10-K405
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
Commission file number 1-9487
ATLANTIS PLASTICS, INC.
(Exact name of registrant as specified in its charter)
Florida 06-1088270
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2665 South Bayshore Drive,
Suite 800, Miami, Florida 33133
(Address of principal (Zip Code)
executive offices)
(Registrant's telephone number, including area code) (305) 858-2200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Class A Common Stock, American Stock Exchange
$.10 par value per share Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [x]
The aggregate market value of shares of Class A Common Stock
held by non-affiliates of the registrant as of January 31, 1995,
was approximately $19,421,000 based on a $5 7/8 average of the high
and low sales prices for the Class A Common Stock on the American
Stock Exchange on such date. For purposes of this computation, all
executive officers, directors and 5% beneficial owners of the
common stock of the registrant have been deemed to be affiliates.
Such determination should not be deemed to be an admission that
such directors, officers or 5% beneficial owners are, in fact,
affiliates of the registrant.
The number of shares of Class A Common Stock, $.10 par value,
and Class B Common Stock, $.10 par value, of the registrant
outstanding as of January 31, 1995 were 4,082,437 and 3,002,363,
respectively.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the following documents have been incorporated by
reference into the parts indicated: The registrant's Annual Report
to Shareholders for the year ended December 31, 1994 - Parts II and
IV; and the registrant's definitive Proxy Statement to be filed
with the Securities and Exchange Commission not later than 120 days
after the end of the fiscal year covered by this report - Part III.
Index to Items
Page
Part I
Item 1. Business . . . . . . . . . . . . . . . . . . .
Item 2. Properties . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings. . . . . . . . . . . . . . .
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . .
Part II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters. . . . . . . . . .
Item 6. Selected Financial Data. . . . . . . . . . . .
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . .
Item 8. Financial Statements and Supplementary Data. .
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . .
Part III
Item 10. Directors and Executive Officers of
the Registrant . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . .
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . .
Part IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . .
Schedules. . . . . . . . . . . . . . . . . . . . . . . .
Exhibits . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . .
PART I
Item 1. Business
The Company
In May 1994, Atlantis Group, Inc. changed its name to Atlantis
Plastics, Inc. ("Atlantis" or the "Company"), moved its state of
incorporation from Delaware to Florida, and cancelled its shares of
Class A and Class B treasury stock then outstanding. Atlantis is
a leading U.S. manufacturer of polyethylene stretch and custom
films used in a variety of industrial and consumer applications and
molded plastic products for the appliance, automotive, recreational
vehicle, and dairy industries.
Atlantis Plastic Films currently accounts for approximately
two-thirds of the Company's net sales and consists of (i) stretch
films (multi-layer plastic films that are used principally to
stretch-wrap pallets of materials for shipping or storage), and
(ii) custom film products (high-grade laminating films, embossed
films and specialty film products targeted primarily to industrial
and agricultural markets).
Atlantis Molded Plastics currently accounts for approximately
one-third of the Company's net sales and consists of three
principal technologies, serving a wide variety of specific market
segments: (i) injection-molded thermoplastic parts that are sold
primarily to original equipment manufacturers and used in major
household appliances, agricultural and automotive products, (ii) a
variety of standard and custom extruded parts (profile extrusion)
that are incorporated into a broad range of consumer and commercial
products, including plastic moldings, trims, channels, seals and
gaskets that are used in recreational vehicles, doors, residential
windows, office furniture and retail store fixtures, and (iii)
blow-molded milk, juice, water and industrial containers in a
variety of shapes and sizes.
The Company believes that Atlantis Plastic Films' size and
market positions provide significant competitive advantages in the
stretch film markets. The Atlantis Molded Plastics subsidiaries
compete in highly fragmented segments of the plastics industry that
are distinguished by numerous small regional producers
manufacturing custom products or targeting specific market niches.
The Company believes that the market positions of its Atlantis
Molded Plastics subsidiaries and the custom nature of many of their
products provide barriers to competition and frequently afford
these subsidiaries with opportunities for higher profit margins.
The Company's sixteen plastics manufacturing facilities produce
a wide spectrum of products for industrial, commercial and consumer
markets. Management believes that the Company's diversification
and broad range of capabilities reduce the Company's exposure to
economic downturns in specific industries and permit the Company to
react efficiently to specific market opportunities. In addition,
in recent years the Company has directed significant efforts toward
maintaining or improving its operating profitability in the face of
continued industry pricing pressures. These efforts have included
consolidating management functions to enhance coordination of
marketing, manufacturing and research and development activities,
and expanding marketing, sales and distribution systems to generate
new customers. The Company intends to continue these efforts,
which management believes have generally enabled the Company to
become a low-cost producer.
The Company's growth strategy seeks to capitalize on the
Company's existing manufacturing capabilities and reputation for
product quality and customer service. The Company's specific
strategies include (i) intensified efforts to reduce cost of sales,
control the Company's cost base and realize manufacturing
efficiencies, (ii) concentrated efforts to continually improve
product quality and customer satisfaction by training employees in
and applying Total Quality Management and Statistical Process
Control systems, (iii) developing new products to increase sales to
new and existing customers, to improve profit margins and to
enhance the Company's position as a provider of value-added
products and services, (iv) expanding and refining the marketing
activities of its direct sales force and independent representative
organizations to target national accounts and penetrate new market
niches, and (v) focusing its acquisition activities on selected
plastics operations that will augment the Company's existing
operations or provide entry into new markets.
The Company was founded in 1984 and has grown primarily through
acquisitions in the plastics, insurance and furniture manufacturing
industries. In recent years the Company has concentrated its
resources in the plastics industry, and, as part of this strategic
focus, in April 1991 the Company sold a 51% interest in its
furniture operations ("Loewenstein"). In October 1993, the Company
sold a portion of its remaining 49% Loewenstein stock interest as
part of Loewenstein's initial public offering, reducing its
ownership to approximately 20%. Events subsequent to December 31,
1993 reduced the Company's share ownership to 18% as of February
14, 1994, and during December 1994 Loewenstein and another
furniture manufacturer were merged into WinsLoew Furniture, Inc.
("WinsLoew"). Subsequent to the merger, Atlantis owned
approximately 10% of WinsLoew, which is subject to further
reduction to approximately 9% in the event certain stock options
are exercised. The Company's insurance operations and its remaining
WinsLoew stock interest are held for sale. See "-- Discontinued
Operations."
Profiles of the Company's businesses and facilities are set
forth within Item 2. Properties. The Company's executive offices
are located at 2665 South Bayshore Drive, Suite 800, Miami, Florida
33133 and its telephone number is (305) 858-2200.
Business Strategy
The Company's general business strategy emphasizes the following
elements:
IMPROVED COST CONTROLS AND MANUFACTURING EFFICIENCIES. The
Company has recently intensified its efforts to reduce operating
costs and improve manufacturing efficiencies with stronger focus on
reducing scrap rates, increasing plant and equipment yields,
reducing equipment downtime, and improving the purchasing cycle in
order to reduce material costs. As part of these efforts, cost
control goals will continually be set and improvements will be
measured in the areas described above compared with performance
levels previously obtained.
EMPHASIS ON QUALITY AND CUSTOMER SATISFACTION. Quality is an
integral part of the products and services provided to customers.
As a result, the Company has made extensive efforts to train its
employees in Total Quality Management Systems. Many of the
Company's employees have also been trained in Statistical Process
Control (SPC) methods, while others have begun training in the
universally-recognized quality standards called ISO 9000. The
Company's efforts to improve customer satisfaction also include
developing strategic partnerships with major customers to enhance
communications and develop long-term relationships, assuring the
production of products which closely match customer specifications,
and maximizing on-time delivery rates.
DEVELOPMENT OF NEW PRODUCTS. Historically, the Company has
enhanced its competitive position and operating profitability by
developing and introducing products that permit the penetration of
new markets, including a new line of thinner gauge polyethylene
films. The Company intends to continue to work with its suppliers
and customers to develop new products that complement the Company's
current product lines and can be produced using the Company's
existing manufacturing capabilities. The Company's Customer
Applications and Training Laboratory for product development,
evaluation and training in its stretch film business permits
focused research and development efforts. Management believes that
the Company's extensive manufacturing capabilities and the
geographic scope of its plant locations provide a competitive
advantage with respect to attracting and accommodating customers
who desire a full service provider. Management also believes that
the Company's diversified customer base reduces the Company's
exposure to economic downturns in specific industries.
EXPANDED MARKETING ACTIVITIES. The Company intends to increase
the size and training of its direct factory sales force and its
sales representatives over the next several years in order to
increase sales to national accounts, better serve existing
geographic markets and initiate sales coverage in new markets to
strengthen the Company's national distribution capabilities.
Although the contemplated expansion of marketing activities may
increase the Company's selling expenses, such expansion is not
expected to increase selling, general and administrative expenses
as a percentage of net sales.
TARGETED ACQUISITIONS IN PLASTICS INDUSTRY. The plastics
industry is highly fragmented, with a large number of small
regional competitors. Management believes that the economics of
the plastics industry and the growing importance of national
customers create significant advantages for large, diversified
plastics manufacturers. Accordingly, the Company intends to
continue to focus its acquisition program on businesses that will
help solidify the Company's position as an industry leader. There
can be no assurance that suitable candidates will be available, or,
because of competition from other potential purchasers or other
business reasons, that the Company will be able to consummate
acquisitions on satisfactory terms.
Market Capabilities
STRETCH FILMS. Atlantis manufactures multi-layer stretch film
used principally to stretch-wrap pallets of material for storage or
shipping. Stretch film is manufactured using both blown and cast
extrusion processes and must meet rigid customer specifications. To
produce this product, Atlantis uses a combination of polyethylene
resins and other materials to make a film with various
characteristics. The resulting product is a very thin film which
stretches up to 300%, clings to itself and is puncture resistant.
Atlantis purchases several types of linear low-density resins
and other materials to manufacture its stretch film products.
Atlantis has contracts with resin manufacturers which allow it to
achieve what it believes to be the best combination of price, resin
availability and new product development support. Management
believes its relationships with its resin suppliers are good.
In marketing its stretch film, Atlantis utilizes a network of
experienced independent manufacturing representatives. Due to the
large volume of sales per representative, these representatives
typically carry its products on an exclusive basis. These products
are sold through independent industrial packaging distributors and,
to a lesser degree, directly to end-users. With the majority of its
products sold to distributors, Atlantis places particular emphasis
on assisting distributors in sales to end-users. The Company
intends to increase its direct marketing and sales efforts to
national accounts in certain areas.
CUSTOM FILMS. Polyethylene film accounts for approximately 95%
of Atlantis' custom film sales and is used for a wide variety of
packaging applications. Atlantis manufactures both low density and
linear low density polyethylene, the latter being a tougher and
more puncture-proof material.
Atlantis has an internal sales staff to market its roll stock
film, primarily to national accounts. Most of the film customers
are in industrial markets and consume the film during their
manufacturing and/or delivery process.
Approximately 20 different types of resin, delivered in pellet
form, and approximately ten types of color additives are used in
the manufacturing process. Atlantis has supply contracts that
fulfill most of its present requirements and believes that it has
adequate sources available to meet remaining raw material needs.
Atlantis also manufactures and sells film products such as
plastic gloves, aprons and tablecloths. During 1993, sales of
these products increased significantly through the acquisition and
integration of the assets of United Plastic Products. This
acquisition not only made Atlantis Plastic Films one of the largest
producers of polyethylene products for institutional food handling
markets, it also added substantial new state-of-the-art cast
embossing capacity to complement its current embossed production.
INJECTION MOLDING. Atlantis produces custom thermoplastic
parts by injection molding. These parts are used in large and small
appliances (including refrigerators, air conditioners,
dehumidifiers, dishwashers and microwave ovens), agricultural and
automotive products and hand-held power tools.
During May 1994, the Company purchased substantially all of the
assets (excluding cash) and assumed all of the liabilities
(excluding interest bearing indebtedness and amounts due to the
seller) of Advanced Plastics, Inc. ("Advanced"), an injection
molder located in Warren, Ohio, for approximately $12.4 million.
The Company also purchased real estate leased by Advanced and owned
by the seller. The acquisition was funded with borrowings from the
Company's revolving credit facility.
Atlantis operates molding presses ranging from 30 to 1,000 tons
and related secondary equipment in Henderson, Kentucky, Ft. Smith,
Arkansas, Nashville and Jackson, Tennessee and the new Advanced
facility located in Warren, Ohio. This wide variety of equipment
configuration and plant location alternatives enables it to
accommodate customers who require multiple components, various
press sizes and secondary operations.
During 1994, approximately 54% of this unit's sales (13% of the
Company's net sales) were to three separate purchasing divisions of
Whirlpool Corporation. Whirlpool has been a customer for over 40
years and management believes that the Company's present relations
with Whirlpool are excellent. However, there can be no assurance
that the loss of Whirlpool as a customer would not have a material
adverse effect on the Company's financial condition or results of
operations.
The injection molding unit competes with numerous other
injection molding companies, most of which are regional and have
smaller sales volumes. Competition is based primarily on quality,
price and service. The injection molding unit distinguishes itself
from other custom molders by providing an in-house sales and
engineering staff which assists in the design of products to
customer specifications, designs molds to produce those products
and oversees the construction of the necessary molds. Its "program
management" concept promotes early involvement with customers'
engineers to assist with product and tooling design and the
establishment of acceptable quality standards. Its SPC systems
enable it to meet these established quality standards on a cost-
efficient basis. Management believes that its ability to offer SPC
quality assurance, as well as value-added secondary operations such
as hot stamping and assembly, provide a competitive advantage in
selling to national accounts.
