a competitive advantage with respect to attracting and accommodating customers who desire a full service provider. Management also believes that the Company's diversified customer base reduces the Company's exposure to economic downturns in specific industries.
MARKET CAPABILITIES
STRETCH FILMS. Atlantis manufactures multi-layer stretch film used principally to wrap pallets of material for storage or shipping. Stretch film is manufactured using both blown and cast extrusion processes and must meet rigid customer specifications. To produce this product, Atlantis uses a combination of polyethylene resins and other materials to make a film with various characteristics. The resulting product is a very thin film which stretches up to 300%, clings to itself, and is puncture resistant.
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Atlantis purchases several types of linear low-density resins and other materials to manufacture its stretch film products. Atlantis has contracts with resin manufacturers which allow it to achieve what it believes to be the best combination of price, resin availability and new product development support. Management believes its relationships with its resin suppliers are very good.
As described above, during the fourth quarter of 1995 the Company reconfigured its stretch film sales organization, converting from an independent sales representative structure to one consisting primarily of direct sales personnel. The Company's stretch film products are sold primarily through independent industrial packaging distributors and, to a lesser degree, directly to end users. With the majority of its products sold to distributors, Atlantis places particular emphasis on assisting distributors in sales to end users. The Company intends to increase its direct marketing and sales efforts to national accounts in certain areas.
CUSTOM FILMS. Polyethylene film accounts for approximately 95% of Atlantis' custom film sales and is used for a wide variety of packaging applications. Atlantis manufactures both low density and linear low density polyethylene, the latter being a tougher and more puncture-proof material.
Atlantis has an internal sales staff to market its roll stock film, primarily to national accounts. Most of the film customers are in industrial markets and consume the film during their manufacturing and/or delivery process.
Approximately 20 different types of resin, delivered in pellet form, and approximately ten types of color additives are used in the manufacturing process. Atlantis has supply contracts that fulfill most of its present requirements and believes that it has adequate sources available to meet remaining raw material needs. Relationships with its suppliers are considered very good.
Atlantis also converts film into institutional products such as plastic gloves, aprons and tablecloths. Since 1993, sales of these products have increased significantly due to the acquisition and integration of the assets of United Plastic Products. This acquisition not only made Atlantis Plastic Films one of the largest producers of polyethylene products for institutional food handling markets, it also added substantial new state-of-the-art cast embossing capacity to complement its current embossed production.
INJECTION MOLDING. Atlantis produces custom thermoplastic parts by injection molding. These parts are used in large and small appliances (including refrigerators, air conditioners, dehumidifiers, dishwashers and microwave ovens), agricultural and automotive products and hand-held power tools.
Atlantis operates molding presses ranging from 30 to 1,000 tons and related secondary equipment in Henderson, Kentucky, Ft. Smith, Arkansas, Warren, Ohio, and Nashville and Jackson, Tennessee. This wide variety of equipment configuration and plant location alternatives enable it to accommodate customers that require multiple components, various press sizes and secondary operations.
During 1995, approximately 46% of this unit's sales (10% of the Company's net sales) were to the refrigeration and air conditioning divisions of Whirlpool Corporation. Although Whirlpool has been a customer for over 40 years, there can be no assurance that a significant reduction in Whirlpool-related volume, or the loss of Whirlpool as a customer, would not have a material adverse effect on the Company's financial condition or results of operations.
The injection molding unit provides an in-house sales and engineering staff which assists in the design of products to customer specifications, designs molds to produce those products and oversees the construction of the necessary molds. Its "program management" concept promotes early involvement with customers' engineers to assist with product and tooling design and the establishment of acceptable quality standards. Its SPC systems enable it to meet these established quality standards on a cost-efficient basis. Management believes that its ability to offer SPC quality assurance, as well as value-added secondary operations such as hot stamping and assembly, provide a competitive advantage in selling to national accounts.
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The majority of the sales are generated by Company personnel. Independent sales agencies' representatives, calling primarily on industrial customers in the Midwest, account for the balance.
The Company's injection molding customers generally place orders for goods based on their production requirements for the following three to four months with a non-binding estimate of requirements over six to twelve months. Management believes that the relatively long production cycles for its customers make these estimates generally reliable. See "Backlog."
A wide variety of materials, such as ABS, polystyrene, polyethylene, polycarbonate and nylon are used in the manufacturing process. The Company has multiple sources of supply for these materials.
PROFILE EXTRUSION. Atlantis produces a variety of extruded plastic trim and channel systems that are incorporated into a broad range of consumer and commercial products. During the past twelve months, the profile extrusion unit utilized approximately 2,000 diffferent dies in fulfilling customer orders, and currently maintains a stock program for approximately 280 products.
Atlantis' marketing and sales activities are conducted by in-house sales personnel that also oversee a network of independent sales representatives. These representatives in turn call on a diversified customer base in approximately 30 states. Atlantis supplies many industries, including manufacturers of recreational vehicles, residential windows and doors, office furniture, retail store fixtures, and marine products.
The use of only five basic types of compound materials in manufacturing allows the purchasing of materials in bulk. These materials are polyvinyl chloride ("PVC") in rigid and flexible forms, polyethylene, polypropylene, and thermoplastic rubber ("TPR"). Atlantis purchases all of its rigid material and approximately 30% of its flexible materials. The balance of flexible material is blended on-site, allowing for greater control over the quality of the finished product. Atlantis believes that it has adequate sources available to meet its raw material needs.
BLOW MOLDING. During September 1995, as the Company's planned first step in exiting its blow molding business, the Company sold its 50% interest in the CKS/Rigal blow molding joint venture to CKS Packaging, Inc., its joint venture partner, for approximately $870,000. During January 1996, the Company announced plans to sell its Plastic Containers, Inc. subsidiary, its remaining manufacturer of blow molded plastic containers. The Company has engaged an outside broker to assist it in pursuing potential sale opportunities. No arrangement or understanding for a sale exists at the present time.
Atlantis manufactures plastic containers in various sizes, substantially all of which are used for the packaging of dairy, juice, water and industrial products. Containers are manufactured by an extrusion blow-molding process that produces containers at high speeds. Its highly standardized line of products permits a high level of automation in its manufacturing process. Marketing activities are conducted by certain key officers and managers, as well as selected sales representatives, and customer contact is often on a daily basis.
High density polyethylene resin is the primary material used in the manufacture of its plastic containers. By generally limiting the resin usage to high density polyethylene, Atlantis can make large-volume, lower cost purchases. In addition, use of one resin reduces extruder changeover time and allows for a higher degree of automation. Although it has no supply contracts, management believes that adequate supply is available to satisfy present raw material requirements at competitive costs.
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RAW MATERIALS
The primary raw materials used by the Company in the manufacture of its products are various plastic resins, primarily polyethylene. The Company selects its suppliers primarily on the basis of technical support, service and price. Virtually all of the Company's plastic resin supplies are manufactured within the United States. Although the plastics industry has from time to time experienced shortages of plastic resins, the Company has not to date experienced any such shortages. Management believes that there are adequate sources available to meet its raw material needs.
The Company uses approximately 300 million pounds of plastic resins annually. Management believes that the Company's large volume purchases of plastic resin have generally resulted in lower raw material costs and enabled the Company to obtain shipments of raw materials even in periods of short supply.
The primary plastic resins used by the Company are produced from petrochemical feedstocks mostly derived from natural gas liquids. Based on the supply and demand cycles in the petrochemical industry, substantial cyclical price fluctuations can occur. Consequently, plastic resin prices may fluctuate as a result. Resin prices fluctuated significantly during 1994 and 1995, as further described within Item 7, "Management's Discussion and Analysis of Operations".
While the Company has historically passed through changes in the cost of its raw materials to its customers, it may not always be able to pass through its raw material cost increases in the form of price increases, or such "pass throughs" may only occur after a time lag. To the extent that increases in the cost of plastic resin cannot be passed on to its customers, or that the duration of time lags associated with "pass throughs" becomes significant, such increases may have a material detrimental impact on the profitability of the Company. Furthermore, during periods when resin prices are falling, gross profits may suffer as the Company is selling product manufactured with resin purchased 1-2 months prior at higher prices.
COMPETITION
The Company's operating subsidiaries face intense competition from numerous competitors, several of which have greater financial resources than the Company. In addition, the markets for certain of the Company's products are characterized by low costs of entry or competition based primarily on price.
Atlantis Plastic Films competes with a limited number of producers capable of national distribution and a greater number of smaller manufacturers that target specific regional markets and specialty film segments. Competition is based on quality, service (including the manufacturer's ability to supply customers in a timely manner), product differentiation and price. Management believes that Atlantis Plastic Films' subsidiaries successfully compete primarily on the basis of their established reputations for service and quality, as well as their respective positions as efficient, low-cost producers.
