<PAGE> 1
- -------------------------------------------------------------------------------
UNITED STATES
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
For the transition period from _______________to__________________
Commission File number 1-9487
------
ATLANTIS PLASTICS, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 06-1088270
------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1870 The Exchange, Suite 200, Atlanta, Georgia 30339
-----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including Area Code) (800) 497-7659
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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 the past 90 days. Yes X . No .
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Shares Outstanding at June 30, 1996
------------ ----------------------------
<S> <C>
A, $.10 par value 4,238,823
B, $.10 par value 2,899,977
</TABLE>
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<PAGE> 2
ATLANTIS PLASTICS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Consolidated Income Statements (Unaudited)
for the three and six months ended June 30, 1996 and 1995 ..... 1
Consolidated Balance Sheets (Unaudited)
as of June 30, 1996 and December 31, 1995 ..................... 2
Consolidated Statements of Cash Flows (Unaudited)
for the six months ended June 30, 1996 and 1995 ............... 3
Notes to Consolidated Financial Statements (Unaudited) ........ 4
Management's Discussion and Analysis
of Financial Condition and Results of Operations .............. 6
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings .................................... 12
Item 4 - Submission of Matters to a Vote of Security-Holders .. 12
Item 6 - Exhibits and Reports on Form 8-K ..................... 12
SIGNATURES ............................................................ 13
</TABLE>
<PAGE> 3
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
------------------------- -------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1996 1995 1996 1995
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net sales................................................................... $ 70,576 $68,344 $134,849 $146,201
Cost of sales............................................................... 57,622 59,967 110,333 123,654
-------- ------- -------- --------
GROSS PROFIT............................................. 12,954 8,377 24,516 22,547
Selling, general and administrative expenses................................ 7,276 6,968 14,817 14,937
Restructuring charges....................................................... 0 0 0 745
-------- ------- -------- --------
OPERATING INCOME ......................................... 5,678 1,409 9,699 6,865
Net interest expense........................................................ (3,255) (3,775) (6,505) (7,363)
Other expense............................................................... (73) (96) (73) (96)
-------- ------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES......................................... 2,350 (2,462) 3,121 (594)
Income tax (provision) benefit.............................................. (1,053) 736 (1,489) (189)
-------- ------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS.................. 1,297 (1,726) 1,632 (783)
Loss from discontinued operations,
net of applicable taxes................................................ 0 (615) 0 (607)
-------- ------- -------- --------
NET INCOME (LOSS) ....................................... 1,297 (2,341) 1,632 (1,390)
Preferred stock dividends................................................... (37) (37) (73) (73)
-------- ------- -------- --------
Income (loss) applicable to
common shares and equivalents............................................ $ 1,260 ($2,378) $ 1,559 ($1,463)
======== ======= ======== ========
INCOME (LOSS) PER COMMON SHARE:
Continuing operations .................................................... $ 0.17 ($0.23) $ 0.21 ($0.11)
Discontinued operations................................................... 0.00 (0.08) 0.00 (0.08)
-------- ------- -------- --------
NET INCOME (LOSS) ........................................ $ 0.17 ($0.31) $ 0.21 ($0.19)
======== ======= ======== ========
Weighted average shares outstanding......................................... 7,479 7,623 7,452 7,621
======== ======= ======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
<PAGE> 4
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
---------- ------------
JUNE 30, DECEMBER 31,
1996 1995
---------- ------------
<S> <C> <C>
ASSETS
Cash and equivalents........................................................ $ 1,775 $ 1,255
Accounts receivable, net.................................................... 33,485 28,250
Inventories................................................................. 19,742 18,544
Other current assets........................................................ 6,762 7,044
-------- --------
Current assets.......................................................... 61,764 55,093
Property and equipment, net................................................. 61,508 64,333
Investment in WinsLoew Furniture, Inc. stock................................ 4,751 4,798
Goodwill, net of amortization............................................... 51,882 52,680
Other assets................................................................ 3,306 3,557
-------- --------
$183,211 $180,461
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses....................................... $ 31,267 $ 28,725
Current portion of long-term debt........................................... 2,606 3,168
-------- --------
Current liabilities..................................................... 33,873 31,893
Long-term debt, net of current portion...................................... 112,513 113,294
