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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 September 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) (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 October 31, 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
September 30, 1995 (Unaudited) and December 31, 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
ASSETS
<S> <C> <C>
Current assets
Cash, including short-term investments $ 36,060,679 $ 30,522,492
Accounts receivable 20,651,894 17,349,786
Inventories 19,437,495 17,106,615
Prepaid expenses 1,421,079 1,347,460
------------ ------------
Total current assets 77,571,147 66,326,353
Property, plant and equipment 25,167,492 25,996,544
Other assets
Excess cost over net assets of businesses acquired 5,205,300 5,433,259
Notes receivable 2,434,843 2,350,455
Other assets 309,247 386,995
------------ ------------
7,949,390 8,170,709
------------ ------------
$110,688,029 $100,493,606
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 19,019,094 $ 15,118,379
Accrued expenses 5,446,048 3,811,432
Income taxes 452,537 380,889
------------ ------------
Total current liabilities 24,917,679 19,310,700
Other liabilities
Notes payable 650,000 1,300,000
Deferred income taxes 340,157 151,328
Other liabilities 1,076,040 657,408
Special charges 458,653 709,226
------------ ------------
2,524,850 2,817,962
Shareholders' equity
Common stock, $1 par value 3,734,242 3,736,042
Additional capital 734,077 812,452
Retained earnings 79,641,821 75,085,671
Cumulative translation adjustment (864,640) (1,269,221)
------------ ------------
83,245,500 78,364,944
------------ ------------
$110,688,029 $100,493,606
============ ============
</TABLE>
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AMERICAN FILTRONA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Periods Ended September 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
------------------------- ----------------------------
1995 1994 1995 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Net sales $43,481,450 $38,487,216 $133,074,217 $110,599,378
Investment income 330,099 276,770 950,943 718,201
----------- ----------- ------------ ------------
43,811,549 38,763,986 134,025,160 111,317,579
Costs and expenses
Cost of products sold 34,854,371 31,413,065 107,792,675 89,753,394
Selling, research,
administrative and
general 4,851,297 4,475,474 14,819,039 13,481,227
----------- ----------- ------------ ------------
39,705,668 35,888,539 122,611,714 103,234,621
----------- ----------- ------------ ------------
Income before income taxes 4,105,881 2,875,447 11,413,446 8,082,958
Income taxes 1,375,000 1,025,000 4,000,000 2,900,000
----------- ----------- ------------ ------------
Income from continuing operations 2,730,881 1,850,447 7,413,446 5,182,958
Discontinued operations, net of
income taxes - - - 3,954,859
----------- ----------- ------------ ------------
Net income $ 2,730,881 $ 1,850,447 $ 7,413,446 $ 9,137,817
=========== =========== ============ ============
Average shares outstanding 3,734,059 3,753,847 3,734,425 3,749,549
Earnings per share
Continuing operations $ .73 $.49 $1.98 $1.38
Discontinued operations - - - 1.05
----- ---- ----- -----
Net income $ .73 $.49 $1.98 $2.43
===== ==== ===== =====
Dividends per share $.265 $.25 $.765 $ .73
</TABLE>
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AMERICAN FILTRONA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine-Month Periods Ended September 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Operating
Income from continuing operations $ 7,413,446 $ 5,182,958
Reconciling items
Depreciation and amortization 4,643,176 3,659,021
Deferred income taxes 188,829 (74,751)
Special charges (250,573) (509,812)
Increase (decrease) from noncash working
capital (99,628) 403,791
Other - net 499,841 70,092
------------ -----------
12,395,091 8,731,299
Investing
Acquisitions and dispositions of
property, plant and equipment (3,185,045) (7,889,262)
Business acquisition, net of cash - (2,472,166)
Increase in notes receivable (84,388) -
------------ -----------
(3,269,433) (10,361,428)
Financing
Decrease in notes payable (650,000) -
Issuance of common stock 57,950 277,685
Purchase of common stock (138,125) -
Dividends paid (2,857,296) (2,737,467)
------------ -----------
(3,587,471) (2,459,782)
------------ -----------
Net cash provided (used) by continuing operations 5,538,187 (4,089,911)
Net cash provided by discontinued operations
(includes proceeds from sale of $15,875,000) - 13,792,966
------------ -----------
