- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________to__________________
Commission File number 1-9487
ATLANTIS PLASTICS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
FLORIDA 06-1088270
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
1870 THE EXCHANGE, SUITE 200, ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including Area Code) (800) 497-7659
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X. No_____.
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
CLASS SHARES OUTSTANDING AT SEPTEMBER 30, 1998
------------- ---------------------------------
A, $.10 par value 4,538,054
B, $.10 par value 2,918,043
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ATLANTIS PLASTICS, INC.
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income (Unaudited) for the
Nine Months Ended September 30, 1998 and 1997................. 1
Consolidated Balance Sheets (Unaudited) as of
September 30, 1998 and December 31, 1997...................... 2
Consolidated Statements of Cash Flows (Unaudited) for the
Nine Months Ended September 30, 1998 and 1997................. 3
Notes to Consolidated Financial Statements (Unaudited)........ 4
Management's Discussion and Analysis
of Financial Condition and Results of Operations.............. 7
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings.................................... 11
Item 4 - Submission of Matters to a Vote of Security-Holders.. 11
Item 6 - Exhibits and Reports on Form 8-K..................... 11
SIGNATURES............................................................. 12
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<TABLE>
<CAPTION>
ATLANTIS PLASTICS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ------------------------------
1998 1997 1998 1997
--------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Net sales.................................................... $62,954 $63,895 $191,461 $193,748
Cost of sales................................................ 51,949 53,920 158,014 165,484
----------------- -------------- -------------- --------------
Gross profit.............................. 11,005 9,975 33,447 28,264
Selling, general and administrative expenses................. 6,092 5,952 18,442 18,838
Impairment of long-lived assets and restructuring charges.... - (125) - 835
----------------- -------------- -------------- --------------
Operating income........................... 4,913 4,148 15,005 8,591
Net interest expense......................................... (2,592) (2,900) (8,036) (8,616)
----------------- -------------- -------------- --------------
Income (loss) from continuing operations
before income taxes...................... 2,321 1,248 6,969 (25)
Income tax provision......................................... (961) (680) (2,346) (432)
----------------- -------------- -------------- --------------
Income (loss) before extraordinary items... 1,360 568 4,623 (457)
Extraordinary loss on early extinguishment of debt, net...... (390) - (390) -
================= ============== ============== ==============
Net income (loss).......................... $ 970 $ 568 $ 4,233 $ (457)
================= ============== ============== ==============
EARNINGS PER COMMON SHARE (BASIC)
Income (loss) before extraordinary items... $0.18 $0.08 $0.62 ($0.06)
Extraordinary loss on early extinguishment of debt, net...... (0.05) - (0.05) -
================= ============== ============== ==============
Net income (loss).......................... $0.13 $0.08 $0.57 ($0.06)
================= ============== ============== ==============
Weighted -average number of shares........................... 7,479 7,062 7,413 7,132
EARNINGS PER COMMON SHARE (DILUTED)
Income (loss) before extraordinary items... $0.17 $0.08 $0.60 ($0.06)
Extraordinary loss on early extinguishment of debt, net...... (0.05) - (0.05) -
================= ============== ============== ==============
Net income (loss).......................... $0.12 $0.08 $0.55 ($0.06)
================= ============== ============== ==============
Weighted -average number of shares........................... 7,833 7,062 7,736 7,132
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
1
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<CAPTION>
ATLANTIS PLASTICS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED - IN THOUSANDS)
September 30, December 31,
1998 1997
----------------- --------------
<S> <C> <C>
ASSETS
Cash and equivalents........................................................ $2,940 $8,346
Accounts receivable, net.................................................... 28,810 25,444
Inventories................................................................. 14,634 18,517
Other current assets........................................................ 5,827 7,448
----------------- --------------
Current assets.......................................................... 52,211 59,755
Property and equipment, net................................................. 59,381 60,065
Goodwill, net of accumulated amortization................................... 47,768 48,961
Other assets................................................................ 1,550 2,108
----------------- --------------
$160,910 $170,889
================= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses....................................... $21,830 $24,146
Current portion of long-term debt........................................... 8,260 3,254
----------------- --------------
Current liabilities..................................................... 25,090 27,400
Long-term debt, less current portion........................................ 84,535 101,862
Deferred income taxes....................................................... 9,094 8,287
