UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 {No Fee Required}
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 {No Fee Required}
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
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1870 THE EXCHANGE, SUITE 200, ATLANTA, GEORGIA 30339
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (800) 497-7659
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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CLASS A COMMON STOCK, AMERICAN STOCK EXCHANGE
$.10 PAR VALUE PER SHARE PACIFIC STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]
The aggregate market value of shares of Class A Common Stock held by
non-affiliates of the registrant as of January 31, 1997, was approximately
$34,391,213 based on a $9.88 average of the high and low sales prices for the
Class A Common Stock on the American Stock Exchange on such date. For purposes
of this computation, all executive officers, directors and 5% beneficial owners
of the common stock of the registrant have been deemed to be affiliates. Such
determination should not be deemed to be an admission that such directors,
officers or 5% beneficial owners are, in fact, affiliates of the registrant.
The number of shares of Class A Common Stock, $.10 par value, and Class B
Common Stock, $.10 par value, of the registrant outstanding as of January 31,
1997 were 4,196,721 and 2,861,979, respectively.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the following document have been incorporated by reference into the
parts indicated: The registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the fiscal year covered by this report - Part III.
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INDEX TO ITEMS
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PAGE
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PART I
Item 1. Business.............................................. 3
Item 2. Properties............................................ 9
Item 3. Legal Proceedings..................................... 9
Item 4. Submission of Matters to a Vote of
Security Holders...................................... 9
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters........................... 10
Item 6. Selected Financial Data............................... 11
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................ 12
Item 8. Financial Statements and Supplementary Data........... 17
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.................................. 35
PART III
Item 10. Directors and Executive Officers of
the Registrant........................................ 35
Item 11. Executive Compensation................................ 35
Item 12. Security Ownership of Certain Beneficial
Owners and Management................................. 35
Item 13. Certain Relationships and Related
Transactions.......................................... 35
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K............................... 35
Exhibits................................................................ 38
Signatures.............................................................. 44
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PART I
ITEM 1. BUSINESS
THE COMPANY
Atlantis Plastics, Inc., a Florida corporation ("Atlantis" or the
"Company"), is a leading U.S. plastics manufacturer consisting of two operating
segments: (i) Atlantis Plastic Films, which produces polyethylene stretch and
custom films used in a variety of industrial and consumer applications, and (ii)
Atlantis Molded Plastics, which produces molded plastic products for a variety
of applications, including products and components for the appliance,
automotive, and recreational vehicle industries.
Atlantis Plastic Films accounts for approximately two-thirds of the
Company's net sales and produces: (i) stretch films (multilayer 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 packaging 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 two principal technologies, serving a wide
variety of specific market segments, described as follows: (i) injection molded
thermoplastic parts that are sold primarily to original equipment manufacturers
and used in major household goods and appliances, power tools, agricultural and
automotive products, and (ii) a variety of extruded plastic parts for both trim
and functional applications (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.
Plastic Containers, Inc. ("PCI"), the Company's manufacturer of blow molded
milk, juice, water and industrial containers, was sold in November 1996.
The Company's twelve plastics manufacturing facilities produce a wide
spectrum of products for industrial, commercial and consumer markets. Management
believes that the Company's diversification and broad range of capabilities
reduce its exposure to economic downturns in specific industries and permit the
Company to react efficiently to specific market opportunities.
The Company was founded in 1984 and grew primarily through acquisitions
in the plastics, insurance and furniture manufacturing industries. As more fully
described below, in recent years the Company has concentrated its resources in
certain segments of the plastics industry, and, as part of this strategic focus,
has disposed of several non-strategic businesses and assets during 1995 and
1996.
Profiles of the Company's businesses are outlined within the "Market
Capabilities" section below. Descriptions of the Company's facilities are set
forth within Item 2, "Properties." The Company's corporate headquarters office
is located at 1870 The Exchange, Suite 200, Atlanta, Georgia, 30339, and its
telephone number is (800) 497-7659.
During 1995, the Company's new senior management group developed a
strategic operating plan. The principal objectives of the plan, set forth below,
were accomplished during 1995 and 1996:
1) Implementing a cost reduction plan, including a simplification of the
Company's organizational structure.
2) Reconfiguring the stretch film sales organization to more effectively
service its customer base at a lower cost.
3) Identifying and disposing of non-strategic businesses and assets.
4) Reducing investment in working assets, outstanding indebtedness, and
interest expense.
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For 1997 and beyond, Atlantis' growth and profit improvement strategies
seek to capitalize on the Company's reputation for product quality and customer
service, its existing manufacturing capabilities, and its reduced fixed and
variable cost structure, which should allow it to compete more effectively for
new business as a low-cost provider. Growth will result from improved
distribution capabilities and new product development. Additionally, recent
improvements in the Company's cash flow, capitalization and liquidity will allow
it to consider potential acquisitions in the plastics industry.
STRATEGIC OPERATING PLAN
The strategic operating plan developed by the Company during 1995 focused
on achieving the following results:
IMPLEMENTATION OF A COST REDUCTION PLAN. Over the past two years, the
Company has implemented a series of cost reduction programs which have, in
total, reduced fixed and variable costs by over $7 million on an annualized
basis. As part of these efforts, the Company's organization structure was
simplified and decentralized, allowing a reduction in salaried headcount of
approximately 22% and lowering annualized salaried personnel costs by
approximately $2.6 million.
The Company's injection molding unit significantly reduced its
headcount, converted its manufacturing facilities to a continuous 7 day
(24-hour) basis, and decentralized its engineering and administrative functions.
These changes allowed this unit to improve operating efficiency and control.
From 1995 to 1996, gross margin improved from 5% to 14%, while SG&A costs
decreased by 11% percent.
The Company closed its unprofitable Tulsa, Oklahoma custom film facility
in August 1996, transferring certain of its production volume to its Mankato,
Minnesota, and Cartersville, Georgia custom film facilities. The Tulsa facility
was sold in December 1996. During the past year, the stretch film unit reduced
headcount in all of its facilities, while increasing throughput on production
lines. Stretch film production volume increased by 4% during 1996. Additional
cost savings were realized through lower cost packaging.
RECONFIGURATION OF THE STRETCH FILM SALES ORGANIZATION. During the fourth
quarter of 1995, the Company reconfigured its stretch film sales organization,
converting from an independent sales representative structure to one consisting
primarily of direct sales personnel. This change was made in order to improve
customer service, account/pricing control, market intelligence, and
relationships with key customers, and also to reduce the Company's marketing
costs.
IDENTIFICATION AND DISPOSITION OF NON-STRATEGIC BUSINESSES AND ASSETS. In
August 1995, the Company sold Western Pioneer Insurance Company ("Western
Pioneer"), its property-casualty insurance subsidiary which had been classified
as a discontinued operation, for $12.0 million to a Massachusetts-based property
casualty insurer. During September 1995, the Company sold its 50% interest in
the CKS/Rigal blow molding joint venture to its joint venture partner, for
approximately $870,000. The net cash proceeds after expenses and taxes of
approximately $9.8 million from these 1995 sales were applied to the Company's
revolving credit facility.
During November 1996, the Company sold PCI to a California-based plastics
manufacturer for approximately $8.3 million. During December 1996, the Company
sold its Tulsa custom manufacturing facility to a private investor group for
$1.5 million. Also during December 1996, the Company sold its investment in
WinsLoew Furniture, Inc. ("WinsLoew") stock to WinsLoew for approximately $9.3
million. The proceeds on the above-mentioned sales represent selling prices,
prior to expenses and taxes. Net proceeds on the 1996 dispositions, after the
payment of expenses and taxes, will approximate $14.5 million. A portion of the
net cash proceeds after expenses from the PCI sale was used during the fourth
quarter of 1996 to pay off the outstanding balance on the Company's revolving
credit facility. See Note 2 of Notes to Consolidated Financial Statements for
further information regarding these dispositions.
IMPLEMENTATION OF AN ASSET MANAGEMENT PROGRAM TO REDUCE INVESTMENT IN
WORKING ASSETS, NET DEBT AND NET INTEREST EXPENSE. Beginning in the second
quarter of 1995, through a focus on reducing inventories and accounts
receivable, and as a result of disposing of non-strategic businesses and assets
as described above, net debt (total debt less cash on hand) was significantly
reduced. Net debt was reduced from $115.2 million at year-end 1995 and a 1995
high of $142.0 million (May, 1995) to $92.0 million at year-end 1996.
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BUSINESS GROWTH AND PROFIT IMPROVEMENT STRATEGIES
The Company's general business strategy emphasizes the following
elements:
DEVELOPMENT OF NEW PRODUCTS AND BROADENING OF MARKET PENETRATION.
Historically, the Company has enhanced its competitive position and operating
profitability by developing and introducing products that permit the penetration
of new markets, including new lines of thinner gauge polyethylene films.
During 1996, the stretch film unit introduced three uniquely-engineered
stretch film products which target all machine wrap applications and market
segments. These films are designed to offer high performance characteristics,
while utilizing more cost-effective materials and manufacturing processes. As
its new products gain wider acceptance in the marketplace, the stretch film unit
will seek broader penetration of the distributor network, as well as expanded
direct sales efforts.
The custom film unit intends to emphasize the production of ultra thin
gauge films which offer greater cost savings to end users and new three-layer,
co-extruded products which meet higher engineering specifications. The custom
unit is also expanding its sales efforts within the converter packaging market
segments.
The injection molding unit significantly reduced its fixed and variable
cost structure during 1996, providing greater flexibility in servicing its
existing customers, and enabling this unit to expand its bidding for new
business. During 1996, the profile extrusion unit expanded the sales of its
proprietary products, including the Ply-J, which is used for trimming
residential round top windows and the Boat Dock Bumper for the do-it-yourself
market.
The Company intends to continue to work with its suppliers and customers
to develop new products that complement the Company's current product lines and
can be produced using the Company's existing manufacturing capabilities.
IMPROVED COST CONTROLS, MANUFACTURING EFFICIENCIES, AND QUALITY EMPHASIS.
The Company continues to concentrate on reducing operating costs and improving
manufacturing efficiencies with a strong emphasis on reducing scrap rates and
overtime, increasing plant and equipment yields, reducing equipment downtime,
and improving the purchasing cycle in order to reduce material costs. Quality is
also an integral part of the products and services provided to customers. The
Company has made extensive efforts to train its employees in Total Quality
Management Systems. The three stretch film manufacturing facilities and the
profile extrusion facility have been ISO 9002 certified.
TARGETED ACQUISITIONS IN PLASTICS INDUSTRY. The plastics industry is
highly fragmented, characterized by several large producers, and many smaller
manufacturers that target specific regional markets. Management believes that
the economics of the plastics industry and the growing importance of national
customers create significant advantages for large, diversified plastics
manufacturers. As a result of the initiatives undertaken by the Company during
the past two years to reduce costs and improve its financial condition, the
Company is now in a position to consider acquisition opportunities. There can be
no assurance that suitable candidates will be available, or that the Company
will be able to consummate acquisitions on satisfactory terms. At the present
time, the Company has no plans, negotiations or oral or written agreements
regarding future acquisitions.
MARKET CAPABILITIES
STRETCH FILMS. Utilizing two plants in Tulsa, Oklahoma and one plant in
Nicholasville, Kentucky, Atlantis manufactures multilayer stretch film used
principally to wrap pallets of material for storage or shipping. Stretch film is
made from a combination of polyethylene resins and other materials and is
manufactured using both blown and cast extrusion processes to meet rigid
customer specifications. The resulting product is a very thin film which
stretches up to 300%, clings to itself, and is puncture resistant.
Atlantis purchases several types of linear low density resins and other
materials to manufacture its stretch film products. The Company has contracts
with resin manufacturers which allow it to achieve what it believes to be the
best combination of price, resin availability, and new product development
support. Management believes its relationships with its resin suppliers are very
good.
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The Company's stretch film products are sold primarily by direct sales
personnel to industrial packaging distributors and, to a lesser degree, to end
users. Since a majority of its products is sold to distributors, Atlantis places
particular emphasis on assisting distributors in sales to end users.
CUSTOM FILMS. Utilizing two plants located in Cartersville, Georgia and
Mankato, Minnesota, Atlantis manufactures both low density and linear low
density polyethylene films for a wide variety of packaging applications. As
described above, during August 1996 the Tulsa custom facility was closed and was
sold in December 1996.
Approximately 20 different types of resin, delivered in pellet form, and
approximately ten types of additives are used in the manufacturing process.
Atlantis has supply contracts that fulfill most of its present requirements and
believes that it has adequate sources available to meet remaining raw material
needs. Relationships with its suppliers are considered very good.
Atlantis has an internal sales staff to market its film products. Most
custom film customers are in industrial markets and consume the film during
their manufacturing and/or delivery processes. Significant growth is planned for
converted market segments, where film is part of the end use product.
Atlantis also converts film into institutional products such as plastic
gloves, aprons and tablecloths at a second manufacturing facility located in
Mankato, Minnesota. During the last several years, Atlantis has become one of
the largest producers of polyethylene products for institutional food handling
markets. With vertical integration of film supply and continued capital
investment in automation, the Company believes that this business unit enjoys a
low cost leadership position.
INJECTION MOLDING. Atlantis produces custom thermoplastic parts by
injection molding. These parts are used in large and small appliances (including
refrigerators, air conditioners, dehumidifiers, dishwashers, and microwave
ovens), agricultural and automotive products and hand-held power tools.
Atlantis operates molding presses ranging from 30 to 1,000 tons and
related secondary equipment at five plants located in Henderson, Kentucky, Ft.
Smith, Arkansas, Warren, Ohio, and Nashville and Jackson, Tennessee. This wide
variety of equipment configurations and plant locations enable it to fulfill
customer requirements, including multiple components, various press sizes and
secondary operations.
During 1996, approximately 39% of the injection molding unit's sales
(9% of the Company's net sales) were to the refrigeration and air conditioning
divisions of Whirlpool Corporation ("Whirlpool"). This unit's efforts to
diversify its customer base have reduced these percentages from 46% and 10%,
respectively, in 1995. Although the injection molding unit has been a supplier
to Whirlpool for over 40 years, there can be no assurance that a significant
reduction in Whirlpool's volume, or the loss of Whirlpool as a customer, would
not have a material adverse effect on the Company's financial condition or
results of operations.
The injection molding unit maintains an in-house sales and engineering
staff which assists in the design of products to customer specifications,
designs molds to produce those products, and oversees the construction of
necessary molds. Its "program management" concept promotes early involvement
with customers' engineers to assist with product and tooling design and the
establishment of acceptable quality standards. Its Statistical Process Control
("SPC") systems enable it to meet these established quality standards on a
cost-efficient basis. Management believes that its ability to offer SPC quality
assurance, as well as value-added secondary operations such as hot stamping,
silk screening and assembly, provide a competitive advantage in selling to
national accounts.
The majority of sales are generated by Company personnel. Independent
sales representatives, calling primarily on industrial customers in the Midwest,
account for the balance.
The Company's injection molding customers generally place orders for
goods based on their production requirements for the following three to four
months with a non-binding estimate of requirements over six to twelve months.
Management believes that the relatively long production cycles for its customers
make these estimates reliable. See "Backlog."
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A wide variety of materials, such as ABS, polystyrene, polyethylene,
polycarbonate and nylon are used in the manufacturing process. The Company has
multiple sources of supply for these materials.
PROFILE EXTRUSION. At its Elkhart, Indiana manufacturing facility,
Atlantis produces a variety of extruded plastic parts for both trim and
functional applications that are incorporated into a broad range of consumer and
commercial products. During 1996 the profile extrusion unit utilized
approximately 2,000 different dies in fulfilling customer orders, and currently
maintains a stock program for approximately 280 products.
This unit's marketing and sales activities are conducted by in-house
sales personnel that also oversee a network of independent sales
representatives. These representatives in turn call on a diversified customer
base in approximately 30 states. Atlantis supplies many industries, including
manufacturers of recreational vehicles, residential windows and doors, office
furniture, retail store fixtures, and marine products.
The use of only five basic types of compound materials in manufacturing
allows the purchasing of materials in bulk. These materials are polyvinyl
chloride in rigid and flexible forms, polyethylene, polypropylene, and
thermoplastic rubber. Atlantis believes that it has adequate sources available
to meet its raw material needs.
RAW MATERIALS
The primary raw materials used by the Company in the manufacture of its
products are various plastic resins, primarily polyethylene. The Company selects
its suppliers primarily on the basis of quality, price, technical support and
service. Virtually all of the Company's plastic resin supplies are manufactured
within the United States. Although the plastics industry has from time to time
experienced shortages of plastic resins, the Company has not to date experienced
any such shortages. Management believes that there are adequate sources
available to meet its raw material needs.
The Company uses approximately 300 million pounds of plastic resins
annually. Management believes that the Company's large volume purchases of
plastic resin have generally resulted in lower raw material costs and enabled
the Company to obtain shipments of raw materials even in periods of short
supply.
The primary plastic resins used by the Company are produced from
petrochemical feedstocks mostly derived from natural gas liquids. Based on the
supply and demand cycles in the petrochemical industry, substantial cyclical
price fluctuations can occur. Consequently, plastic resin prices often
fluctuate, and such prices fluctuated significantly during the 1994 - 1996
period, as further described in Item 7, "Management's Discussion and Analysis of
Operations."
While the Company has historically passed through changes in the cost
of its raw materials to its customers, it may not always be able to pass through
its raw material cost increases in the form of price increases, or such pass
throughs may only occur after a time lag. To the extent that increases in the
cost of plastic resin cannot be passed on to its customers, or that the duration
of time lags associated with pass throughs becomes significant, such increases
may have a material detrimental impact on the profitability of the Company.
Furthermore, during periods when resin prices are falling, gross profits may
suffer since the Company is selling product manufactured with resin purchased
one to two months prior at higher prices.
COMPETITION
The Company's operating units face intense competition from numerous
competitors, several of which have greater financial resources than Atlantis. In
addition, the markets for certain of the Company's products are characterized by
low cost of entry, or competition based primarily on price.
Atlantis Plastic Films competes with a limited number of producers
capable of national distribution and a greater number of smaller manufacturers
that target specific regional markets and specialty film segments. Competition
is based on quality, price, service (including the manufacturer's ability to
supply customers in a timely manner), and product differentiation. Management
believes the Atlantis Plastic Film units successfully compete on the basis of
their established reputations for service and quality, as well as their
respective positions as efficient, low-cost producers.
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Atlantis Molded Plastics competes in a highly fragmented segment of the
plastics industry, with a large number of regional manufacturers competing on
the basis of customer service (including timely delivery and engineering/design
capabilities), quality, product differentiation and price. Management believes
that the Atlantis Molded Plastics units successfully compete based on their
ability to offer extensive customer service, manufacturing efficiencies and a
wide variety of products.
BACKLOG
The Company's total backlog at December 31, 1996 was $19.1 million,
compared to $21.3 million at December 31, 1995. Management does not consider any
specific month's backlog to be a significant indicator of sales trends due to
the various factors that influence backlog, such as price changes which lead to
customer inventory adjustments.
EMPLOYEES
As of December 31, 1996 the Company employed approximately 1,350
persons. Atlantis' overall employee relations are considered to be very good.
PATENTS AND TRADEMARKS
The Company has registered various trademarks with the United States
Patent and Trademark Office and certain overseas trademark regulatory agencies.