Net increase in cash and short-term investments $ 5,538,187 $ 9,703,055
============ ===========
</TABLE>
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 nine-month period ended September 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 September 30, 1995 and December 31, 1994 inventories consisted of (in
thousands):
1995 1994
------- -------
FIFO
Finished products $ 8,120 $ 7,813
Work in process 2,690 1,546
Raw materials 10,763 9,242
------- -------
21,573 18,601
Less excess of FIFO over LIFO
inventory value 2,136 1,494
------- -------
$19,437 $17,107
======= =======
Inventories stated at LIFO approximated $9,253 (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. For 1994 net sales were
$4,788,000 and income from operations was $120,000 net of applicable income
taxes of $100,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
BALANCE SHEET
The Company's strong financial condition and liquidity continue as reflected
in the accompanying consolidated financial statements. Cash and short-term
investments represented 33% of total assets at September 30, 1995 compared to
30% at December 31, 1994. The ratio of current assets to current liabilities
was 3.1 at September 30, 1995 compared to 3.4 at December 31, 1994. The
changes in the various components of working capital arose from the higher
level of business activity.
INCOME STATEMENT
Comparison Between Three-Month and Nine-Month Periods Ended September 30,
1995 and 1994
Net sales increased 13% between the third quarters and 20% between the nine
months of each year. As anticipated the very strong sales growth of the
first half slowed somewhat in the third quarter. In the bonded fibers
segment order softness continued in writing instrument components and, in the
plastic products segment, industry-wide order softness occurred in the
plastic extrusion operations offset by a very substantial sales increase at
the Canadian flexible packaging operation.
Investment income increased 19% between the third quarters and 32% between
the nine months of each year primarily as a result of improved yields.
Costs and expenses increased 11% between the third quarters and 19% between
the nine months of each year which were generally in line with the sales
increases. Cost of products sold from normal operations increased at a
higher rate than sales as a result of shifts in the mix of products sold, but
was more than offset by a one-time recovery of costs at the Canadian flexible
packaging company from settling litigation amounting to approximately
$1,200,000 pretax. Selling, research, administrative and general expenses
increased at a lesser rate than sales.
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The combination of the above factors resulted in pretax income increases of
43% between the third quarters and 41% between the nine months of each year
including the one-time recovery of costs.
Income taxes increased 34% between the third quarters and 38% between the
nine months of each year. The recovery of costs by the Canadian flexible
packaging company offset prior quarters' losses resulting in a lower estimate
of effective tax rates for the third quarter and nine-month periods.
Therefore, income from continuing operations and related earnings per share
increased by 48% and 49% between the third quarters and 43% and 44% between
the nine months of each year. Without the one-time recovery of costs income
from continuing operations and earnings per share would have increased 6% and
8% between the third quarters and 28% and 29% between the nine months of each
year.
In 1994 reported income of the discontinued industrial filtration segment for
the nine-month period was approximately $4,000,000 or $1.05 per share which
included modest earnings prior to the sale. See Note C for additional
information.
PART II. OTHER INFORMATION
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 September 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 October 31, 1995 /s/John D. Barlow, Jr.
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 36,061
<SECURITIES> 0
<RECEIVABLES> 21,077
<ALLOWANCES> 425
<INVENTORY> 19,437
<CURRENT-ASSETS> 77,571
<PP&E> 61,284
<DEPRECIATION> 36,117
<TOTAL-ASSETS> 110,688
<CURRENT-LIABILITIES> 24,918
<BONDS> 650
<COMMON> 3,734
0
0
<OTHER-SE> 79,511
<TOTAL-LIABILITY-AND-EQUITY> 110,688
<SALES> 133,074
<TOTAL-REVENUES> 134,025
<CGS> 107,793
<TOTAL-COSTS> 122,612
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,413
<INCOME-TAX> 4,000
<INCOME-CONTINUING> 7,413
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,413
<EPS-PRIMARY> 1.98
<EPS-DILUTED> 1.98
</TABLE>