Other liabilities........................................................... 544 791
----------------- --------------
Total liabilities....................................................... 124,263 138,340
----------------- --------------
Commitments and contingencies............................................... - -
Shareholders' equity:
Class A Common Stock, $.10 par value, 20,000,000 shares authorized,
4,538,054 and 4,329,527 shares issued and outstanding in 1998 and 1997... 454 436
Class B Common Stock, $.10 par value, 7,000,000 shares authorized,
2,918,043 and 2,742,280 shares issued and outstanding in 1998 and 1997... 292 274
Additional paid-in capital................................................. 9,424 7,117
Notes receivable from sale of Common Stock................................. (942) -
Retained earnings.......................................................... 27,419 24,722
----------------- --------------
Total shareholders' equity............................................... 36,647 32,549
----------------- --------------
$160,910 $170,889
================= ==============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
2
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<CAPTION>
ATLANTIS PLASTICS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - IN THOUSANDS)
Nine Months Ended
September 30,
---------------------
1998 1997
---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................................................... $ 4,233 ($457)
Adjustments to reconcile net income (loss) to -------- --------
net cash provided by operating activities:
Depreciation .................................................................................... 5,928 5,528
Amortization of goodwill ........................................................................ 1,193 1,193
Loan fee and other amortization ................................................................. 570 429
Increase in deferred income taxes ............................................................... 807 348
Changes in assets and liabilities:
Increase in accounts receivable ............................................................. (3,366) (341)
Decrease (increase) in inventories........................................................... 3,883 (185)
Decrease (increase) in other current assets ................................................. 1,621 (111)
Decrease in accounts payable and accrued expenses............................................ (2,316) (4,907)
Decrease in other liabilities ............................................................... (247) (224)
Other, net .................................................................................. (12) 54
-------- --------
Total adjustments ........................................................................... 8,061 1,784
-------- --------
Net cash provided by operating activities.................................................. 12,294 1,327
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .............................................................................. (5,450) (5,567)
Proceeds from asset dispositions .................................................................. 206 129
-------- --------
Net cash used in investing activities ..................................................... (5,244) (5,438)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreements ...................................................... 5,000 --
Payments on long-term debt ........................................................................ (17,321) (2,118)
Purchase of Common Stock and options .............................................................. (1,818) (2,994)
Proceeds from exercise of stock options ........................................................... 1,683 122
-------- --------
Net cash used in financing activities ..................................................... (12,456) (4,990)
-------- --------
Net decrease in cash and equivalents................................................................ (5,406) (9,101)
Cash and equivalents at beginning of period ......................................................... 8,346 15,905
-------- --------
Cash and equivalents at end of period ............................................................... $ 2,940 $ 6,804
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
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ATLANTIS PLASTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited consolidated financial statements of
Atlantis Plastics, Inc. and Subsidiaries ("Atlantis" or the "Company"),
do not include all disclosures provided in the annual consolidated
financial statements. These unaudited consolidated financial statements
should be read in conjunction with the consolidated financial
statements and the footnotes thereto contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 as filed with
the Securities and Exchange Commission. The December 31, 1997 balance
sheet, included herein, was derived from audited financial statements,
but does not include all disclosures required by generally accepted
accounting principles.
Atlantis Plastic Films accounts for approximately
three-quarters 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-quarter of the Company's net sales and employs 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, and agricultural and
automotive products, and (ii) a variety of custom and proprietary
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, building supplies, and
retail store fixtures.
All material intercompany balances and transactions have been
eliminated. Certain amounts included in prior period financial
statements have been reclassified to conform with the current period
presentation.
2. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments, which are of
a normal recurring nature and necessary for a fair presentation of the
financial statements. The results of operations for the nine months
ended September 30, 1998 are not necessarily indicative of the results
to be expected for the full year.
3. In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", which establishes standards for the reporting
and display of comprehensive income and its components in a full set of
general-purpose financial statements. This implementation required no
additional disclosure by the Company.
4. During the first quarter of 1997, the Company recorded impairment
of long-lived assets and other restructuring charges of $960,000, or
$586,000 after taxes, related to: (i) the closing of the Company's
Nashville, Tennessee injection molding facility, including
approximately $250,000 in non-cash charges for the write-down of fixed
assets and leasehold improvements associated with that facility, and
(ii) restructuring expenses associated with management changes in the
Company's stretch film unit. Anticipated costs (primarily severance and
moving costs) associated with the closing of the Nashville
4
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facility were reduced by $145,000 in the second half of 1997.
5. 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 June 1997, the Company had repurchased 320,344 shares
(including 210,244 shares issued in connection with the conversion of
Preferred Stock, described below), and options for 55,125 shares, for
total consideration of approximately $3.3 million. The Company was
restricted from repurchases during the second half of 1997 since it
fell below the fixed charge ratio specified in the 11% Senior Note
Indenture. Since December 31, 1997, the Company has exceeded this fixed
charge ratio and, accordingly, has had the ability to repurchase shares
of its Common Stock under its share repurchase program effective
February 11, 1998. Through June 1998, the Company has repurchased an
additional 222,200 shares for a total consideration of approximately
$1.8 million.
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 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 included in the $3.3
million consideration cited earlier in this Note), and completed the
repurchase in late March 1997. Prior to this conversion, 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.
6. During the third quarter of 1998, the Company repurchased, at a
premium, $14.7 million of its 11% Senior Notes, which resulted in an
after tax extraordinary loss of $390,000, partially related to the
write-off of unamortized fees.
7. In June 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" was issued. SFAS 131 establishes
standards for the way that public businesses report information about
operating segments in annual financial statements, and requires that
those enterprises report selected information about operating segments
in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and
services, geographic areas, and major customers. The Company has not
yet determined the impact of SFAS 131 on its future disclosures. SFAS
131 must be implemented for fiscal years ending after December 15,
1998.
In February 1998, SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" was issued. This Statement
does not apply to the Company.
5
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8. Earnings Per Share Data
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<CAPTION>
(all numbers in thousands except per share data) Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Basic earnings (loss) per common share:
Income (loss) before extraordinary items $1,360 $568 $4,623 ($457)
Weighted-average common shares outstanding 7,479 7,062 7,413 7,132
Basic earnings (loss) per common share: $0.18 $0.08 $0.62 ($0.06)
Diluted earnings per common share
Income (loss) before extraordinary items $1,360 $568 $4,623 ($457)
Weighted-average common shares outstanding 7,479 7,062 7,413 7,132
Add - Options 354 - 323 -
Weighted-average common shares outstanding
Plus potential dilutive common shares 7,833 7,062 7,736 7,132
Diluted earnings per common share $0.17 $0.18 $0.60 ($0.06)
After-tax earnings per share from extraordinary items:
Basic earnings (loss) per common share: ($0.05) - ($0.05) -
Diluted earnings per common share ($0.05) - ($0.05) -
</TABLE>
Excluded from the above calculation of diluted EPS are antidulutive
options which could potentially dilute EPS (Diluted) in the future. Antidulitive
options for the third quarter 1998 and 1997 and year-to-date 1998 and 1997 are:
313,500; 564,800; 313,500; and 355,000 shares respectively.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Atlantis is a leading U.S. manufacturer of polyethylene stretch and
custom films used in a variety of industrial and consumer applications and
molded plastic products for the appliance, automotive, building supply, and
recreational vehicle industries.