Most of the sales are generated by Company personnel.
Independent sales agencies' representatives, who call primarily on
industrial customers in the Midwest, account for the balance.
The Company's injection molding customers generally place
orders for goods based on their production requirements for the
following three to four months with a non-binding estimate of
requirements over six to twelve months. Management believes that
the relatively long production cycles for its customers make these
estimates generally reliable. See "Backlog."
A wide variety of materials, such as ABS, polystyrene,
polyethylene, polycarbonate and nylon are used in the manufacturing
process. The Company has multiple sources of supply for these
materials.
PROFILE EXTRUSION. Atlantis produces a variety of standard and
custom extruded parts, including exterior and interior plastic
moldings, trims, strips, channels, seals, and tubing. At present,
it has over 5,000 dies in-house, with more than 280 different
products in stock.
Atlantis' marketing and sales activities are directed by a
marketing manager who supervises a network of independent sales
representatives. These representatives in turn call on a
diversified customer base in approximately 32 states. Atlantis
supplies many industries, including manufacturers of recreational
vehicles, residential doors and windows, office furniture, retail
store fixtures, and marine products.
The use of only five basic types of compound materials in
manufacturing allows the purchasing of materials in bulk. These
materials are polyvinyl chloride (PVC) in rigid and flexible forms,
polyethylene, polypropylene, and thermoplastic rubber (TPR).
Atlantis purchases all of its rigid material and approximately 30%
of its flexible materials. The balance of flexible material is
blended on-site, allowing for greater control over the quality of
the finished product. Atlantis believes that it has adequate
sources available to meet its raw material needs.
BLOW MOLDING. Atlantis manufactures plastic containers in
various sizes, substantially all of which are used for the
packaging of dairy, juice, water and industrial products.
Containers are manufactured by an extrusion blow-molding process
that produces containers at high speeds. Its highly standardized
line of products permits a high level of automation in its
manufacturing process. Marketing activities are conducted by
certain key officers and managers, as well as selected sales
representatives, and customer contact is often on a daily basis.
High density polyethylene resin is the primary material used in
the manufacture of its plastic containers. By generally limiting
the resin usage to high density polyethylene, Atlantis can make
large-volume, lower cost purchases. In addition, use of one resin
reduces extruder changeover time and allows for a higher degree of
automation. Although it has no supply contracts, management
believes that adequate supply is available to satisfy present raw
material requirements at competitive costs.
RAW MATERIALS. The primary raw materials used by the Company
in the manufacture of its products are various plastic resins,
primarily polyethylene. The Company selects its suppliers
primarily on the basis of technical support, service and price.
All of the Company's suppliers of plastic resins manufacture their
plastic resins in the United States. Although the plastics
industry has from time to time experienced shortages of plastic
resins, the Company has not to date experienced any such shortages.
Management believes that there are adequate sources available to
meet its raw material needs.
The Company uses in excess of 300 million pounds of plastic
resins annually. Management believes that the Company's large
volume purchases of plastic resin have generally resulted in lower
raw material costs and enabled the Company to obtain shipments of
raw materials even in periods of short supply.
The primary plastic resins used by the Company are produced
from petrochemical feedstocks primarily derived from natural gas
liquids. Based on the supply and demand cycles in the
petrochemical industry, substantial cyclical price fluctuations can
occur. Consequently, plastic resin prices may fluctuate as a
result. While the Company has historically passed through changes
in the cost of its raw materials to its customers, it may not
always be able to pass through its raw material cost increases in
the form of price increases. To the extent that increases in the
cost of plastic resin cannot be passed on to its customers, such
increases may have a material detrimental impact on the
profitability of the Company.
COMPETITION. The Company's operating subsidiaries face intense
competition from numerous competitors, several of whom have greater
financial resources than the Company. In addition, the markets for
certain of the Company's products are characterized by low costs of
entry or competition based primarily on price.
Atlantis Plastic Films competes with a limited number of
producers capable of national distribution and a greater number of
smaller manufacturers that target specific regional markets and
specialty film segments. Competition is based on quality, service
(including the manufacturer's ability to supply customers in a
timely manner), product differentiation and price. Management
believes that Atlantis Plastic Films' subsidiaries successfully
compete primarily on the basis of their established reputations for
service and quality, as well as their respective positions as
efficient, low-cost producers.
Atlantis Molded Plastics competes in a highly fragmented
segment of the plastics industry, with a large number of regional
manufacturers competing on the basis of customer service (including
timely delivery and engineering/design capabilities), quality,
product differentiation and price. Management believes that the
Atlantis Molded Plastics subsidiaries successfully compete
primarily on their ability to offer extensive customer service and
a wide variety of products.
BACKLOG. The Company's total backlog at December 31, 1994 was
$21,605,000 compared to $18,830,000 at December 31, 1993.
Management does not consider any specific month's backlog to be a
significant indicator of sales trends due to the various factors
that influence any one month's backlog, such as price changes which
lead to customer inventory adjustments. Blow molded products have
such short production and delivery cycles that their backlogs are
immaterial.
Discontinued Operations
Discontinued operations in 1994 consist of the operations of
Western Pioneer, the Company's California property-casualty
insurance subsidiary. Prior to 1994, discontinued operations
included both Western Pioneer and the Company's interest in
Loewenstein.
WESTERN PIONEER. Western Pioneer was founded in 1948 and was
acquired by the Company in 1984. Private passenger automobile
liability and physical damage insurance accounts for substantially
all of Western Pioneer's business, and commercial automobile and
general liability policies account for the remainder. Western
Pioneer writes insurance exclusively in California. It is also
authorized to write fire, liability, common carrier liability and
other miscellaneous classes of insurance.
The Company formalized plans to dispose of Western Pioneer
several years ago. The Company's determination to dispose of
Western Pioneer was primarily attributable to management's belief
that return on shareholders' equity could be enhanced by using the
proceeds from a Western Pioneer sale to expand the Company's
plastic operations. During October 1994, the Company announced
that the previously disclosed agreement for the sale of Western
Pioneer to an insurance company based in Seattle, Washington had
terminated by its terms. The Company intends to dispose of Western
Pioneer during 1995, and has engaged an outside broker to assist it
in actively pursuing potential sale opportunities. In this
connection, a selling memorandum was prepared and distributed to
potential buyers. The Company has received expressions of interest
from several parties; however, no arrangement or understanding
exists for a sale at the present time. The Company believes that
the ultimate sale proceeds and operating results through
disposition will equal or exceed Western Pioneer's net assets.
On December 31, 1992, Western Pioneer reached a settlement of
its Proposition 103 rollback liability with the California
Department of Insurance for approximately $1.9 million, including
approximately $400,000 of interest. In anticipation of the
settlement, which was formalized on January 12, 1993, Western
Pioneer sold a portion of its investment portfolio in late 1992 and
recognized a gain to help offset the rollback liability. Net of
this gain, this settlement resulted in an after tax charge to 1992
income from discontinued operations of approximately $900,000.
UNDERWRITING. Pursuant to Proposition 103, as more fully
discussed below, Western Pioneer is required to issue automobile
policies to those persons that qualify as "good drivers" as
specified in California Insurance Code Section 1861.02. Under
Proposition 103, rates must be established primarily through the
use of the following factors: the insured's driving safety record,
the number of miles driven annually by the insured, and the
insured's number of years driving experience and such other factors
as the Commissioner shall approve.
PRODUCTION AND SERVICING. Western Pioneer sells its policies
through the American Agency System, a network of independent
agents. As of December 31, 1994, there were approximately 185
appointed independent agents submitting business to Western
Pioneer. In 1994, approximately 70% of the premiums written were in
Southern California with the remaining 30% in Northern California.
The majority of agents have represented Western Pioneer for more
than 15 years. No one agent accounted for more than 6% of total
premiums during 1994. During 1994, total commissions paid to agents
averaged 18% of written premiums.
CLAIMS. All claims operations, including review of initial
loss reports, retention of legal counsel and settlement approval,
are under the ultimate supervision of Western Pioneer's President.
Western Pioneer attempts to analyze each claim to minimize loss
expenses and provide for loss payments in a fair and equitable
manner. Western Pioneer adjusts a majority of its claims without
the assistance of outside claims adjusters or outside counsel.
PRICING. In connection with Western Pioneer's Proposition 103
settlement, the California Department of Insurance has given final
approval to all of Western Pioneer's rates subsequent to the
rollback period. Western Pioneer obtained approval and put into
effect an overall rate increase of approximately 5% for policies
effective September 1, 1993.
LOSSES AND LOSS ADJUSTMENT EXPENSE RESERVES. Western Pioneer's
loss reserves are estimated at a given point in time at an amount
Western Pioneer expects to pay on both reported and unreported
claims. The amount of loss reserves for reported claims is based on
an analysis of the type and amount of the claim, the circumstances
involved and the contractual policy provisions relating to the type
of loss. The amount of loss reserves for unreported claims is
determined on a statistical basis primarily using historical
information. The projected effects of inflation are considered when
estimating liabilities for losses and loss adjustment expenses.
The ultimate liability of Western Pioneer may be greater or
less than the reserves. As a result, reserves are recomputed on a
regular basis by Western Pioneer using additional data on reported
claims and certain statistical techniques. Western Pioneer does not
discount to a present value that portion of its loss reserves it
expects to pay in future periods.
The following table sets forth a reconciliation of beginning
and ending reserves for losses and loss adjustment expenses for
the indicated periods.
Year ended December 31,
1992 1993 1994
(In thousands)
Reserves for losses and
loss adjustment expenses,
beginning of year. . . . . $15,103 $14,233 $12,477
Less reinsurance recover-
ables. . . . . . . . . . . (485) (467) (265)
14,618 13,766 12,212
Incurred losses and loss
adjustment expenses:
Provision for insured events
of the current year. . . . 13,734 16,011 17,965
(Decrease) in provision for
insured events of prior
years. . . . . . . . . . . (1,585) (2,946) (3,019)
Total incurred losses
and loss adjustment
expenses . . . . . . . . . 12,149 13,065 14,946
Payments:
Losses and loss adjustment
expenses attributable to
insured events of the
current year . . . . . . 5,572 7,001 8,909
Losses and loss adjustment
expenses attributable to
insured events of prior
years. . . . . . . . . . 7,429 7,619 7,275
Total payments. . . . . . 13,001 14,619 16,184
13,766 12,212 10,974
Plus reinsurance recover-
ables . . . . . . . . . 467 265 274
Reserves for losses and
loss adjustment expenses,
end of year. . . . . . . $14,233 $12,477 $11,248
The following table represents the development of balance
sheet reserves for the years 1985 through 1994. The balance sheet
reserves include statutory reserves for losses and loss adjustment
expenses (which are equivalent to GAAP reserves, except for certain
reclassifications), as well as unpurchased loss drafts, but exclude
anticipated salvage and subrogation. The top line of the table
shows the reserves for each of the years indicated. Such amount
represents the estimated losses and loss adjustment expenses for
claims arising in all prior years that are unpaid at the particular
balance sheet date, including losses that had been incurred but not
reported to Western Pioneer. The upper portion of the table
indicates the cumulative amounts paid as of successive years with
respect to that reserve liability, net of reinsurance and salvage
and subrogation received. The lower portion of the table indicates
the re-estimated amount of the previously recorded reserves based
on experience as of the end of each succeeding year, including
cumulative payments made since the end of the respective year. The
estimate changes as more information becomes known about the fre-
quency and severity of claims for individual years. A redundancy
exists when the original reserve estimate is greater than the re-
estimated reserves.
Each amount in the following table includes the effects of all
changes in amounts for prior periods. The table does not present
accident or policy year development data. Conditions and trends
that have affected the development of reserves in the past may not
necessarily occur in the future. Therefore, it may not be
appropriate to extrapolate future redundancies based on the table.
December 31,
1985 1986 1987 1988 1989
(In thousands)
Reserves for losses
and loss adjustment
expenses. . . . . $9,687 $11,081 $12,758 $13,185 $15,052
Paid (cumulative) as of:
One year later . 4,860 5,866 6,513 6,491 6,552
Two years later 6,654 8,178 8,687 8,546 8,996
Three years later 7,675 9,196 9,816 9,469 9,875
Four years later 8,082 9,798 10,291 9,695 10,221
Five years later 8,398 10,055 10,404 9,811 10,270
Six years later 8,460 10,073 10,442 9,792
Seven years later 8,468 10,101 10,410
Eight years later 8,471 10,082
Nine years later 8,454
Reserves re-estimated as of:
One year later . 9,252 10,866 11,631 12,079 12,564
Two years later 8,833 10,842 11,397 11,273 11,876
Three years later 8,811 10,617 11,275 10,908 11,244
Four years later 8,617 10,546 11,153 10,444 10,501
Five years later 8,651 10,499 10,764 9,963 10,327
Six years later 8,648 10,188 10,456 9,822
Seven years later 8,499 10,103 10,410
Eight years later 8,471 10,082
Nine years later 8,454
Redundancy . . . . $1,233 $ 999 $ 2,348 $ 3,363 $ 4,725
(continued)
December 31,
1990 1991 1992 1993 1994
(In thousands)
Reserves for losses
and loss adjustment
expenses. . . . . $15,761 $14,618 $13,766 $12,212 $10,974
Paid (cumulative) as of:
One year later . 7,951 7,430 7,619 7,275
Two years later 10,366 10,222 8,973
Three years later 11,324 10,653
Four years later 11,422
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Reserves re-estimated as of:
One year later . 13,798 13,033 10,819 8,587
Two years later 12,952 11,457 9,345
Three years later 11,925 10,853
Four years later 11,486
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Redundancy . . . . $4,275 $3,765 $4,421 $3,625
LOSS AND EXPENSE RATIOS. Loss and expense ratios are
traditionally used to interpret the underwriting experience of
property-casualty insurance companies. Losses and loss adjustment
expenses are stated as a percentage of premiums earned, as losses
may occur over the life of a particular insurance policy.