The Company also has applications pending for the registration of Patents and
other trademarks. Management believes that the Company's trademark position is
adequately protected in all markets in which the Company does business. Atlantis
Plastic Films produces certain stretch film products under non-exclusive
licenses granted by Mobil Oil Corporation, which are coterminous with the
duration of Mobil's underlying patents.
ENVIRONMENTAL REGULATION
Actions by Federal, state and local governments concerning
environmental matters could result in laws or regulations that could increase
the cost of producing the products manufactured by the Company or otherwise
adversely affect the demand for its products. At present, environmental laws and
regulations do not have a material adverse effect upon the demand for the
Company's products. Certain local governments have adopted ordinances
prohibiting or restricting the use or disposal of certain plastic products that
are among the types produced by the Company. If such prohibitions or
restrictions were widely adopted, it could have a material adverse effect upon
the Company. In addition, a decline in consumer preference for plastic products
due to environmental considerations could have a material adverse effect upon
the Company.
In addition, certain of the Company's operations are subject to
Federal, state and local environmental laws and regulations that impose
limitations on the discharge of pollutants into the air and water and establish
standards for the treatment, storage and disposal of solid and hazardous wastes.
Historically, the Company has not had to make significant capital expenditures
for compliance with such laws and regulations.
While the Company cannot predict with any certainty its future capital
expenditure requirements for environmental regulatory compliance because of
continually changing compliance standards and technology, the Company has not
currently identified any of its facilities as requiring major expenditures for
environmental remediation or to achieve compliance with environmental
regulations. Accordingly, the Company has not accrued any amounts relating to
achieving compliance with currently promulgated environmental laws and
regulations. The Company does not currently have any insurance coverage for
environmental liabilities and does not anticipate obtaining such coverage in the
future.
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ITEM 2. PROPERTIES
During the first quarter of 1995, the Company relocated certain of its
corporate functions from Miami, Florida to Atlanta, Georgia. The Atlanta
headquarters office consist of approximately 9,250 square feet of space, with a
present annual lease expense of approximately $111,000, expiring in June 1997.
Atlantis' Miami offices consist of approximately 13,100 square feet of
space that is shared with several entities controlled by the principal
stockholders of the Company or their affiliates. The present annual lease
expense of $329,000, as well as certain other general and administrative
expenses, are allocated among the Company and these entities. See Part III Item
13 - "Certain Relationships and Related Transactions." This lease expires in
August, 2003.
The following table describes the manufacturing facilities owned or
leased by the Company as of December 31, 1996. Substantially all of the owned
facilities are pledged as security for debt. Management believes that the
Company's manufacturing facilities are adequate to meet current needs and
increases in sales volume for the foreseeable future.
COMPANY AND LOCATION
- -------------------- OWNED OR BUILDING AREA
LEASED (SQUARE FEET)
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ATLANTIS PLASTIC FILMS:
Stretch Film, Tulsa, Oklahoma (two facilities)... Owned 189,300
Stretch Film, Nicholasville, Kentucky............ Owned 109,500
Custom Film, Mankato, Minnesota.................. Owned 140,000
Institutional Products, Mankato, Minnesota....... Leased 65,000
Custom Film, Cartersville, Georgia............... Leased 57,500
ATLANTIS MOLDED PLASTICS:
Injection Molding, Henderson, Kentucky........... Owned 90,000
Injection Molding, Jackson, Tennessee............ Owned 50,000
Injection Molding, Nashville, Tennessee.......... Leased 68,000
Injection Molding, Ft. Smith, Arkansas.......... Owned 158,500
Injection Molding, Warren, Ohio.................. Owned 54,000
Profile Extrusion, Elkhart, Indiana.............. Owned 87,900
ITEM 3. LEGAL PROCEEDINGS
The Company believes that it is not presently a party to any litigation
the outcome of which would have a material adverse effect on its consolidated
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fiscal
quarter ended December 31, 1996.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Class A Common Stock is traded on the American Stock
Exchange (the "AMEX") and the Pacific Stock Exchange under the symbol "AGH." The
following table sets forth the high and low sales prices for the Class A Common
Stock on the AMEX for each quarter of the years 1995 and 1996.
HIGH LOW
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1995
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First Quarter 8 1/8 5 3/4
Second Quarter 7 7/8 6 3/8
Third Quarter 6 7/16 4 3/4
Fourth Quarter 5 1/4 3 3/8
1996
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First Quarter 5 13/16 4 5/8
Second Quarter 5 7/8 4 7/8
Third Quarter 5 5/8 4 5/8
Fourth Quarter 11 3/8 5 1/2
As of January 31, 1997, there were approximately 210 holders of record
of the 4,196,721 outstanding shares of Class A Common Stock. The closing sales
price for the Class A Common Stock on January 31, 1997 was $10.00.
Covenants relating to the Company's 11% Senior Notes restrict the
Company from paying dividends, incurring new debt or taking certain other
actions unless specified interest coverage ratio and other tests are met. The
Company met the interest coverage ratio requirement for the trailing four
quarters ended September 30 and December 31, 1996, and is therefore currently
able to, among other things, pay dividends and incur new debt.
During 1995, a decline in operating profitability caused the Company to
fall below the interest coverage ratio requirement for the trailing four quarter
periods ended September 30 and December 31, 1995, and March 31 and June 30,
1996. Accordingly, during those periods the Company could not pay dividends, and
its ability to incur new debt or take certain other actions was restricted.
PREFERRED STOCK
In January 1997, the Company issued a mandatory conversion notice to
the holder of the 20,000 outstanding shares of the Company's Series A
Convertible Preferred Stock ("Preferred Stock"). The Preferred Stock was
convertible into 210,244 shares of Class A common stock. After issuing the
mandatory conversion notice, the Company reached an agreement with the Preferred
Stock holder to repurchase all of the common shares resulting from the
conversion notice for $2 million (the original price paid for the Preferred
Stock by the holder), and completed the repurchase in late March, 1997.
Prior to this conversion and repurchase, the Company's Preferred Stock
entitled 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 was prohibited from paying preferred dividends during the
period that it was unable to meet the interest coverage ratio requirement
relating to its 11% Senior Notes on a trailing four
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<CAPTION>
quarters basis. Since the Company met the requirement as of September 30, 1996,
during October 1996 the Company paid the April 15 and October 15, 1996 Preferred
Stock dividend payments.
COMMON STOCK
Prior to 1994, the Company did not pay cash dividends on any class of
its Common Stock. During February 1994, the Company's Board of Directors
approved a 2.5 cents per share quarterly dividend program beginning in April
1994, and consecutive quarterly dividends were paid through October 1995, after
which the dividend program was discontinued.
In November 1996, the Board of Directors authorized the repurchase of
up to 1,000,000 shares of Atlantis Class A common stock, or 14% of the 7.1
million Class A and Class B common stock then outstanding. Through late March
1997 the Company has repurchased 320,344 shares (including the 210,244 common
shares issued in connection with the conversion of preferred stock, as described
above), and options for 55,125 shares, for total consideration of approximately
$3.3 million. The Company intends to continue buying its shares in the open
market, or in privately negotiated transactions, at times and prices deemed
advantageous.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated
financial data of the Company for each of the years in the five-year period
ended December 31, 1996. The selected consolidated financial data as of December
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1996 have been derived from the Company's financial statements included in
Item 8, which have been audited by Coopers & Lybrand L.L.P., independent
accountants for the Company. The selected consolidated financial data should be
read in conjunction with the Company's Consolidated Financial Statements and the
Notes thereto for the three-year period ended December 31, 1996, included in
Item 8, and Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
YEARS ENDED DECEMBER 31, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
(In millions, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME DATA
Net Sales $ 267.1 $ 281.1 $ 260.8 $ 220.2 $ 188.7
Income (Loss) from Continuing Operations 8.1 (13.6) 5.2 5.2 4.9
Net Income (Loss) 8.1 (13.1) 6.4 3.9 5.8
PER SHARE DATA (PRIMARY - SEE NOTE)
Income (Loss) from Continuing Operations $1.06 ($1.90) $0.67 $0.66 $0.64
Net Income (Loss) $1.06 ($1.83) $0.83 $0.49 $0.76
FINANCIAL DATA
Total Assets $ 177.9 $ 180.5 $ 211.5 $ 171.0 $ 172.6
Total Debt 107.9 116.5 129.2 102.4 114.6
Cash Dividends Declared per Common Share $ -- $ 0.08 $ 0.10 $ -- $ --
</TABLE>
NOTE: For 1996, fully diluted income per share from continuing operations and
fully diluted net income per share were $0.99. For 1992, fully diluted income
per share from continuing operations was $0.62, and fully diluted net income per
share was $0.74.
-11-
<PAGE>
<TABLE>
<CAPTION>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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, and residential window industries.
Discontinued operations in 1995 and 1994 consisted of the operations of
Western Pioneer, the Company's California property-casualty insurance subsidiary
which was sold on August 31, 1995.
As more fully described in Item 1. "Business," during 1995 the
Company's new senior management group developed and implemented a strategic
operating plan which focused on achieving a number of objectives during 1995 and
1996. 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 "Impairment of long-lived assets and restructuring
charges" category of the accompanying 1995 Income Statement.
Sales, gross profit and operating income (loss) for the years ended
December 31, 1996, 1995 and 1994 were as follows:
(IN THOUSANDS)
YEARS ENDED DECEMBER 31, 1996 1995 1994
SALES AMOUNT % TOTAL AMOUNT % TOTAL AMOUNT % TOTAL
- ----- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Atlantis Plastic Films $177,851 67% $192,806 69% $173,947 67%
Atlantis Molded Plastics 89,268 33% 88,258 31% 86,871 33%
-------- ---- -------- ---- -------- -----
Total $267,119 100% $281,064 100% $260,818 $100%
======== ==== ======== ==== ======== =====
GROSS PROFIT AMOUNT % SALES AMOUNT % SALES AMOUNT % SALES
- ------------ ------- ------- -------- ------- ------- -------
Atlantis Plastic Films $29,516 17% $30,311 16% $36,084 21%
Atlantis Molded Plastics 16,226 18% 9,604 11% 15,489 18%
------- --- ------- --- ------- ---
Total $45,742 17% $39,915 14% $51,573 20%
======= ======= =======
OPERATING INCOME (LOSS) AMOUNT % SALES AMOUNT % SALES AMOUNT % SALES
- ----------------------- ------- ------- ------ ------- ------ -------
Atlantis Plastic Films $10,117 6% $1,982 1% $13,455 8%
Atlantis Molded Plastics 8,273 9% (2,697) (3%) 8,918 10%
------- -- ------ ---- ------- ---
Total $18,390 7% ($715) (0%) $22,373 9%
======= ====== =======
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
SALES
Sales for 1996 equaled $267.1 million, approximately 5% below last
year's sales of $281.1 million. The decline in sales during 1996 compared to the
prior year occurred primarily within the Atlantis Plastic Films stretch film
unit. The stretch film unit posted a 7% increase in volume in pounds sold during
1996, offset by lower average film selling prices resulting from lower average
resin prices during 1996. Within the custom film and institutional product
units, volume in pounds sold increased by 6%. Atlantis Molded Plastics 1996
sales equaled $89.3 million, slightly ahead of 1995 sales of $88.3 million.
GROSS PROFIT
Gross profit as a percentage of sales for 1996 equaled 17%, well ahead
of the 1995 gross profit percentage of 14%. 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
and throughout 1996.
-12-
<PAGE>
The Atlantis Plastic Films 1996 gross profit percentage equaled 17%,
ahead of last year's percentage of 16%. The improved film profitability as a
percentage of sales related to the Company's various cost reduction programs, as
described in Item 1. "Business,"-Strategic Operating Plan.
While the Atlantis Plastic Films 1996 gross profit percentage improved
compared to the 1995 percentage, the stretch film unit continues to be impacted
by intense price competition resulting primarily from industry-wide
overcapacity. Efforts to improve the future profitability of this unit include
the 1996 introduction of three new machine wrap stretch film products offering
high performance characteristics while utilizing more cost-effective materials
and manufacturing processes, as well as targeted cost reductions in the areas of
production and overhead expense.
The Atlantis Molded Plastics 1996 gross profit percentage equaled 18%,
significantly ahead of the 11% gross profit percentage for 1995. The strong
improvement compared to 1995 was primarily attributable to a significant
decrease in production and overhead costs, together with improvements in
scheduling and related reductions in overtime expense, in the injection molding
unit. In addition, the profile extrusion unit continued to maintain its high
gross profit margins, and the blow molding unit posted stronger 1996 profit
margins compared to 1995 levels. The blow molding unit was sold in November 1996
(see Note 2 of Notes to Consolidated Financial Statements).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
The Company's 1996 selling, general and administrative ("SG&A") expense
was $27.4 million, 7% lower than the $29.4 million in 1995. SG&A expense for
1996 includes incentive compensation expense related to improved operating
results. Excluding these costs, SG&A expense for 1996 decreased significantly
compared to 1995, primarily due to the previously described cost reduction
programs initiated by the Company during 1995 and 1996.
OTHER INCOME (EXPENSE)
As more fully described in Note 2 of Notes to the Consolidated
Financial Statements, during the fourth quarter of 1996, the Company disposed of
PCI, the Tulsa custom facility, and the Company's investment in WinsLoew stock.
These transactions generated a total pretax gain of $6.7 million, and an after
tax gain of $5.1 million, or $0.68 per share (primary).
NET INTEREST EXPENSE AND INCOME TAXES
Net interest expense during 1996 of $12.6 million was 11% lower than
the $14.2 million posted in the prior year. The decrease can be attributed to
reduced debt levels during 1996, resulting from the following factors: (i) lower
average working capital levels during 1996 compared to 1995, (ii) debt paydowns
from the proceeds generated by the 1995 and 1996 sales of non-strategic
businesses and assets, and (iii) lower effective interest rates as a result of
the Company's 1995 refinancing of debt from the revolving credit facility to
equipment financing programs with lower interest rates, and the 1995 and 1996
repurchases of the Company's 11% Senior Notes, discussed below.
The Company's effective tax rates differed from the applicable
statutory rates during 1996 and 1995 primarily due to nondeductible goodwill
amortization. In addition, the 1996 effective tax rate was also impacted by the
sale of PCI, which generated a gain for book purposes, and a loss for tax
purposes (see Note 8 of Notes to Consolidated Financial Statements).
EXTRAORDINARY GAIN (LOSS)
During July 1996, the Company repurchased, at a slight discount, $5.7
million of its 11% Senior Notes in the open market, which resulted in an after
tax extraordinary loss of ($73,000), principally related to the write-off of
unamortized loan origination costs. During December 1995, the Company
repurchased, at a discount, $4.8 million of its 11% Senior Notes in the open
market, and recognized an after tax extraordinary gain of $254,000.
-13-
<PAGE>
INCOME (LOSS)
As a result of the factors described above, 1996 operating income
equaled 7% of sales, or $18.4 million, compared to an operating loss of
($715,000) in 1995. Income from continuing operations and net income were $8.1
million, or $1.06 per share in 1996, compared to a 1995 loss from continuing
operations of ($13.6) million, or ($1.90) per share, and a net loss of ($13.1)
million, or ($1.83) per share. The above-mentioned per share amounts represent
primary earnings per share.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
SALES
The Company's 1995 sales of $281.1 million were 8% ahead of 1994 sales,
with the sales growth occurring primarily within Atlantis Plastic Films due to
higher average selling prices, partially offset by a decline in volume compared
to 1994. Atlantis Plastic Films sales for 1995 totalled $192.8 million, 11%
ahead of 1994 film sales of $173.9 million.
During the last nine months of 1994, plastic resin prices increased by
over 75%, causing film product demand to rise beyond normal levels as customers
increased inventories in order to avoid purchases at anticipated higher selling
prices. During the second quarter of 1995, the film market, anticipating resin
price declines, experienced a significant weakening in demand as customers
postponed purchases in order to reduce abnormally high inventories created
during the preceding period and to maximize product purchases at expected future
lower prices. Resin prices started declining in June 1995, and fell
approximately 29% from early June through December 1995.
Atlantis Molded Plastics sales during 1995 of $88.3 million exceeded
1994 sales of $86.9 million by 2%, with a slight decline in sales for the
Company's injection molding unit, offset by increased sales within the profile
extrusion and blow molding units. The lack of sales growth within the injection
molding unit was caused by several factors, including: (i) a decline in sales of
refrigeration-related parts compared to last year, and (ii) the effects of a
negotiated price reduction with a major customer.
GROSS PROFIT
The Company's 1995 gross profit of $39.9 million, or 14% of sales,
declined sharply both in dollar and percentage terms from the 1994 gross profit
of $51.6 million, or 20% of sales. The 1995 decline was due primarily to the
adverse impact of the film inventory correction described above, and lower
injection molding profitability compared with 1994.
Atlantis Plastic Films posted 1995 gross profit of $30.3 million, or
16% of sales, compared to 1994 gross profit of $36.1 million, or 21% of sales.
The 1995 second and third quarter customer inventory correction and resulting
decline in demand, described above, reduced sales volume in pounds, and also
reduced selling prices due to competitive market pressures. Weak market demand
during this time period caused selling prices to drop more rapidly than plastic
resin costs. As a result, during 1995 the differential between film selling
prices and plastic resin costs (the major raw material component of the
Company's film products) declined compared to 1994.
Film gross profits also continued to be affected by inefficiencies at
the Tulsa, Oklahoma custom film facility. As a result, during late 1995 this
facility was downsized, and was closed during August 1996. This facility was
subsequently sold in December 1996.
The Atlantis Molded Plastics 1995 gross profit of $9.6 million, or 11%
of sales, decreased substantially compared to 1994 gross profit of $15.5
million, or 18% of sales. This decline in profitability resulted primarily from
a variety of factors within the injection molding unit, including the decline in
sales and price reduction described above, manufacturing inefficiencies within
certain phases of the production process, and unusually high overtime due to
these manufacturing inefficiencies. The Atlantis Molded Plastics 1995 gross
profit was also adversely impacted by lower blow molding profitability,
partially offset by stronger profile extrusion gross profits compared to 1994.
In order to address the injection molding issues described above, the
Company implemented a number of personnel and process improvement changes during
the fourth quarter of 1995. The Company's injection molding unit significantly
reduced
-14-
<PAGE>
overtime and salaried headcount, initiated continuous operations at its
Henderson, Kentucky facility (this change was subsequently implemented at the
remaining injection molding facilities during the first half of 1996), and
initiated the decentralization of its engineering and administrative functions
which were formerly conducted only at the Henderson facility.
The Company's profile extrusion unit posted record sales and
profitability during 1995 compared to 1994, achieving gross margins in excess of
34%.
The 1995 decline in blow molding profitability resulted from continued
competitive pricing pressures within the dairy plastic container markets.
However, during the fourth quarter of 1995 blow molding profit margins improved
due to increases in sales of industrial containers, combined with reductions in
manufacturing costs. As previously discussed, the Company sold its 50% blow
molding joint venture interest during 1995, and sold PCI in late 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
SG&A during 1995 equaled $29.4 million, or 10% of sales, compared to
1994 SG&A of $29.2 million, or 11% of sales. SG&A expense for 1995 included
lower incentive compensation expense resulting from the 1995 decline in
profitability, and lower compensation expense due to a reduction in salaried
headcount. SG&A expense during 1995 included approximately $600,000 recorded
during the third quarter representing an increase in the reserve for bad debts
related to a potentially uncollectable account receivable within the injection
molding unit.