Deferred income taxes....................................................... 6,647 6,610
Other liabilities........................................................... 1,236 1,372
-------- --------
Total liabilities....................................................... 154,269 153,169
-------- --------
Commitments and contingencies
Shareholders' equity:
Series A convertible preferred stock, $1.00 par value,
20,000 shares authorized, issued and outstanding in
1996 and 1995........................................................... 2,000 2,000
Class A common stock, $.10 par value, 20,000,000 shares authorized,
4,238,823 and 4,192,823 shares issued and outstanding in 1996 and 1995.. 424 419
Class B common stock, $.10 par value, 7,000,000 shares authorized,
2,899,977 shares issued and outstanding in 1996 and 1995................ 290 290
Additional paid-in capital................................................ 6,938 6,828
Unrealized holding gains, net of tax...................................... 257 287
Retained earnings......................................................... 19,033 17,468
-------- --------
Total shareholders' equity.............................................. 28,942 27,292
-------- --------
$183,211 $180,461
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
<PAGE> 5
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
<TABLE>
<CAPTION>
----------------------
SIX MONTHS ENDED
JUNE 30,
----------------------
1996 1995
----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................................... $ 1,632 ($1,390)
Adjustments to reconcile net income (loss) to ------- --------
net cash provided by operating activities:
Depreciation............................................................ 4,012 4,504
Amortization of goodwill................................................ 808 935
Loan fee and other amortization......................................... 306 264
Changes in assets and liabilities:
(Increase) decrease in accounts receivable.......................... (5,235) 3,642
(Increase) decrease in inventories.................................. (1,198) 2,976
Decrease in other current assets.................................... 282 1,155
Increase (decrease) in accounts payable and accrued expenses........ 2,469 (9,880)
Increase (decrease) in deferred income taxes........................ 37 (683)
Decrease in other liabilities....................................... (136) (120)
Other, net.......................................................... (7) 159
Effects of discontinued operations...................................... 0 1,111
------- --------
Total adjustments................................................... 1,338 4,063
------- --------
Net cash provided by operating activities......................... 2,970 2,673
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................................... (2,022) (7,389)
Proceeds from asset dispositions.......................................... 800 0
------- --------
Net cash used in investing activities............................. (1,222) (7,389)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreements.............................. 11,982 17,758
Repayments under revolving credit agreements.............................. (11,982) (26,734)
Payments on long-term debt................................................ (1,343) (540)
Proceeds from issuance of long-term debt.................................. 0 15,418
Dividends on preferred and common stock................................... 0 (429)
Proceeds from exercise of stock options................................... 115 47
------- --------
Net cash (used in) provided by financing activities............... (1,228) 5,520
------- --------
Net increase in cash and equivalents........................................ 520 804
Cash and equivalents at beginning of period................................. 1,255 1,433
------- --------
Cash and equivalents at end of period....................................... $ 1,775 $ 2,237
======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
<PAGE> 6
ATLANTIS PLASTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited consolidated financial statements of
Atlantis Plastics, Inc. ("Atlantis" or the "Company"), which are for
interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the footnotes thereto contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 as filed with the
Securities and Exchange Commission. The December 31, 1995 balance sheet,
included herein, was derived from audited financial statements, but does
not include all disclosures required by generally accepted accounting
principles.
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 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. During January 1996, as part
of the Company's strategic operating plan objective to dispose of
non-strategic businesses, the Company announced plans to sell Plastic
Containers, Inc., its remaining manufacturer of blow molded plastic
containers (also see Note 5).
Western Pioneer Insurance Company ("Western Pioneer"), which was
sold during August 1995, has been presented as a discontinued operation
in the accompanying 1995 financial statements (see Note 6).
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 period
presentation.
2. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial
statements. The results of operations for the three and six months ended
June 30, 1996 are not necessarily indicative of the results to be expected
for the full year.
3. Net income (loss) per common share was computed by dividing net income
(loss), after deducting dividends applicable to preferred stock, by the
weighted average number of shares and share equivalents outstanding during
the period. Fully diluted net income (loss) per common share is
substantially equivalent to primary net income (loss) per common share.