Atlantis Molded Plastics competes in a highly fragmented segment of the plastics industry, with a large number of regional manufacturers competing on the basis of customer service (including timely delivery and engineering/design capabilities), quality, product differentiation and price. Management believes that the Atlantis Molded Plastics subsidiaries successfully compete primarily on their ability to offer extensive customer service and a wide variety of products.
BACKLOG
The Company's total backlog at December 31, 1995 was $21.3 million compared to $21.6 million at December 31, 1994. Management does not consider any specific month's backlog to be a significant indicator of sales trends due to the various factors that influence any one month's backlog, such as price changes which lead to customer inventory adjustments. Blow molded products have such short production and delivery cycles that their backlogs are immaterial.
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EMPLOYEES
As of December 31, 1995, the Company employed approximately 1,450 persons. Within the blow molding unit, approximately 75 employees are covered under a collective bargaining agreement with the Retail, Wholesale & Department Store Union, AFL-CIO. Atlantis' overall employee relations are considered to be generally very good.
PATENTS AND TRADEMARKS
The Company and certain of its subsidiaries have registered various trademarks with the United States Patent and Trademark Office and certain overseas trademark regulatory agencies and have applications pending for the registration of other trademarks. Management believes that the Company's trademark position is adequately protected in all markets in which the Company does business. Atlantis Plastic Films produces certain stretch film products under non-exclusive licenses granted by Mobil Oil Corporation. The duration of the licenses is coterminous with the duration of the underlying patents.
ENVIRONMENTAL REGULATION
Actions by Federal, state and local governments concerning environmental matters could result in laws or regulations that could increase the cost of producing the products manufactured by the Company or otherwise adversely affect the demand for its products. At present, environmental laws and regulations do not have a material adverse effect upon the demand for the Company's products. Certain local governments have adopted ordinances prohibiting or restricting the use or disposal of certain plastics products that are among the types produced by the Company. If such prohibitions or restrictions were widely adopted, such regulatory and environmental measures could have a material adverse effect upon the Company. In addition, a decline in consumer preference for plastic products due to environmental considerations could have a material adverse effect upon the Company.
In addition, certain of the Company's operations are subject to Federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. Historically, the Company has not had to make significant capital expenditures for environmental compliance.
While the Company cannot predict with any certainty its future capital expenditure requirements for environmental compliance because of continually changing compliance standards and technology, the Company has not currently identified any of its facilities as requiring major expenditures for environmental remediation or to achieve compliance with environmental regulations. Accordingly, the Company has not accrued any amounts relating to achieving compliance with currently promulgated environmental laws and regulations. The Company does not currently have any insurance coverage for environmental liabilities and does not anticipate obtaining such coverage in the future.
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ITEM 2.
ITEM 2. PROPERTIES
During the first quarter of 1995, the Company relocated certain of its corporate functions from Miami, Florida to Atlanta, Georgia. The Atlanta headquarters office consist of approximately 9,250 square feet of space, with a present annual lease expense of approximately $106,000, expiring in April, 1997.
Atlantis' Miami offices consist of approximately 13,100 square feet of space that is shared with several entities controlled by the principal stockholders of the Company (or their affiliates). The present annual lease expense of $329,000, as well as certain other general and administrative expenses, are allocated among the Company and these entities. See Part III Item 13 - "Certain Relationships and Related Transactions." This lease expires in August, 2003.
The following table describes the manufacturing facilities owned or leased by the Company, with substantially all of the owned facilities pledged as security for debt. Management believes that the Company's manufacturing facilities are adequate to meet current needs and increases in sales volume for the foreseeable future.
(1) Represents the former profile extrusion manufacturing facility which was sold for $525,000 (prior to selling expenses) in March, 1996.
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ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company believes that it is not presently a party to any litigation the outcome of which would have a material adverse effect on its consolidated financial condition or results of operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fiscal quarter ended December 31, 1995.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A Common Stock is traded on the American Stock Exchange (the "AMEX") and the Pacific Stock Exchange under the symbol "AGH". The following table sets forth the high and low sales prices for the Class A Common Stock on the AMEX for each quarter of the years 1994 and 1995.
As of January 31, 1996, there were approximately 229 holders of record of the 4,192,823 outstanding shares of Class A Common Stock. The closing sales price for the Class A Common Stock on January 31, 1996 was $5.00.
The Company's ability to pay cash dividends is subject to the dividend preference of the Company's presently outstanding Series A Convertible Preferred Stock.
Covenants relating to the Company's 11% Senior Notes indebtedness restrict the Company from paying dividends or taking certain other actions unless specified interest coverage ratio and other tests are met. The Company's recent decline in operating profitability caused it to fall below the interest coverage ratio requirement for the trailing four quarter periods ended September 30 and December 31, 1995, and, accordingly, the Company cannot pay dividends or take certain other actions until it is again able to meet the interest coverage ratio requirement on a trailing four quarters basis. Payment of dividends is also restricted under the terms of the Company's revolving credit facility.
Prior to 1994, the Company did not pay cash dividends on any class of its Common Stock. During February 1994 the Company's Board of Directors approved a 2.5 cents per share quarterly dividend program beginning in April 1994, and consecutive quarterly dividends were paid through October 1995, after which the dividend program was discontinued for the reasons described above.
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ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data of the Company for each of the years in the five-year period ended December 31, 1995. The selected consolidated financial data as of December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995 have been derived from the Company's financial statements included in Item 8, which have been audited by Coopers & Lybrand L.L.P., independent certified public accountants for the Company. The selected consolidated financial data should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto for the three-year period ended December 31, 1995, included in Item 8, and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations".
NOTE: For 1992, fully diluted income per share from continuing operations was $0.62 and fully diluted net income per share was $0.74.
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ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Atlantis is a leading U.S. manufacturer of polyethylene stretch and custom films used in a variety of industrial and consumer applications and molded plastic products for the appliance, agricultural, automotive, recreational vehicle, residential window, and dairy and industrial container industries.
Discontinued operations in 1995 and 1994 consisted of the operations of Western Pioneer, the Company's California property-casualty insurance subsidiary which was sold on August 31, 1995. Prior to 1994, discontinued operations included both Western Pioneer and the Company's interest in Loewenstein Furniture, Inc. ("Loewenstein", now known as WinsLoew Furniture, Inc. "WinsLoew"). See Note 18.
As more fully described in Item 1. "Business", during 1995 the Company's new senior management group developed and implemented a strategic operating plan which focuses on achieving a number of objectives during 1995 and 1996. The primary objectives of the strategic operating plan are: (i) to reduce the Company's fixed and variable costs, (ii) to reconfigure its stretch film sales organization, (iii) to exit non-strategic businesses, and (iv) to better manage its assets and reduce its indebtedness. The implementation of certain aspects of the strategic operating plan caused the Company to incur various nonrecurring costs during 1995, which have been segregated within the "Impairment of long-lived assets" and "Other restructuring charges" categories of the accompanying 1995 Income Statement.
Sales, gross profit, and operating income (loss) for the years ended December 31, 1995, 1994 and 1993 were as follows:
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
SALES
The Company's sales of $281.1 million were 8% ahead of last year's sales, with the sales growth occurring primarily within Atlantis Plastic Films due to higher average selling prices, partially offset by a decline in volume compared to 1994. Atlantis Plastic Films sales for 1995 totalled $192.8 million, 11% ahead of last year's film sales of $173.9 million.
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During the last nine months of 1994, plastic resin prices increased by over 75%, causing film product demand to rise beyond normal levels as customers increased inventories in order to avoid purchases at anticipated higher selling prices. During the second quarter of 1995, the film market, anticipating resin price declines, experienced a significant weakening in demand as customers postponed purchases in order to reduce abnormally high inventories created during the preceding period and to maximize product purchases at expected future lower prices.
Resin prices started declining in June 1995, and fell approximately 29% from early June through December 1995, and a further 6% from December 1995 through February 1996. A price increase of 10-15% was recently announced by the Company's suppliers of plastic resin. Unless withdrawn, this increase will affect the Company's resin purchases starting in April, 1996.
Atlantis Molded Plastics sales during 1995 of $88.3 million exceeded last year's $86.9 million by 2%, with a slight decline in sales for the Company's injection molding unit, offset by increased sales within the profile extrusion and blow molding units. The lack of sales growth within the injection molding unit was caused by several factors, including: (i) a decline in sales of refrigeration-related parts compared to last year, and (ii) the effects of a negotiated price reduction with a major customer.
