--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________to__________________
Commission File number 1-9487
ATLANTIS PLASTICS, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 06-1088270
------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1870 The Exchange, Suite 200, Atlanta, Georgia 30339
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including Area Code) (800) 497-7659
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 June 30, 2000
------------- ----------------------------
A, $.10 par value 4,846,846
B, $.10 par value 2,676,947
<PAGE>
ATLANTIS PLASTICS, INC.
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of
June 30, 2000 and December 31, 1999.............................1
Condensed Consolidated Statements of Income for the
three months and six months ended June 30, 2000 and 1999........2
Consolidated Statements of Cash Flows for the
six months ended June 30, 2000 and 1999.........................3
Notes to Consolidated Financial Statements......................4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations................7
Part II. Other Information
Item 1 - Legal
Proceedings.................................................................10
Item 4 - Submission of Matters to a Vote of Security-Holders.............10
Item 6 - Exhibits and Reports on Form 8-K................................10
Signatures..................................................................11
<PAGE>
ATLANTIS PLASTICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------- ---------
(Unaudited) (Note A)
<S> <C> <C>
ASSETS
Cash and cash equivalents ................................................ $ 1,126 $ 2,288
Accounts receivable, net ................................................. 30,954 30,987
Inventories .............................................................. 19,462 17,556
Other current assets ..................................................... 6,337 7,248
--------- ---------
Current assets ....................................................... 57,879 58,079
Property and equipment, net .............................................. 69,061 65,580
Goodwill, net of accumulated amortization ................................ 45,195 45,957
Other assets ............................................................. 829 1,050
--------- ---------
Total assets ......................................................... $ 172,964 $ 170,666
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses .................................... $ 19,600 $ 22,565
Current portion of long-term debt ........................................ 14,601 10,846
--------- ---------
Current liabilities .................................................. 34,201 33,411
Long-term debt, less current portion ..................................... 80,722 80,888
Deferred income taxes .................................................... 10,456 10,258
Other liabilities ........................................................ -- 95
--------- ---------
Total liabilities .................................................... 125,379 124,652
Commitments and contingencies ............................................ -- --
Shareholders' equity:
Class A Common Stock, $.10 par value, 20,000,000 shares authorized,
4,846,846 and 4,752,991 shares issued and outstanding in 2000 and 1999 485 475
Class B Common Stock, $.10 par value, 7,000,000 shares authorized,
2,676,947 shares issued and outstanding in 2000 and 1999 ............. 268 268
Additional paid-in capital ............................................. 10,656 10,046
Notes receivable from sale of Common Stock ............................. (1,552) (1,410)
Retained earnings ...................................................... 37,728 36,635
--------- ---------
Total shareholders' equity ........................................... 47,585 46,014
--------- ---------
Total liabilities and shareholders' equity ........................... $ 172,964 $ 170,666
========= =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
1
<PAGE>
ATLANTIS PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2000 1999 2000 1999
----------------------- -----------------------
<S> <C> <C> <C> <C>
Net sales ............................................................. $ 65,251 $ 65,052 $ 129,725 $ 124,025
Cost of sales ......................................................... 55,718 51,830 109,200 98,389
--------- --------- --------- ---------
Gross profit ....................................... 9,533 13,222 20,525 25,636
Selling, general and administrative expenses .......................... 6,211 6,490 12,787 12,990
--------- --------- --------- ---------
Operating income .................................... 3,322 6,732 7,738 12,646
Net interest expense .................................................. (2,546) (2,285) (5,052) (4,600)
--------- --------- --------- ---------
Income from continuing operations before income taxes 776 4,447 2,686 8,046
Income tax provision ................................................. (420) (1,816) (1,271) (3,309)
--------- --------- --------- ---------
Net income .......................................... $ 356 $ 2,631 $ 1,415 $ 4,737
========= ========= ========= =========
Earnings per Common Share (Basic)
--------- --------- --------- ---------
Net income .......................................... $ 0.05 $ 0.35 $ 0.19 $ 0.63
========= ========= ========= =========
Weighted -average number of shares outstanding - Basic ................ 7,520 7,585 7,511 7,536
Earnings per Common Share (Diluted)
--------- --------- --------- ---------
Net income .......................................... $ 0.05 $ 0.33 $ 0.18 $ 0.61
========= ========= ========= =========
Weighted -average number of shares outstanding - Diluted .............. 7,621 7,897 7,691 7,821
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
2
<PAGE>
ATLANTIS PLASTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
2000 1999
-------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................ $ 1,415 $ 4,737
------- -------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ...................................................... 4,545 4,154
(Gain) loss on disposal of assets ................................. (6) 19
Amortization of goodwill .......................................... 791 786
Loan fee and other amortization ................................... 258 218
Interest receivable ............................................... (67) (43)
Deferred income taxes ............................................. 198 (388)
Changes in operating assets and liabilities, net .................. (3,917) (1,662)
------- -------
Total adjustments ............................................. 1,802 3,084
------- -------
Net cash provided by operating activities ................. 3,217 7,821
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................ (8,087) (7,050)
Proceeds from asset dispositions .................................... 67 --
------- -------
Net cash used in investing activities ....................... (8,020) (7,050)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreements ........................ 4,900 --
Payments on long-term debt .......................................... (1,311) (1,258)
Payments on notes receivable from shareholders ...................... 193 75
Purchase of Common stock ............................................ (389) --
Proceeds from exercise of stock options ............................. 248 168
------- -------
Net cash provided by (used) in financing activities ......... 3,641 (1,015)
------- -------
Net decrease in cash and cash equivalents ............................. (1,162) (244)
Cash and cash equivalents at beginning of period ...................... 2,288 2,879
------- -------
Cash and cash equivalents at end of period ............................ $ 1,126 $ 2,635
======= =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE>
ATLANTIS PLASTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
Note A. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six-month period ended June 30, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Atlantis Plastics, Inc. annual report on Form
10-K for the year ended December 31, 1999.