Selected income statement data for the quarterly periods ended March
31, 1997 through September 30, 1998 are as follows:
<TABLE>
<CAPTION>
($ in millions) 1998 1997
--------------------------------- -------------------------------------------
Q3 Q2 Q1 Q4 Q3 Q2 Q1
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
NET SALES
Plastic Films $44.3 $44.4 $44.9 $45.6 $47.6 $48.1 $45.7
Molded Plastics 18.7 19.7 19.5 16.8 16.3 17.4 18.6
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL $63.0 $64.1 $64.4 $62.3 $63.9 $65.5 $64.3
========== ========== =========== ========== ========== ========== ==========
PERCENTAGE OF NET SALES
-----------------------------------------------------------------------------------------
GROSS PROFIT
Plastic Films 20% 20% 19% 18% 17% 13% 13%
Molded Plastics 11% 12% 15% 17% 13% 17% 18%
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL 18% 17% 18% 17% 16% 14% 14%
========== ========== ========== ========== ========== ========== ==========
OPERATING INCOME
Plastic Films 11% 9% 9% 7% 8% 3% 3%(a)
Molded Plastics 1% 4% 6% 5%(a) 2%(a) 6% 8%(a)
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL 8% 8% 8% 7%(a) 6%(a) 4% 4%(a)
========== ========== ========== ========== ========== ========== ==========
NET INTEREST EXPENSE $2.6 $2.7 $2.7 $2.8 $2.9 $2.9 $2.8
========== ========== ========== ========== ========== ========== ==========
</TABLE>
(a) Amounts exclude the effects of the 1997 impairment of long-lived assets and
restructuring charges totaling $815,000 and more fully described in Note 4 of
Notes to the Consolidated Financial Statements.
RESULTS OF OPERATIONS
The Company's 1998 third quarter and year-to-date sales of $63.0
million and $191.5 million were 1% below last year's sales for the same periods.
Atlantis Molded Plastics' third quarter and year-to-date 1998 sales increased
15% and 11%, respectively, compared to last year's sales for the same periods.
Sales have been impacted by the integration of the $6.2 million of new business
awarded by Whirlpool Corporation in 1997, as well as strong appliance demand in
the U.S. economy.
Atlantis Plastic Films' third quarter and year-to-date 1998 net sales
of $44.3 million and $133.5 million, respectively, were $3.3 million and $8.0
million below last year's sales for the same periods, primarily due to lower
average selling prices resulting from continuing declines in polyethylene resin
7
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prices. Average selling prices were offset by an 8% increase in volume for the
1998 third quarter, versus 1997 third quarter, as well as a 2% volume increase
for the first nine months of 1998 versus 1997.
Atlantis Plastic Films' third quarter and year-to-date 1998 gross
margins equaled 20%, compared to 17% and 14% for the same periods in 1997. This
improvement was due primarily to increased productivity, cost reduction
measures, and a more favorable pricing environment in the film markets.
Atlantis Molded Plastics' third quarter and year-to-date 1998 gross
margins equaled 11% and 13%, respectively, compared to 13% and 16% for the same
periods last year. These decreases were due primarily to necessary increases in
reserves for workmen's compensation, bad debt, and deferred tooling expense, as
well as a reduction in sales volume in one of the Company's injection molding
plants. In June 1998, employment levels in this plant were reduced, and efforts
have been underway to secure additional business in this facility.
The Company's third quarter 1998 selling, general and administrative
("SG&A") expenses were $6.1 million, which was slightly above last year's SG&A
expenses for the same period. SG&A expenses on a year-to-date basis were $18.4
million this year compared to $18.8 million in 1997.
Third quarter and year-to-date 1998 net interest expense equaled $2.6
million and $8.0 million, respectively, compared to $2.9 million and $8.6
million for the same periods in 1997. This decrease is due to reduced debt
levels during the first nine months of 1998 and to higher interest income
resulting from increased cash balances. Interest expense is expected to decline
further in the 1998 fourth quarter due to the above-mentioned Senior Note
repurchase. Effective tax rates differed from applicable statutory rates in both
1998 and 1997, primarily due to nondeductible goodwill amortization, as well as
a reduction in the Company's reserve for deferred taxes in 1998. During the
first half of 1998, the Company made favorable adjustments for amounts that were
no longer considered necessary for contingencies for income taxes, resulting in
a reduction in income tax expense of $544,000 or $0.07 per share.