IMPAIRMENT OF LONG-LIVED ASSETS AND RESTRUCTURING CHARGES
In connection with the Company's adoption of Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" during the fourth
quarter of 1995, the Company recorded noncash charges of approximately $10.6
million for the impairment of long-lived assets associated with the Tulsa custom
film facility, and for the reduction in carrying value of PCI in connection with
its proposed sale. Of this amount, goodwill write-offs equaled approximately
$8.9 million with no associated tax benefit, and fixed asset write-downs equaled
approximately $1.7 million pretax, or $1.0 million after tax.
During 1995, the Company also recorded restructuring charges of
approximately $1.9 million related to: (i) the first quarter 1995 reorganization
of its senior management group (approximately $750,000), (ii) the third and
fourth quarter 1995 reconfiguration of its stretch film sales organization
(approximately $800,000), and (iii) the fourth quarter 1995 headcount reduction
costs associated with the restructuring of the Tulsa custom facility and the
injection molding unit (approximately $350,000).
NET INTEREST EXPENSE AND TAXES
Net interest expense increased from $13.1 million in 1994 to $14.3
million in 1995, primarily due to the higher debt balances maintained during the
first half of 1995. The significant reduction in debt achieved during the second
half of 1995 reduced net interest expense, with net interest expense for the
fourth quarter of 1995 of $3.3 million, compared to $3.4 million during the
fourth quarter of 1994 and $3.8 million during the second quarter of 1995.
The Company's effective tax rates during 1995 and 1994 were affected by
non-deductible goodwill amortization, with the 1995 tax rate also affected by
the tax impact of the September 1995 sale of the Company's 50% interest in the
CKS/Rigal blow molding joint venture.
DISCONTINUED OPERATIONS
Western Pioneer was sold in August 1995 for $12.0 million. The after
tax gain recognized on the sale was approximately $483,000.
Western Pioneer's loss from operations for the period prior to its sale
during 1995 totaled $251,000, compared to its 1994 income from operations of
$1.2 million. The 1995 decline in income was due to: (i) a significant increase
in new policies during
-15-
<PAGE>
1995, with new business historically less profitable than continuing business,
and (ii) poorer than normal weather conditions during the winter of 1994-1995,
which caused an increase in accidents and claims during 1995.
INCOME (LOSS)
As a result of the factors described above, particularly the impact of
the impairment of long-lived assets and the other restructuring charges, and the
decline in gross profit, the 1995 operating loss equaled ($715,000), compared to
1994 operating income of $22.4 million. The 1995 loss from continuing operations
equaled ($13.6) million, or ($1.90) per share, compared to income from
continuing operations of $5.2 million, or $0.67 per share for the year ended
1994. The 1995 net loss equaled ($13.1) million, or ($1.83) per share, compared
to 1994 net income of $6.4 million, or $0.83 per share.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at December 31, 1996 totaled
approximately $36.4 million (including cash and equivalents of $15.9 million),
compared to $23.2 million (including cash and equivalents of $1.3 million) at
December 31, 1995. The increase in cash and equivalents at year-end 1996
resulted primarily from the cash proceeds generated by the fourth quarter 1996
sales of PCI, the Tulsa custom facility, and the Company's investment in
WinsLoew stock.
On December 31, 1996, there were no borrowings on the Company's
revolving credit facility and gross availability equaled $30.0 million. Unused
availability, net of outstanding letters of credit of approximately $1.5
million, equaled $28.5 million. In addition, at year-end the Company had
approximately $6.1 million of unused availability under an existing equipment
financing program. Also see Item 5, "Market for the Registrant's Common Equity
and Related Stockholder Matters" for certain information regarding the Company's
compliance with covenants relating to the Company's 11% Senior Notes, and for
information regarding the Company's 1997 mandatory conversion of Preferred Stock
into 210,244 common shares and subsequent repurchase of those common shares.
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 cash on hand, funds
generated from operations, and funds available under its revolving credit
facility.
CASH FLOWS FROM OPERATING ACTIVITIES
During 1996, net cash provided by operating activities was
approximately $11.6 million, compared to $14.0 million last year. The Company's
1996 dispositions of businesses and assets generated a pretax gain of $6.7
million, as more fully discussed in Note 2 of Notes to Consolidated financial
Statements. Accounts receivable increased by $1.8 million, primarily within the
injection molding unit due to a decrease in reserve for bad debts and stronger
year-end 1996 sales compared to year-end 1995. Inventories decreased by
approximately $400,000, primarily within the film units. The $2.2 million
decrease in other current assets is principally due to the realization of
year-end 1995 income taxes receivable related to the Company's 1995 taxable
loss. Accounts payable and accrued expenses at December 31, 1996 decreased by
$1.1 million compared to the 1995 year-end balance due to higher than normal
accounts payable at year-end 1995, partially offset by 1996 accruals for
incentive compensation related to improved operating results.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash generated from investing activities during 1996 equaled $11.8
million, compared to cash used in investing activities of $750,000 during 1995.
During 1996, approximately $18.6 million of proceeds after expenses, but prior
to income taxes, were generated from the dispositions of businesses and assets,
as follows: PCI sale - $7.0 million, Tulsa facility sale - $1.5 million,
WinsLoew stock sale - $9.3 million, and other asset sales - $800,000.
-16-
<PAGE>
During 1996, capital expenditures of $6.8 million were significantly
below last year's capital expenditures of $13.8 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. As part of Atlantis' ongoing capital spending program,
the Company has converted, or is in the process of converting, its information
systems in order to accomodate the year 2000 century date change. Due to the
nature and timing of the Company's capital expenditures, capital spending during
1996 is not necessarily indicative of the level of spending to be expected in
future years.
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities during 1996 was $8.8 million,
compared to $13.4 million during 1995. During 1996, $5.7 million was used to
repurchase 11% Senior Notes, with the remainder used primarily for principal
payments on long-term debt. During December 1996, the Company refinanced $3.7
million of equipment financing debt with another lender at a lower interest
rate.
ACCOUNTING PRONOUNCEMENTS
In February 1997, SFAS No. 128, "Earnings Per Share" was issued. SFAS
No. 128 specifies the computation, presentation, and disclosure requirements for
Earnings Per Share ("EPS"), and is designed to improve the EPS information
provided in financial statements by simplifying the existing computational
guidelines, revising the disclosure requirements, and increasing the
comparability of EPS data on an international basis. SFAS 128 must be
implemented no later than fiscal year 1997. The Company has not yet determined
the effect on operating results of implementing the statement, however, the
adoption of SFAS 128 is not expected to have a materially adverse effect on
consolidated financial position.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE(S)
-------
Management's Responsibility for Financial Reporting................... 18
Report of Independent Accountants..................................... 19
Consolidated Income Statements For the Years Ended December 31,
1996, 1995 and 1994................................................. 20
Consolidated Balance Sheets as of December 31, 1996 and 1995.......... 21
Consolidated Statements of Shareholders' Equity For the Years Ended
December 31, 1996, 1995 and 1994 ................................... 22
Consolidated Statements of Cash Flows For the Years Ended December 31,
1996, 1995 and 1994 ................................................ 23
Notes to Consolidated Financial Statements............................ 24
-17-
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The Company's management is responsible for the preparation of the consolidated
financial statements in accordance with generally accepted accounting principles
and for the integrity of all the financial data included in this Form 10-K. In
preparing the consolidated financial statements, management makes informed
judgments and estimates of the expected effects of events and transactions that
are currently being reported.
Management maintains a system of internal accounting controls that is designed
to provide reasonable assurance that assets are safeguarded and that
transactions are executed and recorded in accordance with management's policies
for conducting its business. This system includes policies which require
adherence to ethical business standards and compliance with all laws to which
the Company is subject. The internal controls process is continuously monitored
by direct management review.
The Board of Directors, through its Audit Committee, is responsible for
determining that management fulfills its responsibility with respect to the
Company's consolidated financial statements and the system of internal
accounting controls.
The Audit Committee, comprised solely of directors who are not officers or
employees of the Company, meets periodically with representatives of management
and the Company's independent accountants to review and monitor the financial,
accounting, and auditing procedures of the Company in addition to reviewing the
Company's financial reports. The Company's independent accountants have full and
free access to the Audit Committee.
ANTHONY F. BOVA PAUL RUDOVSKY
PRESIDENT AND CHIEF EXECUTIVE VICE PRESIDENT,
EXECUTIVE OFFICER FINANCE AND ADMINISTRATION
-18-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Atlantis Plastics, Inc.:
We have audited the accompanying consolidated balance sheets of Atlantis
Plastics, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Atlantis Plastics,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Atlanta, Georgia Coopers & Lybrand L.L.P.
February 7, 1997, except for Note 7, as
to which the date is March 28, 1997
-19-
<PAGE>
<TABLE>
<CAPTION>
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Dollars in thousands, except per share amounts)
- ------------------------------------------------ ----------- ----------- -----------
YEARS ENDED DECEMBER 31, 1996 1995 1994
- ------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 267,119 $ 281,064 $ 260,818
Cost of sales 221,377 239,969 209,245
----------- ----------- -----------
Gross profit 45,742 41,095 51,573
Selling, general and administrative expenses 27,352 29,357 29,200
Impairment of long-lived assets and restructuring charges -- 12,453 --
----------- ----------- -----------
Operating income (loss) 18,390 (715) 22,373
Net interest expense 12,638 14,179 13,078
Other income (expense) 6,718 (338) --
----------- ----------- -----------
Income (loss) from continuing operations before 12,470 (15,232) 9,295
income taxes
Income tax provision (benefit) 4,396 (1,674) 4,136
----------- ----------- -----------
Income (loss) from continuing operations 8,074 (13,558) 5,159
Income (loss) from discontinued operations, net of income taxes 96 (251) 1,207
Gain on disposition of discontinued operations,
net of income taxe -- 483 --
----------- ----------- -----------
Income (loss) before extraordinary item 8,170 (13,326) 6,366
Extraordinary gain (loss) on early extinguishment of debt,
net of income taxes (73) 254 --
----------- ----------- -----------
Net income (loss) $ 8,097 ($ 13,072) $ 6,366
=========== =========== ===========
Net income (loss) Per Common Share
Primary:
Continuing operations $ 1.06 ($ 1.90) $ 0.67
Discontinued operations 0.01 (0.04) 0.16
Gain on disposition of discontinued operations -- 0.07 --
----------- ----------- -----------
Income (loss) before extraordinary item 1.07 (1.87) 0.83
Extraordinary item (0.01) 0.04 --
----------- ----------- -----------
Net income (loss) $ 1.06 ($ 1.83) $ 0.83
=========== =========== ===========
Fully diluted:
Continuing operations $ 0.99 ($ 1.90) $ 0.67
Discontinued operations 0.01 (0.04) 0.16
Gain on disposition of discontinued operations -- 0.07 --
----------- ----------- -----------
Income (loss) before extraordinary item 1.00 (1.87) 0.83
Extraordinary item (0.01) 0.04 --
----------- ----------- -----------
Net income (loss) $ 0.99 ($ 1.83) $ 0.83
=========== =========== ===========
Weighted average number of shares used in
computing income (loss) per share:
Primary 7,524,292 7,208,173 7,509,979
Fully diluted 8,201,917 7,208,173 7,509,979
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
- ------------------------------------------------------------------------------- -------- --------
AS OF DECEMBER 31, 1996 1995
- ------------------------------------------------------------------------------- -------- --------
<S> <C> <C>
ASSETS
Cash and equivalents $ 15,905 $ 1,255
Accounts receivable, less allowance for doubtful accounts
of $633 in 1996 and $1,530 in 1995 28,364 28,250
Inventories 16,984 18,544
Other current assets 4,825 7,044
-------- --------
Current assets 66,078 55,093
Property and equipment, net 58,523 64,333
Investment in WinsLoew Furniture, Inc. stock - 4,798
Goodwill, net of accumulated amortization 50,532 52,680
Other assets 2,768 3,557
-------- --------
$177,901 $180,461
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 27,131 $ 28,725
Current portion of long-term debt 2,517 3,168
-------- --------
Current liabilities 29,648 31,893
Long-term debt, less current portion 105,365 113,294
Deferred income taxes 6,886 6,610
Other liabilities 1,093 1,372
-------- --------
Total liabilities 142,992 153,169
-------- --------
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,
4,225,823 and 4,192,823 shares issued and outstanding in 1996 and 1995 423 419
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 6,968 6,828
Unrealized holding gain, net of tax - 287
Retained earnings 25,228 17,468
-------- --------
Total shareholders' equity 34,909 27,292
-------- --------
$177,901 $180,461
======== ========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
- ----------------------------- ----------- --------- --------- ---------- ----------- --------- -------- --------
SERIES A UNREALIZED TOTAL
YEARS ENDED CONVERTIBLE CLASS A CLASS B ADDITIONAL HOLDING SHARE-
DECEMBER 31, 1996, PREFERRED COMMON COMMON PAID-IN GAINS RETAINED TREASURY HOLDERS'
1995 AND 1994 STOCK STOCK STOCK CAPITAL (LOSSES) EARNINGS STOCK EQUITY
- ----------------------------- ----------- --------- --------- ---------- ----------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1993 $2,000 $401 $336 $7,998 $- $25,702 ($1,304) $35,133
Adjustment to opening
balance for change in method
of accounting for investment
securities, net of tax - - - - 1,020 - - 1,020
Net income - - - - - 6,366 - 6.366
Dividends on preferred and
common stock - - - - - (851) - (851)
Conversions of Class B
common stock - 32 (32) - - - - -
Exercise of stock options,
including tax benefit - 4 - 124 - - 177 305
Purchases of 122,184 Class A
common treasury stock - - - - - - (729) (729)
Cancellation of treasury shares - (29) (4) (1,823) - - 1,856 -
Adjustment of minority interest
obligation - - - 482 - - - 482
Decrease in unrealized gain,
net of tax - - - - (1,304) - - (1,304)
- ------------------------------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1994 2,000 408 300 6,781 (284) 31,217 - 40,422
Net loss - - - - - (13,072) - (13,072)
Dividends on preferred and
common stock - - - - - (677) - (677)
Conversions of Class B
common stock 10 (10) - - - - -
Exercise of stock options,
including tax benefit - 1 - 47 - - - 48
Increase in unrealized gain,
net of tax - - - - 571 - - 571
- ------------------------------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1995 2,000 419 290 6,828 287 17,468 - 27,292
Net income - - - - - 8,097 - 8,097
Decrease in unrealized gain,
net of tax - - - - (287) - - (287)
Exercise of stock options,
including tax benefit - 6 - 166 - - - 172
Purchases of Class A common stock - - - - - - (256) (256)
Cancellation of Class A common stock - (2) - (26) - (228) 256 -
Dividends on preferred stock - - - - - (109) - (109)
- ------------------------------------------------------------------------------------------------------------------------
BALANCE,
December 31, 1996 $2,000 $423 $290 $6,968 $ - $25,228 $ - $34,909
========= ========= ========= ========== ========= =========== ========== ===========
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
- ---------------------------------------------------------------------------------- -------- -------- --------
YEARS ENDED DECEMBER 31, 1996 1995 1994
- ---------------------------------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ 8,097 ($13,072) $ 6,366
-------- -------- --------
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation 7,810 8,284 7,821
Amortization of goodwill 1,603 1,900 1,803
Loan fee and other amortization 548 522 521
Provision for impairment of long-lived assets -- 10,551 --
Loss (gain) on early extinguishment of debt 112 (392) --
Gain on dispositions of businesses and assets (6,718) (814)
Provision for losses on properties held for sale -- 568 --
Change in assets and liabilities, net of dispositions
and acquisitions of businesses:
(Increase) decrease in accounts receivable (1,766) 8,335 (10,918)
Decrease (increase) in inventories 411 4,311 (5,650)
Decrease (increase) in other current assets 2,205 (691) (2,028)
(Decrease) increase in accounts payable and accrued expenses (1,088) (3,673) 5,275
Increase (decrease) in deferred income taxes 544 (1,232) 456
Decrease in other liabilities (238) (254) (232)
Other, net 106 664 29
Effects of discontinued operations -- (1,033) (1,394)
-------- -------- --------
Total adjustments 3,529 27,046 (4,317)
-------- -------- --------
Net cash provided by operating activities 11,626 13,974 2,049
-------- -------- --------
Cash Flows From Investing Activities
Proceeds from dispositions of businesses and assets 18,583 13,014 571
Payment for acquisition of assets of business -- -- (12,412)
Capital expenditures (6,750) (13,764) (16,448)
-------- -------- --------
Net cash provided by (used in) investing activities 11,833 (750) (28,289)
-------- -------- --------
Cash Flows from Financing Activities
Borrowings under revolving credit agreements 27,435 27,916 37,591
Repayments under revolving credit agreements (27,435) (49,519) (15,988)
Payments on long-term debt (12,258) (6,808) (524)
Proceeds from issuance of long-term debt 3,678 15,639 5,776
Dividends on preferred and common stock (145) (677) (852)
Purchases of common stock (256) -- (729)
Proceeds from exercise of stock options 172 47 229
-------- -------- --------
Net cash (used in) provided by financing activities (8,809) (13,402) 25,503
Net increase (decrease) in cash and equivalents 14,650 (178) (737)
Cash and equivalents at beginning of year 1,255 1,433 2,170
-------- -------- --------
Cash and equivalents at end of year $ 15,905 $ 1,255 $ 1,433
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 12,241 $ 14,017 $ 12,612
Income taxes $ 1,630 $ 1,404 $ 4,300
</TABLE>
Note: In 1994, the Company purchased certain assets and liabilities of Advanced
Plastics, Inc. with a fair value of approximately $13.1 million and $700,000,
respectively, for total consideration of approximately $12.4 million.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, automotive, recreational vehicle, and
dairy industries.
Atlantis Plastic Films manufactures stretch films which are multilayer
plastic films that are used principally to wrap pallets of materials for
shipping or storage and custom film products which include high-grade laminating
films, embossed films, and specialty film products targeted primarily to
industrial and packaging markets.
Atlantis Molded Plastics employs two principal technologies, serving a
wide variety of specific market segments: (i) injection molded thermoplastic
parts that are sold primarily to original equipment manufacturers and used in
major household appliances, agricultural and automotive products, and (ii) a
variety of extruded plastic parts for trim and functional applications (profile
extrusion) that are incorporated into a broad range of consumer and commercial
products such as recreational vehicles, residential doors and windows, office
furniture and retail store fixtures.
Discontinued operations in 1995 and 1994 consisted of the operations of
Western Pioneer which was sold on August 31, 1995.
The following is a summary of the Company's significant accounting
policies:
BASIS OF PRESENTATION The consolidated financial statements include the accounts
of Atlantis and its subsidiaries, all of which are wholly-owned. With regard to
the Company's former 50% interest in the CKS/Rigal joint venture (sold during
September, 1995), the Company recorded its proportionate share of the joint
venture's results of operations, during the periods that the Company owned the
investment, using the equity method of accounting. All material intercompany
balances and transactions have been eliminated.
CASH AND EQUIVALENTS The Company classifies as cash and equivalents all highly
liquid investments which present insignificant risk of changes in value and have
maturities at the date of purchase of three months or less. The Company
maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts.
INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or
market.
PROPERTY AND EQUIPMENT Property and equipment are carried at cost less
accumulated depreciation and amortization. The provisions for depreciation and
amortization have been computed, using both straight-line and accelerated
methods, over the estimated useful lives of the respective assets. Such useful
lives generally fall within the following ranges: buildings and improvements -
15 to 30 years; office furniture and equipment - 5 to 10 years; manufacturing
equipment - 5 to 30 years; and vehicles - 3 to 8 years.
When assets are retired or otherwise disposed, the costs and accumulated
depreciation are removed from the respective accounts, and any related profit or
loss is recognized. Maintenance and repair costs are charged to expense as
incurred. Additions and improvements are capitalized.
GOODWILL Goodwill represents the excess of the purchase price over the fair
value of identifiable assets and liabilities of acquired businesses. Goodwill is
amortized on a straight-line basis over forty years from the date of the
respective acquisitions. Accumulated amortization, excluding the goodwill
writeoffs described in Note 14, amounted to approximately $14.3 million and
$12.7 million at December 31, 1996 and 1995, respectively.
LONG-LIVED ASSETS In the fourth quarter of 1995, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
SFAS No. 121
-24-
<PAGE>
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present, and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The statement also requires that impairment losses be recorded
on long-lived assets to be disposed of when the carrying value of the asset
exceeds the fair value (usually based on discounted cash flows) less the
estimated selling costs. Under this method, the Company reviews for impairment
whenever events or changes in circumstances indicate that the carrying amount of
any of its assets may not be recoverable.
REVENUE RECOGNITION The Company primarily recognizes revenue when goods are
shipped to customers.
AMORTIZATION Loan acquisition costs and related legal fees are amortized over
the respective terms of the related debt utilizing either: (i) the effective
interest method, or (ii) the straight line method when the results do not
materially differ from the effective interest method.
INCOME TAXES The Company and its subsidiaries file consolidated Federal income
tax returns. The Company records income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
PER SHARE DATA Primary earnings (loss) per share are computed by dividing net
income (loss) after deduction of annual preferred dividend requirements, by the
weighted average number of shares and dilutive share equivalents outstanding
during each year. The Company's convertible preferred stock was determined not
to be a common share equivalent in computing primary earnings per share. In
computing 1996 fully diluted income per share, the convertible preferred stock
was assumed to be converted into 210,244 shares of common stock.
USE OF ESTIMATES The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the dates of the
consolidated financial statements, and reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
RECLASSIFICATIONS Certain amounts included in prior period financial statements
have been reclassified to conform with the current year presentation.
NOTE 2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES AND ASSETS
ACQUISITION
During May 1994, the Company purchased substantially all of the assets
(excluding cash) and assumed all of the liabilities (excluding interest bearing
indebtedness and other amounts due to the seller) of Advanced Plastics, Inc.
("Advanced"), an injection molder located in Warren, Ohio, for approximately
$12.4 million. The Company also purchased real estate leased by Advanced and
owned by the seller. The acquisition was accounted for using the purchase
method, and accordingly, the results of operations of Advanced have been
included in the consolidated income statements since the date of the
acquisition.
DISPOSITIONS
In August 1995, the Company sold Western Pioneer for $12.0 million,
generating a pretax gain of $914,000, and an after tax gain of $483,000. In
September 1995, the Company sold its 50% interest in the CKS/Rigal blow molding
joint venture for approximately $870,000, generating a pretax loss of $100,000,
and an after tax gain of $37,000. The net cash proceeds after expenses from
these 1995 sales were applied to the Company's revolving credit facility.
During the fourth quarter of 1996 the Company completed the following
transactions, generating a total pretax gain of $6.7 million: (i) in November,
the Company sold PCI for approximately $8.3 million, generating a pretax gain of
approximately $1.4 million, and an after tax gain of approximately $1.9 million,
(ii) in December, the Company sold its Tulsa custom
-25-
<PAGE>
manufacturing facility for $1.5 million, generating a pretax gain of
approximately $350,000, and an after tax gain of approximately $210,000, and
(iii) also during December, the Company sold its investment in WinsLoew
Furniture, Inc. stock to WinsLoew for approximately $9.3 million, generating a
pretax gain of approximately $4.9 million, and an after tax gain of
approximately $2.9 million.
A portion of the net cash proceeds after expenses from the PCI sale was
used during the fourth quarter of 1996 to pay off the outstanding balance on the
Company's revolving credit facility. As of December 31, 1995 the cost,
unrealized gain and fair value of the WinsLoew investment, which was classified
as available-for-sale, were $4.4 million, $435,000, and $4.8 million,
respectively. WinsLoew is affiliated with Atlantis through its relationship with
Trivest, Inc. ("Trivest") see Note 12.
NOTE 3. INVENTORIES
Inventories at December 31, 1996 and 1995 consisted of the following:
(IN THOUSANDS)
1996 1995
---- ----
Raw materials $9,649 $9,382
Work in progress 204 465
Finished goods 7,131 8,697
------- -------
TOTAL $16,984 $18,544
======= =======
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1995 consisted of the
following:
(IN THOUSANDS)
1996 1995
---- ----
Land $2,203 $2,886
Building & improvements 17,265 18,638
Office furniture & equipment 5,526 5,036
Manufacturing equipment 84,690 88,219
Vehicles 398 826
------- -------
TOTAL 110,082 115,605
Accumulated depreciation
and amortization (51,559) (51,272)
------- -------
NET $58,523 $64,333
======= =======
As more fully described in Note 14, during the fourth quarter of 1995
the Company wrote down certain fixed assets at its Tulsa custom facility by
approximately $1.7 million.
-26-
<PAGE>
NOTE 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following at
December 31, 1996 and 1995:
(IN THOUSANDS)
1996 1995
---- ----
Accounts payable $8,628 $14,631
Accrued interest 3,722 4,058
Accrued compensation, vacation
& profit sharing 3,845 2,439
Accrued health & safety expense 1,310 1,854
Customer deposits
and commissions 1,502 862
Income taxes payable 1,967 171
Accrued construction in progress 2,252 1,439
Other 3,905 3,271
------- -------
TOTAL $27,131 $28,725
======= =======
NOTE 6. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1996 and
1995:
(IN THOUSANDS)
1996 1995
---- ----
Senior Notes $89,500 $95,200
Revolving credit facility - -
Other indebtedness 18,382 21,262
------- -------
TOTAL LONG-TERM DEBT 107,882 116,462
Current portion (2,517) (3,168)
-------- --------
LONG-TERM DEBT, NET $105,365 $113,294
======== ========
During early 1993, the Company refinanced substantially all of its
existing indebtedness through a $100 million, 11% Senior Note offering due
February 15, 2003 (the "Notes"), and borrowings under a $30.0 million revolving
credit facility which matures in February 1998.
During July 1996, the Company repurchased, at a slight discount, $5.7
million of its Notes in the open market, which resulted in an after tax
extraordinary loss of $73,000, principally related to the write-off of
unamortized loan origination costs. During December 1995, the Company
repurchased, at a discount, $4.8 million of its Notes in the open market, and
recognized an extraordinary gain of $254,000, net of tax.
The Notes are senior unsecured obligations of the Company, with all of
the Company's plastics subsidiaries jointly, severally and unconditionally
guaranteeing the payment of principal and interest. The Notes may not be
redeemed prior to February 15, 1998. On and after that date and until February
15, 2001, the Company may redeem all or any portion of the Notes at redemption
prices ranging from 104.125% to 101.375% of the principal amount. After February
15, 2001, the Company may redeem all or any portion of the Notes at 100% of the
principal amount. The Company must redeem $14.5 million and $25.0 million,
respectively, of the Notes on February 15, 2001 and 2002.
Covenants relating to the Notes restrict the Company from paying
dividends, incurring new debt or taking certain other actions unless specified
interest coverage ratio and other tests are met. The Company met the interest
coverage ratio requirement for the trailing four quarters ended September 30 and
December 31, 1996, and is therefore currently able to, among other things, pay
dividends and incur new debt.
During 1995, a decline in operating profitability caused the Company to
fall below the interest coverage ratio requirement for the trailing four quarter
periods ended September 30 and December 31, 1995, and March 31 and June 30,
-27-
<PAGE>
1996. Accordingly, during those periods the Company could not pay dividends, and
its ability to incur new debt or take certain other actions was restricted.
Under the terms of the revolving credit facility, the Company and its
subsidiaries are required to, among other things, maintain certain financial
ratios and minimum specified levels of net worth, refrain from paying dividends
unless certain requirements are met, refrain from incurring additional
indebtedness, or guaranteeing the obligations of others, and limit capital
expenditures. At December 31, 1996, the gross availability on the revolving
credit facility equaled $30.0 million. Unused availability, net of outstanding
letters of credit of approximately $1.5 million, equaled $28.5 million. In
addition, at year-end the Company had approximately $6.1 million of unused
availability under an existing equipment financing program.
Borrowings on the revolving credit facility are subject to a borrowing
base formula which is based on eligible collateral (accounts receivable,
inventories and fixed assets of the subsidiaries). Interest is computed using
either LIBOR or prime-based rates plus a margin. Effective December 31, 1996 the
Company favorably amended the revolving credit facility provisions governing
interest rates and other fees charged by the lender. The LIBOR and prime-based
interest rate margins on the facility are now determined by a formula based upon
the Company's ratio of cash flow to net indebtedness, as defined in the
amendment. At December 31, 1996 the LIBOR and prime rate margins were 1.75% and
0%, respectively, compared to 3% and 1.5%, respectively, at December 31, 1995.
The 30-day LIBOR rate and the prime rate were 5.70% and 8.25%, respectively, at
December 31, 1996.
Other indebtedness of approximately $18.4 million consists of equipment
and other collateralized financings entered into during 1994 through 1996, along
with industrial revenue bonds and capitalized lease obligations entered into
prior to 1994. At December 31, 1996 and 1995, the weighted average interest
rates on these borrowings were 7.97% and 8.40%, respectively, with 85% of the
total at floating interest rates, and the remainder at fixed interest rates as
of December 31, 1996.
Scheduled maturities of indebtedness in each of the next five years are
as follows (in thousands):
YEAR AMOUNT
---- ------
1997 $2,517
1998 3,477
1999 2,505
2000 2,851
2001 16,846
Thereafter 79,686
--------
TOTAL $107,882
========
Based on the quoted market price of the Notes, and the borrowing rates
available to the Company for loans with similar terms and average maturities,
the fair value of the Company's indebtedness at December 31, 1996 and 1995 was
$111.5 million and $106.5 million, respectively.
NOTE 7. CAPITAL STOCK
Generally, the Class A Common Stock has one vote per share and the
Class B Common Stock has ten votes per share. Holders of the Class B Common
Stock are entitled to elect 75% of the Board of Directors; holders of Class A
Common Stock are entitled to elect the remaining 25%. Each share of Class B
Common Stock is convertible, at the option of the holder thereof, into one share
of Class A Common Stock. Class A Common Stock is not convertible into shares of
any other equity security.
-28-
<PAGE>
During February 1994, the Company's Board of Directors approved a 2.5
cents per share quarterly dividend program beginning in April 1994, and
consecutive quarterly dividends were paid through October 1995, after which the
dividend program was discontinued .
In November 1996, the Board of Directors authorized the repurchase of
up to 1,000,000 shares of Atlantis Class A Common Stock, or 14% of the 7.1
million Class A and Class B Common Stock then outstanding. Through late March
1997 the Company has repurchased 320,344 shares (including 210,244 shares
issued in connection with the conversion of preferred stock), and options for
55,125 shares, for total consideration of approximately $3.3 million. The
Company intends to continue to buy its shares in the open market, or in
privately negotiated transactions, at times and prices deemed advantageous.
Prior to the 1997 conversion of Preferred Stock into common stock and
subsequent repurchase of that common stock, each share of Preferred Stock had a
liquidation preference of $100, and the holder of the Preferred Stock was
entitled to an annual cumulative dividend, payable in equal semiannual
installments of $72,500 on April 15 and October 15 of each year.
NOTE 8. INCOME TAXES
The income tax provision (benefit) for the years ended December 31,
1996, 1995 and 1994 consisted of the following:
(IN THOUSANDS)
1996 1995 1994
---- ---- ----
Continuing operations $4,396 ($1,674) $4,136
Discontinued operations 51 (445) 331
Tax effect from sale of Western Pioneer -- 432 --
Extraordinary (loss) gain (39) 137 --
------ ------- ------
TOTAL $4,408 ($1,550) $4,467
====== ======= ======
Current Federal income tax expense $2,607 $108 $3,588
Deferred Federal income tax expense (benefit) 1,182 (1,601) 388
State income tax expense (benefit) 619 (57) 491
------ -------- ------
TOTAL INCOME TAX PROVISION (BENEFIT) $4,408 ($1,550) $4,467
====== ======== ======
The following table provides a reconciliation between the Federal
income tax rate and the Company's effective income tax rate for the years ended
December 31, 1996, 1995 and 1994:
1996 1995 1994
---- ---- ----
Federal income tax rate 34% (34%) 34%
Disposition of PCI (9) -- --
Impairment of long-lived assets -- 20 --
State income taxes 3 (1) 3
Amortization of goodwill 4 4 5
Other, net 3 (1) (1)
- --- ---
Effective tax rate 35% (12%) 41%
=== === ===
-29-
<PAGE>
At December 31, 1996 and 1995, deferred tax assets and liabilities
consisted of the following:
(IN THOUSANDS)
1996 1995
---- ----
DEFERRED TAX LIABILITIES-
Excess of book over tax basis of
property and equipment $7,154 $6,667
Goodwill 383 232
Excess of book over tax basis of
investment in WinsLoew -- 1,550
Other, net 224 52
----- -----
TOTAL DEFERRED TAX LIABILITIES 7,761 8,501
----- -----
DEFERRED TAX ASSETS -
Reserves and accrued expenses not yet
deductible for tax purposes 2,301 2,420
Alternative minimum tax credit
carryforwards -- 975
Capitalized inventory costs 34 64
----- -----
TOTAL DEFERRED TAX ASSETS 2,335 3,459
----- -----
DEFERRED INCOME TAXES, NET $5,426 $5,042
===== =====
At December 31, 1996 and 1995, classification of net current deferred
tax assets and liabilities and net noncurrent tax assets and liabilities is as
follows:
Deferred income taxes $6,886 $6,610
Less: Other current assets 1,460 1,568
------ ------
$5,426 $5,042
====== ======
NOTE 9. STOCK OPTION PLANS
The Company's Stock Option Plans ("Option Plans") are designed to serve
as an incentive for retaining qualified and competent employees, directors and
agents. Options may be granted under the Option Plans on such terms and at such
prices as determined by the Compensation Committee of the Board of Directors
(consisting only of outside directors); provided, however, that the exercise
price of options granted under the Option Plans will not be less than 90% of the
market value of the Class A Common Stock on the date of grant. To date, the
exercise price of all options granted under the Option Plans has been equal to
or greater than the fair market value of the Class A Common Stock on the date of
grant. Each option will be exercisable after the period or periods specified in
the option agreement, but no option shall be exercisable after the expiration of
ten years from the date of grant. Options granted under the Option Plans are not
transferable other than by will or by the laws of descent and distribution. The
Option Plans also authorize the Company to make loans to optionees to exercise
their options.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issues to Employees," and related interpretations in
accounting for its plans. Accordingly, no compensation expense has been
recognized for its stock-based compensation plans. Had compensation cost for the
Company's stock option plans been determined based upon the fair value at the
grant date for awards under these plans consistent with the methodology
prescribed under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation," the Company's 1996 net income and
earnings per share (primary) would have been reduced by approximately $160,000
and $0.02 per share, respectively, and the Company's 1995 net loss and loss per
share would have been increased by $118,000 and $0.02, respectively. The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following
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<PAGE>
weighted average assumptions used for 1996 and 1995, respectively: dividend
yield of 0% for both years; volatility of 45% for both years; risk-free interest
rates of 6.7% and 7.4%; and an expected life of 6 years for both years.
Information with respect to the Option Plans is as follows (in
thousands of shares, except prices per share):
1996 1995 1994
----- ----- ----
OPTIONS OUTSTANDING AT JANUARY 1ST 1,719 1,459 1,410
Granted 145 501 126
Exercised (60) (8) (73)
Canceled (32) (233) (4)
------ ----- ------
OPTIONS OUTSTANDING AT DECEMBER 31ST 1,772 1,719 1,459
====== ===== ======
WEIGHTED AVERAGE OPTION PRICES PER COMMON SHARE:
OPTIONS OUTSTANDING AT JANUARY 1ST $5.12 $4.19 $3.94
Granted at fair market value $6.32 $6.27 $6.38
Granted at above fair market value N/A $10.38 N/A
Exercised $2.86 $5.89 $3.11
Canceled $6.02 $5.28 $4.99
OUTSTANDING AT DECEMBER 31ST $5.28 $5.12 $4.19
Weighted-average fair value of options granted
at fair market value during the year $3.36 $3.40 $3.27
Weighted-average fair value of options granted
at above fair market value during the year N/A $ 2.25 N/A
Options exercisable at December 31st 1,164 1,207 976
Options available for grant at December 31st 193 257 625
The following table summarizes information about stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------- OPTIONS EXERCISABLE
WEIGHTED- ------------------- WEIGHTED-
NUMBER AVERAGE WEIGHTED NUMBER AVERAGE
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE EXERCISE
EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/96 PRICE
--------------- ----------- ---------------- ---------------- ----------- -----
<S><C> <C> <C> <C> <C> <C>
$1.38 -$ 2.99 85,460 5.08 $ 2.70 75,340 $2.68
$3.00 - $4.99 953,381 2.52 $ 3.84 868,381 $3.75
$5.00 - $6.99 448,094 7.52 $ 5.96 173,535 $5.91
$7.00 - $8.99 135,500 8.17 $ 8.45 27,100 $8.45
$9.00 - $11.88 150,000 8.69 $11.00 20,000 $11.88
</TABLE>
-31-
<PAGE>
NOTE 10. BUSINESS SEGMENTS
The Company considers its continuing operations to comprise two
segments: Atlantis Plastic Films and Atlantis Molded Plastics. During 1996, 1995
and 1994, an Atlantis Molded Plastics customer accounted for approximately 9%,
10%, and 13%, respectively, of the Company's net sales. Summary data for 1996,
1995 and 1994 is as follows (in thousands):
ATLANTIS ATLANTIS
PLASTIC MOLDED
FILMS PLASTICS CORPORATE CONSOLIDATED
-------- -------- --------- ------------
1996
- ----
Net sales $177,851 $89,268 $ -- $267,119
Operating income 11,740 6,650 -- 18,390
Identifiable assets 108,586 53,519 15,796 177,901
Capital expenditures 4,084 2,026 640 6,750
Depreciation & amortization 6,002 3,393 566 9,961
1995
- ----
Net sales $192,806 $88,258 $ -- $281,064
Operating income (loss) 1,982 (2,697) -- (715)
Identifiable assets 111,831 56,419 12,211 180,461
Capital expenditures 7,616 5,472 676 13,764
Depreciation & amortization 6,638 3,511 557 10,706
1994
- ----
Net sales $173,947 $86,871 $ -- $260,818
Operating income 13,455 8,918 -- 22,373
Identifiable assets 124,557 67,172 19,793 211,522
Capital expenditures 9,702 6,687 59 16,448
Depreciation & amortization 6,663 2,918 564 10,145
NOTE 11. PROFIT SHARING AND RETIREMENT PLANS
Atlantis and certain of its subsidiaries have profit sharing and
defined contribution retirement plans. Generally, such plans cover all employees
who have attained the age of 21 and have at least one year of service.
