--------------------------------------------------------------------------------
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, 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 September 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. Condensed Consolidated Financial Statements (Unaudited)
Balance Sheets as of September 30, 2000 and December 31, 1999.......1
Statements of Operations for the three months and the
nine months ended September 30, 2000 and 1999.......................2
Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999.........................................3
Notes to 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.................................................11
Item 6 - Exhibits and Reports on Form 8-K..................................11
Signatures....................................................................12
<PAGE>
ATLANTIS PLASTICS, INC.
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------ ----------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents....................................................... $1,623 $2,288
Accounts receivable, net........................................................ 31,496 30,987
Inventories..................................................................... 18,101 17,556
Other current assets............................................................ 5,939 7,248
------------------ ----------------
Current assets.............................................................. 57,159 58,079
Property and equipment, net..................................................... 69,755 65,580
Goodwill, net of accumulated amortization....................................... 44,803 45,957
Other assets.................................................................... 688 1,050
------------------ ----------------
Total assets................................................................ $172,405 $170,666
================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses........................................... $19,610 $22,565
Current portion of long-term debt............................................... 15,605 10,846
------------------ ----------------
Current liabilities......................................................... 35,215 33,411
Long-term debt, less current portion............................................ 80,086 80,888
Deferred income taxes........................................................... 10,230 10,258
Other liabilities............................................................... -- 95
------------------ ----------------
Total liabilities........................................................... 125,531 124,652
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.................................................... 10,661 10,046
Notes receivable from sale of Common Stock.................................... (1,588) (1,410)
Retained earnings............................................................. 37,048 36,635
------------------ ----------------
Total shareholders' equity.................................................. 46,874 46,014
------------------ ----------------
Total liabilities and shareholders' equity.................................. $172,405 $170,666
================== ================
</TABLE>
See accompanying notes to financial statements (unaudited)
1
<PAGE>
ATLANTIS PLASTICS, INC.
STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2000 1999 2000 1999
---------------------- ----------------------
<S> <C> <C> <C> <C>
Net sales......................................................................... $63,206 $65,104 $192,931 $189,129
Cost of sales..................................................................... 55,288 52,718 164,488 151,107
--------- ---------- ---------- ----------
Gross profit............................................................. 7,918 12,386 28,443 38,022
Selling, general and administrative expenses...................................... 6,245 5,936 19,032 18,926
--------- ---------- ---------- ----------
Operating income......................................................... 1,673 6,450 9,411 19,096
Net interest expense.............................................................. (2,567) (2,200) (7,619) (6,800)
--------- ---------- ---------- ----------
(Loss) income from continuing operations before income taxes............. (894) 4,250 1,792 12,296
Income tax benefit (provision)................................................... 213 (1,720) (1,058) (5,029)
--------- ---------- ---------- ----------
Net income (loss) ....................................................... ($681) $2,530 $734 $7,267
========= ========== ========== ==========
Earnings per Common Share (Basic)
Net income (loss)........................................................ ($0.09) $0.33 $0.10 $0.96
========= ========== ========== ==========
Weighted-average number of shares outstanding - Basic 7,524 7,591 7,515 7,555
========= ========== ========== ==========
Earnings per Common Share (Diluted)
Net income (loss)........................................................ ($0.09) $0.32 $0.10 $0.92
========= ========== ========== ==========
Weighted-average number of shares outstanding - Diluted 7,524 7,976 7,645 7,872
========= ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
2
<PAGE>
ATLANTIS PLASTICS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
2000 1999
-----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................................................... $734 $7,267
------------- -------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation................................................................ 6,883 6,312
(Gain) loss on disposal of assets........................................... 32 48
Amortization of goodwill.................................................... 1,187 1,179
Loan fee and other amortization............................................. 360 322
Interest receivable......................................................... (103) (71)
Deferred income taxes....................................................... (28) (238)
Changes in operating assets and liabilities, net............................ (2,649) (2,307)
------------- -------------
Total adjustments....................................................... 5,682 5,245
------------- -------------
Net cash provided by operating activities........................... 6,416 12,512
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................................... (11,159) (10,144)
Proceeds from asset dispositions.............................................. 69 --
------------- -------------
Net cash used in investing activities................................. (11,090) (10,144)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreements.................................. 5,900 --
Payments on long-term debt.................................................... (1,943) (1,892)
Payments on notes receivable from shareholders................................ 193 75
Purchase of Common stock...................................................... (389) --
Proceeds from exercise of stock options....................................... 248 202
------------- -------------
Net cash provided by (used) in financing activities................... 4,009 (1,615)
------------- -------------
Net (decrease) increase in cash and cash equivalents............................ (665) 753
Cash and cash equivalents at beginning of period................................ 2,288 2,879
------------- -------------
Cash and cash equivalents at end of period...................................... $1,623 $3,632
============= =============
</TABLE>
See accompanying notes to financial statements (unaudited).