During the third quarter of 1998, the Company repurchased, at a
premium, $14.7 million of its 11% Senior Notes, which resulted in an after tax
extraordinary loss of $390,000, partially related to the write-off of
unamortized fees.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at September 30, 1998 totaled
approximately $22.1 million (including cash and equivalents of $2.9 million),
compared to $32.4 million (including cash and equivalents of $8.3 million) at
December 31, 1997. On September 30, 1998, the Company's borrowings under its
revolving credit facility were $5.0 million and are currently $3.2 million.
During October 1998, the Company increased its revolver by $5.0 million to $20.0
million. Unused availability, net of outstanding letters of credit of
approximately $1.2 million, equaled $8.8 million at September 30, 1998 and
currently is at $15.6 million.
The Company's primary 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.
8
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CASH FLOWS FROM OPERATING ACTIVITIES
In the first nine months of 1998, net cash provided by operating
activities was approximately $12.3 million, compared to cash provided by
operations of $1.3 million for the same period last year. Inventories decreased
in the first nine months of 1998 by $3.9 million due to lower raw materials
costs and lower levels of inventories, compared to an increase of $0.2 million
in the January to September 1997 period.
Accounts payable and accrued expenses decreased $2.3 million in the
first nine months of 1998 compared to a decline of $4.9 million in 1997. The
large decrease in 1997 was primarily due to incentive compensation and income
tax payments made during the first quarter of 1997 related to 1996 results.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities during the first nine months of
1998 consisted primarily of capital expenditures totaling $5.2 million, compared
to capital expenditures of $5.4 million for the same period last year.
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used by financing activities for the first nine months of 1998
was $12.5 million, compared to $5.0 million during this period last year.
Approximately $1.8 million was used to repurchase Common Stock in the first half
of 1998, compared to $3.0 million in 1997. Due to the $14.7 million Senior Note
repurchase discussed earlier, payments on long-term debt totaled $17.3 million
this year, compared to $2.1 million in the same period last year. Proceeds from
the exercise of stock options amounted to $1.7 million in the first nine months
of 1998, compared to $0.1 million in the same period last year.
YEAR 2000 ISSUES
The Company's Films segment has been in the process of implementing a
new distribution, accounting, and resource planning ("ERP") system ("QAD") which
is designed to improve its operational and financial controls. QAD is Year 2000
compliant. To date, QAD has been installed successfully in its Custom and
Institutional Products businesses and implementation in its Stretch Film
business is expected to be completed in the next three months. Three of the
Company's Molded plants are operating under an ERP system which was installed in
1995 ("DTR") which requires a commercially available upgrade to be Year 2000
compliant. The Company is implementing this upgrade, with a projected completion
in three months. The other two Molded plants are operating under smaller, older
systems for which Year 2000 compliant upgrades and/or replacements are
commercially available. The Company is planning to install QAD in these two
plants in the second quarter of 1999. Upgrades to PC clients, servers, e-mail,
software, telephone systems, and programmable logic controllers are also planned
for implementation in the next five months. These upgrades are commercially
available.
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The incremental costs associated with system changes necessitated by
the Year 2000 issue are not expected to exceed $500,000 in 1998 and 1999
combined.
As the QAD system has been successfully installed in other Film plants,
the risks associated with the Stretch Film implementation are considered to be
insignificant. In the unlikely event that problems are encountered while
installing QAD in the two Molded plants, the Company would install commercially
available upgrades, as discussed above, in affected plants in sufficient time to
meet Year 2000 requirements.
The Company had been in contact with key suppliers and financial
institutions and believes all will be Year 2000 compliant. The Company will
continue to monitor the situation and form contingency plans in the unlikely
event a disruption appears possible because one of the above mentioned outside
parties is not Year 2000 compliant.