4
<PAGE> 7
4. The following table summarizes the cost and approximate fair value of
the Company's WinsLoew stock investment, which is classified as
available-for-sale at June 30, 1996 (in thousands):
<TABLE>
<CAPTION>
Unrealized
------------------
Cost Gains Losses Fair Value
---- ----- ------ ----------
<S> <C> <C> <C> <C>
WinsLoew Stock........ $ 4,363 $ 388 $ -- $ 4,751
</TABLE>
5. During September 1995, 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 plus the assumption of the
joint venture's indebtedness.
6. Western Pioneer, the Company's California property-casualty insurance
subsidiary which was classified as a discontinued operation in the
accompanying financial statements, was sold to a Massachusetts-based
property and casualty insurance holding company in August 1995 for $12.0
million. The following table summarizes Western Pioneer's operating
results for the three and six months ended June 30, 1995 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, 1995 ENDED JUNE 30, 1995
------------------- -------------------
<S> <C> <C>
REVENUES $6,773 $12,992
EXPENSES 7,388 13,599
NET LOSS (615) (607)
</TABLE>
7. During July 1996, the Company repurchased, at a slight discount,
$5.7 million of its 11% Senior Notes in the open market, which will result
in an after tax extraordinary loss of $72,000 principally related to the
writeoff of unamortized loan origination costs.
8. In October, 1995 SFAS No. 123, "Accounting for Stock Based
Compensation" was issued. SFAS No. 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. The
Company will adopt SFAS No. 123 during fiscal year 1996 utilizing the
proforma disclosure method of implementation and, therefore, the adoption
of SFAS No. 123 will have no effect on consolidated financial position.
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
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 door, dairy and industrial container industries.
Western Pioneer, the Company's California property-casualty insurance
subsidiary which was sold during August 1995 for $12.0 million, was presented
as a discontinued operation in the accompanying 1995 financial statements. See
Note 6 to the Consolidated Financial Statements for certain information
regarding Western Pioneer.
During 1995 the Company's new senior management group developed and
implemented a strategic operating plan which focuses on achieving a number of
objectives during 1995 and 1996. The primary objectives of the strategic
operating plan are: (i) to reduce the Company's fixed and variable costs, (ii)
to reconfigure its stretch film sales organization, (iii) to exit non-strategic
businesses, and (iv) to better manage its assets and reduce its indebtedness.
During January 1996, as part of the Company's objective to dispose of
non-strategic businesses, the Company announced plans to sell Plastic
Containers, Inc., its remaining manufacturer of blow molded plastic containers.
The implementation of certain aspects of the strategic operating plan
caused the Company to incur various nonrecurring costs during 1995, which have
been segregated within the "Restructuring charges" category of the accompanying
1995 Income Statement.
Selected income statement data for the quarterly periods ended March 31,
1995 through June 30, 1996 are as follows:
<TABLE>
($ IN MILLIONS)
1996 1995
-------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES: Q2 Q1 Q4 Q3 Q2 Q1
- ---------- -- -- -- -- -- --
PLASTIC FILMS $46.8 $41.7 $43.7 $48.3 $45.7 55.1
MOLDED PLASTICS 23.8 22.5 20.3 22.6 22.6 22.8
----- ----- ----- ----- ----- -----
TOTAL $70.6 $64.2 $64.0 $70.9 $68.3 $77.9
===== ===== ===== ===== ===== =====
GROSS PROFIT: PERCENTAGE OF NET SALES
- ------------- -----------------------
PLASTIC FILMS 17% 18% 16% 16% 13% 20%
MOLDED PLASTICS 20% 18% 11% 8% 10% 15%
TOTAL 18% 18% 14% 13% 12% 18%
OPERATING INCOME(A):
- --------------------
PLASTIC FILMS 6% 6% 5% 4% 2% 9%
MOLDED PLASTICS 13% 8% 1% 0% 1% 6%
TOTAL 8% 6% 4% 3% 2% 8%
NET INTEREST EXPENSE: $ 3.2 $ 3.3 $ 3.3 $ 3.5 $ 3.8 $ 3.6
- ---------------------
</TABLE>
(A) Amounts exclude the effects of the 1995 impairment of long-lived assets
and restructuring charges, which totaled $12.5 million for the Company.