3
<PAGE>
ATLANTIS PLASTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
Note A. Basis of Presentation
The accompanying unaudited condensed 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 nine month period ended September 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:
September 30 December 31
2000 1999
---------------------------------
In Thousands
Raw Materials $ 9,042 $ 9,396
Work in Process 170 76
Finished Products 8,889 8,084
-------- --------
$ 18,101 $ 17,556
======== ========
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>
Nine Months
Ended September 30, 2000
-------------------------------------------------------------------------
Atlantis Atlantis
Plastics Molded
Films Plastics Corporate Consolidated
----- -------- --------- ------------
In Thousands
<S> <C> <C> <C> <C>
Net Sales $ 134,018 $ 58,913 -- $192,931
Operating Income 4,566 4,845 -- 9,411
Identifiable Assets 108,720 61,116 $ 2,569 (1) 172,405
Capital Expenditures 7,838 2,734 587 11,159
Depreciation and
Amortization 3,543 2,865 2,022 8,430
<CAPTION>
Nine Months
Ended September 30, 1999
-------------------------------------------------------------------------
Atlantis Atlantis
Plastics Molded
Films Plastics Corporate Consolidated
----- -------- --------- ------------
In Thousands
<S> <C> <C> <C> <C>
Net Sales $ 129,908 $ 59,221 -- $189,129
Operating Income 14,135 4,961 -- 19,096
Identifiable Assets 117,037 58,741 $ (7,462) (1) 168,316
Capital Expenditures 5,446 2,596 2,102 10,144
Depreciation and
Amortization 3,421 2,677 1,715 7,813
</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 Nine Months
Ended September 30 Ended September 30
2000 1999 2000 1999
-------------- ------------ ------------ ------------
In thousands, except per share data
<S> <C> <C> <C> <C>
Basic:
Net (loss) income $ (681) $2,530 $ 734 $7,267
Weighted average shares outstanding 7,524 7,591 7,515 7,555
Basic (loss) earnings per share $ (0.09) $ 0.33 $ 0.10 $ 0.96
======= ====== ====== ======
Diluted:
Net (loss) income $ (681) $2,530 $ 734 $7,267
Weighted average shares outstanding 7,524 7,591 7,515 7,555
Net effect of dilutive stock options-based
on treasury stock method -- 385 130 317
------- ------ ------ ------
7,524 7,976 7,645 7,872
Diluted (loss) earnings per share $ (0.09) $ 0.32 $ 0.10 $ 0.92
======= ====== ====== ======
</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 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.
Selected income statement data for the quarterly periods ended March 31, 1999
through September 30, 2000 are as follows:
<TABLE>
<CAPTION>
($ in millions) 2000 1999
-------------------------------------- ----------------------------------------------------
Q3 Q2 Q1 Q4 Q3 Q2 Q1
--------- --------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NET SALES
Plastic Films $44.5 $45.9 $43.6 $47.2 $44.7 $44.5 $40.7
Molded Plastics 18.7 19.4 20.9 17.7 20.4 20.5 18.3
--------- --------- ---------- --------- --------- ---------- ---------
TOTAL $63.2 $65.3 $64.5 $64.9 $65.1 $65.0 $59.0
========= ========= ========== ========= ========= ========== =========
Percentage of Net Sales
GROSS PROFIT
Plastic Films 11% 13% 15% 17% 19% 21% 22%
Molded Plastics 16% 18% 21% 22% 19% 19% 18%
--------- --------- ---------- --------- --------- ---------- ---------
TOTAL 13% 15% 17% 19% 19% 20% 21%
========= ========= ========== ========= ========= ========== =========
OPERATING INCOME
Plastic Films 1% 4% 5% 9% 10% 11% 12%
Molded Plastics 6% 9% 10% 10% 10% 9% 7%
--------- --------- ---------- --------- --------- ---------- ---------
TOTAL 3% 5% 7% 9% 10% 10% 10%
========= ========= ========== ========= ========= ========== =========
NET INTEREST EXPENSE $ 2.6 $ 2.6 $ 2.5 $ 2.4 $ 2.2 $ 2.3 $ 2.3
========= ========= ========== ========= ========= ========== =========
</TABLE>
7
<PAGE>
RESULTS OF OPERATIONS
Net sales for the quarter ended September 30, 2000 and the nine month
period ended September 30, 2000 were $63.2 million and $192.9 million compared
with $65.1 million and $189.1 million for the same periods of 1999. Atlantis
Plastic Films' volume (measured in pounds) for the third quarter was 3% below
the third quarter of 1999 due primarily to reductions in customer inventory
levels in both stretch and custom film products. Plastic films volume (measured
in pounds) for the nine months ended September 30, 2000 reflected a decline of
4% from 1999 levels. Net sales for the nine months ended September 30, 2000 for
Atlantis Plastic films were 3% above 1999 due to higher average selling prices
resulting from increases in polyethylene resin prices. Sales volume in Atlantis'
Molded products segment declined 8% for the three month period ended September
30, 2000 compared to the third quarter of 1999 due primarily to continued
weakness in the home building and durable goods sectors. Molded products net
sales for the three month and nine month periods ended September 30, 2000 were
$18.7 million and $59.0 million, compared with $20.4 million and $59.2 million
for the same periods in 1999.
Atlantis' third quarter and year-to-date gross margins were 13% and 15%,
respectively compared with 19% and 20% for the comparable periods of 1999.
