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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
-- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-- EXCHANGE ACT OF 1934
Commission File Number 0-7163
AMERICAN FILTRONA CORPORATION
(Registrant)
Virginia 54-0574583
(State of incorporation) (I.R.S. employer
identification no.)
3951 WESTERRE PARKWAY, SUITE 300
RICHMOND, VIRGINIA 23233
(Executive offices) (Zip code)
Registrant's telephone number: 804-346-2400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for at least the past 90
days. Yes. X No.
Number of shares of common stock outstanding as of August 1, 1995: 3,734,242
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AMERICAN FILTRONA CORPORATION
INDEX
Page No.
Part I. Financial Information
Condensed Consolidated Balance Sheet 3
Condensed Consolidated Statement of Income 4
Condensed Consolidated Statement of Cash Flows 5
Notes to Condensed Consolidated Financial
Statements 5
Management's Discussion and Analysis of
Financial Statements 6
Part II. Other Information 7
Signatures 7
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PART I. FINANCIAL INFORMATION
AMERICAN FILTRONA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1995 (Unaudited) and December 31, 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
ASSETS
<S> <C> <C>
Current assets
Cash, including short-term investments $ 29,585,727 $ 30,522,492
Accounts receivable 22,865,797 17,349,786
Inventories 17,270,298 17,106,615
Prepaid expenses 1,277,843 1,347,460
------------ ------------
Total current assets 70,999,665 66,326,353
Property, plant and equipment 25,662,902 25,996,544
Other assets
Excess cost over net assets of businesses acquired 5,298,830 5,433,259
Notes receivable 2,434,843 2,350,455
Other assets 335,362 386,995
------------ ------------
8,069,035 8,170,709
------------ ------------
$104,731,602 $100,493,606
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 16,518,085 $ 15,118,379
Accrued expenses 4,379,898 3,811,432
Income taxes 195,439 380,889
------------ ------------
Total current liabilities 21,093,422 19,310,700
Other liabilities
Notes payable 650,000 1,300,000
Deferred income taxes 85,329 151,328
Other liabilities 930,842 657,408
Special charges 614,848 709,226
------------ ------------
2,281,019 2,817,962
Shareholders' equity
Common stock, $1 par value 3,733,442 3,736,042
Additional capital 719,878 812,452
Retained earnings 77,900,514 75,085,671
Cumulative translation adjustment (996,673) (1,269,221)
------------ ------------
81,357,161 78,364,944
------------ ------------
$104,731,602 $100,493,606
============ ============
</TABLE>
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AMERICAN FILTRONA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Periods Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Net sales $44,960,034 $35,912,889 $89,592,767 $72,112,162
Investment income 330,271 275,393 620,844 441,431
----------- ----------- ----------- -----------
45,290,305 36,188,282 90,213,611 72,553,593
Costs and expenses
Cost of products sold 37,130,007 29,186,095 72,938,304 58,340,329
Selling, research,
administrative and
general 4,674,000 4,507,141 9,967,742 9,005,753
----------- ----------- ----------- -----------
41,804,007 33,693,236 82,906,046 67,346,082
----------- ----------- ----------- -----------
Income before income taxes 3,486,298 2,495,046 7,307,565 5,207,511
Income taxes 1,250,000 900,000 2,625,000 1,875,000
----------- ----------- ----------- -----------
Income from continuing operations 2,236,298 1,595,046 4,682,565 3,332,511
Discontinued operations, net of
income taxes - 2,334,950 - 3,954,859
----------- ----------- ----------- -----------
Net income $ 2,236,298 $ 3,929,996 $ 4,682,565 $ 7,287,370
=========== =========== =========== ===========
Average shares outstanding 3,733,194 3,751,408 3,734,612 3,747,365
Earnings per share
Continuing operations $.60 $ .43 $1.25 $ .89
Discontinued operations - .62 - 1.05
---- ----- ----- -----
Net income $.60 $1.05 $1.25 $1.94
==== ===== ===== =====
Dividends per share $.25 $ .24 $ .50 $ .48
</TABLE>
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AMERICAN FILTRONA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six-Month Periods Ended June 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Operating
Income from continuing operations $ 4,682,565 $ 3,332,511
Reconciling items
Depreciation and amortization 3,087,617 2,349,044
Deferred income taxes (65,999) (73,642)
Special charges (94,378) (254,361)
Increase (decrease) from noncash working
capital (3,827,355) 2,220,162
Other - net 310,864 (33,472)
----------- -----------
4,093,314 7,540,242
Investing
Acquisitions and dispositions of
property, plant and equipment (2,332,795) (6,918,974)
Business acquisition, net of cash - (2,472,166)
Increase in notes receivable (84,388) -
----------- -----------
(2,417,183) (9,391,140)
Financing
Decrease in notes payable (650,000) -
Issuance of common stock 42,951 241,330
Purchase of common stock (138,125) -
Dividends paid (1,867,722) (1,798,956)
----------- -----------
(2,612,896) (1,557,626)
----------- -----------
Net cash (used) by continuing operations (936,765) (3,408,524)
Net cash provided by discontinued operations (includes
proceeds from sale of $15,875,000) - 13,792,966
----------- -----------
Net increase (decrease) in cash and short-term
investments $ (936,765) $10,384,442
=========== ===========
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
all adjustments (consisting only of normal recurring accruals) which the Company
considers necessary to present fairly the financial position, results of
operations, and cash flows for the interim periods.