6
<PAGE> 9
SALES
Second quarter 1996 sales of $70.6 million were 3% ahead of last year's
second quarter and 10% ahead of the first quarter of 1996. The sales growth
over last year's second quarter and the first quarter of 1996 occurred in both
Atlantis Plastic Films and Atlantis Molded Plastics. Year-to-date 1996 sales
equaled $134.8 million, approximately 8% below last year's first half sales of
$146.2 million. The decline in sales during the first half of 1996 compared to
the same period in the prior year occurred primarily within the Atlantis
Plastic Films stretch film unit, due to: (i) lower sales volume in pounds
during the first quarter of 1996 compared with the first quarter of 1995, and
(ii) lower average film selling prices during the first half of 1996 compared
with the first half of 1995, resulting from lower average resin prices through
June 1996.
Resin prices began declining in June 1995 from the record high levels of
late 1994 and early 1995 and fell approximately 35% from early June 1995
through March 1996. Since that time, resin prices have rapidly increased, and,
as of June 30, 1996, were about 30% above their first quarter 1996 lows and 15%
below their early 1995 highs.
Second quarter 1996 Atlantis Plastic Films sales of $46.8 million were
driven by a 22% increase in volume over the same period a year ago and a 15%
increase in volume over the first quarter of 1996, with second quarter 1996
volume representing the film group's highest quarterly sales volume. However,
due to the effects on 1996 selling prices of the resin price movements
discussed above, the second quarter 1996 film sales increase in dollar terms
was not as significant, with a 2% increase over the same period a year ago and
a 12% increase over the first quarter of this year.
Second quarter 1996 Atlantis Molded Plastics sales of $23.8 million were
5% ahead of both second quarter 1995 and first quarter 1996 sales, and
represented this segment's second highest quarterly sales ever, exceeded only
by the third quarter of 1994. During the second quarter of 1996, sales
increases were posted within the injection, profile and blow molding units
compared with both the second quarter of 1995 and the first quarter of 1996.
Year-to-date 1996 sales for Atlantis Molded Plastics equaled $46.4 million, 2%
ahead of last year's first half sales.
GROSS PROFIT
Second quarter and first half 1996 gross profit equaled 18% of sales, the
highest level since the first quarter of 1995. The strong improvement was
primarily due to the positive impact of a number of initiatives associated with
the Company's strategic operating plan implemented during the latter half of
1995.
The Atlantis Plastic Films second quarter and first half 1996 gross profit
percentages of 17% and 18%, respectively, were well ahead of last year's second
quarter and slightly better than the first half percentages of 13% and 17%,
respectively. The improved film profitability as a percentage of sales related
to higher sales volume in pounds, production efficiencies due to the Company's
capital expenditure program, more effective management of stock keeping units,
the consolidation of inefficient manufacturing facilities, and lower overhead
expense.
While the Atlantis Plastic Films 1996 second quarter and first half gross
profit percentages reflect improvements over the comparable 1995 percentages,
the second quarter percentage of 17% is down slightly from the first quarter
1996 percentage of 18%, primarily due to margin compression within the stretch
film unit, caused by extremely competitive stretch film market conditions which
continue to exert downward pressure on variable stretch film profit margins
compared to the profit margin percentage levels during late 1994 and early
1995.
7
<PAGE> 10
The Atlantis Molded Plastics second quarter and first half 1996 gross
profit percentages equaled 20% and 19%, respectively, with the second quarter
1996 percentage representing that segment's highest quarterly level since 1994.
The continued improvement since the third quarter of 1995 is primarily
attributable to the injection molding unit, due to lower production and
overhead costs, improved scheduling and related reductions in overtime expense.
In addition, blow molding profit margins continued to improve compared to 1995
levels, and the profile extrusion unit continues to maintain its historically
high gross profit margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE AND RESTRUCTURING CHARGES
The Company's second quarter and first half 1996 selling, general and
administrative ("SG&A") expenses were $7.3 million and $14.8 million,
respectively, compared to $7.0 million and $14.9 million for the same periods
in 1995. Second quarter and first half 1996 SG&A expense includes incentive
compensation expenses related to improved operating results and earnings per
share. Excluding these costs, SG&A expense for the 1996 second quarter and
first half periods decreased significantly compared with the same periods in
1995, primarily due to the various cost reduction programs initiated by the
Company during 1995. These programs include 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.
