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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, 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) (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 July 30, 1996: 3,741,751
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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
June 30, 1996 (Unaudited) and December 31, 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
ASSETS
<S> <C>
Current assets
Cash and equivalents $ 37,975,210 $ 34,965,864
Accounts receivable 21,248,825 19,003,632
Inventories 17,563,218 19,666,392
Prepaid expenses 1,583,563 1,498,975
------------ ------------
Total current assets 78,370,816 75,134,863
Property, plant and equipment 25,122,667 25,316,307
Other assets
Excess cost over net assets of businesses acquired 4,894,811 5,096,827
Notes receivable 2,434,843 2,434,843
Other assets 417,251 282,767
------------ ------------
7,746,905 7,814,437
------------ ------------
$111,240,388 $108,265,607
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 15,201,426 $ 14,905,395
Accrued expenses 4,934,619 4,929,522
Income taxes 560,650 1,054,216
------------ ------------
Total current liabilities 20,696,695 20,889,133
Other liabilities
Notes payable - 650,000
Deferred income taxes (228,218) 159,147
Other liabilities 1,914,900 1,742,599
------------ ------------
1,686,682 2,551,746
Shareholders' equity
Common stock, $1 par value 3,741,751 3,735,392
Additional capital 887,166 758,190
Retained earnings 85,239,307 81,342,934
Cumulative translation adjustment (1,011,213) (1,011,788)
------------ ------------
88,857,011 84,824,728
------------ ------------
$111,240,388 $108,265,607
============ ============
</TABLE>
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AMERICAN FILTRONA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Periods Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C>
Revenues
Net sales $49,458,610 $44,960,034 $97,158,824 $89,592,767
Investment income 403,351 330,271 733,336 620,844
----------- ----------- ----------- -----------
49,861,961 45,290,305 97,892,160 90,213,611
Costs and expenses
Cost of products sold 39,893,626 37,130,007 78,353,288 72,938,304
Selling, research,
administrative and
general 5,298,553 4,674,000 10,486,029 9,967,742
----------- ----------- ----------- -----------
45,192,179 41,804,007 88,839,317 82,906,046
----------- ----------- ----------- -----------
Income before income taxes 4,669,782 3,486,298 9,052,843 7,307,565
Income taxes 1,625,000 1,250,000 3,175,000 2,625,000
----------- ----------- ----------- -----------
Net income $ 3,044,782 $ 2,236,298 $ 5,877,843 $ 4,682,565
=========== =========== =========== ===========
Average shares outstanding 3,741,027 3,733,194 3,739,209 3,734,612
Earnings per share $ .81 $.60 $1.57 $1.25
Dividends per share $.265 $.25 $ .53 $ .50
</TABLE>
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AMERICAN FILTRONA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six-Month Periods Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C>
Operating
Net income $ 5,877,843 $ 4,682,565
Reconciling items
Depreciation and amortization 3,062,058 3,087,617
Deferred income taxes (387,365) (65,999)
Decrease from noncash working capital (419,045) (3,827,355)
Other - net 11,185 216,486
----------- -----------
8,144,676 4,093,314
Investing
Acquisitions of property, plant and equipment (2,639,195) (2,332,795)
Increase in notes receivable - (84,388)
----------- -----------
(2,639,195) (2,417,183)
Financing
Decrease in notes payable (650,000) (650,000)
Issuance of common stock 135,335 42,951
Repurchase of common stock - (138,125)
Dividends paid (1,981,470) (1,867,722)
----------- -----------
(2,496,135) (2,612,896)
----------- -----------
Net increase (decrease) in cash and equivalents $ 3,009,346 $ (936,765)
=========== ===========
</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 six-month period ended June 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 June 30, 1996 and December 31, 1995 inventories consisted of (in thousands):
1996 1995
------- -------
FIFO
Finished products $ 8,575 $ 8,886
Work in process 1,917 1,408
Raw materials 9,536 11,622
------- -------
20,028 21,916
Less excess of FIFO over LIFO
inventory value 2,465 2,250
------- -------
$17,563 $19,666
======= =======
Inventories stated at LIFO approximated $8,609 (1995 - $10,559).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
BALANCE SHEET
The Company's strong financial condition and liquidity continued in the 1996
first half. Cash and equivalents represented 34% of total assets at June 30,
1996 compared to 32% at December 31, 1995. The ratio of current assets to
current liabilities was 3.8 at June 30, 1996 compared to 3.6 at December 31,
1995.
INCOME STATEMENT
Comparison Between Three-Month and Six-Month Periods Ended June 30, 1996
and 1995
Net sales increased 10% between the second quarters and 8% between the six
months of each year. The bonded fibers segment posted higher sales for the
second quarter in each of its product lines led by tobacco filters. The plastic
products segment sales growth was led by the Canadian flexible packaging company
with a smaller increase by the plastic extrusion companies.
Investment income increased 22% between the second quarters and 18% between the
six months of each year primarily as a result of the higher level of
investments, which more than offset slightly lower yields.
Costs and expenses increased 8% between the second quarters and 7% between the
six months of each year. Cost of products sold increased at a lower rate than
the sales increase. Selling, research, administrative and general expenses
increased at a somewhat higher rate for the second quarter; however, for the six
months the rate of this increase remained below the sales increase.
The bonded fibers segment second quarter operating earnings increased
substantially, recovering from a soft first quarter, to bring six months results
slightly above last year's very strong performance. The plastic products segment
also recorded substantially increased operating earnings in the second quarter,
continuing its strong first quarter performance through the six months compared
to the 1995 periods. Overall performance of the plastic extrusion companies was
very good in the second quarter and six months, with modest losses in the
Canadian flexible packaging company in both periods. The combination of these
factors produced consolidated pretax income increases of 34% between the second
quarters and 24% between the six months of each year.
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Income taxes increased 30% between the second quarters and 21% between the six
months of each year reflecting the higher level of income partially offset by a
slightly lower estimate of the effective tax rate for 1996. Therefore, net
income and related earnings per share increased by 36% and 35% between the
second quarters and by 26% between the six 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 June 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 July 30, 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> 6-Mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 37,975
<SECURITIES> 0
<RECEIVABLES> 21,854
<ALLOWANCES> 605
<INVENTORY> 17,563
<CURRENT-ASSETS> 78,371
<PP&E> 64,540
<DEPRECIATION> 39,417
<TOTAL-ASSETS> 111,240
<CURRENT-LIABILITIES> 20,697
<BONDS> 0
<COMMON> 3,742
0
0
<OTHER-SE> 85,115
<TOTAL-LIABILITY-AND-EQUITY> 111,240
<SALES> 97,159
<TOTAL-REVENUES> 97,892
<CGS> 78,353
<TOTAL-COSTS> 88,839
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,053
<INCOME-TAX> 3,175
<INCOME-CONTINUING> 5,878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,878
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 1.57
</TABLE>