GROSS PROFITS
The Company's 1995 gross profit of $39.9 million, or 14% of sales, declined sharply both in dollar and percentage terms from the 1994 gross profit of $51.6 million, or 20% of sales. The 1995 decline was due primarily to the adverse impact of the film inventory correction described above, the adverse effects of an extremely competitive stretch film market during 1995, and lower injection molding profitability compared with last year.
Atlantis Plastic Films posted gross profit of $30.3 million, or 16% of sales, compared to last year's gross profit of $36.1 million, or 21% of sales. The second and third quarter customer inventory correction and resulting decline in demand reduced sales volume in pounds, and also reduced selling prices due to competitive market pressures. Weak market demand during this time period caused selling prices to drop more rapidly than plastic resin costs. As a result, during 1995 the differential between film selling prices and plastic resin costs (the major raw material component of the Company's film products) declined compared to 1994.
Film gross profits also continued to be affected by inefficiencies at the Tulsa, Oklahoma custom film facility. In order to reduce fixed overhead and increase profitability at the Tulsa custom film facility, during the fourth quarter of 1995 the Tulsa custom film facility was downsized, making it a satellite of the Cartersville, Georgia custom facility and transferring certain of its production volume to the Mankato, Minnesota and the Cartersville custom film facilities.
Film market conditions remain extremely competitive and continue to exert downward pressure on film volume and selling prices, causing film volumes and selling price/resin cost differentials to remain depressed compared to the first quarter of 1995. However, the various cost reduction programs initiated during 1995, including the Company-wide reduction in salaried headcount and the downsizing of the Tulsa custom film facility, are expected to lower overhead costs and variable costs of manufacturing within Atlantis Plastic Films during the coming year when compared to 1995.
The Atlantis Molded Plastics 1995 gross profit of $9.6 million, or 11% of sales, decreased substantially compared to last year's gross profit of $15.5 million, or 18% of sales. This decline in profitability resulted primarily from a variety of factors within the injection molding unit, including the decline in sales and price reduction described above, manufacturing inefficiencies within certain phases of the production process, and unusually high overtime due to these manufacturing inefficiencies. The Atlantis Molded Plastics 1995 gross profit was also adversely impacted by lower blow molding profitability, partially offset by stronger profile extrusion gross profits compared to 1994.
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In order to address the injection molding issues described above, the Company implemented a number of personnel and process improvement changes during the fourth quarter of 1995. The Company's injection molding unit significantly reduced overtime and salaried headcount, initiated continuous operations at its Henderson, Kentucky facility (this change is scheduled for implementation at the remaining injection molding facilities during the first half of 1996), and initiated the decentralization of its engineering and administrative functions which were formerly conducted only at the Henderson facility. These changes have already begun to yield positive results, and as these changes become fully integrated, they are expected to lower operating costs, improve operating efficiency and control, and increase throughput.
The 1995 decline in blow molding profitability resulted from continued competitive pricing pressures within the dairy plastic container markets. However, during the fourth quarter of 1995 blow molding profit margins improved due to increases in sales of industrial containers, combined with reductions in manufacturing costs.
As more fully discussed in Item 1, "Business", the Company sold its 50% blow molding joint venture interest during 1995 for gross proceeds of $870,000, and recognized an after-tax gain on the sale of approximately $36,000. During January, 1996 the Company also announced its plans to sell Plastic Containers, Inc., its remaining blow molding business.
The Company's profile extrusion unit posted record sales and profitability during 1995 compared to 1994, and once again achieved operating margins in excess of 20%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A")
SG&A equaled $28.4 million, or 10% of sales, compared to last year's SG&A of $29.2 million, or 11% of sales. The dollar and percentage decrease in SG&A for 1995 was primarily caused by lower incentive compensation expense resulting from the 1995 decline in profitability, and a reduction in salaried headcount. SG&A expense during 1995 includes approximately $600,000 recorded during the third quarter representing an increase in the reserve for bad debts related to a potentially uncollectable account receivable within the injection molding unit.
The various cost reduction programs initiated by the Company during 1995, including the Company-wide reduction in salaried headcount, the reconfiguration of the stretch film sales organization, and the restructuring of the Tulsa custom film facility and the injection molding unit, are expected to reduce SG&A during the coming year when compared to 1995.
IMPAIRMENT OF LONG-LIVED ASSETS AND RESTRUCTURING CHARGES
As more fully discussed in Notes 1 and 17, during the fourth quarter of 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
In connection with the adoption of this statement, during the fourth quarter of 1995 the Company recorded noncash charges of approximately $10.6 million for the impairment of long-lived assets associated with the Tulsa custom film facility, and for the reduction in carrying value of the Company's blow molding unit in connection with its proposed sale. Of this amount, goodwill writeoffs equaled approximately $8.9 million with no associated tax benefit, and fixed asset writedowns equaled approximately $1.7 million pre-tax, or $1 million after-tax.
During 1995, the Company also incurred restructuring charges of approximately $1.9 million related to (i) the first quarter 1995 reorganization of its senior management group (approximately $750,000), (ii) the third and fourth quarter 1995 reconfiguration of its stretch film sales organization (approximately $800,000), and (iii) the fourth quarter 1995 headcount reduction costs associated with the restructuring of the Tulsa custom facility and the injection molding unit (approximately $350,000).
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NET INTEREST EXPENSE AND TAXES
Net interest expense increased from $13.1 million in 1994 to $14.3 million in 1995, primarily due to the higher debt balances maintained during the first half of 1995. The significant reduction in debt achieved during the second half of 1995 has reduced net interest expense, with net interest expense for the fourth quarter of 1995 of $3.3 million, compared to $3.4 million during the fourth quarter of 1994 and $3.8 million during the second quarter of 1995.
Based upon the reduction in outstanding indebtedness achieved during the second half of 1995, assuming market interest rates remain constant, management anticipates a continued reduction in net interest expense compared to the interest expense levels experienced during the first half of 1995.
The Company's effective tax rates during 1995 and 1994 were affected by nondeductible goodwill amortization, with the 1995 tax rate also affected by the tax impact of the September 1995 sale of the Company's 50% interest in the CKS/Rigal blow molding joint venture.
DISCONTINUED OPERATIONS AND EXTRAORDINARY GAIN
Western Pioneer was sold to a Massachusetts-based property and casualty insurance company on August 31, 1995 for $12.0 million. The after-tax gain recognized on the sale of Western Pioneer was approximately $483,000 (see Note 18).
Western Pioneer's loss from operations for the period prior to its sale during 1995 totaled $251,000, compared to its 1994 income from operations of $1.2 million. The 1995 decline in income was due to: (i) a significant increase in new policies during 1995, with new business historically less profitable than continuing business, and (ii) poorer than normal weather conditions during the winter of 1994-1995, which caused an increase in accidents and claims during 1995.
During December 1995, the Company repurchased $4.8 million of its 11% Senior Notes in the open market, and recognized an extraordinary gain of $254,000, net of tax.
NET INCOME (LOSS)
As a result of the factors described above, particularly the impact of the impairment of long-lived assets and other restructuring charges, and the decline in gross profit, the 1995 net loss equaled $13.1 million, or $1.83 per share, compared to last year's net income of $6.4 million, or $0.83 per share. The 1995 loss from continuing operations equaled $13.6 million, or $1.90 per share, compared to income from continuing operations of $5.2 million, or $0.67 per share for the year ended 1994.
COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1993
SALES
The Company's 1994 sales of $260.8 million were ahead of 1993 sales by 18%, due to higher selling prices during 1994 resulting from a significant increase in resin prices during the last nine months of 1994, and also due to increases in sales volume in both the film and injection molding operating units. In addition, 1994 sales include incremental sales volume resulting from added capacity created by the Company's 1993 and 1994 capital expansion programs, and the contribution from the May 1994 acquisition of Advanced Plastics, Inc. ("Advanced"), an injection molder located in Warren, Ohio. (See Note 2 of Notes to the Company's Consolidated Financial Statements.)
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GROSS PROFITS
The 1994 increase in sales resulted in higher gross profit dollar levels compared to 1993, while gross profit as a percentage of sales remained constant at 20% of sales for the 1994 and 1993 periods. During 1994, gross profit equaled $51.6 million, compared to the prior year's gross profit of $43.4 million.
For Atlantis Plastic Films, the 1994 gross profit percentage of 21% improved compared to the 1993 gross profit percentage of 19%, reflecting stronger profitability in the custom film unit resulting from improved plant efficiencies combined with lower scrap rates, which served to offset the margin pressure experienced as a result of the significant increase in resin prices during the period.