Plastic Films' gross margins for the quarter ended September 30, 2000 and
year-to-date were 11% and 13% compared with 19% and 21% for the same periods of
1999. The declines were largely due to increased polyethylene resin prices and
lower sales volumes. Molded products 2000 third quarter gross margin of 16%
declined from the third quarter 1999 gross margin of 19% due primarily to
continued weakness in the durable goods sectors. Year-to-date gross margins in
the Molded products segment were 19% for both years. Improvements in operational
efficiencies, reduced scrap rates, and reduced overhead made in 1999 were
sustained through 2000.
Selling, general, and administrative ("SG&A") expenses for the third
quarter of 2000 were $6.2 million compared with $5.9 million in 1999. During the
quarter ended September 30, 1999, Atlantis' SG&A expense was favorably impacted
by reductions in workers compensation costs as a result of improved safety
experience and favorable settlement of a potential claim. For the first nine
months, SG&A expense was $ 19.0 million compared with $18.9 million for 1999.
Net interest expense for the quarter and the nine month period ended
September 30, 2000 were $2.6 million and $7.6 million, respectively, which were
higher than comparable levels in 1999 by approximately 17% and 12%. 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 September 30, 2000 totaled $21.9
million (including cash and cash equivalents of $1.6 million), compared to $24.7
million (including cash and cash equivalents of $2.3 million) at December 31,
1999. At September 30, 2000, borrowings on the Company's $30 million revolving
credit facility were $13 million and unused availability, net of outstanding
letters of credit of approximately $1.3 million, equaled $15.7 million. The
present credit agreement was renewed September 30, 2000 at a principal amount of
$30 million and expires November 12, 2001. 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
September 30, 2000 the borrowing rates were 9% and 10%, respectively.
8
<PAGE>
The Company's new 120 inch five layer cast extrusion line in the
Sapulpa, OK stretch film facility went into production during the third quarter
and a new coextrusion line for custom films is on order with delivery expected
in the fourth quarter 2000. Atlantis is presently outfitting the Fontana, CA
stretch film facility with production expected to commence by the end of the
year.
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
2000 Atlantis announced that it was 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
For the nine months ended September 30, 2000, net cash provided by
operating activities was approximately $6.4 million, compared to $12.5 million
for the same period last year. Net income for the nine months ended September
30, 2000 was $0.7 million compared to $7.3 million for the nine months ended
September 30, 1999. Accounts receivable increased by $0.5 million during the
nine months ended September 30, 2000 compared to an increase of $6.3 million for
the same period last year. Inventories increased by approximately $0.5 million
during the first nine months of 2000 compared to $2.3 million for the same
period last year. Both the 2000 increases in accounts receivable and inventories
are primarily the result of higher polyethylene resin prices.
Accounts payable and accrued expenses decreased $3.0 million during the
first nine months of 2000 compared to an increase of $3.8 million during the
same period of 1999. This decrease is primarily timing differences in payments
of normal operating expenses and taxes and reduced accruals for incentive
compensation programs.
Cash Flows from Investing Activities
Net cash used in investing activities during the first nine months of
2000 consisted of capital expenditures (net of dispositions) totaling $11.1
million, compared to capital expenditures (net of dispositions) of $10.1 million
for the same period last year.
Cash Flows from Financing Activities
Net cash provided by financing activities for the first nine months of
2000 was $4.0 million, compared to $1.6 million cash used during the same period
last year. Net borrowings under the revolving credit agreement equaled $5.9
million during the first nine of 2000 compared to none in 1999. Proceeds from
the exercise of stock options were $248,000 during the first nine months of
2000, and $202,000 during the same period of 1999. During the first nine months
of 2000, $389,000 was used to repurchase the Company's Common stock. There were
no repurchases in the comparable period for 1999.
9
<PAGE>
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.
10
<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 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Commercial Installment Note from Pierce Plastics, Inc. to National City
Bank of Indiana in the amount of $826,557.52, dated as of August 15,
2000.
10.2 * Separation Agreement, dated July 18, 2000, between Registrant and Paul
Rudovsky.
10.3 Nineteenth Amendment to Heller Credit Agreement, dated as of October
31, 2000.
10.4 Amended Revolving Note, dated October 31, 2000, between the Registrant
and Heller Financial, Inc.
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
<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: November 14, 2000 /s/ Anthony F. Bova
-------------------
ANTHONY F. BOVA
President and Chief Executive Officer
Date: November 14, 2000 /s/ Susan G. Edwards
--------------------
SUSAN G. EDWARDS
Treasurer
12
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
10.1 Commercial Installment Note from Pierce Plastics, Inc. to
National City Bank of Indiana in the amount of $826,557.52,
dated as of August 15, 2000.
10.2 * Separation Agreement, dated July 18, 2000, between Registrant
and Paul Rudovsky.
10.3 Nineteenth Amendment to Heller Credit Agreement, dated as of
October 31, 2000.
10.4 Amended Revolving Note, dated October 31, 2000, between the
Registrant and Heller Financial, Inc.
27.1 Financial Data Schedule