As described above, 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 "Restructuring charges" category of
the accompanying 1995 Income Statement.
INTEREST EXPENSE AND INCOME TAXES
Second quarter and year-to-date 1996 interest expense of $3.2 million and
$6.5 million, respectively, were 14% and 12% lower than the $3.8 million and
$7.4 million posted for the same periods last year. These decreases can be
attributed to reduced debt levels during the first half of 1996, resulting from
lower working capital levels compared to the same period of 1995, along with
debt paydowns from the proceeds generated by the August and September 1996
sales of Western Pioneer and the Company's 50% interest in the CKS/Rigal blow
molding joint venture, respectively.
The Company's effective tax rates during the second quarter and first half
periods of 1996 and 1995 were primarily affected by nondeductible goodwill
amortization.
INCOME (LOSS)
As a result of the factors described above, second quarter 1996 operating
income equaled 8% of net sales, or $5.7 million, the highest quarterly level
since the fourth quarter of 1994. Year-to-date 1996 operating income equaled
$9.7 million, compared to $6.9 million in the first half of 1995.
Net income in the second quarter of 1996 was $1.3 million, or $0.17 per
share, compared to a loss from continuing operations of $1.7 million, or $0.23
per share, in the same period of 1995. Year-to-date 1996 net income equaled
$1.6 million, or $0.21 per share, compared to a first half 1995 loss from
continuing operations of $783,000, or $0.11 per share.
8
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at June 30, 1996 totaled approximately $27.9
million compared to $23.2 million at December 31, 1995. Cash and equivalents
totaled $1.8 million at June 30, 1996, compared to $1.3 million at December 31,
1995. The table below presents selected balance sheet and quarterly cash flow
data (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DEC. 31, JUNE 30,
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
SELECTED WORKING CAPITAL/DEBT DATA:
Working Capital $ 27,891 $ 23,200 $ 34,442
Accounts Receivable 33,485 28,250 32,943
Inventories 19,742 18,544 19,879
Total Debt 115,119 116,462 135,136
</TABLE>
<TABLE>
<CAPTION>
---------------------
SIX MONTHS ENDED
JUNE 30,
---------------------
1996 1995
---- ----
<S> <C> <C>
SELECTED CASH FLOW DATA:
Cash Provided by Operating Activities $ 2,970 $ 2,673
Cash Used in Investing Activities (1,222) (7,389)
Cash Provided by (Used in) Financing Activities (1,228) 5,520
</TABLE>
Effective December 1995, the Company amended its $30.0 million revolving
credit facility and implemented a revolving credit availability formula based
upon the Company's ratio of cash flow to total indebtedness. Due to the
Company's improved 1996 performance, the gross availability on the revolving
credit facility increased from $17.5 million as of March 31, 1996 to $25.0
million as of June 30, 1996, and the unused availability equaled $23.5 million,
net of outstanding letters of credit of approximately $1.5 million. There were
no revolver borrowings outstanding as of June 30, 1996.
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 1995 decline in operating
profitability caused it to fall below the interest coverage ratio requirement
for the trailing four quarters ended September 30, 1995, December 31, 1995,
March 31, 1996 and June 30, 1996 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
(ii) incur new debt in connection with the refinancing of existing debt and
certain other types of financings.
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 above, the Company is prohibited from paying preferred dividends
until it is again 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
holder of the Preferred Stock has the right to elect one director of the
Company. As of July 1996, only one dividend payment is in arrears.
9
<PAGE> 12
The Company's principal needs for liquidity, on both a short- and
long-term basis, relate to working capital (principally accounts receivable and
inventories), 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 operations along with funds available under its revolving credit facility.
CASH FLOWS FROM OPERATING ACTIVITIES
In the first six months of 1996, net cash provided by operating activities
was approximately $3.0 million, compared to $2.7 million for the same period
last year. Accounts receivable and inventories increased by $5.2 million and
$1.2 million, respectively, during the first half of 1996, due primarily to:
(i) higher selling prices and resin raw material costs resulting from the
effects of the second quarter 1996 resin price increases described above, and
(ii) higher sales during the month of June 1996 compared to December 1995.