Underwriting expenses on a statutory basis are stated as a
percentage of premiums written rather than premiums earned because
most underwriting expenses are incurred when policies are written
and not spread over the policy period. As reflected in the data
below, property-casualty underwriters typically have combined loss
and expense ratios that exceed 100%. Western Pioneer's automobile
insurance and the private passenger automobile insurance industry's
loss ratios, expense ratios and combined ratios, each on a
statutory basis, are shown in the following table:
Year ended December 31,
1992 1993 1994
Western Pioneer Ratios
Loss Ratio. . . . . . . . . 67.7% 73.6% 68.6%
Expense Ratio . . . . . . . 30.1 29.4 29.2
Combined Ratio. . . . . . . 97.8% 103.0% 97.8%
Industry Ratios (All Writers)(1)
Loss Ratio. . . . . . . . . 78.2% 79.3% (2)
Expense Ratio . . . . . . . 22.9 22.3 (2)
Combined Ratio . . . . . . . . . 101.1% 101.6% (2)
(1) Source: BEST'S AGGREGATES & AVERAGES, PROPERTY--CASUALTY 54th
Annual Edition 1994. Data relate to property-casualty
insurance companies (private passenger automobile lines only,
excluding policyholder dividends).
(2) Not available.
PREMIUMS AND SURPLUS RATIO. The following table shows, for the
periods indicated, Western Pioneer's statutory ratios of net
premiums written to policyholders' surplus. Although there is no
statutory requirement that establishes a permissible net premiums
to surplus ratio for property-casualty insurance companies,
guidelines established by the National Association of Insurance
Commissioners provide that such ratio should be reasonably
maintained in the range of three-to-one or less.
Year ended December 31,
1990 1991 1992 1993 1994
(In thousands, except ratios)
Net premiums written $17,341 $17,780 $17,559 $19,179 $24,185
Policyholders' surplus $6,176 $6,482 $5,867 $7,535 $7,825
Ratio. . . . . . . . 2.81 2.74 2.99 2.55 3.09
INVESTMENTS AND INVESTMENT RESULTS. Western Pioneer utilizes
outside investment counselors for advice regarding the structure of
its investment portfolio. Transactions are generally executed by
the Company's Executive Vice President under the supervision of
Western Pioneer's Board of Directors. Western Pioneer invests in
high quality, tax-exempt state and municipal bonds and, to a lesser
extent, government and agency securities, preferred and common
stocks and other securities. Generally, Western Pioneer will only
purchase bonds if rated "A" or higher.
The following table summarizes the investment results and
investment portfolio for the three years ended December 31, 1994.
Year ended December 31,
1992 1993 1994
(In thousands)
Average invested assets (includes
short-term cash investments). . . . . $24,014 $23,123 $22,397
Investment income:
Before income taxes. . . . . . . . . 1,450 1,187 1,218
After income taxes . . . . . . . . . 1,262 1,017 1,066
Average annual return on investments:
Before income taxes. . . . . . . . . 6.0% 5.1% 5.4%
After income taxes . . . . . . . . . 5.3% 4.4% 4.7%
Net realized investment gains after
income taxes . . . . . . . . . . . . 366 121 --
Net increase (decrease) in
unrealized investment gains
after income taxes. . . . . . . . . . (459) 598 (1,257)
The following table sets forth the composition of Western
Pioneer's investment portfolio at the dates indicated:
December 31,
1992 1993
Amortized Market Amortized Market
Cost Value Cost Value
(In thousands)
Taxable bonds. . . . . . . . $ 2,000 $ 2,010 $ - $ -
Tax-exempt state and
municipal bonds . . . . . . - - 19,110 19,952
Total fixed maturity
investments . . . . . . . . 2,000 2,010 19,110 19,952
Equity investments . . . . . 1,964 1,931 1,964 2,006
Short-term cash
investments . . . . . . . . 20,376 20,376 774 774
Total investments. . . . . $24,340 $24,317 $21,848 $22,732
(continued)
December 31,
1994
Amortized Market
Cost Value
Taxable bonds. . . . . . . $1,494 $1,493
Tax-exempt state and municipal
bonds . . . . . . . . . . 19,043 18,150
Total fixed maturity
investments . . . . . . . 20,537 19,643
Equity investments . . . . 1,964 1,838
Short-term cash
investments . . . . . . . 896 896
Total investments. . . . $23,397 $22,377
At December 31, 1994, Western Pioneer had a net unrealized
loss on all investments of approximately $1,020,800, before income
taxes.
At December 31, 1994, the maturity distribution of Western
Pioneer's investments was as follows:
Maturity Date Amortized Cost
(In thousands)
Due:
Within 1 year . . . . . . . . . . . . . . . $ -
Beyond 1 year but within 5 years . . . . . . 1,494
Beyond 5 years but within 10 years . . . . . 19,043
Beyond 10 years but within 20 years. . . . . -
Beyond 20 years. . . . . . . . . . . . . . -
Total . . . . . . . . . . . . . . . . . . $ 20,537
COMPETITION. The property-casualty insurance industry is
highly competitive and consists of numerous companies, a large
proportion of which operate in more than one state and offer auto-
mobile, homeowners and commercial property insurance, as well as
insurance coverage in other lines. Many of Western Pioneer's
competitors have a larger volume of business and greater financial
resources than Western Pioneer. Price, reputation for service and
a long-term presence in the Japanese-American market are the
principal means by which Western Pioneer competes with other
automobile insurers.
REINSURANCE. Western Pioneer purchases reinsurance to protect
itself from liabilities in excess of certain limits for all lines
of business except comprehensive and collision. Reinsurance enables
Western Pioneer to write more policies in larger amounts while
reducing its own risk by reinsuring the amount of a policy in
excess of the maximum amount Western Pioneer is willing or able to
retain.
Western Pioneer currently has an excess of loss reinsurance
treaty with Munich American Reinsurance Company ("Munich
American"). Munich American's parent, Munich Reinsurance Company of
Germany, is one of the largest reinsurers in the world. Under this
treaty, Western Pioneer currently pays the first $20,000 per loss
occurrence on losses occurring prior to June 30, 1991 and $25,000
on losses occurring after June 30, 1991 and Munich American pays
the excess. Western Pioneer has had coverage with Munich American
since 1954 and believes that Munich American is a stable company
with resources sufficient to meet its reinsurance obligations.
However, to the extent that Munich American is unable to meet such
obligations under its treaty with Western Pioneer, Western Pioneer
would be obligated to pay policyholders' claims. Such event could
have a material adverse effect on Western Pioneer.
ASSIGNED RISKS. Automobile liability insurers in California
are required to sell bodily injury liability coverage to a propor-
tionate number (based on the insurer's share of the California
automobile casualty insurance market) of those drivers applying to
the California Automobile Assigned Risk Plan for placement as
"assigned risks". Drivers seek placement as assigned risks because
their driving records or other relevant characteristics make it
difficult for them to obtain insurance in the open market. During
the last five years, approximately 2.7% of the gross automobile
premiums written by Western Pioneer were for assigned risk
policies, which historically have had higher loss ratios than
Western Pioneer's standard policies. For 1994, the percentage was
1.1%. Automobile insurance policies for assigned risks are written
for a 12-month term and premium rates are set by the California
Department of Insurance.
TERRITORIAL RATING. Proposition 103 provides that after
November 8, 1989, automobile rates and premiums shall be determined
by application of driving safety record (including specified "good
driver" discounts), number of miles driven annually, number of
years of driving experience and other factors as the Insurance
Commissioner shall adopt by regulation that have substantial
relationship to the risk of loss. Western Pioneer's automobile
class plan complies with the requirements of Proposition 103.
However, Western Pioneer's automobile class plan is based on
regulations promulgated by a prior Commissioner. Although
temporarily continuing those prior regulations in force, the
present Commissioner is in the process of developing other and/or
further regulations to implement the class plan aspects of
Proposition 103. Various consumer groups have petitioned the new
insurance commissioner to expedite the adoption of such
regulations.
REGULATION. Both the Company and Western Pioneer are subject
to regulation and supervision by the California Department of
Insurance, which powers relate primarily to standards of solvency
that must be met and maintained by insurers; levels of dividends
that can be paid; the licensing of insurers and their agents; the
nature of and limitation of insurers' investments; the issuance of
securities by insurers; premiums charged; periodic examination of
the affairs of insurers; the annual and other reports required to
be filed on the financial condition of such insurers or their
holding companies or for other purposes; the fair treatment of
policyholders; and the establishment of reserves required to be
maintained for unearned premiums, losses and other purposes. The
regulation and supervision by the California Department of
Insurance are designed principally for the benefit of policyholders
and not for insurance company stockholders. The Insurance
Department conducts periodic examinations of all California
insurance companies. The examination of Western Pioneer for the
three years ended December 31, 1991 was completed in June 1992.
With the adoption of Proposition 103, the establishment of
premium rates for automobile and homeowners insurance in California
is now subject to the prior approval of the California Insurance
Commissioner.
The insurance industry is highly regulated and Western
Pioneer's operations are therefore affected by any changes in
applicable laws and regulations. As indicated above, Proposition
103 is a far reaching statutory initiative that significantly
affects the manner in which insurance companies conduct business
within the state of California. Any changes in the statutes and
regulations governing insurance activities in California may
similarly affect Western Pioneer's future operations.
At least two legislative bills and a voter initiative have
been proposed which would provide for no fault insurance. In
addition, a legislative bill has been introduced which would reduce
mandated auto insurance coverage and otherwise attempt to reduce
costs of automobile insurance.
RISK-BASED CAPITAL. The annual financial reporting form used
by insurance regulators now requires the presentation of a risk-
based capital analysis according to instructions adopted by the
National Association of Insurance Commissioners (the "NAIC"). The
risk-based capital formula adopted by the NAIC is intended to take
into account asset risk, credit risk, underwriting risk and other
business risks. The NAIC's Risk-Based Capital for Insurers Model
Act ("Model Act") indicates that an excess of capital over the
amount produced by the risk-based capital requirements established
by the NAIC is desirable in the business of insurance.
Accordingly, insurers should seek to maintain capital above the
risk-based levels required under the NAIC's procedures. Additional
capital is used and useful in the insurance business and helps to
secure an insurer against various risks inherent in, or affecting,
the business of insurance and not accounted for or only partially
measured by the risk-based capital requirements contained in the
Model Act. In accordance with the NAIC instructions, Western
Pioneer calculated it had $7,825,000 in total adjusted surplus to
policyholders at December 31, 1994 and "authorized control level
risk-based capital" of $1,588,000. Accordingly, Western Pioneer's
capital and surplus was more than 4.9 times its "authorized control
level risk-based capital" and exceeded all risk-based capital
levels established under the Model Act.
WINSLOEW INVESTMENT. In October 1993 Atlantis sold a portion
of its Loewenstein stock as part of an initial public offering.
The sale resulted in an after-tax gain of approximately $1.9
million, including approximately $600,000 related to the Company's
write-up of its remaining investment in Loewenstein based upon the
difference between the post-offering book value per share of
Loewenstein and the carrying value of Atlantis' remaining
investment.
The Loewenstein initial public offering reduced Atlantis'
investment in Loewenstein from 49% to approximately 20%. On
February 14, 1994, Loewenstein acquired New West Industries, Inc.
for stock, the issuance of which further reduced Atlantis'
ownership of Loewenstein to approximately 18%. During December
1994, Loewenstein and another furniture manufacturer were merged
into WinsLoew Furniture, Inc. (WinsLoew"), and Atlantis' ownership
interest decreased to approximately 10% of WinsLoew's outstanding
shares. The Company's interest is subject to further reduction to
approximately 9% in the event that certain stock options are
exercised. The Company began accounting for this investment under
the cost method in 1994.
EMPLOYEES
As of December 31, 1994, the Company's plastics companies
employed approximately 1,600 persons. Approximately 38 of the blow
molding unit's employees were covered under a collective bargaining
agreement with the Retail, Wholesale & Department Store Union, AFL-
CIO. Western Pioneer employed approximately 47 non-union
personnel. Atlantis' overall employee relations are considered to
be generally very good.
PATENTS AND TRADEMARKS
Certain of the Company's subsidiaries have registered various
trademarks with the United States Patent and Trademark Office and
have applications pending for the registration of other trademarks
and the issuance of certain patents. Management believes that the
Company's trademark and patent position is adequately protected in
all markets in which the Company does business. Linear produces
certain stretch film products under non-exclusive licenses granted
by Mobil Oil Corporation. The duration of the licenses is
coterminous with the duration of the underlying patents.
ENVIRONMENTAL REGULATION
Actions by Federal, state and local governments concerning
environmental matters could result in laws or regulations that
could increase the cost of producing the products manufactured by
the Company or otherwise adversely affect the demand for its
products. At present, environmental laws and regulations do not
have a material adverse effect upon the demand for the Company's
products. Certain local governments have adopted ordinances
prohibiting or restricting the use or disposal of certain plastics
products that are among the types produced by the Company. If such
prohibitions or restrictions were widely adopted, such regulatory
and environmental measures could have a material adverse effect
upon the Company. In addition, a decline in consumer preference
for plastic products due to environmental considerations could have
a material adverse effect upon the Company.