The 1994 Atlantis Molded Plastics gross profit percentage of 18% decreased from the 1993 gross profit percentage of 20%. This decrease reflects lower injection molding profitability resulting from a variety of factors, including: (i) a higher level of tooling sales during 1994, which produced lower margins in comparison to the normal product line, (ii) additional expenses related to debugging costs of new tools, which were placed in service in late 1994 or during 1995, (iii) higher subcontracted and overtime labor costs due to the shortage of qualified labor resulting from low national unemployment levels during 1994, (iv) unfavorable product mix, and (v) a decline in blow molding profitability due to ongoing competitive pricing pressures in the dairy plastic container markets.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A during 1994 totaled $29.2 million, or 11% of sales, compared to 1993 SG&A of $23.9 million, also 11% of sales. The dollar increase in SG&A for 1994 reflected additional employees to support volume growth, higher costs in the injection molding unit, which included the operating results of Advanced since May 1994, and higher commission costs in the stretch film unit resulting from increased sales volume.
NET INTEREST EXPENSE AND TAXES
Net interest expense during 1994 of $13.1 million was higher than the $12.6 million in net interest expense for 1993. However, excluding interest income, interest expense was comparable at $13.2 million and $13.1 million, respectively, during 1994 and 1993. These amounts were comparable despite the increase in indebtedness and interest rates during 1994, primarily due to the Company's lower cost of capital resulting from the refinancing of substantially all of its indebtedness during the first quarter of 1993.
The Company's effective tax rates during 1994 and 1993 were affected by nondeductible goodwill amortization.
DISCONTINUED OPERATIONS
Western Pioneer's 1994 income totaled $1.2 million, compared to 1993 income of $881,000. Losses and loss adjustment expenses during 1994 of $14.9 million equaled 68% of premiums earned, compared to 72% during 1993. The decrease was primarily due to improved collections of salvage and subrogation, combined with an increase in the 1994 estimate of salvage and subrogation receivable.
NET INCOME
As a result of the factors described above, net income for 1994 equaled $6.4 million, or $0.83 per share, compared to 1993 net income of $3.9 million, or $0.49 per share. Income from continuing operations during 1994 equaled $5.2 million, or $0.67 per share, compared to $5.2 million, or $0.66 per share in 1993.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at December 31, 1995 totaled approximately $23.2 million, compared to $33.0 million at December 31, 1994. Cash totaled $1.3 million at December 31, 1995, compared to $1.4 million at December 31, 1994.
As of December 31, 1995, the Company amended certain revolving credit facility covenants and implemented a revolving credit availability formula which provides for gross availability on the credit facility, prior to any borrowings or reductions for outstanding letters of credit, of between $17.5 million and $30.0 million based upon the Company's ratio of cash flow to total indebtedness, as defined in the amendment. At December 31, 1995 the gross availability on the revolving credit facility equaled $17.5 million, and the unused availability equaled $16.2 million, net of approximately $1.3 million for outstanding letters of credit. There were no revolver borrowings outstanding as of December 31, 1995.
Various financial covenants contained within certain of the other senior obligations outstanding as of December 31, 1995 were also amended in a manner consistent with the amendments to the revolving credit facility described above. See Note 7 of the Company's Notes to Consolidated Financial Statements.
As further discussed in Note 9, the Company's Series A Convertible Preferred Stock ("Preferred Stock") entitles the holder to an annual cumulative dividend, payable in equal semiannual installments of $72,500 on April 15 and October 15 of each year. As discussed below within "Liquidity", the Company is prohibited from paying preferred dividends until it is able to meet the interest coverage ratio requirement relating to its 11% Senior Notes on a trailing four quarters basis. In the event that three or more dividend payments are in arrears on the Preferred Stock, the holders of the Preferred Stock have the right to elect one director of the Company.
CASH FLOWS FROM OPERATING ACTIVITIES
During the second quarter of 1995, as film demand began to soften and resin price decreases appeared imminent, the Company focused on the reduction of inventories, accounts receivable and outstanding indebtedness. This program, along with the effects of the resin price declines experienced during 1995, resulted in significant declines in these areas from the levels maintained during late 1994 and early 1995.
During 1995, net cash provided by operating activities was approximately $14.0 million, compared to $2.0 million during 1994. The 1995 net loss was $13.1 million, offset by the noncash provision for the impairment of long-lived assets of $10.6 million, depreciation and amortization of $10.7 million, and the decrease in accounts receivable and inventories of $12.6 million due to the reduction programs initiated by the Company during the second quarter, as described above, and a lower level of film sales volume and selling prices. Accounts payable and accrued expenses at December 31, 1995 decreased by $3.7 million compared to the 1994 year-end balance primarily due to lower incentive compensation and capital expenditures accruals compared to year-end 1994.
The Company's management expects that, given the significant working capital reductions achieved in the last nine months of 1995, future working capital fluctuations will not be as significant and will correspond to the Company's future sales levels.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities during 1995 equaled approximately $750,000, consisting of the proceeds from the August and September, 1995 sales of Western Pioneer (see Note 18) and the Company's 50% interest in the CKS/Rigal blow molding joint venture, for gross proceeds of $12.0 million and $870,000, respectively, offset by capital expenditures of $13.8 million. Capital expenditures decreased during 1995 compared with 1994 capital expenditures of $16.4 million, and the Company expects 1996 capital expenditures to be lower than 1995.
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Cash used in investing activities during 1994 equaled $28.3 million, comprised primarily of capital expenditures, and funds used to acquire the assets of Advanced of $12.4 million (see Note 2 for information regarding the Company's purchase of Advanced in May 1994).
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities during 1995 equaled $13.4 million, compared to cash provided by financing activities of $25.5 million during 1994. From May, 1994 through mid-May, 1995 total debt outstanding steadily increased due to: (i) higher inventory and accounts receivable balances associated with higher sales levels and raw material costs compared to the first half of 1994, (ii) revolver borrowings required to finance the May 1994 acquisition of Advanced, and (iii) borrowings in connection with equipment financing programs established during 1994 and 1995.
Total debt was reduced from $129.2 million at year-end 1994 and a high of $142.8 million in mid-May to $116.5 million at year-end 1995, primarily due to the previously described reductions in inventories and accounts receivable, along with the sales of Western Pioneer and the CKS/Rigal joint venture interest. Outstanding indebtedness was also reduced by the Company's December, 1995 repurchases, at a discount, of $4.8 million of its 11% Senior Notes. Other principal payments on long-term debt of approximately $2.0 million were also made during the year.
Net borrowings on the Company's revolving credit facility were reduced by approximately $21.6 million during 1995, with the unused availability on the Company's revolving credit line favorably impacted by the events described above, and also by the refinancing of outstanding indebtedness from the revolving credit line to borrowings collateralized by certain equipment acquired during 1994 and 1995, and collateralized by Advanced's property, equipment, inventories and accounts receivable. During 1995, $15.6 million of these borrowings were established.
During the period from January to October 1995, the Company paid dividends on common and preferred stock of approximately $677,000. For the reasons cited below, the Company discontinued its 2.5 cents per share quarterly common stock dividend program after the October 1995 dividend payment. (Also see the discussion above regarding the Company's ability to make future required preferred stock dividend payments.)
LIQUIDITY
During the last half of 1994 and the first half of 1995, the Company utilized equipment financing programs to finance the majority of its capital expenditures. Covenants relating to the Company's 11% Senior Notes indebtedness restrict the Company from taking certain actions unless specified interest coverage ratio and other tests are met. The Company's recent decline in operating profitability caused it to fall below the interest coverage ratio requirement for the trailing four quarters ended September 30 and December 31, 1995, and, accordingly, the Company cannot pay dividends and its ability to incur new debt or take certain other actions is restricted in certain respects until it is again able to meet the interest coverage ratio requirement on a trailing four quarters basis.
However, notwithstanding the foregoing restrictions, the Company is fully permitted to (i) borrow available funds on its revolving credit facility, and to (ii) incur new debt in connection with the refinancing of existing debt and certain other types of financings.
The Company's primary needs for liquidity, on both a short and long-term basis, relate to working capital (principally inventory and accounts receivable), debt service and capital expenditures. The Company presently does not have any material commitments for future capital expenditures, and expects to meet its short and long-term liquidity needs with funds generated from continuing operations, along with funds available under its revolving credit facility.
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ACCOUNTING PRONOUNCEMENTS
As previously discussed, during the fourth quarter of 1995, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (see Notes 1 and 17).
In October, 1995 SFAS No. 123, "Accounting for Stock Based Compensation" was issued. SFAS 123 introduces a preferable fair-value based method of accounting for stock-based compensation. It encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options, and other equity instruments to employees based on the new fair value accounting rules.