Contributions to the plans are determined by the individual companies' Boards of
Directors on an annual basis. Related expenses applicable to continuing
operations were approximately $1.1 million, $812,000 and $1.1 million for the
years ended December 31, 1996, 1995 and 1994, respectively.
NOTE 12. RELATED PARTIES
A management agreement exists between the Company and Trivest, an
affiliate of a major shareholder. Trivest and the Company have certain common
officers, directors and shareholders. Fees charged to expense under this
agreement, including the portion related to discontinued operations, amounted to
$497,000, $478,000, and $399,000 for the years ended December 31, 1996, 1995 and
1994, respectively. This agreement expires in December 1997. In addition to the
above fees, Atlantis paid Trivest an acquisition fee of $405,000 relating to the
May 1994 acquisition of Advanced.
Atlantis shares its Miami, Florida office space with several related
entities. Rent expense for this office space, as well as certain other
non-direct general and administrative expenses, are allocated among Atlantis and
these entities.
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<PAGE>
NOTE 13. COMMITMENTS AND CONTINGENCIES
The Company is, from time to time, involved in routine litigation.
None of such litigation, in which the Company is presently involved, is believed
to be material to its financial condition or results of operations.
As part of Atlantis' ongoing capital spending program, the Company has
converted, or is in the process of converting, its information systems in order
to accomodate the year 2000 century date change.
Atlantis and its subsidiaries lease various office space, buildings,
transportation and production equipment with terms in excess of one year. Total
expense under these agreements for the years ended December 31, 1996, 1995 and
1994 was approximately $1.7 million, $1.5 million and $2.2 million,
respectively.
The total minimum rental commitments under long-term, noncancelable
operating leases at December 31, 1996 consisted of the following (in thousands):
YEAR AMOUNT
---- ------
1997 $1,613
1998 1,347
1999 581
2000 355
2001 329
Thereafter 548
------
TOTAL $4,773
======
NOTE 14. IMPAIRMENT OF LONG-LIVED ASSETS AND OTHER RESTRUCTURING CHARGES
In accordance with the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
during the fourth quarter of 1995 the Company wrote off certain goodwill and
wrote down certain fixed assets, as discussed below.
The Company's Tulsa custom film facility was unprofitable during 1995,
had experienced operating losses in prior periods, and was expected to continue
to incur operating losses in the future if the fourth quarter 1995 restructuring
of the business was not undertaken. As part of that restructuring, the Company
estimated the facility's future cash flows from its operations and its eventual
disposition, compared those amounts to its carrying value, and determined that
an impairment loss should be recognized. Accordingly, during the fourth quarter
of 1995 goodwill associated with the facility was written off, and its fixed
assets were written down to fair value. This facility was closed in August 1996,
and was subsequently sold in December 1996 (see Note 2).
Also during the fourth quarter of 1995, the Company decided to dispose
of PCI as part of its strategy to focus its resources on the manufacture of film
products and selected molded products. The Company determined that the carrying
value of this operation exceeded its fair value, and determined the amount of
the impairment charge by developing its best estimate of the fair value of the
long-lived assets and comparing it to the carrying value of those long-lived
assets. As a result, the majority of the goodwill associated with this business
was written off during the fourth quarter of 1995. During 1996, PCI's
profitability improved compared to 1995 levels, and in 1996, PCI was sold for
approximately $8.3 million (see Note 2).
The fourth quarter 1995 noncash charges for the impairment of
long-lived assets associated with the Tulsa custom film facility and the
reduction in carrying value of PCI totaled $10.6 million. Of this amount,
goodwill write-offs totalled approximately $8.9 million (with no associated tax
benefit), and fixed asset write-downs totalled approximately $1.7 million
pretax, or $1.0 million after tax.
During 1995, the Company also recorded restructuring charges of
approximately $1.9 million related to: (i) the first quarter 1995 reorganization
of its senior management group (approximately $750,000), (ii) the third and
fourth quarter 1995 reconfiguration of its stretch film sales organization
(approximately $800,000), and (iii) the fourth quarter 1995 headcount
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<PAGE>
reduction costs associated with the restructuring of the Tulsa custom facility
and the injection molding unit (approximately $350,000). As of December 31, 1996
all amounts relating to these matters have been paid.
NOTE 15. DISCONTINUED OPERATIONS
Discontinued operations in 1995 consisted of the operations of Western
Pioneer. The Western Pioneer sale contract contains a provision which requires
that the adequacy of Western Pioneer's loss reserves as of March 31, 1995 (the
"Original Loss Reserves") be evaluated during the fourth quarter of 1997 (with
provisions for extension of the evaluation to a later date). The Original Loss
Reserves will be evaluated by comparison of the Original Loss Reserve amount to
the sum of the actual payments made from March 31, 1995 to the evaluation date,
plus the remaining loss reserves related to the coverage in place at March 31,
1995 (together, the "Actual Loss Reserves"). To the extent that the Original
Loss Reserves are greater or less than the Actual Loss Reserves, the Company
will receive an additional payment from, or make an additional payment to, the
purchaser of Western Pioneer, subject to certain deductions. At the present
time, the Company does not anticipate that it will be required to make an
additional payment in the future related to this contract provision.
During 1996, the Company sold vacant land acquired in connection with
the Western Pioneer sale and recognized a net after tax loss of approximately
$47,000. In addition, during 1996 the Company recognized additional income on
the sale of Western Pioneer of approximately $143,000, net of tax, related to
certain tax benefits due to the Company.
The following table summarizes Western Pioneer's operating results for
the eight months ended August 31, 1995 and the year ended December 31, 1994:
(IN THOUSANDS)
1995 1994
---- ----
Revenues $17,621 $23,306
Expenses 17,872 22,099
------ ------
Net income (loss) $ (251) $ 1,207
====== ======
NOTE 16. ACCOUNTING PRONOUNCEMENTS
In February 1997, SFAS No. 128, "Earnings Per Share" was issued. SFAS
No. 128 specifies the computation, presentation, and disclosure requirements for
Earnings Per Share ("EPS"), and is designed to improve the EPS information
provided in financial statements by simplifying the existing computational
guidelines, revising the disclosure requirements, and increasing the
comparability of EPS data on an international basis. SFAS 128 must be
implemented no later than fiscal year 1997. The Company has not yet determined
the effect on operating results of implementing the statement, however, the
adoption of SFAS 128 is not expected to have a materially adverse effect on
consolidated financial position.
NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited consolidated quarterly financial data for the years ended
December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES $64,273 $77,857 $70,576 $68,344 $68,211 $70,911 $64,059 $63,952
GROSS PROFIT 11,501 14,170 12,892 8,377 11,566 9,390 9,783 9,158
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 335 943 1,344 (1,726) 1,322 (1,277) 5,073 (11,498)
NET INCOME (LOSS) 335 951 1,297 (2,341) 1,392 (439) 5,073 (11,243)
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM PER
COMMON SHARE-
PRIMARY (SEE NOTE) $0.04 $0.12 $0.17 ($0.23) $0.17 ($0.17) $0.65 ($1.62)
</TABLE>
Note: For the fourth quarter of 1996, fully diluted income before extraordinary
item per common share equaled $0.62.
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<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has had no changes in or disagreements with its independent
accountants on accounting and financial disclosure.
PART III
ITEMS 10, 11, 12, AND 13.
The information called for by Items 10, 11, 12, and 13 is incorporated
by reference to the registrant's Proxy Statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(A) DOCUMENTS FILED AS A PART OF THIS REPORT:
PAGE(S)
-------
(1) Financial Statements:
Report of Independent Accountants.................... 19
Consolidated Income Statements....................... 20
Consolidated Balance Sheets.......................... 21
Consolidated Statements of Shareholders' Equity...... 22
Consolidated Statements of Cash Flows................ 23
Notes to Consolidated Financial Statements........... 24
(2) Financial Statement Schedules:
The following Financial Statement Schedule for the years
ended December 31, 1994, 1995 and 1996 is submitted herewith:
Report of independent accountants on Financial
Statement Schedule.......................... 36
Schedule II
Valuation and Qualifying Accounts.......... 37
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission have been omitted because the required
information is contained in the financial statements and
notes thereto or because such schedules are not required or
applicable.
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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Atlantis Plastics, Inc.:
In connection with our audits of the consolidated financial statements of
Atlantis Plastics, Inc., as of December 31, 1996 and 1995, and for each of the
three years in the period ended December 31, 1996, which financial Statements
are included in this Annual Report on Form 10-K, we have also audited the
financial statement schedule listed in Item 14(A)2 herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included herein.
Atlanta, Georgia Coopers & Lybrand L.L.P.
February 7, 1997
-36-
<PAGE>
<TABLE>
<CAPTION>
Atlantis Plastics, Inc.
Schedule II - Valuation and Qualifying Accounts
for the years ended December 31
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
CLASSIFICATION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
---------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
1996
Allowances reducing the assets in the balance sheet:
Doubtful accounts receivable $1,530 $ 143 $- $1,040 $ 633
Reserve for inventory obsolesence 342 91 - 15 418
------ ------ -- ------ -------
Total $1,872 $ 234 $0 $1,055 $1,051
====== ====== == ====== =======
1995
Allowances reducing the assets in the balance sheet:
Doubtful accounts receivable $ 761 $1,152 $- $ 383 $1,530
Reserve for inventory obsolesence 266 140 - 64 342
------ ------ -- ------ ------
Total $1,027 $1,292 $0 $ 447 $1,872
====== ====== == ====== ======
1994
Allowances reducing the assets in the balance sheet:
Doubtful accounts receivable $ 258 $ 618 $- $ 115 $ 761
Reserve for inventory obsolesence 103 163 - - 266
------ ------ -- ------- ------
Total $ 361 $ 781 $0 $ 115 $1,027
====== ====== == ======= ======
</TABLE>
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<PAGE>
(3) Exhibits (An asterisk to the left of an exhibit number denotes a
management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Form 10-K.)
2.1 Agreement and Plan of Merger by and between Atlantis Plastics, Inc.,
a Florida corporation and Atlantis Group, Inc., a Delaware
corporation, dated as of April 22, 1994. (2)(1)
3.1 Registrant's Articles of Incorporation (3.1)(1)
3.2 Registrant's Bylaws (February 1988) (3.2)(1)
4.1 Form of Stock Certificate evidencing ownership of Registrant's Class
A Common Stock(10)
4.2 Trust Indenture between Registrant and American Stock Transfer and
Trust Company (4.2)(7)
4.3 Form of Senior Note, dated February 15, 1993 (4.3)(7)
*10.1 Registrant's Amended and Restated Stock Option Plan, dated as of
March 16, 1989 (10.1)(4)
*10.2 Registrant's 1987 Disinterested Directors Stock Option Plan (10.2)(2)
*10.3 Registrant's Amended and Restated 1990 Stock Option Plan (10.2)(4)
*10.4 Fourth Amended and Restated Management Agreement between Registrant
and Trivest, Inc. (10.5)(6)
*10.5 Second Amended and Restated Employment Agreement, dated January 1,
1990 between Registrant and Earl W. Powell (10.6)(3)
*10.6 First Amendment To Second Amended and Restated Employment Agreement,
dated as of April 1, 1992, between Registrant and Earl W. Powell
(10.7)(7)
*10.7 Employment Agreement, dated January 1, 1990, between Registrant and
Phillip T. George, M.D. (10.7)(3)
*10.8 First Amendment to Employment Agreement, dated as of April 1, 1992,
between the Registrant and Phillip T. George, M.D. (10.9)(7)
10.9 Form of Indemnification Agreement (10.47)(9)
10.10 Office Lease, dated as of December 31, 1993, between Grand Bay Plaza
Joint Venture and the Registrant, and First Addendum thereto.
(10.12)(8)
10.11 Settlement Agreement by and between Mobil Oil Corporation and Linear
Films, Inc. of Civil Action No. 87 civ. 874-B in the Northern
District of Oklahoma, effective as of February 21, 1992 (10.40)(5)
10.12 License Agreement by and between Mobil Oil Corporation and Linear
Films, Inc. for use of U.S. Patent No. 4,518,654, effective as of
February 21, 1992 (10.41)(5)
10.13 Loan Contract, dated October 30, 1987, between State of Minnesota and
National Poly Products, Inc. (10.11)(2)
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<PAGE>
10.14 Letter of Consent to the Loan Contract between State of Minnesota and
National Poly Products, Inc., dated October 30, 1991 (10.43)(5)
10.15 Letter of Consent to the Loan Contract between State of Minnesota and
National Poly Products, Inc., dated January 13, 1992 (10.44 )(5)
10.16 Consent and Acknowledgement to the Loan Contract between State of
Minnesota and National Poly Products, Inc., dated February 18, 1993
(10.22)(7)
10.17 Loan Agreement between Arkansas Development Finance Authority and
Cyanede, dated March 18, 1992 (10.69)(6)
10.18 Promissory Note from Cyanede to the Arkansas Development Finance
Authority, in the amount of $1,600,000, dated June 1, 1992 (10.70)(6)
10.19 Office Lease, dated as of April 1, 1992, between Euram 1870 Exchange
Associates and National Poly Products, Inc. (10.78)(6)
10.20 Subordination and Attornment Agreement between State Farm Life
Insurance Company and National Poly Products, Inc. dated April 6,
1992 (10.78)(6)
10.21 Intercreditor Agreement between Heller Financial, Inc., Arkansas
Development Finance Authority and Worthen Trust Company, Inc.
(10.40)(7)
10.22 Asset Purchase Agreement, dated May 17, 1994, among the Registrant,
Advanced Plastics, Inc. and Frederick R. Warren. (2.1)(9)
10.23 Credit Agreement, dated February 22, 1993, between the Registrant and
Heller Financial, Inc. (the "Heller Credit Agreement") (10.39)(7)
10.24 First Amendment and Waiver, dated March 28, 1994, to Heller Credit
Agreement. (10.29)(10)
10.25 Consent Letter, dated May 23, 1994, to Heller Credit Agreement.
(10.30)(10)
10.26 Second Amendment, dated August 15, 1994, to Heller Credit Agreement.
(10.31)(10)
10.27 Consent Letter, dated September 9, 1994, to Heller Credit Agreement.
(10.32)(10)
10.28 Consent Letter, dated February 13, 1995, to Heller Credit Agreement.
(10.33)(10)
10.29 Consent and Waiver Letter, dated February 24, 1995, to Heller Credit
Agreement. (10.34)(10)
10.30 Third Amendment to Heller Credit Agreement and Consent, dated as of
March 30, 1995. (10.3)(11)
10.31 Fourth Amendment to Heller Credit Agreement, dated as of
September 30, 1995. (10.2)(13)
10.32 Fifth Amendment to Heller Credit Agreement, dated as of December 31,
1995. (10.33)(14)
10.33 Sixth Amendment to Heller Credit Agreement, dated as of December 30,
1995. (10.1)(16)
10.34 Seventh Amendment to Heller Credit Agreement, dated as of
September 5, 1996. (10.2)(16)
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<PAGE>
10.35 Eighth Amendment to Heller Credit Agreement, dated as of November 6,
1996.(18)
10.36 Ninth Amendment to Heller Credit Agreement, dated as of January 31,
1997.(18)
10.37 Lease with option to purchase Real Estate between Atlantis Plastic
Films, Inc. and the City of Mankato, Minnesota, dated as of
March 2, 1995. (10.35)(10)
*10.38 Employment Agreement, dated February 1, 1995, between the Registrant
and Anthony F. Bova. (10.1)(11)
*10.39 Amendment dated April 8, 1996 to Employment Agreement dated
February 1, 1995 between Registrant and Anthony F. Bova. (10.1)(15)
*10.40 Employment Agreement, dated March 6, 1995, between the Registrant and
Paul Rudovsky. (10.2)(11)
*10.41 Amendment dated Arpil 8, 1996 to Employment Agreement dated March 6,
1995 between Registrant and Paul Rudovsky. (10.2)(15)
10.42 Master Security Agreement and Promissory Note between Cyanede
Plastics, Inc. and General Electric Capital Corporation ("GECC") in
the amount of $2,673,919, dated as of February 23, 1995. (10.4)(11)
10.43 Corporate Guaranty of the Registrant of the obligations of Cyanede
Plastics, Inc. to GECC, dated as of February 23, 1995. (10.5)(11)
10.44 Master Security Agreement and Promissory Note between Pierce
Plastics, Inc. and GECC in the amount of $221,790, dated as of
February 23, 1995. (10.6)(11)
10.45 Corporate Guaranty of the Registrant of the obligations of Pierce
Plastics, Inc. to GECC, dated as of February 23, 1995. (10.7)(11)
10.46 Master Security Agreement and Promissory Note between Atlantis
Plastic Films, Inc. (as successor by merger to Linear Films, Inc.)
and GECC in the amount of $900,000, dated as of February 23, 1995.
(10.10)(11)
10.47 Promissory Note from Atlantis Plastic Films, Inc. to GECC in the
amount of $650,000, dated as of February 23, 1995. (10.11)(11)
10.48 Corporate Guaranty of the Registrant of the obligations of Atlantis
Plastic Films, Inc. to GECC dated as of February 23, 1995.
(10.12)(11)
10.49 Loan and Security Agreement by the Among Atlantis Plastic Films,
Inc., Cyanede Plastics, Inc., Pierce Plastics, Inc., Plastic
Containers, Inc. and The CIT/Equipment Group Financing, Inc. ("CIT"),
dated as of 4/13/95. (10.13)(11)
10.50 First Amendment to Loan and Security Agreement by and among Atlantis
Plastic Films, Inc., Atlantis Plastics Injection Molding, Inc.
(formerly known as Cyanede Plastics, Inc.) Pierce Plastics, Inc.,
Plastic Containers, Inc. and CIT dated to be effective as of
December 31, 1995. (10.47)(14)
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<PAGE>
10.51 Second Amendment to Loan and Security Agreement by and among
Atlantis Plastic Films, Inc., Atlantis Plastics Injection Molding,
Inc. (formerly known as Cyanede Plastics, Inc.) Pierce Plastics, Inc.
and CIT dated to be effective as of December 31, 1996.(18)
10.52 Promissory Note from Atlantis Plastic Films, Inc., Cyanede
Plastics, Inc., Pierce Plastics, Inc., and Plastic Containers, Inc.
to CIT in the amount of $15,000,000, dated as of April 13, 1995.
(10.14)(11)
10.53 Guaranty of the Registrant of the obligations of Atlantis
Plastic Films, Inc. to CIT, dated as of April 13, 1995. (10.15)(11)
10.54 Credit Agreement between Atlantis Plastics Injection Molding,
Inc. and the Registrant and National City Bank, Northeast, dated as
of May 19, 1995. (10.16)(12)
10.55 First Amendment to National City Bank, Northeast, Credit
Agreement, dated as of September 30, 1995. (10.3)(13)
10.56 Second Amendment to National City Bank, Northeast, Credit
Agreement, dated to be effective as of December 31, 1995. (10.52)(14)
10.57 Amendment and Restatement of Promissory Note by and between
Atlantis Plastics Injection Molding, Inc. and the Registrant and
National City Bank, Northeast, dated as of January 30, 1997.(18)
10.58 Stock Purchase Agreement for the acquisition of Western Pioneer
Insurance Company by and between the Commerce Insurance Company, a
Massachusetts Corporation and the Registrant, dated as of May 18,
1995.(10.17)(12)
10.59 Demand Promissory Note from Atlantis Plastic Films, Inc. to
GECC in the amount of $1,280,579.70, dated as of May 8, 1995.
