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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, 1996
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 November 7, 1996: 3,743,751
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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, 1996 (Unaudited) and December 31, 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
ASSETS
<S> <C>
Current assets
Cash and equivalents $ 40,667,561 $ 34,965,864
Accounts receivable 20,762,139 19,003,632
Inventories 18,446,848 19,666,392
Prepaid expenses 1,336,382 1,498,975
------------ ------------
Total current assets 81,212,930 75,134,863
Property, plant and equipment 25,776,176 25,316,307
Other assets
Excess cost over net assets of businesses acquired 4,793,803 5,096,827
Notes receivable 2,434,843 2,434,843
Other assets 396,637 282,767
------------ ------------
7,625,283 7,814,437
------------ ------------
$114,614,389 $108,265,607
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 16,197,394 $ 14,905,395
Accrued expenses 5,658,960 4,929,522
Income taxes 337,217 1,054,216
------------ ------------
Total current liabilities 22,193,571 20,889,133
Other liabilities
Notes payable - 650,000
Deferred income taxes (450,810) 159,147
Other liabilities 2,017,995 1,742,599
------------ ------------
1,567,185 2,551,746
Shareholders' equity
Common stock, $1 par value 3,741,751 3,735,392
Additional capital 887,166 758,190
Retained earnings 87,207,969 81,342,934
Cumulative translation adjustment (983,253) (1,011,788)
------------ ------------
90,853,633 84,824,728
------------ ------------
$114,614,389 $108,265,607
============ ============
</TABLE>
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AMERICAN FILTRONA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Periods Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
------------------------- ----------------------------
1996 1995 1996 1995
----------- ----------- ------------ ------------
<S> <C>
Revenues
Net sales $47,998,797 $43,481,450 $145,157,621 $133,074,217
Investment income 403,878 330,099 1,137,214 950,943
----------- ----------- ------------ ------------
48,402,675 43,811,549 146,294,835 134,025,160
Costs and expenses
Cost of products sold 38,351,626 34,854,371 116,704,914 107,792,675
Selling, research,
administrative and
general 5,409,696 4,851,297 15,895,725 14,819,039
----------- ----------- ------------ ------------
43,761,322 39,705,668 132,600,639 122,611,714
----------- ----------- ------------ ------------
Income before income taxes 4,641,353 4,105,881 13,694,196 11,413,446
Income taxes 1,625,000 1,375,000 4,800,000 4,000,000
----------- ----------- ------------ ------------
Net income $ 3,016,353 $ 2,730,881 $ 8,894,196 $ 7,413,446
=========== =========== ============ ============
Average shares outstanding 3,741,751 3,734,059 3,740,063 3,734,425
Earnings per share $.81 $ .73 $2.38 $1.98
Dividends per share $.28 $.265 $ .81 $.765
</TABLE>
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<PAGE>
AMERICAN FILTRONA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine-Month Periods Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C>
Operating
Net income $ 8,894,196 $ 7,413,446
Reconciling items
Depreciation and amortization 4,601,829 4,643,176
Deferred income taxes (609,957) 188,829
Increase (decrease) from noncash working
capital 928,068 (99,628)
Other - net 148,352 249,268
----------- -----------
13,962,488 12,395,091
Investing
Acquisitions of property, plant and equipment (4,716,965) (3,185,045)
Increase in notes receivable - (84,388)
----------- -----------
(4,716,965) (3,269,433)
Financing
Decrease in notes payable (650,000) (650,000)
Issuance of common stock 135,335 57,950
Repurchase of common stock - (138,125)
Dividends paid (3,029,161) (2,857,296)
----------- -----------
(3,543,826) (3,587,471)
----------- -----------
Net increase in cash and equivalents $ 5,701,697 $ 5,538,187
=========== ===========
</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, 1996 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, 1995 Form 10-K.
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NOTE B. INVENTORIES
At September 30, 1996 and December 31, 1995 inventories consisted of (in
thousands):
1996 1995
------- -------
FIFO
Finished products $10,284 $ 8,886
Work in process 1,412 1,408
Raw materials 9,362 11,622
------- -------
21,058 21,916
Less excess of FIFO over LIFO
inventory value 2,611 2,250
------- -------
$18,447 $19,666
======= =======
Inventories stated at LIFO approximated $8,426 (1995 - $10,559).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
BALANCE SHEET
The Company's strong financial condition and liquidity continued in the first
nine months of 1996. Cash and equivalents represented 35% of total assets at
September 30, 1996 compared to 32% at December 31, 1995. The ratio of current
assets to current liabilities was 3.7 at September 30, 1996 compared to 3.6 at
December 31, 1995.
INCOME STATEMENT
Comparison Between Three-Month and Nine-Month Periods Ended September 30, 1996
and 1995
Net sales increased 10% between the third quarters and 9% between the nine
months of each year. The bonded fibers segment posted higher sales for the third
quarter in each of its product lines. The plastic products segment's solid sales
growth for the third quarter was at approximately the same rate for the plastic
extrusion companies and the Canadian flexible packaging company.
Investment income increased 22% between the third quarters and 20% between the
nine months of each year as a result of the higher level of investments, which
more than offset lower yields.
Costs and expenses increased 10% between the third quarters and 8% between the
nine months of each year. Cost of products sold increased at a slightly lower
rate than the sales increase. Selling, research, administrative and general
expenses increased at a somewhat higher rate than sales for the third quarter
and at a lower rate than sales for the nine months.
The bonded fibers segment's third quarter operating earnings increased very
substantially as a result of the sales increase and improved operating
efficiencies. In the plastic products segment, earnings of the plastic extrusion
companies increased substantially. The Canadian flexible packaging company had
improved operating earnings; however, overall performance was below last year's
third quarter because of a one-time recovery of costs from settling litigation
of approximately $1,200,000 pretax received in that quarter.
The combination of the above factors resulted in pretax income increases of 13%
between the third quarters and 20% between the nine months of each year.
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Income taxes increased 18% between the third quarters because of the higher
level of income and the effects of the litigation recovery in the 1995 third
quarter. Income taxes increased 20% between the nine months of each year
reflecting the higher level of income. Therefore, net income and related
earnings per share increased 11% between the third quarters and 20% between the
nine months of each year.
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, 1996.
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 November 7, 1996 /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-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 40,668
<SECURITIES> 0
<RECEIVABLES> 21,454
<ALLOWANCES> 692
<INVENTORY> 18,447
<CURRENT-ASSETS> 81,213
<PP&E> 66,617
<DEPRECIATION> 40,841
<TOTAL-ASSETS> 114,614
<CURRENT-LIABILITIES> 22,194
<BONDS> 0
<COMMON> 3,742
0
0
<OTHER-SE> 87,112
<TOTAL-LIABILITY-AND-EQUITY> 114,614
<SALES> 145,158
<TOTAL-REVENUES> 146,295
<CGS> 116,705
<TOTAL-COSTS> 132,601
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,694
<INCOME-TAX> 4,800
<INCOME-CONTINUING> 8,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,894
<EPS-PRIMARY> 2.38
<EPS-DILUTED> 2.38
</TABLE>