In addition, certain of the Company's operations are subject
to Federal, state and local environmental laws and regulations that
impose limitations on the discharge of pollutants into the air and
water and establish standards for the treatment, storage and dis-
posal of solid and hazardous wastes. While historically the
Company has not had to make significant capital expenditures for
environmental compliance, the Company cannot predict with any
certainty its future capital expenditure requirements for environ-
mental compliance because of continually changing compliance
standards and technology. The Company does not currently have any
insurance coverage for environmental liabilities and does not
anticipate obtaining such coverage in the future.
ITEM 2. PROPERTIES
Atlantis' Miami corporate offices consist of approximately
13,138 square feet of space that is shared with several entities
controlled by the principal stockholders of the Company (or their
affiliates). The present annual lease expense of $329,000, as well
as certain other general and administrative expenses, are allocated
among the Company and these entities. See Part III Item 13 -
"Certain Relationships and Related Transactions." In addition,
during 1992 the Company began to sublease approximately 2,500
square feet of such office space to an unaffiliated third party.
The Company also leases certain office space in Atlanta, Georgia.
The following table describes the operating facilities owned
or leased by the Company, with substantially all of the owned
plastics facilities pledged as security for debt. Management
believes that the Company's manufacturing facilities are adequate
to meet current needs and increases in sales volume for the
foreseeable future.
Company and Location Owned or Building Area
Leased (square feet)
Atlantis Films:
Stretch Film, Tulsa, Oklahoma
(two facilities) . . . . . . . . . Owned 189,300
Stretch Film, Nicholasville,
Kentucky . . . . . . . . . . . . . Owned 109,500
Custom Film, Mankato, Minnesota. . . Owned 140,000
Custom Film, Mankato, Minnesota. . . Leased 65,000
Custom Film, Tulsa, Oklahoma . . . . Owned 57,500
Custom Film, Cartersville,
Georgia. . . . . . . . . . . . . . Leased 57,500
Atlantis Molded Plastics:
Injection Molding, Henderson,
Kentucky . . . . . . . . . . . . . Owned 90,000
Injection Molding, Jackson,
Tennessee. . . . . . . . . . . . . Owned 50,000
Injection Molding, Nashville,
Tennessee. . . . . . . . . . . . . Leased 68,000
Injection Molding, Ft. Smith,
Arkansas . . . . . . . . . . . . . Owned 158,500
Injection Molding, Warren, Ohio. . . Owned 54,000
Profile Extrusion, Elkhart,
Indiana (1) . . . . . . . . . . . Owned 40,900
Blow Molding, Demopolis, Alabama . . Owned 53,000
Blow Molding, (Joint Venture)-
Orlando, Florida . . . . . . . . . Leased 72,000
Blow Molding, (Joint Venture)-
Dallas, Texas . . . . . . . . . . . Leased 45,000
Discontinued Operations:
Western Pioneer-Pleasanton,
California . . . . . . . . . . . Leased 10,000
(1) New facility purchased in February 1995, 87,000 square feet.
ITEM 3. LEGAL PROCEEDINGS
The Company believes that it is not presently a party to any
litigation the outcome of which would have a material adverse
effect on its consolidated financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during
the fiscal quarter ended December 31, 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Class A Common Stock is traded on the American
Stock Exchange (the "AMEX") and the Pacific Stock Exchange under
the symbol "AGH". The following table sets forth the high and low
sales prices for the Class A Common Stock on the AMEX for each
quarter of the years 1993 and 1994.
High Low
1993
First Quarter 6 3/4 5
Second Quarter 5 3/4 4 3/4
Third Quarter 6 3/4 4 7/8
Fourth Quarter 6 1/2 5 1/4
1994
First Quarter 6 5/8 5 1/2
Second Quarter 7 1/8 5 1/4
Third Quarter 6 5/8 5 7/8
Fourth Quarter 6 1/8 5 1/2
As of January 31, 1995, there were approximately 244 holders
of record of the 4,082,437 outstanding shares of Class A Common
Stock. The closing sales price for the Class A Common Stock on
January 31, 1995 was $6.00.
Prior to 1994, the Company did not pay cash dividends on any
class of its Common Stock. During February 1994 the Company's
Board of Directors approved a quarterly dividend program and the
Company paid 2.5 cents per share quarterly dividends in April, July
and October, 1994. The Company's ability to pay cash dividends is
subject to the dividend preference of the Company's presently
outstanding Series A Convertible Preferred Stock. Payment of
dividends is also restricted under the terms of the Company's
Senior Notes and its revolving credit facility. In addition,
insurance regulations generally limit Western Pioneer's dividends
to net investment income.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 1 of the registrant's Annual
Report to Shareholders for the year ended December 31, 1994 is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition
and Results of Operations on pages 12 through 16 of the
registrant's Annual Report to Shareholders for the year ended
December 31, 1994 is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statement information and the supplemental data
required in response to this item is incorporated herein by
reference to pages 18 through 31 of the registrant's Annual Report
to Shareholders for the year ended December 31, 1994.
Certain other financial statement schedules are included in
Part IV-Item 14(b) of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has had no changes in or disagreements with its
independent certified public accountants on accounting and
financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to directors and executive
officers of the Company is incorporated by reference to the
registrant's Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120
days after the end of the fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this item is
incorporated by reference to the registrant's Proxy Statement to be
filed with the Securities and Exchange Commission pursuant to
Regulation 14A not later than 120 days after the end of the fiscal
year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required in response to this item is
incorporated by reference to the registrant's Proxy Statement to be
filed with the Securities and Exchange Commission pursuant to
Regulation 14A not later than 120 days after the end of the fiscal
year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this item is
incorporated by reference to the registrant's Proxy Statement to be
filed with the Securities and Exchange Commission pursuant to
Regulation 14A not later than 120 days after the end of the fiscal
year covered by this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Documents filed as part of this report:
Form 10-K
Page Number
(1) Report of Independent Public
Accountants on Financial Statements
and Financial Statement Schedules 23
Financial Statements.
The following financial statements have been incorporated into
Part II of this report by reference to the registrant's Annual
Report to Shareholders for the year ended December 31, 1994.
Annual Page
Report Number
Consolidated Income Statements for the Years
Ended December 31, 1994, 1993 and 1992. . . . . 18
Consolidated Balance Sheets as of
December 31, 1994 and 1993. . . . . . . . . . . 19
Consolidated Statements of Shareholders'
Equity for the Years Ended December 31,
1994, 1993 and 1992 . . . . . . . . . . . . . . 20
Consolidated Statements of Cash Flows
for the Years Ended December 31,
1994, 1993 and 1992 . . . . . . . . . . . . . . 21
Notes to Consolidated Financial Statements . . . . . 22
(2) Financial Statement Schedules.
The following financial statement schedules for the
years ended December 31, 1994, 1993 and 1992 are submitted
herewith:
Form 10-K
Item Page Number
Financial Statement Schedules
Schedule I (Articles 5 and 7)
Parent Company Only Condensed
Financial Information. . . . . . . . . . 24
Schedule II (Articles 5 and 7)
Valuation and Qualifying Accounts. . . . . 28
Any required information not included in the above-described
schedules is included in the consolidated financial statements and
notes thereto incorporated herein by reference.
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or are
not applicable and therefore have been omitted.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Atlantis Plastics, Inc.:
We have audited the consolidated financial statements of Atlantis
Plastics, Inc. and Subsidiaries as of December 31, 1994 and 1993,
and for each of the three years in the period ended December 31,
1994, which financial statements are included on pages 18 through
31 of the 1994 Annual Report to Shareholders of Atlantis Plastics,
Inc. and incorporated by reference herein. We have also audited
the financial statement schedules listed in the index on page 21 of
this Form 10-K. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Atlantis Plastics, Inc. and Subsidiaries as of December
31, 1994 and 1993, and the consolidated results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly,
in all material respects, the information required to be included
therein.
COOPERS & LYBRAND L.L.P.
Miami, Florida
February 6, 1995
SCHEDULE
I
Articles 5 and
7
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
(Parent Company Only)
BALANCE SHEETS
For the years ended December 31, 1994, 1993 and 1992
(In thousands)
1994 1993
ASSETS
Cash and cash equivalents $ 51 $ 394
Intercompany (payables) receivables (86) 1,058
Other current assets 199 373
Total current assets 164 1,825
Intercompany subordinated notes
receivable 120,572 97,054
Investment in operating subsidiaries 29,267 27,295
Investment in WinsLoew Furniture, Inc. stock 5,097 -
Investment in discontinued operations 9,379 13,287
Property and equipment, net 194 200
Other assets 3,909 4,363
$168,582 $144,024
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 4,920 $ 5,775
Senior notes 100,000 100,000
Revolving credit facility 21,603 -
Deferred income taxes 1,637 2,634
Other liabilities - 482
Total liabilities 128,160 108,891
Shareholders' equity:
Series A convertible preferred stock 2,000 2,000
Class A common stock. 408 401
Class B common stock 300 336
Additional paid-in capital 6,781 7,999
Unrealized holding losses,
net of tax (284) -
Retained earnings 31,217 25,702
40,422 36,438
Treasury stock at cost, 237,293 Class A
and B common shares in 1993 - (1,305)
Total shareholders' equity, net 40,422 35,133
$168,582 $144,024
SCHEDULE
I
Articles 5 and
7
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
(Parent Company Only)
INCOME STATEMENTS
For the years ended December 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
Revenues:
Management fees from operating
subsidiaries $3,170 $2,754 $964
Interest and other income 6 337 673
Intercompany interest 11,919 9,461 2,016
Preferred stock dividends from
subsidiary -- 435
15,095 12,552 4,088
Expenses:
General and administrative expenses (2,477) (2,111) (1,939)
Management fees to Trivest, Inc. (399) (326) (320)
Income related to litigation
settlements, net -- 2,212 4,604
Interest expense (12,207) (11,358) (6,462)
(15,083) (11,583) (4,117)
Income (loss) before taxes 12 969 (29)
Income tax (provision) benefit (63) (387) 186
Equity in earnings (before
extraordinary loss) of operating
subsidiaries 5,210 4,630 4,726
Income from continuing operations 5,159 5,212 4,883
Gain on Loewenstein stock
transactions, net - 1,884 -
Equity in earnings of discontinued
operations 1,207 1,442 1,325
Income before extraordinary
items 6,366 8,538 6,208
Extraordinary loss on early
extinguishment of debt, net
(1) - (4,643) (433)
Net income $6,366 $3,895 $5,775
(1) 1993 and 1992 includes the Parent's equity of $ 1,437,000 and
$414,000,
respectively, in subsidiary extraordinary losses on early
extinguishment
of debt, net of taxes.
SCHEDULE
I
Articles 5 and
7
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
(Parent Company Only)
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
Cash flows from operating activities:
Net income $6,366 $3,895 $5,775
Adjustments to reconcile net
income to net cash provided
by (used in) operating activities:
Equity in earnings of
subsidiaries and
Loewenstein (6,417) (4,635) (5,637)
Gain on Loewenstein stock
transactions - (2,939) -
Depreciation and amortization 563 485 282
Loss on repurchases of
subordinated notes - 4,612 29
Increase (decrease) in:
Accounts payable and accrued
expenses 22 3,450 (3,531)
Deferred income taxes (233) 326 1,379
Other, net 1,275 552 (353)
Total adjustments (4,790) 1,851 (7,831)
Net cash provided by (used in)
operating activities 1,576 5,746 (2,056)
Cash flow from investing activities:
Proceeds from sale of
Loewenstein stock 122 4,684 -
Purchase of marketable securities - - (4,030)
Proceeds from sale of marketable
securities - 1,978 2,030
Decrease in Ameriwood investment - - 10,132
Capital expenditures (59) (37) (9)
Payments for acquisitions
of minority interests - - (579)
Dividends from subsidiaries 1,284 6,872 814
Net cash provided by investing
activities 1,347 13,497 8,358
SCHEDULE
I
Articles 5 and
7
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
(Parent Company Only)
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
Cash flows from financing activities:
Increase in intercompany
subordinated notes receivable $(23,518) $(77,594)$(7,010)
Borrowings under revolving
credit agreement 37,591 18,336 -
Payments under revolving
credit agreement (15,988) (18,336) -
Payments on long-term debt
and repurchase of minority interest - (46,032) (1,032)
Proceeds from issuance of long
term debt - 100,000 -
Dividends paid on preferred
and common stock (851) (145) (145)
Deferred financing costs - (4,236) (503)
Purchases of treasury stock (729) (1,110) -
Proceeds from exercise of
stock options 229 28 -
Net cash used in financing activities (3,266) (29,089) (8,690)
Net decrease in cash and
cash equivalents (343) (9,846) (2,388)
Cash and cash equivalents
at beginning of year 394 10,240 12,628
Cash and cash equivalents
at end of year $51 $394 $10,240
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $12,135 $9,095 $6,301
Income taxes paid
(refunds received), including
amounts for consolidated
subsidiaries $ 3,885 $ (300) $2,325
SCHEDULE II
Articles 5 and
7
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands)
Balance at Charged to Balance
beginning costs and at end
of period expenses Deductions of
period
Year ended December $12,212 $14,946 $16,184 $10,974
31, 1994: Insurance
losses and loss
adjustment expenses,
net of reinsurance
recoverables
Year ended December $13,766 $13,065 $14,619 $12,212
31, 1993: Insurance
losses and loss
adjustment expenses,
net of reinsurance
recoverables
Year ended December $14,618 $12,149 $13,001 $13,766
31, 1992: Insurance
losses and loss
adjustment expenses,
net of reinsurance
recoverables
(3) Exhibits (An asterisk to the left of an exhibit
number denotes a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this Annual
Report on Form 10-K.)