(10.18)(12)
10.60 Purchase Agreement for the acquisition of the Joint Venture
Interest of Rigal Plastics, Inc. in CKS/Rigal Plastics, by and
between CKS Plastics, Inc., a Florida corporation and the Registrant,
dated as of July 31, 1995. (10.1)(13)
10.61 Stock Purchase Agreement dated as of October 18, 1996 among
Reid Plastics, Inc., Atlantis Molded Plastics, Inc. and Plastic
Containers, Inc.(2.1)(17)
11.1 Calculation of Earnings Per Share(18)
21.1 Registrant's Subsidiaries(18)
23.1 Consent of Coopers & Lybrand L.L.P.(18)
27.1 Financial Data Schedule (for SEC use only)
- --------------
(1) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Form 8-B filed June 7, 1994.
(2) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1987.
-41-
<PAGE>
(3) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1990.
(4) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's registration statement on Form S-8 (No.
33-41012).
(5) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991.
(6) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's registration statement on Form S-2
(33-53152).
(7) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992.
(8) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993.
(9) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Report on Form 8-K filed June 3, 1994.
(10) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1994.
(11) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.
(12) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995.
(13) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Quarterly Report on Form 10-Q for the
ended September 30, 1995.
(14) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995.
(15) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996.
(16) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Quarterly Report on Form 10-Q for the
ended September 30, 1996.
(17) Incorporated by reference to the exhibit shown in parentheses and
filed with the Registrant's Report on Form 8-K dated November 27,
1996.
(18) Filed herewith.
(B) REPORTS ON FORM 8-K
During the fourth quarter of 1996, the Registrant filed a current
report on Form 8-K, dated November 27, 1996.
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<PAGE>
(C) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
The index to exhibits that are listed in Item 14(a)(3) of this report
and not incorporated by reference follows the "Signatures" section
hereof and is incorporated herein by reference.
(D) FINANCIAL STATEMENT SCHEDULES REQUIRED BY
REGULATION S-X See Item 14 (a) 2.
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<PAGE>
<TABLE>
<CAPTION>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 28, 1997 By:/S/ PAUL RUDOVSKY
-------------------------------
PAUL RUDOVSKY
EXECUTIVE VICE PRESIDENT,
FINANCE AND ADMINISTRATION
(PRINCIPAL FINANCIAL OFFICER)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ EARL W. POWELL Chairman of the Board March 28, 1997
--------------------------------------------
EARL W. POWELL
Director and
/S/ PHILLIP T. GEORGE, M.D. Vice Chairman March 28, 1997
--------------------------------------------
PHILLIP T. GEORGE, M.D.
President and Chief
Executive Officer
/S/ ANTHONY F. BOVA (Principal Executive Officer) March 28, 1997
--------------------------------------------
ANTHONY F. BOVA
Executive Vice President
Finance and Administration
/S/ PAUL RUDOVSKY (Principal Financial Officer) March 28, 1997
--------------------------------------------
PAUL RUDOVSKY
/S/ CHARLES D. MURPHY, III Director March 28, 1997
--------------------------------------------
CHARLES D. MURPHY, III
/S/ CHESTER B. VANATTA Director March 28, 1997
--------------------------------------------
CHESTER B. VANATTA
/S/ LARRY D. HORNER Director March 28, 1997
--------------------------------------------
LARRY D. HORNER
/S/ CESAR ALVAREZ Director March 28, 1997
--------------------------------------------
CESAR ALVAREZ
</TABLE>
-44-
<PAGE>
INDEX TO EXHIBITS
PAGE NUMBER IN
SEQUENTIAL
EXHIBIT NUMBERING SYSTEM
- ------- ----------------
10.35 Eighth Amendment to Heller Credit Agreement,
dated as of November 6, 1996.
10.36 Ninth Amendment to Heller Credit Agreement,
dated as of January 31, 1997.
10.51 Second Amendment to Loan and Security Agreement
by and among Atlantis Plastic Films, Inc.,
Atlantic Plastics Injection Molding, Inc. (formerly
known as Cyanede Plastics, Inc.) Pierce Plastics, Inc.
and CIT dated to be effective as of December 31, 1996.
10.57 Amendment and Restatement of Promissory Note by and
between Atlantis Plastics Injection Molding, Inc. and
the Registrant and National City Bank, Northeast,
dated as of January 30, 1997.
11.1 Calculation of Earnings Per Share
21.1 Registrant's Subsidiaries
23.1 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule (for SEC use only)
EXHIBIT 10.35
EIGHTH AMENDMENT TO CREDIT AGREEMENT
This Eighth Amendment to Credit Agreement, dated as of November 6, 1996
(this "Agreement") is between Atlantis Plastics, Inc., a Florida corporation
("Borrower") and Heller Financial, Inc., a Delaware corporation for itself as
Agent and as Lender ("Heller").
RECITALS
A. Borrower and Heller are parties to that certain Credit Agreement
dated as of February 22, 1993 (as amended from time to time the "Credit
Agreement"). Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in this Credit Agreement.
B. Heller and Borrower desire to further amend the Credit
Agreement as provided herein.
NOW THEREFORE, in consideration of the foregoing, the covenants and
conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT.
A. The definition of "Adjusted Tota1 Debt" as set forth in Section 1.1
of the Credit Agreement is hereby amended by adding the following after the word
"Month" and before the period,(".") in the last line of said definition:
"less Borrower's cash on hand (to the extent but only to the extent
such amount is expressed as a positive number) as of the last day of
the Fiscal Month provided, however, if on any date of determination
there is an outstanding balance under the Revolving Loan, and
Borrower's cash on hand exceeds $1,000,000, the amount of cash on hand
in excess of $1,000,00O shall be excluded from this calculation."
B. Section l.1 of the Credit Agreement is further amended by adding the
following new definitions in their proper alphabetical order:
"Eighth Amendment" means that certain Eighth Amendment to Credit
Agreement dated as of November 6, 1996 executed between Borrower and
Heller and acknowledged by the Subsidiary Guarantors.
"Eighth Amendment Effective Date" means the first date on which each of
the conditions set forth in Paragraph 3 of the Eighth Amendment shall
have been satisfied.
<PAGE>
C. Clause (d) of the first sentence of subsection 2.4(C)(2) is hereby
amended by adding the following after the words "Net Proceeds" and before the
period (".") which concludes said sentence:
"Provided, however, with respect to the Net Proceeds from an Asset
Disposition to be received by Borrower in connection with the sale by
Borrowrer of One Hundred Percent (100%) of the stock of PCI (the "PCI
Proceeds") to Reid Plastics, Inc., a California corporation pursuant to
the terms of that certain Stock Purchase Agreement dated as of October
18, 1996 (the "PCI Stock Purchase Agreement") only, Borrower shall be
permitted, notwithstanding any provision of Section 7.7 or in the
definition of Permitted Investments to the contrary (but provided that
all of the conditions set forth in Section 7.7 shall have been
satisfied), to use the PCI Proceeds to repurchase Borrower's Senior
Notes and for other general corporate purposes".
D. Section 6.4 of the Credit Agreement shall be amended by adding the
following as a new paragraph:
For purposes of calculating the ratio of Adjusted Tota1 Debt to EBIDAT
as provided in this Section 6.4, Borrower's EBIDAT for each Trailing
Twelve-Fisca1 Month Period ending on the last day of each of Borrower's
Fiscal Quarters ending on December 31, 1996, March 31, 1997, June 30,
1997 and September 30, l997, there shall be excluded from each such
calculation any contribution to Borrower's EBIDAT made by PCI on or
before the Eighth Amendment Effective Date which would have been
otherwise properly included in Borrower's EBIDAT for the re1evant
Trailing Twelve-Fiscal Month then ending.
E. Clause (iii) of Section 7.7 is hereby amended by inserting the
following immediately before the word "the" which is the first word of said
clause prior to its amendment hereby:
"except as permitted by clause (d) of subsection 2.4(C)(2) as amended
by the Eighth Amendment,"
F. OMNIBUS AMENDMENT TO CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS.
By their respective signatures below, Borrower, Agent and Lender each
agree that from and after the Eighth Amendment Effective Date PCI shall cease,
for all purposes, to be a Loan Party or Subsidiary Guarantor under the Credit
Agreement
2
<PAGE>
and the Loan Documents including, without limitation, the Notes and from and
after the Eighth Amendment Effective Date PCI shall be released from any and all
duties and liabilities to Heller as a Loan Party or Subsidairy Guarantor under
the Credit Agreement or any Loan Document, and the security interest granted in
the Collateral of PCI is released and discharged.
2. REPRESENTATIONS AND WARRANTIES. To induce Heller to enter into this
Agreement, Borrower represents and warrants to Heller that:
(a) AUTHORITY AND BINDING EFFECT. The execution, delivery, and
performance by Borrower of this Agreement is within its corporate power, has
been duly authorized by all necessary corporate action (including, without
limitation, shareholder approval), has received all necessary government
approvals (if any shall be required), and does not and will not contravene or
conflict with any provision of law applicable to Borrower, the Certificate of
Incorporation or Bylaws of Borrower, or any order, judgment, or decree of any
court or other agency of government or any agreement instrument, or document
binding upon Borrower including, without limitation, that certain Indenture
dated as of February 22, 1993, naming American Stock Tranfer & Trust Company as
Trustee relating to Borrower's 11% Senior Notes due 2003; and the Credit
Agreement as heretofore amended and as amended as of the date hereof is the
legal, valid, and binding obligation of Borrower enforceable against Borrower in
accordance with its terms.
(b) NO DEFAULT. No Default or Event of Default under the Credit
Agreement, as amended hereby, has occurred and is continuing.
3. CONDITIONS. The effectiveness of this Agreement and the amendments
to the Credit Agreement set forth herein are subject to the satisfaction of each
of the following conditions precedent or concurrent:
(a) CLOSING OF THE SALE OF PCI. The sale of PCI to Reid Plastics,
Inc. shall have closed and Borrower shall have confirmed receipt, to Agent, in
writing, of Net Proceeds from such sale in an amount not less than $6,000,000;
and
(b) EXECUTION OF EIGHTH AMENDMENT. Borrower shall have executed and
delivered this Eighth Amendment to Agent for the Benefit of Lenders together
with an Acknowledgment executed by each of the Subsidiary Guarantors in the
form of Exhibit A appended hereto.
3
<PAGE>
4. MISCELLANEOUS
(a) CAPTIONS. Section captions used in this Agreement are for
convenience only, and shall not affect the construction of this Agreement.
(b) GOVERNING LAW. This Agreement shall be a contract made under and
governed by the laws of the State of Illinois, without regard to conflict of
laws principles. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
(c) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which counterparts shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same Agreement.
(d) SUCCESSORS AND ASSIGNS. This Agreement shal1 be binding upon
Borrower and Heller and their respective successors and assigns, and shall
inure to the sole benefit of Borrower and Heller and the successors and assigns
of Borrower and Heller.
(e) REFERENCES. Any reference to the Credit Agreement or the
Financing Agreements contained in any notice, request, certificate, or other
document executed concurrently with or after the execution and delivery of this
Agreement shall be deemed to include this Agreement unless the context shall
otherwise require.
(f) CONTINUED EFFECTIVENESS. Notwithstanding anything contained
herein, the terms of this Agreement are not intended to and do not serve to
effect a novation as to the Credit Agreement. The parties hereto expressly do
not intend to extinguish the Credit Agreement. Instead, it is the express
intention of the parties hereto to reaffirm the indebtedness created under the
Credit Agreement which is evidenced by the notes provided for therein and
secured by the Collateral. The Credit Agreement as amended hereby and each of
the Loan Documents remain in full force and effect.
4
<PAGE>
Delivered at Chicago, Illinois, as of the date and year first above written.
ATLANTIS PLASTICS, INC.
(f/k/a Atlantis Group, Inc.)
By: /S/
-------------------------------
Name Printed:
----------------------
Title:
-----------------------------
HELLER FINANCIAL, INC., for itself
and as Agent for the Lenders
By: /S/
-------------------------------
Name Printed:
----------------------
Title:
-----------------------------
5
<PAGE>
EXHIBIT A
ACKNOWLEDGMENT OF CONSENT
The undersigned have entered into various Corporate Guaranties in favor of
Heller as Lender and Agent in connection with various loans made to Atlantis
Plastics, Inc., formerly known as Atlantis Group, Inc. Thc undersigned has
reviewed the foregoing and consents to thc amendment contemplated thereunder.
In connection with the foregoing, the undersigned acknowledges and
confirms that each Corporate Guaranty will continue to guarantee and secure, to
the fullest extent provided thereby, the payment and performance of all
Borrower's Obligations (as defined in each Corporate Guaranty) including without
limitation the payment and performance of all Obligations (as defined in the
Credit Agreement) of the Borrower now or hereafter existing under or in respect
of the Credit Agreement, as amended from time to time.
Each of the undersigned confirms and agrees that their respective
Corporate Guranty shall continue to be in full force and effect and is hereby
confirmed and ratified in all respects.
IN WITNESS WHEREOF, the undersigned has caused this Acknowledgement and
Consent to be duly executed by its officer thereunto duly authorized as of
November__, 1996.
ATLANTIS MOLDED PLASTICS, INC. ATLANTIS PLASTIC FILMS, INC.
(successor by Merger of Linear Films, Inc.
and National Poly Products, Inc.
By: /S/ By: /S/
----------------- ------------------
Title: Title:
ATLANTIS PLASTIC INJECTION PIERCE PLASTICS, INC.
MOLDING, INC. (f/k/a CYANEDE
PLASTICS, INC.)
By: /S/ By: /S/
----------------- ------------------
Title: Title:
6
EXHIBIT 10.36
CONSENT AND NINTH AMENDMENT TO CREDIT AGREEMENT
This Consent and Ninth Amendment to Credit Agreement, dated as of
January 31, 1997 (this "Agreement"), is between ATLANTIS PLASTICS, INC., a
Florida corporation ("Borrower"), and HELLER FINANCIAL, INC., a Delaware
corporation in its individual capacity as a Lender and in its capacity as agent
for the Lenders, "Agent".
W I T N E S S E T H:
WHEREAS, Agent, Borrower and Lenders are parties to that certain Credit
Agreement dated as of February 22, 1993 (as heretofore amended, the "Credit
Agreement"; capitalized terms not otherwise defined herein shall have the
definitions provided therefor in the Credit Agreement) and to certain other
documents executed in connection with the Credit Agreement; and
WHEREAS, the parties wish to further amend the Credit Agreement as
provided herein;
NOW, THEREFORE, the parties agree as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) The definitions of "Base Rate Loans" and "LIBOR Rate
Loans" contained in subsection 1.1 of the Credit Agreement are hereby amended
and restated as follows:
"Base Rate Loans" means Loans bearing interest at rates
determined by reference to the Base Rate.
"LIBOR Rate Loans" means Loans bearing interest at rates
determined by reference to the LIBOR.
(b) The following definition is hereby inserted into
subsection 1.1 of the Credit Agreement in alphabetical order:
"Ninth Amendment Effective Date" means December 31, 1996.
(c) Subsection 2.2(A) of the Credit Agreement is hereby
amended and restated as follows:
(A) RATE OF INTEREST.
(1) So long as no Event of Default has occurred
and is continuing, from the Ninth Amendment Effective Date with
respect to the Revolving Loans outstanding at the Ninth Amendment
Effective Date and from the date all future Revolving Loans are made
and the date all other Obligations become due, depending upon
Borrower's election from time to time, as permitted herein, to have
portions of the
<PAGE>
Loans accrue interest based upon the LIBOR, the Loans and the other
Obligations shall bear interest at the rates set forth in below:
The Revolving Loan and all other Obligations shall bear
interest as follows:
(a) If a Base Rate Loan, then at the sum of the Base Rate PLUS
the Base Rate Margin.
(b) If a LIBOR Loan, then at the sum of the LIBOR PLUS the LIBOR
Margin.
"Base Rate Margin" shall mean, (i) for the period commencing
on the Ninth Amendment Effective Date and ending on the day preceding the
first Business Day of the calendar month commencing immediately after the
receipt by Agent of the next Compliance Certificate delivered by Borrower
(the first Business Day of the calendar month commencing immediately after
the receipt by Agent of each Compliance Certificate delivered by Borrower
being hereinafter referred to as an "Adjustment Date"), the applicable
percent per annum set forth in the pricing table below opposite the
Adjusted Total Debt to EBIDAT ratio, assuming that the Adjusted Total Debt
to EBIDAT ratio equals 4.50 to 1.00, and (ii) during the period commencing
on each Adjustment Date and ending on the day preceding each subsequent
Adjustment Date (each such period being hereinafter referred to as a
"Calculation Period"), the applicable percent per annum set forth in the
pricing table below opposite the Adjusted Total Debt to EBIDAT ratio
calculated for such Calculation Period.
"LIBOR Margin" shall mean (i) for all LIBOR Rate Loans having
an Interest Period (as defined in subsection 2.2(B)(1)) commencing during
the period commencing on the Ninth Amendment Effective Date and ending on
the day preceding the first Adjustment), the applicable percent per annum
set forth in the pricing table below opposite the Adjusted Total Debt to
EBIDAT ratio, assuming that the Adjusted Total Debt to EBIDAT ratio equals
4.50 to 1.00, and (ii) for all LIBOR Rate Loans having an Interest Period
commencing during the period commencing on an Adjustment Date and ending on
the day preceding the subsequent Adjustment, the applicable percent per
annum set forth in the pricing table below opposite the Adjusted Total Debt
to EBIDAT ratio calculated for such Calculation Period.
2
<PAGE>
PRICING TABLE
- -------------------------------------------------------------------------------
ADJUSTED TOTAL BASE RATE MARGIN LIBOR MARGIN
DEBT TO
EBIDAT RATIO
- -------------------------------------------------------------------------------
Revolving Revolving
Loans Loans
- -------------------------------------------------------------------------------
Greater than 4.75x 1.00% 2.75%
- -------------------------------------------------------------------------------
Greater than 4.50 but
less than or equal to 0.75% 2.50%
4.75x
- -------------------------------------------------------------------------------
Greater than 4.00 but
less than or equal to 0.50% 2.25%
4.50x
- -------------------------------------------------------------------------------
Greater than 3.50 but
less than or equal to 0.25% 2.00%
4.00x
- -------------------------------------------------------------------------------
Equal to or less than
3.50x 0.00% 1.75%
- -------------------------------------------------------------------------------
If Borrower shall fail to deliver a Compliance Certificate by
the date required pursuant to subsection 5.1(C), effective as of the
first Business Day of the immediately succeeding calendar month and
continuing through the day preceding the next succeeding Adjustment
Date, each applicable Base Rate Margin and each applicable LIBOR Rate
Margin shall be conclusively presumed to equal the highest applicable
Base Rate Margin and the highest applicable LIBOR Margin specified in
the pricing table set forth above.