Accounts payable and accrued expenses at June 30, 1996 increased $2.5
million, compared to the 1995 year-end balance primarily due to increased
inventory levels associated with the previously-described second quarter 1996
resin price increases and accruals for incentive compensation.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities during the first half of 1996
equaled $1.2 million, consisting of approximately $2.0 million of capital
expenditures, offset by the proceeds from the sales of the former profile
extrusion manufacturing facility and the land acquired during the sale of
Western Pioneer.
First half 1996 capital expenditures of $2.0 million were significantly
below last year's first half capital expenditures of $7.4 million, which
included expenditures relating to two new film lines, the expansion of capacity
at the injection molding unit, and the purchase of the new profile extrusion
manufacturing facility. Due to the nature and timing of the Company's capital
expenditures, capital spending for the six months ended June 30, 1996 is not
necessarily indicative of the spending to be expected for the full year.
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities for the first half of 1996 was $1.2
million, compared to $5.5 million of cash provided by financing activities in
the first half of 1995. This cash was used primarily for principal payments on
long-term debt.
During July 1996, the Company repurchased, at a slight discount, $5.7
million of its 11% Senior Notes in the open market, which will result in an
after tax extraordinary loss of $72,000 principally related to the writeoff of
unamortized loan origination costs. Given today's interest rate environment,
this repurchase should reduce the Company's pre-tax expenses by approximately
$150,000 per year.
10
<PAGE> 13
ACCOUNTING PRONOUNCEMENTS
In October, 1995 SFAS No. 123, "Accounting for Stock Based Compensation"
was issued. SFAS No. 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. The Company
will adopt SFAS No. 123 during fiscal year 1996 utilizing the proforma
disclosure method of implementation and, therefore, the adoption of SFAS No.
123 will have no effect on consolidated financial position.
11
<PAGE> 14
Part II. Other Information
Item 1. Legal Proceedings.
The Company is not a party to any legal proceeding other than
routine litigation incidental to its business, none of which is
material.
Item 4. Submission of Matters to a Vote of Security-Holders.
(a) The Registrant held its Annual meeting of Shareholders on
June 11, 1996.
(b) Not Required.
(c) The matter voted on at the Annual Meeting of Shareholders,
and the tabulation of votes on such matter are as follows:
<TABLE>
<CAPTION>
Election of Directors
---------------------
Name For Withheld
---- --- --------
CLASS A
-------
<S> <C> <C>
Charles D. Murphy, III 3,653,289 159,661
Chester B. Vanatta 3,653,289 159,661
CLASS B
-------
Cesar L. Alvarez 2,451,184 -0-
Anthony F. Bova 2,451,184 -0-
Phillip T. George, M.D. 2,451,184 -0-
Larry D. Horner 2,451,184 -0-
Earl W. Powell 2,451,184 -0-
Paul Rudovsky 2,451,184 -0-
</TABLE>
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule (for SEC use only)
- ----------------
(b) Reports on Form 8-K:
During the quarter for which this Quarterly Report on Form 10-Q is filed,
no reports on Form 8-K were filed by the Registrant.
12
<PAGE> 15
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.
ATLANTIS PLASTICS, INC.
Date: August 1, 1996 /s/ Anthony F. Bova
-------------------------------------
ANTHONY F. BOVA
President and Chief Executive Officer
Date: August 1, 1996 /s/ Paul Rudovsky
-------------------------------------
PAUL RUDOVSKY
Executive Vice President, Finance and
Administration
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ATLANTIS PLASTICS, INC. FOR THE SIX MONTHS ENDED
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,775
<SECURITIES> 0
<RECEIVABLES> 34,957
<ALLOWANCES> 1,472
<INVENTORY> 19,742
<CURRENT-ASSETS> 61,764
<PP&E> 116,305
<DEPRECIATION> 54,797
<TOTAL-ASSETS> 183,211
<CURRENT-LIABILITIES> 33,873
<BONDS> 112,513
714
0
<COMMON> 2,000
<OTHER-SE> 26,228
<TOTAL-LIABILITY-AND-EQUITY> 183,211
<SALES> 134,849
<TOTAL-REVENUES> 134,849
<CGS> 110,333
<TOTAL-COSTS> 110,333
<OTHER-EXPENSES> 14,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,505
<INCOME-PRETAX> 3,121
<INCOME-TAX> 1,489
<INCOME-CONTINUING> 1,632
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,632
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