2.1 Agreement and Plan of Merger by and between Atlantis
Plastics, Inc., a Florida corporation and Atlantis Group,
Inc., a Delaware corporation, dated as of April 22, 1994.
(2)(1)
3.1 Registrant's Articles of Incorporation (3.1)(1)
3.2 Registrant's Bylaws (February 1988) (3.2)(1)
4.1 Trust Indenture between Registrant and American Stock
Transfer and Trust Company (4.2)(10)
4.2 Form of Senior Note, dated February 15, 1993 (4.3)(10)
10.1 Preferred Stock Subscription and Purchase Agreement,
dated October 24, 1986, between Registrant and Southeast
Banking Corporation (10.20)(1)
*10.2 Registrant's Amended and Restated Stock Option Plan,
dated as of March 16, 1989 (10.1)(6)
*10.3 Registrant's 1987 Disinterested Directors Stock Option
Plan (10.2)(2)
*10.4 Registrant's Amended and Restated 1990 Stock Option Plan
(10.2)(6)
*10.5 Fourth Amended and Restated Management Agreement between
Registrant and Trivest, Inc. (10.5)(9)
*10.6 Second Amended and Restated Employment Agreement, dated
January 1, 1990 between Registrant and Earl W. Powell
(10.6) (5)
*10.7 First Amendment To Second Amended and Restated Employment
Agreement, dated as of April 1, 1992, between Registrant
and Earl W. Powell (10.7) (10)
*10.8 Employment Agreement, dated January 1, 1990, between
Registrant and Phillip T. George, M.D. (10.7) (5)
*10.9 First Amendment to Employment Agreement, dated as of
April 1, 1992, between the Registrant and Phillip T.
George, M.D. (10.9) (10)
10.10 Form of Indemnification Agreement (10.47)(12)
10.11 Office Lease, dated as of December 31, 1993, between
Grand Bay Plaza Joint Venture and the Registrant, and
First Addendum thereto (11)
10.12 Settlement Agreement by and between Mobil Oil Corporation
and Linear Films, Inc. of Civil Action No. 87 civ. 874-B
in the Northern District of Oklahoma, effective as of
February 21, 1992 (10.40)(8)
10.13 License Agreement by and between Mobil Oil Corporation
and Linear Films, Inc. for use of U.S. Patent No.
4,518,654, effective as of February 21, 1992 (10.41)(8)
10.14 Loan Contract, dated October 30, 1987, between State of
Minnesota and National Poly Products, Inc. (10.11)(2)
10.15 Letter of Consent to the Loan Contract between State of
Minnesota and National Poly Products, Inc., dated
October 30, 1991 (10.43)(8)
10.16 Letter of Consent to the Loan Contract between State of
Minnesota and National Poly Products, Inc., dated January
13, 1992 (10.44 )(8)
10.17 Consent and Acknowledgement to the Loan Contract between
State of Minnesota and National Poly Products, Inc.,
dated February 18, 1993 (10.22)(10)
10.18 Joint Venture Agreement, dated as of January 26, 1990
between Rigal Plastics, Inc. and CKS Plastics, Inc.
("CKS/Rigal Plastics") (10.65)(5)
10.19 Amendment to CKS/Rigal Plastics Joint Venture Agreement,
dated as of January 17, 1994.(11)
10.20 Amendment to CKS/Rigal Plastics Joint Venture Agreement
dated as of January 24, 1994.(11)
10.21 Limited Guarantee of the Registrant dated as of January
19, 1994, of the obligations of CKS/Rigal Plastics in
favor of Bank South, N.A. (11)
10.22 Loan Agreement between Arkansas Development Finance
Authority and Cyanede, dated March 18, 1992 (10.69)(9)
10.23 Promissory Note from Cyanede to the Arkansas Development
Finance Authority, in the amount of $1,600,000, dated
June 1, 1992 (10.70)(9)
10.24 Office Lease, dated as of April 1, 1992, between Euram
1870 Exchange Associates and National Poly Products, Inc.
(10.78)(9)
10.25 Subordination and Attornment Agreement between State Farm
Life Insurance Company and National Poly Products, Inc.
dated April 6, 1992 (10.78)(9)
10.26 Intercreditor Agreement between Heller Financial, Inc.,
Arkansas Development Finance Authority and Worthen Trust
Company, Inc. (10.40)(10)
10.27 Asset Purchase Agreement, dated May 17, 1994, among the
Registrant, Advanced Plastics, Inc. and Frederick R.
Warren. (12)
10.28 Credit Agreement, dated February 22, 1993, between the
Registrant and Heller Financial, Inc. (the "Heller
Credit Agreement") (10.39)(10)
10.29 First Amendment and Waiver, dated March 28, 1994, to
Heller Credit Agreement.(13)
10.30 Consent Letter, dated May 23, 1994, to Heller Credit
Agreement.(13)
10.31 Second Amendment, dated August 15, 1994, to Heller Credit
Agreement.(13)
10.32 Consent Letter, dated September 9, 1994, to Heller Credit
Agreement.(13)
10.33 Consent Letter, dated February 13, 1995, to Heller Credit
Agreement.(1)
10.34 Consent and Waiver Letter, dated February 24, 1995, to
Heller Credit Agreement.(13)
10.35 Lease with option to purchase Real Estate between
Atlantis Plastic Films, Inc. and the City of Mankato,
Minnesota, dated as of March 2, 1995.(13)
11.1 Calculation of Earnings Per Share(13)
13.1 Registrant's Annual Report to Shareholders for the year
ended December 31, 1994(13)
21.1 Registrant's Subsidiaries(13)
23.1 Consent of Coopers & Lybrand L.L.P.(13)
(1) Incorporated by reference to the exhibit shown in parentheses
and filed with the Registrant's form 8-B filed June 7, 1994.
(2) Incorporated by reference to the exhibit shown in parentheses
and filed with the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1987.
(3) Incorporated by reference to the exhibit shown in parentheses
and filed with the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1988.
(4) Incorporated by reference to the exhibit shown in parentheses
and filed with the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989.
(5) Incorporated by reference to the exhibit shown in parentheses
and filed with the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1990.
(6) Incorporated by reference to the exhibit shown in parentheses
and filed with the Registrant's registration statement on
Form S-8 (No. 33-41012).
(7) Incorporated by reference to the exhibit shown in parentheses
and filed with the Registrant's Form 8-K, dated April 10,
1991.
(8) Incorporated by reference to the exhibit shown in parentheses
and filed with the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991.
(9) Incorporated by reference to the exhibit shown in parentheses
and filed with the Registrant's registration statement on
Form S-2 (33-53152).
(10) Incorporated by reference to the exhibit shown in
parentheses and filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992.
(11) Incorporated by reference to the exhibit shown in
parentheses and filed with the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1993.
(12) Incorporated by reference to the exhibit shown in
parentheses and filed with the Registrant's Report on
Form 8-K filed June 3, 1994.
(13) Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant
during the last quarter of the period covered by this Report.
(c) Exhibits required by Item 601 of Regulation S-K
The index to exhibits that are listed in Item 14(a)(3) of
this report and not incorporated by reference follows the
"Signatures" section hereof and is incorporated herein by
reference.
(d) Financial Statement Schedules required by
Regulation S-X
The financial statement schedules required by Regulation
S-X which are excluded from the Registrant's Annual Report to
Shareholders for the year ended December 31, 1994, by
Rule 14a-3(b)(1) are included above. See Item 14(a)2 for
index.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, there-
unto duly authorized.
ATLANTIS PLASTICS, INC.
Date: March 30, 1995 By:/s/ Paul Rudovsky
Paul Rudovsky
Executive Vice President,
Finance and Planning
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant in the capacities and on the dates
indicated.
Signature Title Date
/s/Earl W. Powell Chairman of the Board March 30, 1995
Earl W. Powell
/s/Phillip T. George, M.D. Director and March 30, 1995
Phillip T. George, M.D. Vice Chairman
/s/Anthony F. Bova President and Chief March 30, 1995
Anthony F. Bova Executive Officer
(Principal Executive Officer)
/s/Paul Rudovsky Executive Vice President, March 30, 1995
Paul Rudovsky Finance and Planning
(Principal Financial Officer)
/s/Charles D. Murphy, III Director March 30, 1995
Charles D. Murphy, III
/s/Chester B. Vanatta Director March 30, 1995
Chester B. Vanatta
/s/ Director March 30, 1995
Larry D. Horner
INDEX TO EXHIBITS
Page Number in
Sequential
Number System
EXHIBIT
10.29 First Amendment and Waiver, dated March 28, 1994,
to Heller Credit Agreement.(13)
10.30 Consent Letter, dated May 23, 1994, to Heller
Credit Agreement.(13)
10.31 Second Amendment, dated August 15, 1994, to
Heller Credit Agreement.(13)
10.32 Consent Letter, dated September 9, 1994, to
Heller Credit Agreement.(13)
10.33 Consent Letter, dated February 13, 1995, to
Heller Credit Agreement.(1)
10.34 Consent and Waiver Letter, dated February 24,
1995, to Heller Credit Agreement.(13)
10.35 Lease with option to purchase Real Estate
between Atlantis Plastic Films, Inc. and the
City of Mankato, Minnesota, dated as of
March 2, 1995.(13)
11.1 Calculation of Earnings Per Share(13)
13.1 Registrant's Annual Report to Shareholders
for the year ended December 31, 1994(13)
21.1 Registrant's Subsidiaries(13)
23.1 Consent of Coopers & Lybrand L.L.P.(13)
EXHIBIT 10.29
FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT
This First Amendment And Waiver to Credit Agreement, dated as
of March 28, 1994 (this "Agreement") is between Atlantis Group,
Inc., a Delaware corporation ("Borrower") and Heller Financial,
Inc., a Delaware corporation for itself as Agent and as Lender
("Heller").
RECITALS
A. Borrower and Heller are parties to that certain Credit
Agreement dated as of February 22, 1993, (the "Credit Agreement").
Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Credit Agreement.
B. The parties hereto wish to amend the Credit Agreement, as
provided herein.
NOW THEREFORE in consideration of the foregoing, the covenants
and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT TO THE CREDIT AGREEMENT. The Credit Agreement
is hereby amended as follows:
(a) The definition of "Fixed Charges" contained in
Section 1.1 of the Credit Agreement is hereby amended to provide
that Capital Expenditures made or accrued by the Borrower and
Subsidiary Guarantors for the trailing twelve month periods ended
March 31, 1994, June 30, 1994, September 30, 1994 and December 31,
1994 shall mean $9,000,000.
(b) The first sentence of Section 6.1 of the Credit
Agreement is hereby amended and as amended shall read as follows:
"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 (i)
$15,500,000 for the Fiscal Year ended December 31, 1994, and
(ii) $9,000,000 for any Fiscal year thereafter (the "Capital
Expenditures Allowance"), plus sixty-five percent (65%) of the
unused Capital Expenditure Allowance from the prior Fiscal
Year in any Fiscal Year."
2. CONSENT TO WAIVER.
(a) Borrower has requested that Heller waive for the
period ended December 31, 1993 the requirement set forth in Section
6.1 of the Credit Agreement that Borrower and the Subsidiary
Guarantors not exceed $9,000,000 as the aggregate amount of all
Capital Expenditures (excluding expenditures funded by insurance
proceeds) in any Fiscal Year. Borrower has informed Lender that
for the period ended December 31, 1993, Borrower was in violation
of the Capital Expenditure Covenant.
The foregoing failure by Borrower to comply with such
covenant would, if Heller chose to declare it, constitute an Event
of Default under the Credit Agreement. However, at the request of
Borrower and in the exercise of Heller's discretion, Heller has
elected to waive its right to declare the foregoing failure to
comply with such covenant as an Event of Default and defers from
enforcing its remedies with respect thereto.
(b) By execution of this Agreement, Borrower
acknowledges
and agrees that the present election to forbear by Heller shall not
be construed by Borrower as a waiver of compliance with any other
term or condition contained in the Credit Agreement nor as an
agreement to forbear with respect to any term or condition
contained in the Credit Agreement other than as expressly set forth
herein.
3. REPRESENTATIONS AND WARRANTIES. To induce Heller to
enter into this Agreement, Borrower represents and warrants to
Heller that:
(a) AUTHORITY AND BINDING EFFECT. The execution,
delivery, and performance by Borrower of this Agreement is within
its corporate power, has been duly authorized by all necessary
corporate action (including, without limitation, shareholder
approval), has received all necessary government approvals (if any
shall be required), and does not and will not contravene or
conflict with any provision of law applicable to Borrower, the
Certificate of Incorporation or Bylaws of Borrower, or any order,
judgment, or decree of any court or other agency of government or
any agreement, instrument, or document binding upon Borrower; and
the Credit Agreement as heretofore amended and as amended as of the
date hereof is the legal, valid, and binding obligation of Borrower
enforceable against Borrower in accordance with its terms.
(b) NO DEFAULT. No Default or Event of Default under
the
Credit Agreement, as amended hereby, has occurred and is
continuing, except as provided herein.