Note B. Inventories
The components of inventory consist of the following:
June 30 December 31
2000 1999
------- -------
In Thousands
Raw Materials $11,065 $ 9,396
Work in Process 116 76
Finished Products 8,281 8,084
------- -------
$19,462 $17,556
======= =======
The increase in raw material inventory is principally associated with a four
cent per pound price increase as well as additional resins purchased in the
Plastic Films segment in preparation for the introduction of revised and
improved film structures as well as an alternative resin required for production
of certain films during high ambient heat conditions during the summer months.
It is anticipated that these inventories will be reduced to lower levels by the
end of the third quarter of 2000.
4
<PAGE>
Note C. Segment Information
The Company has two operating segments: Atlantis Plastic Films and Atlantis
Molded Plastics. Information related to such segments is as follows:
<TABLE>
<CAPTION>
Six Months
Ended June 30, 2000
Segment
-------------------------------------------------------
Atlantis Atlantis
Plastics Molded
Films Plastics Corporate Consolidated
--------- --------- --------- ------------
In Thousands
<S> <C> <C> <C> <C>
Net Sales $ 89,507 $ 40,218 -- $ 129,725
Operating Income 3,947 3,791 -- 7,738
Identifiable Assets 109,528 60,108 $ 3,328(1) 172,964
Capital Expenditures 5,967 1,726 394 8,087
Depreciation and
Amortization 2,343 1,907 1,344 5,594
<CAPTION>
Six Months
Ended June 30, 1999
Segment
-------------------------------------------------------
Atlantis Atlantis
Plastics Molded
Films Plastics Corporate Consolidated
--------- --------- --------- ------------
In Thousands
<S> <C> <C> <C> <C>
Net Sales $ 85,215 $ 38,810 -- $124,025
Operating Income 9,570 3,076 -- 12,646
Identifiable Assets 111,603 57,124 $ (5,509)(1) 163,218
Capital Expenditures 3,498 2,049 1,493 7,040
Depreciation and
Amortization 2,306 1,785 1,067 5,158
</TABLE>
(1) Corporate identifiable assets are primarily intercompany receivables.
5
<PAGE>
Note D. Earnings Per Share Data
The following table sets forth the computation of basic and diluted earnings per
share for the periods indicated.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
2000 1999 2000 1999
------ ------ ------ ------
In thousands, except per share data
<S> <C> <C> <C> <C>
Basic:
Net income $ 356 $2,631 $1,415 $4,737
Weighted average shares outstanding 7,520 7,585 7,511 7,536
------ ------ ------ ------
Basic earnings per share $ 0.05 $ 0.35 $ 0.19 $ 0.63
====== ====== ====== ======
Diluted:
Net income $ 356 $2,631 $1,415 $4,737
Weighted average shares outstanding 7,520 7,585 7,511 7,536
Net effect of dilutive stock options-based
on treasury stock method 101 312 180 285
------ ------ ------ ------
7,621 7,897 7,691 7,821
Diluted earnings per share $ 0.05 $ 0.33 $ 0.18 $ 0.61
====== ====== ====== ======
</TABLE>
6
<PAGE>
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.
Atlantis Plastic Films accounts for approximately 70% 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 30% 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, building supplies, and agricultural
and automotive products, and (ii) a variety of custom and proprietary extruded
plastic parts (profile extrusion) for both trim and functional application 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 to the current period presentation.