FORWARD LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements which are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from these
statements. These risks include, but are not limited to, raw material costs and
the ability to pass price increases to customers in a timely fashion, industry
overcapacity, product acceptance, and technological changes which could alter
the demand for product or adversely impact the competitive cost of production.
All forward-looking statements should be considered in light of these risks and
uncertainties.
ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" was issued. SFAS 131 establishes standards
for the way that public businesses report information about operating segments
in annual financial statements, and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The Company
has not yet determined the impact of SFAS 131 on its future disclosures. SFAS
131 must be implemented for fiscal years ending after December 15, 1998.
In February 1998, SFAS No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits" was issued. This Statement does not apply to
the Company.
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Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceeding other than
routine litigation incidental to its business, none of which
is material.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Thirteenth Amendment to Heller Credit Agreement, dated as of August 21,
1998.
10.2 Fourteenth Amendment to Heller Credit Agreement, dated as of October 15,
1998.
10.3 *Registrant's 1998 Stock Option Plan incorporated by reference to Exhibit
A filed with the Registrant's Schedule 14A filed on April 17, 1998.
27.1 Financial Data Schedule
- ------------------
(b) Reports on Form 8-K:
During the quarter for which this Quarterly Report on Form 10-Q is
filed, no reports on Form 8-K were filed by the Registrant.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATLANTIS PLASTICS, INC.
Date: November 3, 1998 /S/ ANTHONY F. BOVA
---------------------------
ANTHONY F. BOVA
President and Chief Executive Officer
Date: November 3, 1998 /S/ PAUL RUDOVSKY
----------------------------
PAUL RUDOVSKY
Executive Vice President, Finance and
Administration
12
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.1 Thirteenth Amendment to Heller Credit Agreement, dated as of August 21,
1998.
10.2 Fourteenth Amendment to Heller Credit Agreement, dated as of October 15,
1998.
27.1 Financial Data Schedule
EXHIBIT 10.1
THIRTEENTH AMENDMENT TO CREDIT AGREEMENT
This Thirteenth Amendment to Credit Agreement ("Amendment") is made and
entered into as of August ___, 1998 by and between ATLANTIS PLASTICS, INC.
("Borrower"), HELLER FINANCIAL, INC., in its capacity as Agent for the Lenders
party to the Credit Agreement described below ("Agent") and the Lenders which
are signatories hereto.
WHEREAS, Agent, Lenders and Borrower are parties to a certain Credit
Agreement dated as of February 22, 1993 and all amendments thereto (as such
agreement has from time to time been amended, supplemented or otherwise
modified, the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Agreement.
2. AMENDMENTS. Subject to the conditions set forth below, the Agreement
is amended as follows:
A. Subsection 2.5 is hereby amended by deleting the first
sentence in subsection 2.5 in its entirety and inserting the following in lieu
thereof:
"This Agreement shall be effective until February 22, 1999
(the "Termination Date"), and the Commitments shall terminate
on said date."
B. Subsection 6.1 is hereby amended by deleting the first
sentence in subsection 6.1 in its entirety and inserting the following in lieu
thereof:
"The aggregate amount of all Capital Expenditures of Borrower
and the Subsidiary Guarantors (excluding expenditures funded
by insurance proceeds) will not exceed the sum of $15,000,000
from January 1, 1998 through February 22, 1999."
C. Subsection 6.2 is hereby amended by deleting subsection 6.2
in its entirety and inserting the following in lieu thereof:
"6.2 FIXED CHARGE COVERAGE. The Fixed Charge Coverage, on a
trailing twelve (12) Fiscal Month basis, shall not be less
than 0.9 for the Fiscal Quarter ending September 30, 1998 and
each Fiscal Quarter thereafter."
<PAGE>
D. Subsection 6.5 is hereby amended by deleting subsection 6.5
in its entirety and inserting the following in lieu thereof:
"6.5 EBIDAT. EBIDAT, on a trailing twelve (12) Fiscal Month
basis, shall not be less than $25,000,000 for the Fiscal
Quarter ending September 30, 1998 and each Fiscal Quarter
thereafter."