(2) At the election of Agent, in its sole discretion, after
the occurrence of an Event of Default and for so long as such Event of
Default continues, the Loans and all other Obligations shall bear
interest until paid in full at a rate per annum (meaning 360 days) that
is two percent (2.0%) in excess of the rate of interest otherwise
payable under this Agreement; PROVIDED that, in the case of LIBOR Rate
Loans, upon the expiration of the Interest Period in effect at the time
any such increase in interest rate is effective, such LIBOR Rate Loans
shall thereupon become Base Rate Loans and thereafter bear interest
payable upon demand at a rate which is two percent (2.0%) per annum in
excess of the interest rate otherwise payable under this Agreement for
Base Rate Loans.
(d) Subsection 2.3(B) of the Credit Agreement is hereby
amended by reducing the unused facility fee from 0.5% per annum to 0.375% per
annum.
(e) Subsection 2.3(C) of the Credit Agreement is hereby
amended by reducing the Letter of Credit and Guaranty fees from 2.5% per annum
to 1.75% per annum.
3
<PAGE>
(f)Subsection 6.4 of the Credit Agreement is hereby amended by
adding the following as a new paragraph:
For purposes of calculating the ratio of Adjusted Total Debt to EBIDAT
as provided in this section 6.4, Borrower's EBIDAT for each Trailing
Twelve-Fiscal Month Period ending on the last day of each of Borrower's
Fiscal Quarters ending on March 31, 1997, June 30, 1997, September 30,
1997 and December 31, 1997, there shall be excluded from each such
calculation any contribution to Borrower's EBIDAT attributable to the
Tulsa-Custom business which otherwise would have been included in
Borrower's EBIDAT for the relevant Trailing Twelve-Fiscal Month Period
then ending.
2. CONSENTS.
(a) Subsection 7.7 of the Credit Agreement prohibits Borrower
or any Subsidiary from disposing of assets unless certain specified conditions
have been met. Borrower has requested that Lenders consent to the sale by its
Subsidiary of certain assets of the Custom Film business located in Tulsa,
Oklahoma ("Tulsa-Custom Assets") for an amount not less than $1,500,000 in the
aggregate. Lenders hereby consent to the sale by Borrower's Subsidiary of the
Tulsa-Custom Assets.
(b) At Borrower's request, Lenders hereby consent to Borrower
using the Net Proceeds from the sale of the Tulsa-Custom Assets to repurchase
Borrower's Senior Notes and for other general corporate purposes.
3. REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders
to enter into this Agreement, Borrower represents and warrants to Heller that:
(a) AUTHORITY AND BINDING EFFECT. The execution, delivery, and
performance by Borrower of this Agreement is within its corporate power, has
been duly authorized by all necessary corporate action (including, without
limitation, shareholder approval), has received all necessary government
approvals (if any shall be required), and does not and will not contravene or
conflict with any provision of law applicable to Borrower, the Certificate of
Incorporation or Bylaws of Borrower, or any order, judgment, or decree of any
court or other agency of government or any agreement, instrument, or document
binding upon Borrower; and the Credit Agreement as heretofore amended and as
amended as of the date hereof is the legal, valid, and binding obligation of
Borrower enforceable against Borrower in accordance with its terms.
(b) NO DEFAULT. No Default or Event of Default under the
Credit Agreement, as amended hereby, has occurred and is continuing.
4. MISCELLANEOUS.
(a) CAPTIONS. Section captions used in this Agreement are
for convenience only, and shall not affect the construction of this Agreement.
4
<PAGE>
(b) GOVERNING LAW. This Agreement shall be a contract made
under and governed by the laws of the State of Illinois, without regard to
conflict of laws principles. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(c) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
Agreement.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon Agent, Borrower and Lenders and their respective successors and assigns,
and shall inure to the sole benefit of Agent, Borrower and Lenders and the
successors and assigns of Agent, Borrower and Lenders.
(e) REFERENCES. Any reference to the Credit Agreement
contained in any notice, request, certificate, or other document executed
concurrently with or after the execution and delivery of this Agreement shall be
deemed to include this Agreement unless the context shall otherwise require.
(f) CONTINUED EFFECTIVENESS. Notwithstanding anything
contained herein, the terms of this Agreement are not intended to and do not
serve to effect a novation as to the Credit Agreement. The parties hereto
expressly do not intend to extinguish the Credit Agreement. Instead, it is the
express intention of the parties hereto to reaffirm the indebtedness created
under the Credit Agreement which is evidenced by the Notes and secured by the
Collateral. The Credit Agreement as amended hereby and each of the other Loan
Documents remains in full force and effect.
(g) COSTS, EXPENSES AND TAXES. Borrower affirms and
acknowledges that subsection 10.1 of the Credit Agreement applies to this
Agreement and the transactions and Agreements and documents contemplated
hereunder.
5
<PAGE>
Delivered at Chicago, Illinois, as of the day and year first above
written.
ATLANTIS PLASTICS, INC.
By:______________________________
Name Printed:____________________
Title:___________________________
HELLER FINANCIAL, INC.,
Individually and as Agent
By:______________________________
Name Printed:____________________
Title:___________________________
6
<PAGE>
ACKNOWLEDGMENT
Each of Atlantis Molded Plastics, Inc., Atlantis Plastic Injection
Molding, Inc. (f/k/a Cyanede Plastics, Inc.), Atlantis Plastic Films, Inc. and
Pierce Plastics, Inc. hereby acknowledges and consents to the terms of this
Agreement and hereby affirms, ratifies and confirms all of the terms and
provisions of the such entity's Guaranty in favor of Agent and Lenders.
ATLANTIS MOLDED PLASTICS, INC.
By:_______________________________
Name Printed:_____________________
Title:____________________________
ATLANTIS PLASTICS INJECTION
MOLDING, INC.
By:_______________________________
Name Printed:_____________________
Title:____________________________
ATLANTIS PLASTICS FILMS, INC.
By:_______________________________
Name Printed:_____________________
Title:____________________________
PIERCE PLASTICS, INC.
By:_______________________________
Name Printed:_____________________
Title:____________________________
7
EXHIBIT 10.51
AMENDMENT NO. 2
TO LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT ("AMENDMENT NO.
2") dated as of December 31, 1996, by and among ATLANTIS PLASTICS FILMS, INC., a
Delaware corporation ("FILMS"), ATLANTIS PLASTICS INJECTION MOLDING, INC.
(formerly known as CYANEDE PLASTICS, INC.), a Kentucky corporation ("MOLDING"),
and PIERCE PLASTICS, INC., a Delaware corporation ("PIERCE"), (Films, Molding,
and Pierce are herein referred to individually as "DEBTOR" and collectively as
"DEBTORS") and THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT"), a New York
corporation.
WHEREAS, Debtors and CIT entered into a Loan and Security
Agreement, dated as of April 13, 1995 pursuant to which CIT made a loan to
Debtors in the original principal amount not to exceed $15,000,000;
WHEREAS, Debtors and CIT entered into a First Amendment to
Loan and Security Agreement dated to be effective as of December 31, 1995 (the
Loan and Security Agreement, as amended, the "ORIGINAL LOAN AGREEMENT");
WHEREAS, pursuant to a letter dated November 12, 1996, CIT
agreed to release, and thereby did release, Plastic Containers, Inc. from any
and all obligations as a "Debtor" under the Original Loan Agreement; and
WHEREAS, CIT and Debtors have agreed to enter into this
Amendment No. 2 in order to permit additional Loans to be made pursuant to the
terms of the Original Loan Agreement, as amended by the terms hereof;
NOW, THEREFORE, in consideration of the premises and in order
to induce CIT to amend the Original Loan Agreement, and intending to be bound
hereby, the parties hereto hereby agree as follows:
1. DEFINED TERMS. All capitalized terms which are used herein and not
otherwise defined herein shall have the meanings set forth in the Original Loan
Agreement.
2. AMENDMENTS TO ORIGINAL LOAN AGREEMENT.
(a) Notwithstanding anything to the contrary contained in the Original
Loan Agreement, its terms are hereby amended MUTATIS MUTANDIS, as follows:
(i) There shall be three additional Loans made. (A) The first two loans
("A Loans") shall be in the aggregate maximum principal amount of
$5,000,000.00, and the proceeds of the A Loans shall be used to
refinance the purchase of certain used Equipment including used
Equipment currently existing as collateral of the General Electric
Credit Corporation ("GECC"). The refinancing of the GECC collateral
shall be the subject of a separate Loan. The term of the A Loans shall
be for sixty (60) months, and the A Loans shall bear interest at a rate
per annum equal, at the Debtor's option, to the Treasury Rate plus
2.00% or the LIBOR Rate plus 2.00%. If the interest rate initially
chosen is based on the LIBOR Rate, the Debtors shall have until
December 31, 1997, to elect to convert the A Loans to Loans bearing an
interest rate equal to the Treasury Rate plus 2.00%, all pursuant to
the applicable terms of Subsection 2.2(b) of the Original Loan
Agreement. The A Loans shall be evidenced by a note ("A Note")
substantially in the form of Exhibit A (Fixed Interest Rate) or Exhibit
A-1 (Floating Interest Rate) attached hereto.
(B) The third loan ("B Loan") shall be in the maximum principal amount
of $2,500,000.00, and the proceeds of the B Loan shall be used to
finance the purchase of certain new Equipment which CIT shall have
found acceptable in its sole discretion. The term of the B Loan shall
be for eighty-four (84) months, and the B Loan shall bear interest at a
rate per
1
<PAGE>
annum equal, at the Debtors' option, to the Treasury Rate plus 2.00% or
the LIBOR Rate plus 2.00%. If the interest rate intially chosen is
based on the LIBOR Rate, the Debtors shall have until December 31,
1997, to elect to convert the B Loan to a Loan bearing an interest rate
equal to the Treasury Rate plus 2.00%, all pursuant to the applicable
terms of Subsection 2.2(b) of the Original Loan Agreement. The B Loan
shall be evidenced by a note ("B Note") substantially in the form of
Exhibit B (Fixed Interest Rate) or Exhibit B-1 (Floating Interest Rate)
attached hereto.
(iii) The Debtors shall likewise have until December 31, 1997, to
convert any Drawdowns made before January 1, 1996, to a Loan or Loans
("C Loan") bearing an interest rate equal to the Treasury Rate plus
2.25%, all pursuant to the applicable terms of Subsection 2.2(b) of the
Original Loan Agreement. The C Loan shall be evidenced by a Note ("C
Note") substantially in the form of Exhibit C attached hereto.
(b)(i) For purposes of the A Loans and any C Loan the original term of
which was five (5) years the term "Treasury Rate" shall be defined as follows:
"TREASURY RATE" shall mean with respect to the Loan if Debtors
elect a Fixed Interest Rate, the rate per annum equal to the
yield to maturity for the U.S. Treasury security having a
remaining term to maturity closest to three (3) years as at
the close of business of the third Business Day prior to the
conversion of the interest rate, as reported on page 5 ("U.S.
Treasury and Money Markets") of the information provided by
Telerate Systems Incorporated.
(ii) For purposes of the B Loan and any C Loan the original term of
which was seven (7) years the term "Treasury Rate" shall be defined as follows:
"TREASURY RATE" shall mean with respect to the Loan if Debtors
elect a Fixed Interest Rate, the rate per annum equal to the
yield to maturity for the U.S. Treasury security having a
remaining term to maturity closest to five (5) years as at the
close of business of the third Business Day prior to the
conversion of the interest rate, as reported on page 5 ("U.S.
Treasury and Money Markets") of the information provided by
Telerate Systems Incorporated.
(c) Subsection 9.4 of the Original Loan Agreement is hereby amended in
its entirety to read as follows:
9.4 COMMITMENT FEE. CIT acknowledges receipt from Guarantor of
a commitment fee in the amount of $75,000 (the "Commitment
Fee"). CIT agrees to refund the Commitment Fee to Guarantor,
after the expiration of the commitment period hereunder and
completion by CIT of all follow-up matters related to the
transactions contemplated hereby, such refund to be, however,
net any out-of-pocket fees, costs, disbursements and expenses
incurred by CIT in connection with the transactions
contemplated hereby.
(d) CIT's obligation to make any Loan pursuant to this Amendment No. 2
shall terminate on March 31, 1997.
3. REPRESENTATIONS AND WARRANTIES. In order to induce CIT to enter into this
Amendment No. 2, each Debtor represents and warrants to CIT for itself as
follows:
(a) REAFFIRMATION. Debtor hereby repeats each of the representations
and warranties set forth in the Original Loan Agreement, except as otherwise
amended by this Amendment No. 2 as if set
2
<PAGE>
forth at length herein.
(b) POWER AND AUTHORITY. Debtor has full corporate power, authority and
legal right to execute and deliver this Amendment No. 2 and the A Note and B
Note and to perform its obligations hereunder and thereunder.
(c) FINANCIAL CONDITION OF DEBTORS AND GUARANTOR. The financial
statements of each Debtor and Guarantor as at and for the period ended
___________________, 1996, copies of which have heretofore been delivered to
CIT, are complete and correct, have been prepared in accordance with generally
accepted accounting principles, and present fairly the financial position of
each Debtor and Guarantor, respectively, as at said dates and the results of its
operations for the period ended on said dates. There are no known material
contingent liabilities or material liabilities for taxes which are not reflected
in said financial statements or the notes thereto and there has been no material
adverse change in the financial condition, business or operations of any Debtor
or Guarantor since said dates.
(d) REAFFIRMATION OF SECURITY INTEREST. The first and only lien on and
security interest granted by Debtors to CIT in the Collateral shall continue in
full force and effect and shall continue to secure all Obligations including,
without limitation, the Obligations of Debtors incurred pursuant to this
Amendment No. 2.
(e) NO DEFAULTS. Upon the effectiveness of this Amendment No. 2, no
Default or Event of Default shall exist under the Original Loan Agreement, as
amended hereby, and no default or event of default shall exist under any
agreement of Guarantor and/or Debtors or any of their respective affiliates with
Heller Financial, Inc. or National City Bank, Northeast.
4. CONDITIONS PRECEDENT TO EFFECTIVE OF AMENDMENT NO. 2. This Amendment No. 2
shall become effective on the date on which all of the following conditions
precedent have been fulfilled:
(a) CIT shall have received this Amendment No. 2 duly executed by each
Debtor and Guarantor.
(b) CIT shall have received the Supplements and the A Note and the B
Note, duly executed by Debtors.
(c) Debtors shall have received from Heller Financial, Inc., GECC,
National City Bank, Northeast, and any other necessary party waivers of all
events of default arising under the agreements between each such lender and
Guarantor and its subsidiaries and all necessary lien releases.
5. MISCELLANEOUS.
(a) COUNTERPARTS. This Amendment No. 2 may be executed by the parties
hereto in any number of separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
(b) CONSTRUCTION. Any provision of this Amendment No. 2 which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability shall not invalidate or render unenforceable such provision in
any other jurisdiction. To the extent permitted by law, each Debtor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
(c) NO FURTHER WAIVERS. Except as expressly amended hereby, the
Original Loan Agreement, all representations, warranties, terms, covenants an
conditions of the Original Loan Agreement, the Original Note, the Contribution
Agreement, each of the Drawdown Requests and Progress Payment Certificates shall
remain unamended and not waived and shall continue to be in full force and
effect. No amendment of any provision of this Amendment No. 2 shall be effective
unless it is in writing and signed by each Debtor and CIT , and no waiver of any
provision of this Amendment No. 2, nor
3
<PAGE>
consent to any departure by Debtors therefrom, shall be effective unless it is
in writing and signed by CIT, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No failure on the part of CIT to exercise, and no delay in exercising,
any right, power or privilege hereunder or under the Original Loan Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies of CIT provided herein are cumulative and are in addition to, not
exclusive of, any rights or remedies provided by law.
(d) INDEMNITY. Debtors, jointly and severally agree to pay, indemnify
and hold harmless CIT and its affiliates from and against any and all claim,
losses, obligation, damages, penalties, actions, judgments, suits, liabilities
and out-of-pocket costs and disbursements (including, without limitation, the
reasonable fees, disbursements and other charges of counsel to CIT, including
attorney's fees and legal expenses incurred by CIT in the collection or
enforcement of its rights hereunder, under the Original Loan Agreement or in
connection with any bankruptcy proceeding involving any Debtor or Guarantor
and/or the Equipment, including relief from stay motions, cash collateral
disputes, assumption/rejection motions and disputes concerning any proposed
disclosure statement and plan proposed during any such case).
(e) TRIAL BY JURY; JURISDICTION. EACH DEBTOR AND CIT HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON,
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDMENT NO. 2 OR ANY OTHER
DOCUMENT EXECUTED AND DELIVERED BY DEBTORS IN CONNECTION HEREWITH. THIS FIRST
AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of
December __, 1996.
ATLANTIS PLASTIC FILMS, INC.
By: /s/
------------------------------
Title:
---------------------------
ATLANTIS PLASTICS INJECTION MOLDING, INC.
By: /s/
------------------------------
Title:
---------------------------
PIERCE PLASTICS, INC.
By: /s/
------------------------------
Title:
---------------------------
THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: /s/
------------------------------
Title:
---------------------------
4
<PAGE>
Guarantor hereby agrees with the foregoing and ratifies and reaffirms its
Guaranty, including the First Amendment and Ratification of Guaranty, dated to
be effective as of December 31, 1995.
ATLANTIS PLASTICS, INC.
By: /s/
--------------------------------
Title:
-----------------------------
5
EXHIBIT 10.57
AMENDMENT AND RESTATEMENT OF PROMISSORY NOTE
This Amendment and Restatement of Promissory Note is executed at
Youngstown, Ohio, on January 30, 1997 by and between ATLANTIS PLASTICS INJECTION
MOLDING, INC., a Kentucky corporation, and ATLANTIS PLASTICS, INC., a Florida
corporation (collectively, the "Borrower") and NATIONAL CITY BANK, NORTHEAST
(the "Bank").
PRELIMINARY STATEMENTS
1. Bank extended a loan to the Borrower in the amount of Five Hundred
Seventy-eight Thousand and No/100ths Dollars ($578,000.00) as evidenced by a
promissory note dated May 17, 1995 (the "Note").
2. The Note has an outstanding principal balance of Five Hundred
Sixteen Thousand Nine Hundred Ninety-one and No/100ths Dollars ($516,991.00).
3. The Bank and the Borrower desire to modify the Note and to restate
the terms, conditions, and provisions thereof to reflect such modification.
4. Borrower and Bank ratify and confirm all of the terms and conditions
of the Note not specifically amended herein and all of those terms and
conditions of all other documents between Borrower and Bank pertaining to the
indebtedness evidenced by the Note, including, without limitation, the Open End
Mortgage and Security Agreement given by Borrower dated May 17, 1995 for the
purpose of securing the Note, as recorded in Official Record 933, Page 40 of
Trumbull County, Ohio Records (the "Mortgage").
5. Borrower does not have any claim, offset, or defense against the
Bank.