Although expense recognition for employee stock-based compensation is not mandatory, SFAS No. 123 requires companies that choose not to adopt the new fair value accounting rules to make certain proforma disclosures. SFAS No. 123 must be implemented no later than fiscal year 1996. The Company has not yet determined the method or effect on operating results of implementing the statement. However, the adoption of SFAS No. 123 is not expected to have a materially adverse effect on consolidated financial position.
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ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The Company's management is responsible for the preparation of the financial statements in accordance with generally accepted accounting principles and for the integrity of all the financial data included in this Form 10-K. In preparing the financial statements, management makes informed judgments and estimates of the expected effects of events and transactions that are currently being reported.
Management maintains a system of internal accounting controls that is designed to provide reasonable assurance that assets are safeguarded and that transactions are executed and recorded in accordance with management's policies for conducting its business. This system includes policies which require adherence to ethical business standards and compliance with all laws to which the Company is subject. The internal controls process is continuously monitored by direct management review.
The Board of Directors, through its Audit Committee, is responsible for determining that management fulfills its responsibility with respect to the Company's financial statements and the system of internal accounting controls.
The Audit Committee, comprised solely of directors who are not officers or employees of the Company, meets periodically with representatives of management and the Company's independent accountants to review and monitor the financial, accounting, and auditing procedures of the Company in addition to reviewing the Company's financial reports. The independent accountants have full and free access to the Audit Committee.
ANTHONY F. BOVA PAUL RUDOVSKY PRESIDENT AND CHIEF EXECUTIVE VICE PRESIDENT, EXECUTIVE OFFICER FINANCE AND ADMINISTRATION
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Atlantis Plastics, Inc.
We have audited the accompanying consolidated balance sheets of Atlantis Plastics, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlantis Plastics, Inc. and subsidiaries as of December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 17 to the consolidated financial statements, Atlantis Plastics, Inc. and subsidiaries adopted Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" during 1995.
Coopers & Lybrand L.L.P. Atlanta, Georgia February 14, 1996, except for Note 7, as to which the date is February 26, 1996.
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ATLANTIS PLASTICS, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
- 24 - ATLANTIS PLASTICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
- 25 - ATLANTIS PLASTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
- 26 - ATLANTIS PLASTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Atlantis is a leading U.S. manufacturer of polyethylene stretch and custom films used in a variety of industrial and consumer applications and molded plastic products for the appliance, automotive, recreational vehicle, and dairy industries.
Atlantis Plastic Films manufactures stretch films which are multilayer plastic films that are used principally to stretch-wrap pallets of materials for shipping or storage and custom film products which include high-grade laminating films, embossed films, and specialty film products targeted primarily to industrial and agricultural markets.
Atlantis Molded Plastics employs three principal technologies, serving a wide variety of specific market segments: (i) injection molded thermoplastic parts that are sold primarily to original equipment manufacturers and used in major household appliances, agricultural, and automotive products, (ii) a variety of extruded plastic trim and channel systems (profile extrusion) that are incorporated into a broad range of consumer and commercial products such as recreational vehicles, residential doors and windows, office furniture, and retail store fixtures, and (iii) blow molded milk, juice, water and industrial containers in a variety of shapes and sizes.
Discontinued operations in 1995 and 1994 consisted of the operations of Western Pioneer, the Company's California property-casualty insurance subsidiary which was sold on August 31, 1995. Prior to 1994, discontinued operations included both Western Pioneer and the Company's interest in Loewenstein Furniture Group, Inc., ("Loewenstein", now known as WinsLoew Furniture, Inc. "WinsLoew"). See Note 18.
The consolidated financial statements include the accounts of Atlantis and its subsidiaries, all of which are 100% owned. With regard to the Company's 50% interest in the CKS/Rigal joint venture (sold during September, 1995), the Company recorded its proportionate share of the joint venture's results of operations, during the periods that the Company owned the investment, using the equity method of accounting. All material intercompany balances and transactions have been eliminated. Certain amounts included in prior period financial statements have been reclassified to conform with the current year presentation.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date(s) of the financial statements, and reported amounts of revenues and expenses during the reporting period(s). Actual results could differ from those estimates.
The following is a summary of the Company's significant accounting policies:
CASH AND EQUIVALENTS The Company classifies as cash and equivalents all highly liquid investments which present insignificant risk of changes in value and have maturities at the date of purchase of three months or less. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.
INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market.
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PROPERTY AND EQUIPMENT Property and equipment are carried at cost less accumulated depreciation and amortization. The provisions for depreciation and amortization have been computed, using both straight-line and accelerated methods, over the estimated useful lives of the respective assets. Such useful lives generally fall within the following ranges: buildings and improvements - 15 to 30 years; office furniture and equipment - 5 to 10 years; manufacturing equipment - 5 to 30 years; and vehicles - 3 to 8 years.
When assets are retired or otherwise disposed, the costs and accumulated depreciation are removed from the respective accounts, and any related profit or loss is recognized. Maintenance and repair costs are charged to expense as incurred. Additions and improvements are capitalized.
GOODWILL Goodwill is being amortized on a straight-line basis over forty years from the date of the respective acquisitions. Accumulated amortization amounted to approximately $12.7 million and $10.8 million at December 31, 1995 and 1994, respectively.
LONG-LIVED ASSETS During the fourth quarter of 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present, and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. The statement also requires that impairment losses be recorded on long-lived assets to be disposed of when the carrying value of the asset exceeds the fair value (usually based on discounted cash flows) less the estimated selling costs. Under the new method, the Company reviews impairment whenever events or changes in circumstances indicate that the carrying amount of any of its assets is not recoverable (see Note 17).
AMORTIZATION Loan acquisition costs and related legal fees are amortized over the respective terms of the related debt utilizing either: (i) the effective interest method, or (ii) the straight line method when the results do not materially differ from the effective interest method.
FEDERAL INCOME TAXES The Company and its subsidiaries file consolidated Federal income tax returns. Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes" which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
PER SHARE DATA Primary earnings (loss) per share are computed by dividing net income (loss) after deduction of annual preferred dividend requirements, by the weighted average number of shares and dilutive share equivalents outstanding during each year. The Company's convertible preferred stock was determined not to be a common share equivalent in computing primary earnings per share (see Note 9). In computing fully diluted income per share, the assumed conversion of the convertible preferred stock was not material.
NOTE 2. ACQUISITION
During May 1994, the Company purchased substantially all of the assets (excluding cash) and assumed all of the liabilities (excluding interest bearing indebtedness and other amounts due to the seller) of Advanced Plastics, Inc. ("Advanced"), an injection molder located in Warren, Ohio, for approximately $12.4 million. The Company also purchased real estate leased by Advanced and owned by the seller. The acquisition was initially funded with borrowings from the Company's revolving credit facility, and was subsequently refinanced during 1995 with indebtedness secured by Advanced's property, equipment, inventories and accounts receivable. The acquisition was accounted for using the purchase method, and accordingly, the results of operations of Advanced have been included in the consolidated income statements since the date of the acquisition.
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NOTE 3. INVENTORIES
Inventories at December 31, 1995 and 1994 consisted of the following:
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consisted of the following:
As more fully described in Note 17, during the fourth quarter of 1995 the Company wrote down certain fixed assets at its Tulsa custom facility by approximately $1.7 million.
NOTE 5. INVESTMENTS IN DEBT AND EQUITY SECURITIES
The following table summarizes the cost and fair value of the Company's investments, which were classified as available-for-sale at December 31, 1995 and 1994:
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In light of the present federal securities law restrictions associated with the disposal of WinsLoew stock, pursuant to SFAS No. 115 only the portion of the stock that could be reasonably disposed of within one year is considered to have a readily determinable fair value. However, without taking into consideration present federal securities law restrictions, the pre-tax unrealized gain on WinsLoew stock equaled approximately $1.1 million and $1.4 million, respectively, at December 31, 1995 and 1994.
NOTE 6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following at December 31, 1995 and 1994:
NOTE 7. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1995 and 1994:
During the first quarter of 1993, the Company refinanced substantially all of its existing indebtedness through a $100 million, 11% Senior Note offering due February 15, 2003 (the "Notes"), and borrowings under a $30.0 million revolving credit facility which matures in 1998. During 1993, an extraordinary loss of $4.6 million was recorded related to debt extinguishments, representing redemption premiums and the write-off of deferred loan fees and unamortized discounts.
During December 1995, the Company repurchased, at a discount, $4.8 million of its $100 million, 11% Senior Notes in the open market, and recognized an extraordinary gain of $254,000, net of tax.