Selected income statement data for the quarterly periods ended March 31, 1999
through June 30, 2000 are as follows:
<TABLE>
<CAPTION>
($ in millions) 2000 1999
-------------------- ----------------------------------------------
Q2 Q1 Q4 Q3 Q2 Q1
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET SALES
Plastic Films $ 45.9 $ 43.6 $ 47.2 $ 44.7 $ 44.5 $ 40.7
Molded Plastics 19.4 20.9 17.7 20.4 20.6 18.3
------- ------- ------- ------- ------- -------
TOTAL $ 65.3 $ 64.5 $ 64.9 $ 65.1 $ 65.1 $ 59.0
======= ======= ======= ======= ======= =======
<CAPTION>
Percentage of Net Sales
<S> <C> <C> <C> <C> <C> <C>
GROSS PROFIT
Plastic Films 13% 15% 17% 19% 21% 22%
Molded Plastics 18% 21% 22% 19% 19% 18%
------- ------- ------- ------- ------- -------
TOTAL 15% 17% 19% 19% 20% 21%
======= ======= ======= ======= ======= =======
OPERATING INCOME
Plastic Films 4% 5% 9% 10% 11% 12%
Molded Plastics 9% 10% 10% 10% 9% 7%
------- ------- ------- ------- ------- -------
TOTAL 5% 7% 9% 10% 10% 10%
======= ======= ======= ======= ======= =======
NET INTEREST EXPENSE $ 2.6 $ 2.5 $ 2.4 $ 2.2 $ 2.3 $ 2.3
======= ======= ======= ======= ======= =======
</TABLE>
7
<PAGE>
RESULTS OF OPERATIONS
The Company's 2000 second quarter and year-to-date net sales were $65.3
million and $129.7 million compared with $65.1 million and $124.0 million for
the same periods of 1999. Atlantis Plastic Films' volume (measured in pounds)
for the second quarter was 4% below the second quarter of 1999 and the first six
months volume for 2000 was 5% below the comparable period of 1999. First half
net sales for Atlantis Plastic films were 5% above 1999 due to higher average
selling prices resulting from increases in polyethylene resin prices. Atlantis
Molded Products' net sales for the second quarter and first half of 2000 were
$19.3 million and $40.2 million, compared with $20.5 million and $38.8 million
respectively.
Atlantis' second quarter and year-to-date gross margins equaled 15% and 16%
respectively compared with 20% and 21% for the comparable periods of 1999.
Plastic Films accounted for most of the decline, with gross margins in the
second quarter and year-to-date periods of 2000 of 13% and 14% respectively,
compared to 21% and 22% for the same periods of 1999. The declines were largely
due to increased polyethylene resin prices and lower sales volumes. Molded
Plastics' second quarter and year-to-date gross margins of 18% and 19% were
similar to 1999 levels of 19% and 18% for comparable periods. The molded
products 1999 improvements in operational efficiencies, reduced scrap rates, and
reduced overhead were sustained through the first six months of this year.
Selling, general, and administrative ("SG&A") expenses for the second
quarter of 2000 were $6.2 million compared with $6.5 million in 1999. For the
first half, SG&A expense was $12.8 million compared to $13.0 million for 1999.
For both the second quarter and first half, the year to year decline reflects
reduced accruals for incentive compensation programs.
Second quarter and year-to-date net interest expense of $2.5 million
and $5.1 million respectively were higher than comparable levels in 1999 by
approximately 11% and 10%. These increases were a result of increased borrowing
on the Company's revolving credit facility. Effective income tax rates differed
from applicable statutory rates in both 2000 and 1999, primarily due to
nondeductible goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at June 30, 2000 totaled $23.7 million
(including cash and cash equivalents of $1.1 million), compared to $24.7 million
(including cash and cash equivalents of $2.3 million) at December 31, 1999. At
June 30, 2000, borrowings on the Company's $25 million revolving credit facility
were $12 million and unused availability, net of outstanding letters of credit
of approximately $1.3 million, equaled $11.7 million. The present credit
agreement was renewed effective May 12, 2000 and expires November 12, 2000.
Interest is computed using LIBOR or prime-based rates plus a margin. The LIBOR
and prime-based rates are determined by a formula based upon the Company's ratio
of cash flow to net indebtedness. At June 30, 2000 these rates were 8.86% and
10%, respectively.
The Company's new 120 inch five layer cast extrusion line presently is
being tested in the Sapulpa, OK stretch film facility and a new coextrusion line
for custom films is on order with delivery expected September 2000. Atlantis
signed a 10 year lease in May 2000 and presently is outfitting the Fontana, CA
stretch film facility with production expected to commence in the fourth quarter
of 2000.
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 (see above). The Company
expects to fund the above capital expenditure requirements as well as its short
and long-term liquidity needs with cash on hand, funds generated from
operations, and funds available under its revolving credit facility. In March
8
<PAGE>
2000 Atlantis announced that it is exploring alternatives which would allow it
to refinance its long term debt including its 11% Senior Notes due February
2003.