(c) WARRANTIES AND REPRESENTATIONS. The warranties and
representations of Borrower contained in this Agreement, the Credit
Agreement, as amended hereby, and the Financing Agreements, shall
be true and correct as of the date hereof, with the same effect as
though made on such date except to the extent that such
representations and warranties expressly relate solely to an
earlier date, in which case such representations or warranties were
true and correct as of such earlier date.
4. MISCELLANEOUS.
(a) CAPTIONS. Section captions used in this Agreement
are for convenience only, and shall not affect the construction of
this Agreement.
(b) GOVERNING LAW. This Agreement shall be a contract
made under and governed by the laws of the State of Illinois,
without regard to conflict of laws principles. Whenever possible,
each provision of this Agreement shall be interpreted in such a
manner as to be effective and valid under applicable law, but if
any provision of this Agreement shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Agreement.
(c) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which counterparts shall be deemed to be an
original, but all of such counterparts shall together constitute
but one and the same Agreement.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon Borrower and Heller and their respective successors
and assigns, and shall inure to the sole benefit of Borrower and
Heller and the successors and assigns of Borrower and Heller.
(e) REFERENCES. Any reference to the Credit Agreement
or the Financing Agreements contained in any notice, request,
certificate, or other document executed concurrently with or after
the execution and delivery of this Agreement shall be deemed to
include this Agreement unless the context shall otherwise require.
(f) CONTINUED EFFECTIVENESS. Notwithstanding anything
contained herein, the terms of this Agreement are not intended to
and do not serve to effect a novation as to the Credit Agreement.
The parties hereto expressly do not intend to extinguish the Credit
Agreement. Instead, it is the express intention of the parties
evidenced by the notes provided for therein and secured by the
Collateral. The Credit Agreement as amended hereby and each of the
Loan Documents remain in full force and effect.
Delivered at Chicago, Illinois, as of the date and year first
above written.
ATLANTIS GROUP, INC.
By:
Name Printed:
Title:
HELLER FINANCIAL, INC., for
itself and as Agent for the
Lenders
By:
Name Printed:
Title:
EXHIBIT 10.30
VIA FACSIMILE
May 23, 1994
Mr. Peter Kacer
Assistant Vice President and
Controller
Atlantic Group, Inc.
2665 South Bayshore Drive
8th Floor
Miami, Florida 33133-5401
Dear Peter:
Atlantis Group, Inc. ("Atlantis") has informed Heller
Financial, Inc. ("Heller") that it is seeking to form a new
subsidiary called Atlantis Plastics, Inc, ("Plastics") and merge
Atlantis with and into Plastics. Pursuant to Section 7.6 of the
Credit Agreement, Atlantis is prohibited from entering into any
mergers without Heller's consent. Heller hereby consents to the
merger and proposed name change; provided, however, that Heller's
consent is contingent upon Atlantis and/or Plastics executing any
and all documents that Heller may require to continue its first
priority perfected security interest in and to the assets of
Atlantis, which documents shall include but not be limited to the
execution of new UCC-1 Financing Statements.
Please contact me with any questions.
Sincerely,
/s/David A. Meier
David A. Meier
Vice President
cc: Dave Sherbin
Karen Finnerty
File
EXHIBIT 10.31
SECOND AMENDMENT TO CREDIT AGREEMENT
This Second Amendment to Credit Agreement, dated as of August
15, 1994 (this "Agreement") is between Atlantis Plastics, Inc., a
Florida corporation ("Borrower") and Heller Financial, Inc., a
Delaware corporation for itself as Agent and as Lender ("Heller").
RECITALS
A. Borrower and Heller are parties to that certain Credit
Agreement dated as of February 22, 1993, as amended by the First
Amendment and Waiver to Credit Agreement dated as of March 28,
1994, (with this Second Amendment, the "Credit Agreement").
Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Credit Agreement.
B. The parties hereto wish to amend the Credit Agreement, as
provided herein.
NOW THEREFORE, in consideration of the foregoing, the
covenants and conditions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. AMENDMENT TO THE CREDIT AGREEMENT. The Credit Agreement
is hereby amended as follows:
(a) The definition of "Fixed Charges" contained in
Section 1.1 of the Credit Agreement is hereby amended to provide
that Capital Expenditures made or accrued by the Borrower and
Subsidiary Guarantors for the trailing twelve month periods ended
September 30, 1994 and December 31, 1994, March 31, 1995 and June
30, 1995, shall equal $9,000,000. After June 30, 1995, Capital
Expenditures shall equal the actual trailing twelve month Capital
Expenditures.
(b) The first sentence of Section 6.1 of the Credit
Agreement is hereby amended and as amended shall read as follows:
"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 (i)
$21,300,000 for the Fiscal Year ended December 31, 1994, provided
that at all times until December 31, 1994, availability under the
Revolving Loan shall exceed $2,000,000, and (ii) $12,000,000 for
any Fiscal year thereafter (the "Capital Expenditures Allowance"),
plus sixty-five percent (65%) of the unused Capital Expenditure
Allowance from the prior Fiscal Year in any Fiscal Year."
2. REPRESENTATIONS AND WARRANTIES. To induce Heller to
enter into this Agreement, Borrower represents and warrants to
Heller that:
(a) AUTHORITY AND BINDING EFFECT. The execution,
delivery, and performance by Borrower of this Agreement is within
its corporate power, has been duly authorized by all necessary
corporate action (including, without limitation, shareholder
approval), has received all necessary government approvals (if any
shall be required), and does not and will not contravene or
conflict with any provision of law applicable to Borrower, the
Certificate of Incorporation or Bylaws of Borrower, or any order,
judgment, or decree of any court or other agency of government or
any agreement, instrument, or document binding upon Borrower; and
the Credit Agreement as heretofore amended and as amended as of the
date hereof is the legal, valid, and binding obligation of Borrower
enforceable against Borrower in accordance with its terms.
(b) NO DEFAULT. No Default or Event of Default under
the Credit Agreement, as amended hereby, has occurred and is
continuing.
(c) WARRANTIES AND REPRESENTATIONS. The warranties and
representations of Borrower contained in this Agreement, the Credit
Agreement, as amended hereby, and the Financing Agreements, shall
be true and correct as of the date hereof, with the same effect as
though made on such date except to the extent that such
representations and warranties expressly relate solely to an
earlier date, in which case such representations or warranties were
true and correct as of such earlier date.
3. MISCELLANEOUS.
(a) CAPTIONS. Section captions used in this Agreement
are for convenience only, and shall not affect the construction of
this Agreement.
(b) GOVERNING LAW. This Agreement shall be a contract
made under and governed by the laws of the State of Illinois,
without regard to conflict of laws principles. Whenever possible,
each provision of this Agreement shall be interpreted in such a
manner as to be effective and valid under applicable law, but if
any provision of this Agreement shall be prohibited by or invalid
under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Agreement.
(c) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which counterparts shall be deemed to be an
original, but all of such counterparts shall together constitute
but one and the same Agreement.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon Borrower and Heller and their respective successors
and assigns, and shall inure to the sole benefit of Borrower and
Heller and the successors and assigns of Borrower and Heller.
(e) REFERENCES. Any reference to the Credit Agreement
or the Financing Agreements contained in any notice, request,
certificate, or other document executed concurrently with or after
the execution and delivery of this Agreement shall be deemed to
include this Agreement unless the context shall otherwise require.
(f) CONTINUED EFFECTIVENESS. Notwithstanding anything
contained herein, the terms of this Agreement are not intended to
and do not serve to effect a novation as to the Credit Agreement.
The parties hereto expressly do not intend to extinguish the Credit
Agreement Instead, it is the express intention of the parties
hereto to reaffirm the indebtedness created under the Credit
Agreement which is evidenced by the notes provided for therein and
secured by the Collateral. The Credit Agreement as amended hereby
and each of the Loan Documents remain in full force and effect.
Delivered at Chicago, Illinois as of the date and year first
above written.
ATLANTIS PLASTICS, INC.
By:
Name Printed:
Title:
HELLER FINANCIAL, INC., for
itself and as Agent for the
Lenders
By:
Name Printed:
Title:
EXHIBIT 10.32
September 9, 1994
Harvey G. Ershing
200 South Green Street
Henderson, KY 42420
Gentlemen:
The undersigned, Cyanede Plastics, Inc. (the "Company"), will,
from time to time, deliver or cause to be delivered certain
inventory, raw materials, tooling or other goods owned by it (the
"Goods") to you for storage, processing or use at your facilities
located at the address shown above.
Heller Financial, Inc. (the "Agent"), as agent for the Lenders
under that certain Credit Agreement dated as of February 22, 1993
by and among the Company, Heller and the Lenders signatory thereto,
will be engaged in certain financing of the Company, which
financing will be secured by a security interest in, among other
things, the tangible and intangible personal property of the
Company, including, without limitation, the Goods.
The security interest of the Agent, for the benefit of the
Lenders, in the Goods shall be senior to all liens, claims and
interests other than your lien, if any, for any accrued and unpaid
storage and/or processing charges for the actual storage and/or
processing of the Goods. To protect the security interest of the
Agent, for the benefit of the Lenders, in the Goods, if you issue
storage receipts or other documents of title which evidence any
Goods now or hereafter delivered by the Company to you, please make
those documents non-negotiable and note on them that they have been
issued to or for the account of the Agent, for the benefit of the
Lenders.
If at a later date, the Agent requests copies of such
documents, you agree that you will provide them. Until further
notice you may release any of the Goods to any authorized agent of
the Company upon the Company's request. However, upon the written
direction of the Agent, you agree not to deliver the Goods to the
Company or its designated agent, but to hold those Goods subject to
the Agent's further direction.
The Company agrees that you shall have no liability to the
Company if you comply with the Agent's written direction as
described above. The Company further agrees that it will continue
to pay all storage, processing or manufacturing expenses related to
the storage and/or processing of the Goods and will reimburse you
for all reasonable costs or expenses incurred as a direct result of
your compliance met the terms and provisions of this letter.
Please confirm receipt of this letter and your agreement to
delivery instructions contained herein by signing the enclosed copy
of this letter as indicated and returning it as soon as possible to
Heller Financial, Inc., 500 West Monroe, Chicago, Illinois 60661,
Attention: Karen Finnerty.
Very truly yours,
CYANEDE PLASTICS, INC.
By:
Title:
Acknowledged and agreed to this
day of , 1994.
Name and Address of Bailee
Signature of Bailee
Acknowledged and agreed to this
day of , 1994.
HELLER FINANCIAL, INC., as
Agent for the Lenders
By:
Title:
EXHIBIT 10.33
February 13, 1995
VIA FACSIMILE
Atlantis Group, Inc.
2665 South Bayshore Drive
8th Floor
Miami, Florida 33133
Attention: Mr. Craig Brumfield
Dear Mr. Brumfield:
Reference is hereby made to that certain Credit Agreement dated as
of February 22, 1993 (the "Credit Agreement") between Atlantis
Group, Inc. ("Borrower") and Heller Financial, Inc. ("Heller").
Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Credit Agreement.
Pursuant to subsection 7.1 of the Credit Agreement, Borrower
may only incur such Indebtedness as is specifically permitted in
such subsection. Borrower has informed Heller that is in the
process of obtaining secured bank financing for the purpose of
purchasing the Aeroquip facility located in Elkhart, Indiana.
Without the express consent of Heller, such secured financing would
violate the covenants set forth in subsection 7.1 and would create
an Event of Default under the Credit Agreement.
Heller, in the exercise of its discretion as a prudent lender,
hereby consents to Borrower obtaining the financing on a secured
basis; provided, however, that the foregoing consent is
specifically conditioned on the following terms and conditions:
1. There shall be no Default or Event of Default of the Credit
Agreement now existing; and
2. The amount of the secured financing shall not exceed $1.5
million.
By receipt of this letter, Borrower acknowledges and agrees
that the foregoing consent by Heller shall not be construed by it
as a waiver of compliance with any other term or condition
contained in the Credit Agreement nor as an agreement to forbear
with respect to any other term or condition contained in the Credit
Agreement, other than as expressly set forth herein.
Very truly yours,
HELLER FINANCIAL, INC.
/s/Andrew D. Marek
Vice President
cc: Albert Ricchio
David M. Sherbin, Esq.
EXHIBIT 10.34
February 24, 1995
Atlantis Plastics, Inc.
f/k/a Atlantis Group, Inc.
2665 South Bayshore Drive
Miami, Florida 33133-5401
ATTN: Craig Brumfield
Re: CONSENT AND WAIVER
Dear Mr. Brumfield:
Reference is made to that certain Credit Agreement dated as of
February 22, 1993 by and between Atlantis Plastics, Inc. f/k/a
Atlantis Group, Inc. ("Borrower") and Heller Financial, Inc.
("Heller") as Agent and as Lender as amended on March 28, 1994 and
on August 15, 1994 ("all hereinafter referred to as the "Credit
Agreement").
Borrower has requested that Heller consent to the Borrower
and/or its subsidiaries entering into an equipment financing
arrangement with General Electric Capital Corporation ("GECC")
substantially consistent with that certain proposal letter to
Trivest, Inc. from GECC dated February 2, 1995 (the "Transaction").
Heller has considered Borrower's request and hereby consents
to the Transaction and waives any and all defaults (if any) that
may occur under the Credit Agreement arising solely from the
Transaction. Heller's consent and waiver is expressly limited to
the Transaction and is subject to the loan proceeds of the
Transaction being wired to Heller to be applied against the
Revolving Loan.
If you have any questions, do not hesitate to contact me.
HELLER FINANCIAL, INC.
By:
Title:
cc: Peter Klein, Atlantis Plastics, Inc.