The Notes are senior unsecured obligations of the Company, with the Company's plastics subsidiaries guaranteeing the payment of principal and interest. The Company's investment in WinsLoew is generally not subject to the indenture. The Notes may not be redeemed prior to February 15, 1998. On and after that date and until February 15, 2001, the Company may redeem all or any portion of the Notes at redemption prices ranging from 104.125% to
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101.375% of the principal amount. After February 15, 2001, the Company may redeem all or any portion of the Notes at 100% of the principal amount. The Company must redeem $20.2 million and $25 million, respectively, of the Notes on February 15, 2001 and 2002.
Covenants relating to the Notes restrict the Company with regard to making certain payments or taking certain actions as described in the related indenture. Among other restrictions, the Company and its subsidiaries may not make certain restricted payments, including dividend payments, stock redemptions or repurchases, or investments in affiliates during the existence and continuation of an event of default under the Notes, or if immediately after giving effect to such restricted payment, certain net equity or other tests are violated. The Company and its subsidiaries are prohibited from paying dividends, incurring certain new debt or otherwise becoming directly or indirectly obligated with respect to any debt unless certain interest coverage ratio tests are met.
The Company's recent decline in operating profitability caused it to fall below the interest coverage ratio requirement for the trailing four quarter periods ended September 30 and December 31, 1995. Accordingly, during November 1995 the Company discontinued its quarterly dividend payable on its Class A and B common shares (also see Note 9 regarding the Company's ability to make future required preferred stock dividend payments) and its ability to incur new debt or otherwise become directly or indirectly obligated with respect to any new debt is restricted in certain respects until it is again able to meet the interest coverage ratio requirement on a trailing four quarters basis.
However, notwithstanding the foregoing restrictions, the Company is fully permitted to (i) borrow available funds on its revolving credit facility, and to (ii) incur new debt in connection with the refinancing of existing debt and certain other types of financings.
Under the terms of the revolving credit facility, the Company and its subsidiaries are required to, among other things, maintain certain financial ratios and minimum specified levels of net worth; refrain from paying dividends unless certain requirements are met; refrain from incurring additional indebtedness, or guaranteeing the obligations of others; and limit capital expenditures. As of December 31, 1995, the Company amended certain revolving credit facility covenants and implemented a revolving credit availability formula which provides for gross availability on the credit facility, prior to any borrowings or reductions for outstanding letters of credit, of between $17.5 million and $30.0 million based upon the Company's ratio of cash flow to total indebtedness, as defined in the amendment. At December 31, 1995, the gross availability on the revolving credit facility equaled $17.5 million, and the unused availability equaled $16.2 million.
Borrowings on the revolving credit facility are subject to a borrowing base formula which is based on eligible collateral (accounts receivable, inventories and fixed assets of the subsidiaries), and interest is computed using either LIBOR-based rates plus 3%, or prime plus 1.5%. At December 31, 1995 the 30-day LIBOR rate and the prime rate were 5.8% and 8.5%, respectively.
Other senior and subordinated indebtedness of approximately $21.3 million consists of equipment and other collateralized financings entered into during 1995 and 1994, along with industrial revenue bonds and capitalized lease obligations entered into prior to 1994. As of December 31, 1995 various financial covenants contained within certain of these obligations were amended in a manner consistent with the amendments to the revolving credit facility described above. This indebtedness provides for maturity dates from 1998 to 2007. At December 31, 1995 and 1994, the weighted average interest rates on these borrowings were 8.4% and 7.8%, respectively, with 85% of the total at floating interest rates, and the remainder at fixed interest rates as of December 31, 1995.
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Scheduled maturities of indebtedness in each of the next five years are as follows (in thousands):
Based on the quoted market price of the Notes, and the borrowing rates available to the Company for loans with similar terms and average maturities, the fair value of the Company's indebtedness at December 31, 1995 and 1994 was $106.5 million and $123.3 million, respectively.
NOTE 8. MINORITY INTERESTS
In December, 1992 the Company acquired the outstanding minority interest in Atlantis Plastics Injection Molding, Inc. (formerly known as Cyanede Plastics, Inc. ("the injection molding unit") for, among other things, 120,400 shares of treasury stock with a cost and market value of $481,600. In connection with this transaction, the Company granted the former injection molding unit minority shareholders the right to require the Company to repurchase such stock in 1995 at a specified formula price based on the injection molding unit's 1994 earnings, and established a liability of $481,600 to be utilized in the event that the repurchase provision was exercised. The Company determined that the repurchase provision would not be exercised and, accordingly, the Company reclassified the carrying value of the repurchase obligation to additional paid-in capital as of December 31, 1994.
In November, 1992 Atlantis acquired the Linear Films, Inc. ("Linear") minority interest and $7.0 million of the $20.0 million outstanding principal amount of Linear's subordinated debt for a cash payment of $7.3 million. In conjunction with the Company's 1993 refinancing, Atlantis acquired the remaining $13.0 million outstanding principal amount for a cash payment of $13.2 million. The Company allocated the cash payments between the debt and the minority interest based on the estimated fair values of each instrument. In this connection, extraordinary losses of $640,000 and $394,000, net of income taxes, were recognized in 1993 and 1992, respectively, related to the Linear debt extinguishment; and credits to additional paid-in capital of $1.9 million and $1.0 million were recognized in 1993 and 1992, respectively, related to the redemption of the Linear minority interest.
NOTE 9. CAPITAL STOCK
Generally, the Class A Common Stock has one vote per share and the Class B Common Stock has ten votes per share. Holders of the Class B Common Stock are entitled to elect 75% of the Board of Directors; holders of Class A Common Stock are entitled to elect the remaining directors.
Each share of Class B Common Stock is convertible, at the option of the holder thereof, into one share of Class A Common Stock. Class A Common Stock is not convertible into shares of any other equity security.
During February 1994, the Company's Board of Directors approved a 2.5 cents per share quarterly dividend program beginning in April 1994, and consecutive quarterly dividends were paid through October 1995, after which the dividend program was discontinued (see Note 7).
As part of a share repurchase program initiated by the Company during 1993, 122,184 and 185,878 shares of Class A and B Common Stock were repurchased during 1994 and 1993 at a total cost of approximately $729,000 and $1.1 million, respectively.
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Each share of Series A Convertible Preferred Stock ("Preferred Stock") has a liquidation preference of $100 and entitles the holder to an annual cumulative dividend, payable in equal semiannual installments of $72,500 on April 15 and October 15 of each year. As more fully discussed in Note 7, the Company is prohibited from paying preferred dividends until it is able to meet the interest coverage ratio requirement relating to its 11% Senior Notes on a trailing four quarters basis. In the event that three or more dividend payments are in arrears on the Preferred Stock, the holders of the Preferred Stock have the right to elect one director of the Company.
The Preferred Stock is convertible at the option of the holder thereof into an aggregate of 205,074 shares of Class A Common Stock. The Company has the right to compel conversion of the Preferred Stock, if the Class A Common Stock has a market value in excess of 100% of the Series A Convertible Preferred Stock's conversion price. The current conversion price is $9.75.
NOTE 10. INCOME TAXES
The income tax (benefit) provision for the years ended December 31, 1995, 1994 and 1993 consisted of the following:
The following table provides a reconciliation between the Federal income tax rate and the Company's effective income tax rate:
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At December 31, 1995 and 1994, deferred tax assets and liabilities consisted of the following:
NOTE 11. STOCK OPTION PLANS
The Company's Stock Option Plans ("Option Plans") are designed to serve as an incentive for retaining qualified and competent employees, directors and agents. Options may be granted under the Option Plans on such terms and at such prices as determined by the Compensation Committee of the Board of Directors (consisting only of outside directors); provided, however, that the exercise price of certain options will not be less than 90% of the fair market value of the Class A Common Stock on the date of grant. Each option will be exercisable after the period or periods specified in the option agreement, but no option shall be exercisable after the expiration of ten years from the date of grant. Options granted under the Option Plans are not transferable other than by will or by the laws of descent and distribution.
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The Option Plans also authorize the Company to make loans to optionees to exercise their options. Information with respect to the Option Plans is as follows:
NOTE 12. BUSINESS SEGMENTS
The Company considers its continuing operations to comprise two segments: Atlantis Plastic Films and Atlantis Molded Plastics. During 1995, 1994 and 1993, an Atlantis Molded Plastics customer accounted for approximately 10%, 13%, and 15%, respectively, of the Company's net sales. Summary data for 1995, 1994 and 1993 is as follows:
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NOTE 13. PROFIT SHARING AND RETIREMENT PLANS
Atlantis and certain of its subsidiaries have profit sharing and defined contribution retirement plans. Generally, such plans cover all employees who have attained the age of 21 and have at least one year of service. Contributions to the plans are determined by the individual companies' Boards of Directors on an annual basis. Related expenses applicable to continuing operations were approximately $812,000, $1.1 million, and $855,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
NOTE 14. RELATED PARTIES
A management agreement exists between the Company and Trivest, Inc. ("Trivest"), an affiliate of a major shareholder. Trivest has certain common shareholders, officers and directors with the Company. Fees charged to expense under this agreement, including the portion related to discontinued operations, amounted to $478,000, $399,000, and $326,000 for the years ended December 31, 1995, 1994 and 1993, respectively. This agreement expires in December 1997. In addition to the above fees, Atlantis paid Trivest an acquisition fee of $405,000 relating to the May 1994 acquisition of Advanced.