3. COVENANTS. Notwithstanding the limitations of subsection 7.11,
Borrowers may make payments of fees and compensation to Trivest, Inc. and its
officers and subsidiaries, for January 1, 1998 through December 31, 1998, so
long as such payments do not exceed the total amount paid in Fiscal Year 1997.
4. CONDITIONS. The effectiveness of this Amendment is subject to the
following conditions precedent (unless specifically waived in writing by Agent):
(a) Borrower shall have executed and delivered this Amendment,
and such other documents and instruments as Agent may require shall
have been executed and/or delivered to Agent;
(b) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto shall be satisfactory to Agent and its
legal counsel;
(c) No Default or Event of Default shall have occurred and be
continuing;
(d) Borrower shall have paid Agent an amendment fee in the
amount of $12,500.
5. REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders to enter
into this Amendment, Borrower represents and warrants to Agent and Lenders that
(a) the execution, delivery and performance of this Amendment has been duly
authorized by all requisite corporate action on the part of Borrower and that
this Amendment has been duly executed and delivered by Borrower and (b) each of
the representations and warranties set forth in Section 4 of the Agreement
(other than those which, by their terms, specifically are made as of certain
date prior to the date hereof) are true and correct in all material respects as
of the date hereof.
6. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this
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<PAGE>
Amendment and the effect thereof shall be confined to the provision so held to
be invalid or unenforceable.
7. REFERENCES. Any reference to the Agreement contained in any
document, instrument or agreement executed in connection with the Agreement
shall be deemed to be a reference to the Agreement as modified by this
Amendment.
8. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which taken
together shall be one and the same instrument.
9. RATIFICATION. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions of the
Agreement and shall not be deemed to be a consent to the modification or waiver
of any other term or condition of the Agreement. Except as expressly modified
and superseded by this Amendment, the terms and provisions of the Agreement are
ratified and confirmed and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
Delivered at Chicago, Illinois, as of the day and year first above written.
ATLANTIS PLASTICS, INC.
By:_______________________________
Name Printed:_____________________
Title:____________________________
3
<PAGE>
HELLER FINANCIAL, INC.,
Individually and as Agent
By:_______________________________
Name Printed:_____________________
Title:____________________________
4
<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 PLASTIC INJECTION
MOLDING, INC.
By:_______________________________
Name Printed:_____________________
Title:____________________________
ATLANTIS PLASTIC FILMS, INC.
By:_______________________________
Name Printed:_____________________
Title:____________________________
PIERCE PLASTICS, INC.
By:_______________________________
Name Printed:_____________________
Title:____________________________
5
EXHIBIT 10.2
FOURTEENTH AMENDMENT TO CREDIT AGREEMENT
This Fourteenth Amendment to Credit Agreement ("Amendment") is made and
entered into as of October ___, 1998 by and between ATLANTIS PLASTICS, INC.
("Borrower"), HELLER FINANCIAL, INC., in its capacity as Agent for the Lenders
party to the Credit Agreement described below ("Agent") and the Lenders which
are signatories hereto.
WHEREAS, Agent, Lenders and Borrower are parties to a certain Credit
Agreement dated as of February 22, 1993 and all amendments thereto (as such
agreement has from time to time been amended, supplemented or otherwise
modified, the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in the Agreement and this Amendment, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Amendment, unless
otherwise defined herein, shall have the meaning ascribed to such terms in the
Agreement.
2. AMENDMENTS. Subject to the conditions set forth below, the Agreement
is amended as follows:
(A) Subsection 1.1 is hereby amended by adding the following
definition to subsection 1.1 in its appropriate place:
"Fourteenth Amendment Effective Date" means October ___,
1998."