Greenberg Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
EXHIBIT 10.35
LEASE WITH OPTION TO PURCHASE
PREAMBLE: This Lease with Option to Purchase is intended by the
parties to substitute for the Interim Construction and Lease
Agreement between the City of Mankato and National Poly Products,
Inc. entered into on November 30, 1993. A copy of that Agreement
is attached hereto for reference. As provided for therein, this
document incorporates actual cost data and effective dates in place
of estimates contained in the Interim Construction and Lease
Agreement. In the event of conflict between any of the terms of
this document and the Interim Construction and Lease Agreement, the
terms contained in this document shall govern.
PARTIES: The parties to this Agreement are the City of Mankato, a
Minnesota municipal corporation ("City"), located in Blue Earth
County, Minnesota, and Atlantis Plastic Films, Inc., f/k/a National
Poly Products, Inc., a Delaware corporation with principal offices
in Atlanta, Georgia ("Atlantis").
BACKGROUND: Atlantis is engaged in the business of manufacturing
plastic-based products and is in need of additional manufacturing
space within the City of Mankato.
City owns real estate in the City of Mankato, Blue Earth
County, Minnesota, described as:
All of Lots 2 and 3, Block 3, Eastwood Industrial Centre,
upon which it has constructed a prestressed concrete building of
approximately 61,000 square feet suitable for Atlantis' needs.
Said building has been constructed specifically to Atlantis'
specifications. The value of the building and the land upon which
it is located total $2,430,000.00.
LEASE: City hereby leases to Atlantis, and Atlantis hereby takes
from City, the real estate consisting of the land and building
described above for an initial lease term of five years, beginning
August 1, 1994, and terminating July 31, 1999. Atlantis shall pay
to City, for the leased real estate, a rental sum of $962,215.20,
payable in equal monthly installments of $16,036.92 due and payable
on the first of each month, beginning August 1, 1994.
In addition to the monthly rental, Atlantis shall pay to
City each month, as additional rent, an amount equal to 1/12 of the
estimated real estate taxes on the leased real estate. Said amount
shall be held by City in an escrow fund from which City shall pay,
when due, all real estate taxes attributed to the leased real
estate.
REPAIRS MAINTENANCE AND INSURANCE: Atlantis shall, at all times
during the lease period, keep the property insured against fire,
wind, hail or any other hazard in an amount sufficient to cover any
replacement costs in the event of damage caused by such
occurrences. Atlantis shall also carry premises liability
insurance coverage in an amount not less than $1,000,000.00. Any
insurance policy acquired by Atlantis must be submitted to City for
its approval and must name City as an additional insured. All
costs of insurance shall be borne by Atlantis.
Atlantis shall also, at its own expense, keep the leased
real estate in a state of good repair and maintenance and shall
pay, when due, all charges for utilities serving the leased real
estate. The City shall be responsible for all structural and
mechanical maintenance and repairs that are not covered by
insurance or warranty.
OPTION TO RENEW: Atlantis shall have the exclusive option, not
assignable without the consent of City, to renew its lease of the
leased real estate upon the same terms as for the initial lease
period for two renewal periods of five years each. To exercise its
option, Atlantis shall give notice to City of its intent to renew
not less than 12 months prior to the expiration of the initial
lease, or, in the case of the first renewal option, twelve months
prior to the end of the first refusal option.
OPTION TO BUY: Atlantis shall have the right to acquire from City,
and City shall be obligated to sell to Atlantis at any time during
the initial lease period, the leased real estate at a price of
$2,430,000.00, minus 50% of that portion of each rental payment
that would be considered principal reduction, using 20 year
amortization and a 5% interest rate. By way of illustration, the
purchase price at the end of one year will be $2,393,704.19.
During the option periods, the percent of the lease payments that
would be considered principal reduction would increase to 75%
percent.
There is hereby granted to Atlantis by City an option to
acquire Lot 1, Block 3, Eastwood Industrial Centre, for a period of
five years. The purchase price, in the event Atlantis exercises
this option, shall be $81,160.00. During any lease renewal period,
Atlantis may extend its option for additional one year periods for
the payment of $1,000 per year, which payment shall be applied to
the purchase price.
CONDITIONS OF GRANT: It is understood by Atlantis that a portion
of the funds for construction of the building being leased by City
to Atlantis was provided by the State of Minnesota Department of
Trade and Economic Development under its Small Cities Development
Program, and that a condition of the grant made by said Department
to the City is that the party receiving the benefits of such grant,
Atlantis, comply with all requirements of the Department under the
Small Cities Development Program. Atlantis thus agrees as follows:
(a) LOBBYING. Atlantis will not use Small Cities
Development Program funds to pay any person for influencing or
attempting to influence an officer or employee of a federal agency,
a member of Congress, an officer or employee of Congress, or any
employee of a member of Congress in connection with the awarding of
any federal contract, the making of a federal grant, the making of
a federal loan, the entering into of any cooperative agreement, and
the extension, continuation, renewal, amendment, or modification of
any federal contract, grant, loan, or cooperative agreement. If
Atlantis uses nonfederal funds to conduct any of the aforementioned
activities, the grantee must complete and submit Standard Form LLL,
"Disclosure Form to Report Lobbying".
(b) EMPLOYMENT OBJECTIVE. Atlantis agrees to take
affirmative action to ensure that 100 permanent jobs will be
created by its occupancy of the leased premises, of which, at a
minimum, 51% shall be held by low and moderate income individuals.
Atlantis agrees that the above job requirements shall be completed
by December 31, 1995.
(c) EMPLOYMENT DOCUMENTATION. Atlantis shall complete
and provide to the City notification of employment semiannually of
hiring each new employee. This notification requirement will not
be necessary after December 31, 1995, provided the employment
objective set forth above has been met. In addition, Atlantis
agrees to provide verification that jobs are available to persons
of low and moderate income by documenting that once the jobs are
filled, at least 51% of the persons hired are low and moderate
income families, as per Section 8 Income Guidelines.
(d) JOB CREATION DOCUMENTATION. Atlantis shall include
job creation information in each semiannual progress report. This
information shall be provided by Atlantis and must include:
(i) jobs created;
(ii) job title per job; and
(iii) date employees hired.
(e) FIRST SOURCE EMPLOYMENT REFERRAL AGREEMENT.
Atlantis agrees to list any vacant or new positions with the job
services of the Commissioner of Job Services or a local service
unit operated by a county or counties operating under a joint
powers agreement, one or more cities of the first class operating
under a joint powers agreement, or a city of-the first class.
(f) PROVISIONS OF MONITORING INFORMATION RELATED TO
PROJECT PROGRESS. Atlantis shall provide to the City information
for incorporation into progress reports, as required by the
Department of Trade and Economic Development as needed by the City,
to monitor project implementation for compliance with grantor and
local guidelines.
(g) NONDISCRIMINATION. The provisions of Minnesota
Statutes Section 181.59, which relate to civil rights and
discrimination, shall be considered a part of this Agreement as
though wholly set forth herein.
REMEDIES: In the event of breach of any condition of the terms of
the lease entered into between City and Atlantis, City shall have
the right to declare this lease terminated and reenter the leased
real estate, but by so doing, it will not give up any rights to
collect from Atlantis all rents for the remainder of the lease
term. City shall further have available to it all remedies of a
landlord under Minnesota law. The lease will not be terminated by
City for a monetary default without 10 days written notice to
Atlantis. For non-monetary defaults, it will not be terminated for
30 days following written notice to Atlantis, unless the default is
one that will reasonably require more than 30 days to cure. In
such case, the parties will diligently pursue the cure using as
much time as is reasonable to cure. Failure to comply with the
conditions of the grant, breach of the representations and
warranties below, failure to obtain workers compensation insurance,
and failure to comply with Minnesota state tax law, shall not be
deemed defaults hereunder.
NOT ASSIGNABLE: This lease between City and Atlantis shall not be
assignable by Atlantis without the written consent of City. City
shall not unreasonably withhold its consent.
REPRESENTATIONS AND WARRANTIES: Atlantis warrants and represents,
in connection with the Small Cities Development Program grant and
for the benefit of the Commissioner of the Department of Trade and
Economic Development and the City that:
(a) The representations, statements, and 7 other matters
provided by Atlantis relating to those activities of the project to
be completed by Atlantis which were contained in the application
for the grant, were true and complete in all material respects as
of the date of submission to the City and that such representa-
tions, statements, and other matters are true as of the date of
this Agreement.
(b) To the best of Atlantis' knowledge, no member,
officer, or employee of the City or its designees or agents, no
consultant, member of the governing body of the City, and no other
public official of the City, who exercises or has exercised any
functions or responsibilities with respect to the construction of
the building and its lease by Atlantis during his or her tenure
shall have any interest, direct or indirect, in any contract or
subcontract, or the proceeds thereof, for work to be performed in
connection with the construction and lease or in any activity, or
benefit therefrom, which is part of this project.
(c) Atlantis acknowledges that the Commissioner, in
selecting the City as recipient of the grant, relied in material
part upon the assured completion of the project to be carried out
by Atlantis, and Atlantis assures the City that its obligations
will be carried out by it.
(d) Atlantis warrants that to the best of its knowledge,
it has obtained all federal, state, and local governmental
approvals, reviews, and permits required by law to be obtained in
connection with the project.
(e) Atlantis warrants that it shall keep and maintain
books, records, and other documents relating directly to its
obligations under this Lease and Purchase Agreement and that any
duly authorized representative of the Commissioner shall, at all
reasonable times, have access to and the right to inspect, copy,
audit, and examine all such books, records, and other documents of
Atlantis until its obligations have been fulfilled.
(f) Atlantis warrants that it has fully complied with
all applicable state and federal laws pertaining to its business
and will continue said compliance throughout the terms of this
lease. If, at any time, notice of noncompliance is received by
Atlantis, it agrees to take any necessary action to comply with the
state of federal law in question.
WORKERS' COMPENSATION INSURANCE: Atlantis has obtained workers'
compensation insurance as required by Minnesota Statutes, 1982,
Section 176.181, Subd. 2. Atlantis' workers' compensation insurance
information is as follows:
(a) Company Name: LIBERTY MUTUAL
(b) Policy Number: WA2-151-273391-015
(c) Local Agent: LIBERTY MUTUAL - MINNEAPOLIS
BUSINESS WITH THE STATE OF MINNESOTA/STATE TAX LAWS: Atlantis
acknowledges that it is required by Minnesota Statutes, 1982,
Section 270.66, to provide its Minnesota tax identification number
if it does business with the State of Minnesota. This information
may be used in the enforcement of federal and state tax laws.
Supplying these numbers could result in an action to require it to
file state tax returns and pay delinquent state tax liabilities.
Atlantis acknowledges that these numbers will be available to
federal and state tax authorities and state personnel involved in
the payment of state obligations.
Minnesota Tax ID: 464-52-90
Federal Employer ID: 41-1445891
FORUM FOR DISPUTES: In the event disputes arise under this
Agreement, said disputes shall be submitted to binding arbitration
in Mankato, Minnesota, under the Commercial Arbitration Rules of
the American Arbitration Association and any judgment rendered by
the arbitrator may be entered into district court. In the event
litigation is necessary for the enforcement of any right or
obligation, the same shall be brought in District Court, Blue Earth
County, Minnesota.
IN WITNESS WHEREOF, the parties have signed the day and year
appearing below.
CITY OF MANKATO
By:
Its City Manager
ATLANTIS PLASTIC FILMS, INC.
By:
Its:
STATE OF MINNESOTA )
) ss.
COUNTY OF BLUE EARTH )
The foregoing instrument was acknowledged before me this
of January, 1995, by William A. Bassett, the City Manager of the
City of Mankato, a Minnesota municipal corporation, on behalf of
said corporation.
Notary Public (SEAL)
STATE OF GEORGIA )
) ss.
COUNTY OF COBB )
The foregoing instrument was acknowledged before me this
day of March, 1995, by , the
of Atlantis Plastic Films, Inc., a
corporation, on behalf of said corporation.
Notary Public (SEAL)
EXHIBIT 11.1
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Primary:
1994 1993 1992
Shares outstanding:
Weighted average out-
standing 7,066,512 7,291,364 7,311,173
Share equivalents 443,468 408,376 43,963
Adjusted outstanding 7,509,980 7,699,740 7,355,136
Net income available to
common shareholders:
Net income $6,366,130 $3,894,742 $5,774,924
Less - preferred
stock dividend (145,000) (145,000) (145,000)
Net income available to
common shareholders $6,221,130 $3,749,742 $5,629,924
Income per common share $ 0.83 $ 0.49 $ 0.76
Fully Diluted(1)
1994 1993 1992
Shares outstanding:
Weighted average out-
standing 7,066,512 7,291,364 7,311,173
Share equivalents 452,710 423,067 297,313
Adjusted outstanding 7,519,222 7,714,431 7,608,486
Net income available to
common shareholders:
Net income $6,366,130 $3,894,742 $5,774,924
Less - preferred
stock dividend (145,000) (145,000) (145,000)
Net income available to
common shareholders $6,221,130 $3,749,742 $5,629,924
Income per common share $ 0.83 $ 0.49 $ 0.74
(1) The conversion of preferred stock is not considered, as the
dilutive effect was not material.