Atlantis shares its Miami, Florida office space with several related entities. Rent expense for this office space, as well as certain other non-direct general and administrative expenses, are allocated among Atlantis and these entities.
NOTE 15. LITIGATION
The Company is, from time to time, involved in routine litigation. None of such litigation, in which the Company is presently involved, is believed to be material to its financial position or results of operations. Set forth below is a description of certain non-routine litigation which Atlantis or its subsidiaries were parties.
In December 1989, Atlantis filed a complaint against Charter-Crellin, Inc., and certain related parties alleging fraud and misrepresentation relating to a July 8, 1988 stock purchase agreement between Atlantis and Charter-Crellin, Inc. This lawsuit was settled during January 1993, with Atlantis receiving $2.5 million in cash. All litigation relating to this claim has been dismissed.
NOTE 16. COMMITMENTS
Atlantis and its subsidiaries lease various office space, buildings, transportation and production equipment with terms in excess of one year. Total expense under these agreements for the years ended December 31, 1995, 1994 and 1993 was approximately $1.5 million, $2.2 million and $2.6 million, respectively.
The total minimum rental commitments under operating leases at December 31, 1995 consisted of the following (in thousands):
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NOTE 17. IMPAIRMENT OF LONG-LIVED ASSETS AND OTHER RESTRUCTURING CHARGES
During the fourth quarter of 1995, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". In accordance with the provisions of SFAS No. 121, the Company wrote off certain goodwill and wrote down certain fixed assets, as discussed below.
As more fully discussed in "Management's Discussion and Analysis of Operations", the Company's Tulsa custom film facility was unprofitable during 1995, had experienced operating losses in prior periods, and was expected to continue to incur operating losses in the future if the fourth quarter 1995 restructuring of the business was not undertaken. As part of that restructuring, the Company estimated the facility's future cash flows from its operations and its eventual disposition, compared those amounts to its carrying value, and determined that an impairment loss should be recognized. Accordingly, during the fourth quarter of 1995 goodwill associated with the facility was written off, and its fixed assets were written down to fair value.
Also as previously discussed, during the fourth quarter of 1995 the Company decided to dispose of Plastic Containers, Inc., its remaining blow molding operation, as part of its strategy to focus its resources on the manufacture of film products and selected molded products, and to dispose of product groups that are not part of these operations. The Company determined that the carrying value of this operation exceeded its fair value, and determined the amount of the impairment charge by developing its best estimate of the fair value of the long-lived assets and comparing it to the carrying value of those long-lived assets. As a result, the majority of the goodwill associated with this business was written off during the fourth quarter of 1995. This business operates within the Atlantis Molded Plastics segment, and posted 1995 sales and operating income of approximately $12.9 million and $783,000, respectively, excluding the effects of the goodwill writeoff.
The fourth quarter 1995 noncash charges for the impairment of long-lived assets associated with the Tulsa custom film facility and the reduction in carrying value of the Company's blow molding unit in connection with its proposed sale totaled $10.6 million. Of this amount, goodwill writeoffs totalled approximately $8.9 million (with no associated tax benefit), and fixed asset writedowns totalled approximately $1.7 million pre-tax, or $1 million after-tax.
During 1995, the Company also recorded restructuring charges of approximately $1.9 million related to (i) the first quarter 1995 reorganization of its senior management group (approximately $750,000), (ii) the third and fourth quarter 1995 reconfiguration of its stretch film sales organization (approximately $800,000), and (iii) the fourth quarter 1995 headcount reduction costs associated with the restructuring of the Tulsa custom facility and the injection molding unit (approximately $350,000).
NOTE 18. DISCONTINUED OPERATIONS
Discontinued operations in 1995 and 1994 consisted of the operations of Western Pioneer, the Company's California property-casualty insurance subsidiary which was sold on August 31, 1995 to a Massachusetts-based property casualty insurer for $12.0 million. In connection with the sale, the Company purchased vacant land from Western Pioneer for approximately $639,000. The Company intends to dispose of this land and established a valuation allowance to reduce the carrying value of the land to approximately $370,000. The after-tax gain recognized on the sale was approximately $483,000, including the effects of the land valuation allowance. The net cash proceeds after the land purchase, taxes, expenses and inter-company amounts were applied to the Company's revolving credit facility.
The following table summarizes Western Pioneer's operating results for the eight months ended August 31, 1995 and the years ended December 31, 1994 and 1993:
* Represents operating results for the period January 1 - August 31, 1995.
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Prior to 1994, discontinued operations included both Western Pioneer and the Company's interest in Loewenstein, now known as WinsLoew. During 1993, Loewenstein accounted for approximately $561,000 of the Company's income from discontinued operations, and a gain of approximately $1,885,000 was recognized on Loewenstein stock transactions. The Company continues to hold for sale a 9% WinsLoew stock investment.
NOTE 19. ACCOUNTING PRONOUNCEMENTS
As previously discussed, during the fourth quarter of 1995, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (see Notes 1 and 17).
In October, 1995 SFAS No. 123, "Accounting for Stock Based Compensation" was issued. SFAS 123 introduces a preferable fair-value based method of accounting for stock-based compensation. It encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options, and other equity instruments to employees based on the new fair value accounting rules.
Although expense recognition for employee stock-based compensation is not mandatory, SFAS No. 123 requires companies that choose not to adopt the new fair value accounting rules to make certain proforma disclosures. SFAS No. 123 must be implemented no later than fiscal year 1996. The Company has not yet determined the method or effect on operating results of implementing the statement; however, the adoption of SFAS No. 123 is not expected to have a materially adverse effect on consolidated financial position.
NOTE 20. QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited consolidated quarterly financial data for the years ended December 31, 1995 and 1994 is as follows:
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ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has had no changes in or disagreements with its independent certified public accountants on accounting and financial disclosure.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to directors and executive officers of the Company is incorporated by reference to the registrant's Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this item is incorporated by reference to the registrant's Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in response to this item is incorporated by reference to the registrant's Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this item is incorporated by reference to the registrant's Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.
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PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS A PART OF THIS REPORT:
(2) Financial statement schedules have been omitted because the required information is contained in the financial statements and notes thereto or because such schedules are not required or applicable.
(3) Exhibits (An asterisk to the left of an exhibit number denotes a management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.)