(B) Subsection 2.1(A) is hereby amended by deleting the first
paragraph of subsection 2.1(A) in its entirety and inserting the following in
lieu thereof:
"(A) REVOLVING LOAN. Subject to the terms and conditions of
this Agreement and in reliance upon the representations and
warranties of Borrower herein set forth, each Lender agrees to
lend to Borrower from time to time during the period from the
Fourteenth Amendment Effective Date to and excluding the
Expiry Date, its Pro Rata Share of the Revolving Loan. The
aggregate amount of all Revolving Loan Commitments shall be
$20,000,000, as reduced from time to time pursuant to
subsection 2.4. Amounts borrowed under this subsection 2.1(A)
may be repaid and reborrowed at any time prior to the Expiry
Date. No Lender shall have any obligation to make advances
under this subsection 2.1(A) to the extent any requested
advance would cause the principal balance of the Revolving
Loans then outstanding to exceed the Maximum Revolving Loan
Amount; provided that Lenders may, in their sole discretion,
elect from time to time to make Loans in excess of the Maximum
Revolving Loan Amount."
3. CONDITIONS. The effectiveness of this Amendment is subject to the
following conditions precedent (unless specifically waived in writing by Agent):
<PAGE>
(a) Borrower shall have executed and delivered this Amendment,
and such other documents and instruments as Agent may require shall
have been executed and/or delivered to Agent;
(b) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto shall be satisfactory to Agent and its
legal counsel;
(c) No Default or Event of Default shall have occurred and be
continuing;
(d) Borrower shall have executed an Amended Revolving Note in
the amount of $20,000,000; and
(e) Borrower shall have paid Agent a closing fee in the amount
of $6,250.
4. REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders to enter
into this Amendment, Borrower represents and warrants to Agent and Lenders that
(a) the execution, delivery and performance of this Amendment has been duly
authorized by all requisite corporate action on the part of Borrower and that
this Amendment has been duly executed and delivered by Borrower and (b) each of
the representations and warranties set forth in Section 4 of the Agreement
(other than those which, by their terms, specifically are made as of certain
date prior to the date hereof) are true and correct in all material respects as
of the date hereof.
5. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6. REFERENCES. Any reference to the Agreement contained in any
document, instrument or agreement executed in connection with the Agreement
shall be deemed to be a reference to the Agreement as modified by this
Amendment.
7. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which taken
together shall be one and the same instrument.
8. RATIFICATION. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions of the
Agreement and shall not be deemed to be a consent to the modification or waiver
of any other term or condition of the Agreement. Except as expressly modified
and superseded by this Amendment, the terms and provisions of the Agreement are
ratified and confirmed and shall continue in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
ATLANTIS PLASTICS, INC.
By:______________________________
Name Printed:____________________
Title:___________________________
HELLER FINANCIAL, INC.,
Individually and as Agent
By:______________________________
Name Printed:____________________
Title:___________________________
3
<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 PLASTIC INJECTION
MOLDING, INC.
By:______________________________
Name Printed:____________________
Title:___________________________
ATLANTIS PLASTIC FILMS, INC.
By:______________________________
Name Printed:____________________
Title:___________________________
PIERCE PLASTICS, INC.
By:______________________________
Name Printed:____________________
Title:___________________________
4
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<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 2,940
<SECURITIES> 0
<RECEIVABLES> 29,825
<ALLOWANCES> 1,015
<INVENTORY> 14,634
<CURRENT-ASSETS> 52,211
<PP&E> 121,932
<DEPRECIATION> 62,551
<TOTAL-ASSETS> 160,910
<CURRENT-LIABILITIES> 25,090
<BONDS> 89,535
0
0
<COMMON> 746
<OTHER-SE> 35,901
<TOTAL-LIABILITY-AND-EQUITY> 160,910
<SALES> 191,461
<TOTAL-REVENUES> 191,461
<CGS> 158,014
<TOTAL-COSTS> 158,014
<OTHER-EXPENSES> 18,442
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,036
<INCOME-PRETAX> 6,969
<INCOME-TAX> 2,346
<INCOME-CONTINUING> 4,623
<DISCONTINUED> 0
<EXTRAORDINARY> 390
<CHANGES> 0
<NET-INCOME> 4,233
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.55
</TABLE>