The results of operations for the six-month period ended June 30, 1995 are not
necessarily indicative of the results to be expected for the entire year.
The financial statements have been prepared in accordance with instructions to
Form 10-Q and, therefore, do not include all information and notes necessary for
a fair presentation in conformity with generally accepted accounting principles.
For additional information regarding significant accounting policies and other
financial data see the Company's December 31, 1994 Form 10-K.
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NOTE B. INVENTORIES
At June 30, 1995 and December 31, 1994 inventories consisted of (in thousands):
1995 1994
------- -------
FIFO
Finished products $ 7,661 $ 7,813
Work in process 2,006 1,546
Raw materials 9,457 9,242
------- -------
19,124 18,601
Less excess of FIFO over LIFO
inventory value 1,854 1,494
------- -------
$17,270 $17,107
======= =======
Inventories stated at LIFO approximated $8,293 (1994 - $8,135).
NOTE C. DISCONTINUED OPERATIONS
In April, 1994 the Company completed the sale of its industrial filtration
segment effective as of March 31, 1994 for a cash sales price of $15,875,000.
For 1994 the gain on disposal of the segment of $3,835,000 after income tax
credits, or $1.02 per share ($2,999,000 pretax), includes other income and costs
incurred in connection with the disposal. The second quarter gain on disposal of
the segment of $2,335,000 after income taxes or 62 cents per share when combined
with the $1,500,000 or 40 cents per share tax credit reported in the first
quarter reflects the gain reported for the six-month period. For 1994 net sales
were $4,788,000 and income from operations was $120,000 net of applicable taxes
of $100,000.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
BALANCE SHEET
The Company maintained its strong financial condition and liquidity. Cash and
short-term investments represented 28% of total assets at June 30, 1995 compared
to 30% at December 31, 1994. The ratio of current assets to current liabilities
was 3.4 at June 30, 1995 and December 31, 1994.
INCOME STATEMENT
Comparison Between Three-Month and Six-Month Periods Ended June 30, 1995 and
1994
Net sales increased 25% between the second quarters and 24% between the six
months of each year. Bonded fibers segment and plastic products segment sales
increased for the quarter and six-month periods. The strong sales growth of the
first half could slow somewhat as several locations experienced some softening
of orders in the second quarter.
Investment income increased 20% between the second quarters and 41% between the
six months of each year primarily as a result of improved yields.
Costs and expenses increased 24% between the second quarters and 23% between the
six months of each year which was in line with the sales increase. Cost of
products sold increased at a somewhat higher rate than sales, while selling,
research, administrative and general expenses increased at a lesser rate.
The bonded fibers segment operating earnings increased substantially from the
sales growth and because the 1994 second quarter earnings were reduced by a
non-recurring charge of approximately $900,000. The plastic products segment
recorded significantly increased
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operating results. Overall improvement by the five established plastic
extrusion companies was aided by the mid-1994 acquisition of the Tri-Lite
Plastics companies. The extrusion operations' earnings more than offset poor
performance by the Canadian flexible packaging company resulting from production
inefficiencies caused in part by high preparation costs for increased business
with a major customer. The combination of these factors resulted in 40%
increases in pretax income between the second quarters and six months of each
year.
Income taxes increased about 40% between the second quarters and six months of
each year. Therefore, income from continuing operations and related earnings per
share also increased by about 40% between each period.
In 1994 reported income of the discontinued industrial filtration segment was
$2,300,000 or 62 cents per share for the second quarter related to the sale and
approximately $4,000,000 or $1.05 per share for the six months which included
modest earnings prior to the sale. See Note C for additional information.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Date of meeting -- Annual Meeting of Shareholders, April 25, 1995
(c) Other matters -- Approval of the following item was obtained at the
Annual Meeting of Shareholders:
1. The 1995 Stock Incentive Plan:
Affirmative votes = 2,985,481, Negative votes = 150,691,
Abstain = 273,802
The above action was submitted to the shareholders in the registrant's
Proxy Statement dated March 10, 1995 previously filed with the
Commission.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed for the
three months ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN FILTRONA CORPORATION
(Registrant)
Date August 1, 1995 /s/John D. Barlow, Jr., Vice
President-Finance (Chief Financial
Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 29,586
<SECURITIES> 0
<RECEIVABLES> 23,270
<ALLOWANCES> 404
<INVENTORY> 17,270
<CURRENT-ASSETS> 71,000
<PP&E> 60,860
<DEPRECIATION> 35,197
<TOTAL-ASSETS> 104,732
<CURRENT-LIABILITIES> 21,093
<BONDS> 650
<COMMON> 3,733
0
0
<OTHER-SE> 77,624
<TOTAL-LIABILITY-AND-EQUITY> 104,732
<SALES> 89,593
<TOTAL-REVENUES> 90,214
<CGS> 72,938
<TOTAL-COSTS> 82,906
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,308
<INCOME-TAX> 2,625
<INCOME-CONTINUING> 4,683
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,683
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
</TABLE>