2.1 Agreement and Plan of Merger by and between Atlantis Plastics, Inc., a Florida corporation and Atlantis Group, Inc., a Delaware corporation, dated as of April 22, 1994. (2)(1)
3.1 Registrant's Articles of Incorporation (3.1)(1)
3.2 Registrant's Bylaws (February 1988) (3.2)(1)
4.1 Form of Stock Certificate evidencing ownership of Registrant's Class A Common Stock(10)
4.2 Trust Indenture between Registrant and American Stock Transfer and Trust Company (4.2)(7)
4.3 Form of Senior Note, dated February 15, 1993 (4.3)(7)
10.1 Preferred Stock Subscription and Purchase Agreement, dated October 24, 1986, between Registrant and Southeast Banking Corporation (10.20)(1)
*10.2 Registrant's Amended and Restated Stock Option Plan, dated as of March 16, 1989 (10.1)(4)
*10.3 Registrant's 1987 Disinterested Directors Stock Option Plan (10.2)(2)
*10.4 Registrant's Amended and Restated 1990 Stock Option Plan (10.2)(4)
*10.5 Fourth Amended and Restated Management Agreement between Registrant and Trivest, Inc. (10.5)(6)
*10.6 Second Amended and Restated Employment Agreement, dated January 1, 1990 between Registrant and Earl W. Powell (10.6) (3)
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*10.7 First Amendment To Second Amended and Restated Employment Agreement, dated as of April 1, 1992, between Registrant and Earl W. Powell (10.7) (7)
*10.8 Employment Agreement, dated January 1, 1990, between Registrant and Phillip T. George, M.D. (10.7) (3)
*10.9 First Amendment to Employment Agreement, dated as of April 1, 1992, between the Registrant and Phillip T. George, M.D. (10.9) (7)
10.10 Form of Indemnification Agreement (10.47)(9)
10.11 Office Lease, dated as of December 31, 1993, between Grand Bay Plaza Joint Venture and the Registrant, and First Addendum thereto (8)
10.12 Settlement Agreement by and between Mobil Oil Corporation and Linear Films, Inc. of Civil Action No. 87 civ. 874-B in the Northern District of Oklahoma, effective as of February 21, 1992 (10.40)(5)
10.13 License Agreement by and between Mobil Oil Corporation and Linear Films, Inc. for use of U.S. Patent No. 4,518,654, effective as of February 21, 1992 (10.41)(5)
10.14 Loan Contract, dated October 30, 1987, between State of Minnesota and National Poly Products, Inc. (10.11)(2)
10.15 Letter of Consent to the Loan Contract between State of Minnesota and National Poly Products, Inc., dated October 30, 1991 (10.43)(5)
10.16 Letter of Consent to the Loan Contract between State of Minnesota and National Poly Products, Inc., dated January 13, 1992 (10.44 )(5)
10.17 Consent and Acknowledgment to the Loan Contract between State of Minnesota and National Poly Products, Inc., dated February 18, 1993 (10.22)(7)
10.18 Loan Agreement between Arkansas Development Finance Authority and Cyanede, dated March 18, 1992 (10.69)(6)
10.19 Promissory Note from Cyanede to the Arkansas Development Finance Authority, in the amount of $1,600,000, dated June 1, 1992 (10.70)(6)
10.20 Office Lease, dated as of April 1, 1992, between Euram 1870 Exchange Associates and National Poly Products, Inc. (10.78)(6)
10.21 Subordination and Attornment Agreement between State Farm Life Insurance Company and National Poly Products, Inc. dated April 6, 1992 (10.78)(6)
10.22 Intercreditor Agreement between Heller Financial, Inc., Arkansas Development Finance Authority and Worthen Trust Company, Inc. (10.40)(7)
10.23 Asset Purchase Agreement, dated May 17, 1994, among the Registrant, Advanced Plastics, Inc. and Frederick R. Warren. (9)
10.24 Credit Agreement, dated February 22, 1993, between the Registrant and Heller Financial, Inc. (the "Heller Credit Agreement") (10.39)(7)
10.25 First Amendment and Waiver, dated March 28, 1994, to Heller Credit Agreement. (10.29) (10)
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10.26 Consent Letter, dated May 23, 1994, to Heller Credit Agreement. (10.30) (10)
10.27 Second Amendment, dated August 15, 1994, to Heller Credit Agreement. (10.31) (10)
10.28 Consent Letter, dated September 9, 1994, to Heller Credit Agreement. (10.32) (10)
10.29 Consent Letter, dated February 13, 1995, to Heller Credit Agreement. (10.33) (10)
10.30 Consent and Waiver Letter, dated February 24, 1995, to Heller Credit Agreement. (10.34) (10)
10.31 Third Amendment to Heller Credit Agreement and Consent, dated as of March 30, 1995. (10.3) (11)
10.32 Fourth Amendment to Heller Credit Agreement, dated as of September 30, 1995. (10.2) (13)
10.33 Fifth Amendment to Heller Credit Agreement, dated as of December 31, 1995. (14)
10.34 Lease with option to purchase Real Estate between Atlantis Plastic Films, Inc. and the City of Mankato, Minnesota, dated as of March 2, 1995. (10.35) (10)
*10.35 Employment Agreement, dated February 1, 1995, between the Registrant and Anthony F. Bova. (10.1) (11)
*10.36 Employment Agreement, dated March 6, 1995, between the Registrant and Paul Rudovsky. (10.2) (11)
10.37 Master Security Agreement and Promissory Note between Cyanede Plastics, Inc. and General Electric Capital Corporation ("GECC") in the amount of $2,673,919, dated as of February 23, 1995. (10.4) (11)
10.38 Corporate Guaranty of the Registrant of the obligations of Cyanede Plastics, Inc. to GECC, dated as of February 23, 1995. (10.5) (11)
10.39 Master Security Agreement and Promissory Note between Pierce Plastics, Inc. and GECC in the amount of $221,790, dated as of February 23, 1995. (10.6) (11)
10.40 Corporate Guaranty of the Registrant of the obligations of Pierce Plastics, Inc. to GECC, dated as of February 23, 1995. (10.7) (11)
10.41 Master Security Agreement and Promissory Note between Plastic Containers, Inc. and GECC in the amount of $340,000, dated as of February 23, 1995. (10.8) (11)
10.42 Corporate Guaranty of the Registrant of the obligations of Plastic Containers, Inc. to GECC, dated as of February 23, 1995. (10.9) (11)
10.43 Master Security Agreement and Promissory Note between Atlantis Plastic Films, Inc. (as successor by merger to Linear Films, Inc.) and GECC in the amount of $900,000, dated as of February 23, 1995. (10.10) (11)
10.44 Promissory Note from Atlantis Plastic Films, Inc. to GECC in the amount of $650,000, dated as of February 23, 1995. (10.11) (11)
10.45 Corporate Guaranty of the Registrant of the obligations of Atlantis Plastic Films, Inc. to GECC dated as of February 23, 1995. (10.12) (11)
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10.46 Loan and Security Agreement by the Among Atlantis Plastic Films, Inc., Cyanede Plastics, Inc., Pierce Plastics, Inc., Plastic Containers, Inc. and The CIT/Equipment Group Financing, Inc. ("CIT"), dated as of 4/13/95. (10.13) (11)
10.47 First Amendment to Loan and Security Agreement by and among Atlantis Plastic Films, Inc., Atlantic Plastics Injection Molding, Inc. (formerly known as Cyanede Plastics, Inc.) Pierce Plastics, Inc., Plastic Containers, Inc. and CIT dated to be effective as of December 31, 1995. (14)
10.48 Promissory Note from Atlantis Plastic Films, Inc., Cyanede Plastics, Inc., Pierce Plastics, Inc., and Plastic Containers, Inc. to CIT in the amount of $15,000,000, dated as of April 13, 1995. (10.14) (11)
10.49 Guaranty of the Registrant of the obligations of Atlantis Plastic Films, Inc. to CIT, dated as of April 13, 1995. (10.15) (11)
10.50 Credit Agreement between Atlantis Plastics Injection Molding, Inc. and the Registrant and National City Bank, Northeast, dated as of May 19, 1995. (10.16) (12)
10.51 First Amendment to National City Bank, Northeast, Credit Agreement, dated as of September 30, 1995. (10.3) (13)
10.52 Second Amendment to National City Bank, Northeast, Credit Agreement, dated to be effective as of December 31, 1995. (14)
10.53 Stock Purchase Agreement for the acquisition of Western Pioneer Insurance Company by and between the Commerce Insurance Company, a Massachusetts Corporation and the Registrant, dated as of May 18, 1995. (10.17) (12)
10.54 Demand Promissory Note from Atlantis Plastic Films, Inc. to GECC in the amount of $1,280,579.70, dated as of May 8, 1995. (10.18) (12)
10.55 Purchase Agreement for the acquisition of the Joint Venture Interest of Rigal Plastics, Inc. in CKS/Rigal Plastics, by and between CKS Plastics, Inc., a Florida corporation and the Registrant, dated as of July 31, 1995. (10.1) (13)
11.1 Calculation of Earnings Per Share(14)
21.1 Registrant's Subsidiaries(14)
23.1 Consent of Coopers & Lybrand L.L.P.(14)
27.1 Financial Data Schedule (for SEC use only) - ----------------
(1) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Form 8-B filed June 7, 1994.
(2) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987.
(3) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990.
(4) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's registration statement on Form S-8 (No. 33-41012).
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(5) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991.
(6) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's registration statement on Form S-2 (33-53152).
(7) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992.
(8) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993.
(9) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Report on Form 8-K filed June 3, 1994.
(10) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994.
(11) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
(12) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
(13) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Quarterly Report on Form 10-Q for the ended September 30, 1995.
(14) Filed herewith.
(B) REPORTS ON FORM 8-K
During the fourth quarter of 1995, the Registrant filed a current report on Form 8-K, dated November 27, 1995.
(C) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
The index to exhibits that are listed in Item 14(a)(3) of this report and not incorporated by reference follows the "Signatures" section hereof and is incorporated herein by reference.
(D) FINANCIAL STATEMENT SCHEDULES REQUIRED BY REGULATION S-X
See Item 14(a)2.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ATLANTIS PLASTICS, INC.
Date: March 29, 1996 By: /S/ PAUL RUDOVSKY --------------------------------- PAUL RUDOVSKY EXECUTIVE VICE PRESIDENT, FINANCE AND ADMINISTRATION (PRINCIPAL FINANCIAL OFFICER)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
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