Cash Flows from Operating Activities
In the first six months of 2000, net cash provided by operating
activities was approximately $3.3 million, compared to $7.8 million for the same
period last year. Net income through June 2000 was $1.4 million compared to $4.7
million through June 1999. During the first half of 2000 accounts receivable
decreased by $33,000 compared to an increase of $2.4 million for the same period
of 1999. Inventories increased by approximately $1.9 million during the first
six months of 2000 compared to $1.5 million in 1999. The year 2000 increase is
principally associated with a four cent per pound price increase as well as
additional resins purchased in the Plastic Films segment in preparation for the
introduction of revised and improved film structures as well as an alternative
resin required for production of certain films during high ambient heat
conditions during the summer months.
Accounts payable and accrued expenses decreased $3.0 million during the
first half of 2000 compared to an increase of $770,000 during the same period of
1999. This decrease is primarily timing differences in payments of normal
operating expenses and taxes.
Cash Flows from Investing Activities
Net cash used in investing activities during the first six months of
2000 consisted of capital expenditures (net of dispositions) totaling $8.1
million, compared to capital expenditures (net of dispositions) of $7.1 million
for the same period last year.
Cash Flows from Financing Activities
Net cash provided by financing activities for the first six months of
2000 was $3.6 million, compared to $1.0 million cash used during this period
last year. Net borrowings under the revolving credit agreement equaled $4.9
million during the first half of 2000 compared to none in 1999. Proceeds from
the exercise of stock options were $248,000 during the first six months of 2000,
and $168,000 during the same period, 1999. During the first half of 2000,
$389,000 was used to repurchase the Company's Common stock. There were no
repurchases in the comparable period, 1999.
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. Forward-looking statements may include, but are not limited
to, projections of revenues, income or losses, capital expenditures, plans for
future operations, financing needs or plans, compliance with financial covenants
in loan agreements, plans for liquidation or sale of assets or businesses, plans
relating to products or services of the Company, assessments of materiality,
predictions of future events, the ability to obtain additional financing, the
Company's ability to meet obligations as they become due, the impact of pending
and possible litigation, as well as assumptions relating to the foregoing. In
addition, when used in this discussion, the words "anticipates," "believes,"
"estimates," "expects," "intends," "plans" and similar expressions are intended
to identify forward-looking statements. Forward-looking statements are
inherently subject to risks and uncertainties, including, but not limited to,
the impact of leverage, dependence on major customers, fluctuating demand for
the Company's products, risks in product and technology development, fluctuating
resin prices, competition, litigation, labor disputes, capital requirements, and
other risk factors detailed in the Company's Securities and Exchange Commission
filings, some of which cannot be predicted or quantified based on current
expectations.
9
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings.
The Company is not a party to any legal proceeding other than
routine litigation incidental to its business, none of which is
material.
Item 4. Submission of Matters to a Vote of Security-Holders
(a) The Registrant held its Annual Meeting of Shareholders on June 13,
2000.
(b) Not Required
(c) The matter voted on at the Annual Meeting of Shareholders, and the
tabulation of votes on such matter are as follows:
Election of Directors
---------------------
Name For Withheld
---- --- --------
CLASS A
-------
Charles D. Murphy, III 4,445,351 1,165
Chester B. Vanatta 4,445,351 1,165
CLASS B
-------
Cesar L. Alvarez 2,676,947 -0-
Anthony F. Bova 2,676,947 -0-
Phillip T. George, M.D. 2,676,947 -0-
Larry D. Horner 2,676,947 -0-
Earl W. Powell 2,676,947 -0-
Paul Rudovsky 2,676,947 -0-
(d) Not applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Second Amendment and Restatement of Promissory Note by and between
Atlantis Plastics Injection Molding, Inc. and the Registrant and
National City Bank, dated as of May 17, 2000
10.2 Lease between Principal Life Insurance Company and Atlantis
Plastic Films, Inc., dated as of March 8, 2000
10.3 Guaranty of Lease by Registrant of the obligations of Atlantis
Plastics Films, dated as of March 8, 2000
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, the Registrant filed no reports on Form 8-K.
10
<PAGE>
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: July 27, 2000 /s/ Anthony F. Bova
-------------------
ANTHONY F. BOVA
President and Chief Executive Officer
Date: July 27, 2000 /s/ Paul Rudovsky
-----------------
PAUL RUDOVSKY
Executive Vice President, Finance and
Administration
11
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
10.1 Second Amendment and Restatement of Promissory Note by and between
Atlantis Plastics Injection Molding, Inc. and the Registrant and
National City Bank, dated as of May 17, 2000
10.2 Lease between Principal Life Insurance Company and Atlantis
Plastic Films, Inc., dated as of March 8, 2000
10.3 Guaranty of Lease by Registrant of the obligations of Atlantis
Plastics Films, dated as of March 8, 2000
27.1 Financial Data Schedule