AGREEMENT
For valuable considerations as hereinafter granted each to the other
and intending to be legally bound, the parties acknowledge the preliminary
statements and amend and restate the terms, conditions, and provisions of the
Note as follows:
FOR VALUE RECEIVED, ATLANTIS PLASTICS INJECTION MOLDING, INC., a Kentucky
corporation whose address is Highway 60, West, P.O. Box 3, Henderson, Kentucky
42420 and ATLANTIS PLASTICS, INC., a Florida corporation whose address is 1870
The Exchange, Suite 200, Atlanta, Georgia 30339 (collectively, the "Borrower")
promises to pay to the order of NATIONAL CITY BANK, NORTHEAST (the "Bank"), a
national banking association having its main office at One Cascade Plaza, Akron,
Ohio 44308, at Bank's main
<PAGE>
office (or at such other place as Bank may from time to time designate by
written notice) in lawful money of the United States of America, the principal
sum of
FIVE HUNDRED SIXTEEN THOUSAND NINE HUNDRED NINETY-ONE
AND NO/100THS DOLLARS
together with interest, all as provided below.
1. INTEREST. The Principal Balance shall at all times bear interest at a rate
equal to the Contract Rate, provided that so long as any principal of or accrued
interest on any this Note overdue, the Principal Balance and all overdue
interest thereon shall bear interest at a fluctuating rate equal to two percent
(2%) per annum above the rate that would otherwise be applicable, but in no case
less than two and one-fourth percent (2-1/4%) per annum above the Prime Rate;
PROVIDED FURTHER that in no event shall any principal of or interest on this
Note bear interest at any time after Maturity at a lesser rate than the rate
applicable thereto immediately after Maturity. The "CONTRACT RATE" shall at all
times be a fluctuating rate (the "PRIME MARGIN RATE") equal to three quarters of
one percent (3/4%) in excess of the Prime Rate, provided that Borrower shall
have the right from time to time to irrevocably elect a fixed rate (the "LIBOR
MARGIN RATE") equal to the sum of two and one half percent (2-1/2%) per annum
plus LIBOR as the Contract Rate applicable to the Principal Balance during a
Contract Period by specifying the term of the Contract Period and the Principal
Balance that such Borrower expects to have outstanding on the first day thereof
(giving effect to any payments to be made on or before that day) in a notice
given to Bank orally or in writing not later than 10:00 a. m., Main-Office Time,
of the third (3rd) Eurodollar Banking Day preceding the first day of that
Contract Period, and stating that such Borrower is election the LIBOR Margin
Rate.
Interest on this Note shall be payable monthly commencing on January 20, 1997
and continuing on the twentieth day of each month until Maturity, and on demand
thereafter. At the end of each Contract Period during which the LIBOR Margin
Rate is the Contract Rate, the Principal Balance shall bear interest at the
Prime Margin Rate unless either Borrower shall have elected otherwise as
hereinbefore provided. Bank shall be entitled to fund and maintain its funding
of all or any part of the Principal Balance in any manner Bank may from time to
time deem advisable, Borrower acknowledging that all determinations relating to
the LIBOR Margin Rate shall be made as if Bank had actually funded and
maintained the Principal Balance by the purchase of deposits in an amount
similar to the amount of the Principal Balance, with a maturity similar to the
Contract Period during which the LIBOR Margin Rate was elected, and bearing
interest at LIBOR.
2. INEFFECTIVE ELECTIONS. Notwithstanding any provision or inference to the
contrary, Bank shall have the right in its discretion, without notice to
Borrower, to deem ineffective any election of a Contract Rate if (a) at the time
of that election or on the first day of the Contract Period specified in the
notice thereof, there shall exist or there would occur any Event of Default, (b)
any representation, warranty, or other statement made by any Person (other than
Bank) in any Related
-2-
<PAGE>
Writing (other than any financial statement) would, if made either at the time
of that election or on the first day of the Contract Period specified in the
notice thereof, be untrue or incomplete in any respect, (c) after giving effect
to that election, more than one Contract Rate would be applicable to the
Principal Balance, (d) Bank shall determine that (i) dollar deposits of the
appropriate amount and maturity are not available in the market selected by Bank
for the purpose of funding the Principal Balance at LIBOR, (ii) circumstances
affecting that market make it impracticable for Bank to ascertain LIBOR, or
(iii) any governmental authority has asserted that it is unlawful for Bank to
fund, make, or maintain loans bearing interest based on LIBOR, (e) after giving
effect to that election, the actual Principal Balance is or would be, on the
first day of the Contract Period specified in the notice of that election,
different than the expected Principal Balance specified in that notice, (f) any
principal payment is scheduled to become due during the Contract Period
specified in the notice of that election, (g) the expected Principal Balance
specified in the notice of that election is less than Fifty Thousand and
No/100ths Dollars ($50,000.00), or (h) the Contract Period specified in the
notice of that election would end after the scheduled due date of the last
principal payment under this Note, giving effect to any prepayments. Bank's
books and records shall be conclusive (absent manifest error) as to whether Bank
shall have deemed any such election ineffective.
3. PREMIUM: INEFFECTIVE AND UNLAWFUL ELECTIONS. If Bank shall deem ineffective
any election of any Contract Rate, Borrower shall pay to Bank, on Bank's demand,
a premium based on the amount the expected Principal Balance specified in the
notice of that election and computed for the Contract Period specified in that
notice at a rate per annum equal to the excess, if any, of the Contract Rate so
elected over the Reinvestment Rate. If any governmental authority shall assert
that it is unlawful for Bank to fund, make or maintain loans bearing interest
based on LIBOR, then, and in each such case, notwithstanding any provision or
inference to the contrary, the Principal Balance shall thereupon bear interest
at the Prime Margin Rate, and Borrower shall pay to Bank, on Bank's demand, (a)
all unpaid interest theretofore accruing at the LIBOR Margin Rate and (b) a
premium based on the amount of the principal theretofore bearing interest at the
LIBOR Margin Rate and computed for the remainder of the Contract Period
therefor, at a rate equal to the excess, if any, of the Contract Rate
theretofore applicable over the Reinvestment Rate.
4. REPAYMENT. Subject to section 7, the principal of this Note shall be due and
payable in forty-one (41) instalments, commencing on January 20, 1997, and
continuing on the twentieth day of each month thereafter until paid in full,
each such instalment except the final instalment to be in a principal amount
equal to Three Thousand Two Hundred Eleven and No/100ths Dollars ($3,211.00)
(the "AMORTIZATION AMOUNT"), and the final instalment to be an amount equal to
all unpaid principal of this Note.
Borrower shall have the right to prepay the principal of this Note in whole or
in part at any time before maturity, PROVIDED that if any payment (whether a
prepayment or a payment following any acceleration of the due date thereof) is
made before the last day of a Contract Period during which the LIBOR Margin Rate
is the Contract Rate applicable to the Principal Balance, then, and
-3-
<PAGE>
in each such case, Borrower shall, concurrently with the payment, pay to Bank
(i) the accrued interest on the principal being paid and (ii) a premium based on
the principal amount paid and computed for the period from the date of payment
to the last day of the Contract Period in question at a rate per annum equal to
the excess, if any, of the Contract Rate theretofore applicable over the
Reinvestment Rate.
5. COLLATERAL. This Note is secured by a mortgage of even date herewith on
property located in the Township of Howland, Trumbull County Ohio. Reference is
made thereto for rights as to acceleration or default of this Note.
6. DEFINITIONS. As used in this Note, except where the context clearly requires
otherwise, "BANKING DAY" means any day (other than any Saturday, Sunday or legal
holiday) on which Bank's main office is open to the public for carrying on
substantially all of its banking functions; "CONTRACT PERIOD" means a period
selected by a Borrower, PROVIDED that each Contract Period shall commence on a
Eurodollar Banking Day and end one (1) month, three months (3), or six (6)
months thereafter, PROVIDED that (a) if any such Contract Period otherwise would
end on a day that is not a Eurodollar Banking Day, it shall end instead on the
next following Eurodollar Banking Day unless that day falls in another calendar
month, in which latter case the Contract Period shall end instead on the next
preceding Eurodollar Banking Day and (b) if any such Contract Period commences
on a day for which there is no numerical equivalent in the calendar month in
which that Contract Period is to end, it shall end on the last Eurodollar
Banking Day of that calendar month; "EURODOLLAR BANKING DAY" means any Banking
Day on which banks in the London Interbank Market deal in United States dollar
deposits and on which banking institutions are generally open for domestic and
international business at the place where Bank's main office is located and in
New York City; "LIBOR" means, with respect to a given Contract Period, the rate
per annum (rounded upwards, if necessary, to the next higher 1/16 of 1%)
determined by Bank to equal the average rate per annum at which deposits
(denominated in United States dollars) in an amount similar to the then
Principal Balance and with a maturity similar to that Contract Period are
offered to Bank at 11:00 A.M. London time (or as soon thereafter as practicable)
two (2) Eurodollar Banking Days prior to the first day of that Contract Period
by banking institutions in any Eurodollar market selected by Bank; "NOTE" means
this promissory note (including, without limitation, each addendum, allonge, or
amendment, if any, hereto); "OBLIGOR" means any Person who, or any of whose
property, shall at the time in question be obligated in respect of all or any
part of the Indebtedness evidenced by this Note of Borrower and in addition to
Borrower, includes, without limitation, co-makers, indorsers, guarantors,
pledgors, hypothecators, mortgagors, and any other Person who agrees,
conditionally or otherwise, to make any loan to, purchase from, or investment
in, any other Obligor or otherwise assure such other Obligor's creditors or any
of them against loss; "PERSON" means an individual or entity of any kind,
including, without limitation, any association, company, cooperative,
corporation, partnership, trust, governmental body, or any other form or kind of
entity; "PRIME RATE" means the fluctuating rate per annum which is publicly
announced from time to time by Bank at its main office as being its so-called
"prime rate" or "base rate" thereafter in effect, with each change in the Prime
Rate automatically, immediately, and without notice changing the Prime Rate
-4-
<PAGE>
thereafter applicable hereunder, it being acknowledged that the Prime Rate is
not necessarily the lowest rate of interest then available from Bank on
fluctuating-rate loans; "PRINCIPAL BALANCE" means, at a given time, the entire
unpaid principal balance of the this Note; "REINVESTMENT RATE" means, when used
with respect to any period, a per annum rate of interest equal to the "bond
equivalent yield" for the most actively traded issues of U. S. Treasury Bills,
U. S. Treasury Notes, or U. S. Treasury Bonds for a term similar to the period
in question; "RELATED WRITING" means this Note and any indenture, note,
guaranty, assignment, mortgage, security agreement, subordination agreement,
notice, financial statement, legal opinion, certificate, or other writing of any
kind pursuant to which all or any part of the Indebtedness evidenced by this
Note of Borrower is issued, which evidences or secures all or any part of the
Indebtedness evidenced by this Note of Borrower, which governs the relative
rights and priorities of Bank and one or more other Persons to payments made by,
or the property of, any Obligor, which is delivered to Bank pursuant to another
such writing, or which is otherwise delivered to Bank by or on behalf of any
Person (or any employee, officer, auditor, counsel, or agent of any Person) in
respect of or in connection with all or any part of the Indebtedness evidenced
by this Note of Borrower or either of them; and the foregoing definitions shall
be applicable to the respective plurals of the foregoing defined terms.
7. EVENTS OF DEFAULT. It shall be an "EVENT OF DEFAULT" if (a) there is a
failure of the Borrower to make any payment within ten (10) days of when due
hereunder; (b) there is an occurrence of a default or Event of Default under, or
as defined in, the Mortgage or any other instrument given as security for this
note; (c )there occurs a default or "Event of Default" as defined in the
promissory note given by Borrower to Bank of even date herewith in the amount of
$1,739,000.00; (d) there occurs a default or "Event of Default" as defined in
the revolving credit agreement between Borrower and Bank of even date herewith
in the amount of $1,300,000.00; or (e) there is a filing by, or against,
Borrower of any complaint or action for relief under any bankruptcy or
insolvency laws, or for the appointment of a receiver, which is not dismissed
within sixty (60) days of filing.
8. EFFECTS OF DEFAULT. If any Event of Default occurs, Bank may, at its option,
accelerate the maturity of this note. If Bank chooses to accelerate, the entire
unpaid principal amount, together with interest at the default rate set forth
above, shall be immediately due and payable, without demand or notice, both of
which are expressly waived by Borrower.
9. LATE CHARGES. In each case in which any principal of or interest on this Note
is not paid within ten (10) days after its due date, Bank shall have the right
to assess a late charge, payable by Borrower on demand, equal to the greater of
twenty dollars ($20.00) or five percent (5%) of the unpaid amount. The payment
of a late charge will not cure or constitute a waiver of any default under this
Note.
10. INDEMNITY: ADMINISTRATION AND ENFORCEMENT. Borrower will pay to Bank all
costs and expenses of collection of this Note, including, without limitation,
attorneys' fees. If any amount (other than the principal of any Subject Loan and
any interest and late charges) owing under this Note is not paid when due, then,
and in each such case, Borrower shall pay, on Bank's demand,
-5-
<PAGE>
interest on that amount from the due date thereof until paid in full at a
fluctuating rate equal to four percent (4%) per annum plus the Prime Rate.
11. INDEMNITY: GOVERNMENTAL COSTS. If (a) there shall be enacted any law
(including, without limitation, any change in any law or in its interpretation
or administration and any request by any governmental authority) relating to any
interest rate or any reserve or special deposit requirements against assets held
by, deposits in, or loans by Bank or to any tax (other than any tax on Bank's
overall net income) and (b) in Bank's sole opinion any such event increases the
cost of funding or maintaining any LIBOR Rate Unit or reduces the amount of any
payment to be made to Bank in respect thereof, then, and in each such case, upon
Bank's demand, Borrower shall pay Bank an amount equal to each such cost
increase or reduced payment, as the case may be. In determining any such amount,
Bank may use reasonable averaging and attribution methods. Each determination by
Bank shall be conclusive absent manifest error.
12. APPLICATION OF PAYMENTS. Payments other than prepayments will be applied
first to instalments in the order of their respective due dates; provided,
however, that if a payment so applied would pay the principal amount of the note
in full, but would leave late charges outstanding, the payment will instead be
applied to late charges prior to being applied to the principal amount of the
final instalment.
13. OTHER PROVISIONS. All fees, interest, and premiums for any given period
shall be computed on the basis of a 360-day year and the actual number of days
in the period. Any term used in this Note shall have the meaning ascribed
thereto by the Uniform Commercial Code as in effect on the date hereof in the
jurisdiction in which Bank's main office is located, subject, however, to such
modification, if any, as may be provided in this Note. This Note shall be
governed by the laws of the State of Ohio.
14. WARRANT OF ATTORNEY. Borrower authorizes any attorney at law at any time or
times to appear in any state or federal court of record in the United States of
America after all or any part of the obligations created by this Note shall have
become due, whether by lapse of time, by acceleration of the due date thereof,
or otherwise, and in each case to waive the issuance and service of process, to
present to the court this Note and any other writing (if any) evidencing the
obligation or obligations in question, to admit the due date thereof and the
nonpayment thereof when due, to confess judgment against Borrower in favor of
Bank for the full amount then appearing due, together with interest and costs of
suit, and thereupon to release all errors and waive all rights of appeal and any
stay of execution. The foregoing warrant of attorney shall survive any judgment,
it being understood that should any judgment against Borrower be vacated for any
reason, Bank may nevertheless utilize the foregoing warrant of attorney in
thereafter obtaining one or more additional judgments against Borrower.
-6-
<PAGE>
-------------------------------------------------------------------------
"WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND
-------------------------------------------------------------------------
COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN
-------------------------------------------------------------------------
AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN
-------------------------------------------------------------------------
BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE
-------------------------------------------------------------------------
AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE
-------------------------------------------------------------------------
ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE."
-------------------------------------------------------------------------
BORROWERS:
ATLANTIS PLASTICS
INJECTION MOLDING, INC.
(a Kentucky corporation)
By:____________________________
Title:_________________________
ATLANTIS PLASTICS, INC.
(a Florida corporation)
By:____________________________
Title:_________________________
Accepted by Bank:
NATIONAL CITY BANK, NORTHEAST
By: _________________________
BRIAN V. KOCHUNAS
Title: Vice President
-7-
EXHIBIT 11.1
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
PRIMARY 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Shares outstanding:
Weighted average outstanding 7,133,067 7,089,467 7,066,511
Share equivalents 391,225 118,706 443,468
--------- --------- ---------
Adjusted outstanding 7,524,292 7,208,173 7,509,979
========= ========= =========
Net income (loss) available to common shareholders:
Net income (loss) $8,096,895 $(13,072,150) $6,366,130
Less - preferred stock dividend (108,748) (145,000) (145,000)
---------- ------------ ----------
Net income (loss) available to common shareh $7,988,147 $(13,217,150) $6,221,130
========== ============ ==========
Income (loss) per common share $1.06 $ (1.83) $ 0.83
========== ============ ==========
FULLY DILUTED 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Shares outstanding:
Weighted average outstanding 7,133,067
Share equivalents 1,068,850
---------
Adjusted outstanding 8,201,917
=========
Net income (loss) available to common shareholders:
Net income (loss) $8,096,895
Income (loss) per common share $0.99 (1), (2) (1), (2)
==========
</TABLE>
(1) The difference between primary and fully dilutive earnings per share is
not material.
(2) The Company's convertible preferred stock was determined not to be a
common stock equivalent in computing primary earnings per share.
In computing fully diluted income per share, the dilutive effect was not
material.
EXHIBIT 21.1
REGISTRANTS'S SUBSIDIARIES -- ALL 100% OWNED
ATLANTIS PLASTIC FILMS, INC., a Delaware corporation
ATLANTIS MOLDED PLASTICS, INC., a Florida corporation
ATLANTIS PLASTIC INJECTION MOLDING, INC., a Kentucky corporation
PIERCE PLASTICS, INC., a Delaware corporation
PLASTIC CONTAINERS, INC., an Alabama corporation
RIGAL PLASTICS, INC., a Florida corporation
WP ACQUISITION CORP., a California corporation
ATLANTIS PLASTICS FOREIGN SALES INC., a Barbados corporation
LINEAR FILMS, INC., a Canadian corporation
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Atlantis Plastics, Inc. and subsidiaries on Form S-8 (Registration Nos. 33-25983
and 33-41012) of our reports dated February 7, 1997, except for Note 7, as to
which the date is March 28, 1997, on our audits of the consolidated financial
statements of Atlantis Plastics, Inc. as of December 31, 1996 and 1995 and for
each of the three years in the period ended Decemebr 31, 1996 which reports are
included in this Form 10-K.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
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<SECURITIES> 0
<RECEIVABLES> 28,997
<ALLOWANCES> 633
<INVENTORY> 16,984
<CURRENT-ASSETS> 66,078
<PP&E> 110,082
<DEPRECIATION> 51,559
<TOTAL-ASSETS> 177,901
<CURRENT-LIABILITIES> 29,648
<BONDS> 105,365
0
2,000
<COMMON> 713
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<TOTAL-LIABILITY-AND-EQUITY> 177,901
<SALES> 267,119
<TOTAL-REVENUES> 267,119
<CGS> 221,377
<TOTAL-COSTS> 221,377
<OTHER-EXPENSES> 20,634
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,638
<INCOME-PRETAX> 12,470
<INCOME-TAX> 4,396
<INCOME-CONTINUING> 8,074
<DISCONTINUED> 96
<EXTRAORDINARY> (73)
<CHANGES> 0
<NET-INCOME> 8,097
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 0.99
</TABLE>