EXHIBIT 13.1
Financial Highlights
(In thousands, except per share data)
Years Ended
December 31, 1994 1993 1992 1991 1990
Income Data
Net Sales $260,818 $220,163 $188,738 $177,685 $181,174
EBITDA(A) 31,997 27,697 25,648 23,832 23,231
Operating Income 22,373 19,536 18,346 16,909 16,232
Interest Expense 13,213 13,111 15,127 16,979 18,304
Income (Loss)
From Continuing
Operations 5,159 5,211 4,883 (4,838)
(689)
Core Earnings
(Loss)(B) 5,159 3,773 1,844 288
(509)
Per Share Data
Continuing Opera-
tions (Primary)(C)$.67 $.66 $.64 $(.69)
$(.11)
Core Earnings $.67 $.47 $.23 $ .02
$(.09)
Cash Dividends
Declared $.10 $ -- $ -- $ -- $ --
Balance Sheet Data
Working Capital$ 32,968 $ 22,857 $ 21,915 $ 12,995 $ 21,113
Total Assets 211,521 170,968 172,647 178,651 179,126
Long-term Debt,
Net 127,374 102,174 102,274 95,078 124,411
Total Debt 129,234 102,380 114,554 127,521 134,347
Shareholders'
Equity 40,422 35,133 30,566 23,918 13,980
Capital Expendi-
tures 16,448 10,241 6,487 2,832 5,185
(A) EBITDA represents income (loss) from continuing operations
before interest, taxes, depreciation, and amortization.
(B) Core earnings (loss) represents income (loss) from continuing
operations excluding litigation settlements and costs, net of
tax.
(C) For 1992, fully diluted income per share from continuing
operations was $.62.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Atlantis is a leading U.S. manufacturer of polyethylene
stretch and custom films used in a variety of industrial and
consumer applications and molded plastic products for the
appliance, agricultural, automotive, recreational vehicle,
residential window, and dairy industries. Its continuing
operations consist of two primary operating segments: Atlantis
Plastic Films manufactures polyethylene stretch film and a variety
of custom film products, and Atlantis Molded Plastics manufactures
products using three distinct technologies: injection molding,
profile extrusion, and blowmolding.
Discontinued operations in 1994 consist of the operations of
Western Pioneer, the Company's California property-casualty
insurance subsidiary. Prior to 1994, discontinued operations
included both Western Pioneer and the Company's interest in
Loewenstein Furniture Group, Inc. ("Loewenstein"). See Note 17 of
Notes to the Company's Consolidated Financial Statements.
Results of Continuing Operations
Sales, gross profit, operating income and core earnings for
the years ended December 31, 1994, 1993, and 1992 were as follows:
(In thousands)
Years Ended December 31, 1994 1993
Amount % Total Amount %
Total
Sales
Atlantis Plastic Films $173,947 67% $150,065 68%
Atlantis Molded Plastics 86,871 33% 70,098 32%
Total $260,818 100% $220,163 100%
Amount % Sales Amount %
Sales
Gross Profit
Atlantis Plastic Films $ 36,084 21% $ 29,246 19%
Atlantis Molded Plastics 15,489 18% 14,157 20%
Total $ 51,573 20% $ 43,403 20%
Amount % Sales Amount %
Sales
Operating Income
Atlantis Plastic Films $ 13,455 8% $ 10,854 7%
Atlantis Molded Plastics 8,918 10% 8,682 12%
Total $ 22,373 9% $ 19,536 9%
Core Earnings(A) $ 5,159 $ 3,773
(continued)
(In thousands)
Years Ended December 31, 1992
Amount % Total
Sales
Atlantis Plastic Films $134,429 71%
Atlantis Molded Plastics 54,309 29%
Total $188,738 100%
Amount % Sales
Gross Profit
Atlantis Plastic Films $ 25,604 19%
Atlantis Molded Plastics 11,567 21%
Total $ 37,171 20%
Amount % Sales
Operating Income
Atlantis Plastic Films $ 10,893 8%
Atlantis Molded Plastics 7,453 14%
Total $ 18,346 10%
Core Earnings(A) $ 1,844
(A) Core earnings represent income from continuing operations
excluding
litigation settlements and costs, net of tax.
Comparison of Years Ended December 31, 1994 and 1993
The Company's sales of $260.8 million were ahead of last
year's by 18%, due to higher selling prices during 1994 resulting
from increases in resin prices, and also due to increases in sales
volume in both the film and injection molding operating units. In
addition, 1994 sales include incremental sales volume resulting
from added capacity created by the Company's recent capital
expansion programs, and the contribution from the May 1994
acquisition of Advanced Plastics, Inc. ("Advanced"), an injection
molder located in Warren, Ohio. (See Note 2 of Notes to the
Company's Consolidated Financial Statements.)
The 1994 increase in sales resulted in higher gross profit
dollar levels compared to the same periods last year, while gross
profit as a percentage of sales remained constant for the 1994 and
1993 periods. During 1994, gross profit equaled $51.6 million, or
20% of sales, compared to last year's gross profit of $43.4
million, also 20% of sales.
For Atlantis Plastic Films, the 1994 gross profit percentage
of 21% improved compared to last year's 19%, reflecting stronger
profitability in the custom film unit resulting from improved plant
efficiencies combined with lower scrap rates, which served to
offset the margin pressure experienced as a result of the
significant increase in resin prices during the period.
The 1994 Atlantis Molded Plastics gross profit percentage of
18% decreased from last year's gross profit percentage of 20%.
This decrease reflects lower injection molding profitability
resulting from a variety of factors, including: (i) a higher level
of tooling sales during 1994, which produced lower margins in
comparison to the normal product line, (ii) additional expenses
related to debugging costs of new tools, which were placed in
service in late 1994, or will be placed in service in 1995, (iii)
higher subcontracted and overtime labor costs due to the shortage
of qualified labor resulting from this year's low national
unemployment levels, (iv) unfavorable product mix, and (v) a
decline in blow molding profitability due to ongoing competitive
pricing pressures in the dairy plastic container markets.
Selling, general and administrative expenses during 1994
totaled $29.2 million, or 11% of sales, compared to last year's
selling, general and administrative expenses of $23.9 million, also
11% of sales.
The dollar increase in selling, general and administrative
expenses for 1994 reflects additional employees to support volume
growth, a higher cost base in the injection molding unit, which
includes the operating results of Advanced since May 1994, and
higher commission costs in the stretch film unit resulting from
increased sales volume.
Operating income for 1994 of $22.4 million was 15% ahead of
last year's operating income of $19.5 million.
Despite the increase in indebtedness and interest rates during
1994, interest expense of $13.2 million was comparable to the $13.1
million in interest expense for 1993, primarily due to the
Company's lower cost of capital resulting from the refinancing of
substantially all of its indebtedness during the first quarter of
1993.
The Company's effective tax rates during 1994 and 1993 were
affected by nondeductible goodwill amortization.
The Company's core earnings for 1994 of $5.2 million exceeded
last year's core earnings of $3.8 million by 37%, due to higher
operating income. Core earnings represent income from continuing
operations excluding litigation settlements and costs, net of tax.
Comparison of Years Ended December 31, 1993 and 1992
The Company's sales of $220.2 million during 1993 increased
17% over the $188.7 million posted during 1992. Atlantis Plastic
Films sales of $150.1 million were 12% higher than 1992's $134.4
million, with substantially all of the increase from the stretch
film unit. Sales for Atlantis Molded Plastics of $70.1 million
during 1993 were 29% higher than the $54.3 million in 1992, due
primarily to increased sales in the injection molding unit
resulting from higher sales of appliance-related parts.The Company
posted 1993 gross profit of $43.4 million, or 20% of sales,
compared to $37.2 million, also 20% of sales during 1992. The
Atlantis Plastic Films gross profit percentage remained constant
for 1993 and 1992 at 19%, reflecting reduced operating
profitability in the custom film unit during 1993, offset by
stronger profitability in the stretch film unit. During 1992 and
1993, the custom film industry was characterized by severe
competition and over-capacity, resulting in consolidation efforts
and reduced profit margins. In order to restore profitability to
prior historical levels, the custom film unit focused on increasing
sales of higher margin, specialty films while reducing sales of
lower margin, commodity-type film products.
In the Atlantis Molded Plastics segment, the 1993 gross profit
percentage fell below that posted during 1992 due to product mix in
the injection molding unit, as well as lower sales prices and
higher shipping costs in the blow molding units.
The Company's selling, general and administrative expenses for
1993 equaled 11% of sales, compared to 10% of sales for 1992. The
$5.0 million increase in selling, general and administrative
expenses during 1993 was due to (i) higher commission costs within
the stretch film unit resulting from increased sales volume, (ii)
higher costs within the custom film unit related to its strategy of
focusing on specialty film sales, and (iii) higher labor costs
within the injection molding unit required to support higher
volume.
Operating income for 1993 of $19.5 million was 6% ahead of
operating income for 1992, due primarily to higher stretch film and
injection molding sales volume. The 1993 operating income
percentage of 9% was lower than 1992's primarily due to lower
custom film profitability.
During 1993, Atlantis settled its Charter-Crellin litigation,
with the Company receiving cash of $2.5 million, and recognizing a
pre-tax gain of approximately $2.2 million, net of associated
litigation expenses. During 1992, Atlantis settled certain
litigation involving Ameriwood Industries and various related
defendants, with the Company receiving $16.1 million in cash and
recognizing a pre-tax gain of approximately $4.6 million. As part
of the settlement, Atlantis conveyed to Ameriwood its shares of
Ameriwood common stock (see Note 15 of Notes to Consolidated
Financial Statements).
The first quarter 1993 refinancing of substantially all of
Atlantis' debt reduced interest expense during 1993 compared to
1992. Interest expense for 1993 was also reduced as a result of
the reduction in revolving credit borrowings since the completion
of the refinancing, as well as declining interest rates. Total
debt at December 31, 1993 of $102.4 million was $12.2 million lower
than total debt at December 31, 1992. Interest expense for 1993 of
$13.1 million was $2.0 million lower than 1992 interest expense of
$15.1 million.
The Company's effective tax rates during 1993 and 1992 were
affected by nondeductible goodwill amortization. Throughout 1992
and during the first quarter of 1993 (periods prior to the
refinancing), the effective tax rates were also affected by tax-
free interest income.
The extraordinary losses of $4.6 million in 1993 and $433,000
in 1992 related to debt extinguishments and represented redemption
premiums and the write-off of deferred loan fees and unamortized
discounts. (See Note 7 of Notes to the Company's Consolidated
Financial Statements.)
The Company's 1993 core earnings of approximately $3.8 million
were more than double the previous year. The 1993 increase was
primarily attributable to higher operating income and lower
interest expense.
Results of Discontinued Operations
Western Pioneer
Comparison of Years Ended December 31, 1994 and 1993
Western Pioneer's 1994 income totaled $1.2 million, compared
to 1993's $881,000. Losses and loss adjustment expenses during
1994 of $14.9 million equaled 68% of premiums earned, compared to
72% during 1993. The decrease is primarily due to improved
collections of salvage and subrogation, combined with an increase
in the 1994 estimate of salvage and subrogation receivable.
During October 1994, the Company announced that the previously
disclosed agreement for the sale of Western Pioneer to an insurance
company based in Seattle, Washington had terminated by its terms.
The Company expects to dispose of Western Pioneer during 1995, and
has engaged an outside broker to assist it in pursuing potential
sale opportunities. In this connection, a selling memorandum was
prepared and distributed to potential buyers. The Company has
received expressions of interest from several parties; however, no
arrangement or understanding exists for a sale at the present time.
Comparison of Years Ended December 31, 1993 and 1992
Western Pioneer's 1993 income totaled $881,000 compared to
1992's $569,000. The 1992 results included the effects of the
settlement of Western Pioneer's Proposition 103 rollback liability
with the California Department of Insurance.
This settlement resulted in an after-tax charge to Western
Pioneer's 1992 results of approximately $900,000, net of the
effects of a gain on the sale of a portion of Western Pioneer's
investment portfolio, which was sold in order to offset a portion
of the Proposition 103 liability. Excluding the net Proposition
103 charge, Western Pioneer's 1992 income from discontinued
operations would have approximated $1.5 million. The 1993 decline
in income for Western Pioneer was primarily attributable to higher
losses and loss adjustment expenses.
Losses and loss adjustment expenses during 1993 of $13.1
million equaled 72% of premiums earned, compared to 68% during
1992. The increase was primarily due to a larger number of claims
reported during 1993.
WinsLoew Investment
In October 1993, Atlantis sold a portion of its stock in
Loewenstein as part of an initial public offering. The sale
resulted in an after-tax gain of approximately $1.9 million,
including approximately $600,000 related to the Company's write-up
of its remaining investment in Loewenstein, based upon the
difference between the post-offering book value per share of
Loewenstein and the carrying value of Atlantis' remaining
investment.
The Loewenstein initial public offering reduced Atlantis'
investment in Loewenstein from 49% to approximately 20%. On
February 14, 1994, Loewenstein acquired New West Industries, Inc.
for stock, the issuance of which diluted Atlantis' ownership of
Loewenstein to approximately 18%. During December 1994,
Loewenstein and another furniture manufacturer were merged into
WinsLoew Furniture, Inc. ("WinsLoew"), and Atlantis' ownership
interest decreased to approximately 10% of WinsLoew's outstanding
shares. The Company's interest is subject to further reduction to
approximately 9% in the event that certain stock options are
exercised. The Company began accounting for this investment under
the cost method in 1994.
Liquidity and Capital Resources
Management believes that (i) funds generated from continuing
operations, (ii) funds generated from the 1995 financing of
equipment as described below, and (iii) funds available under its
revolving credit facility will be sufficient to satisfy the
Company's debt service obligations, working capital requirements
(principally inventory and accounts receivable), and commitments
for capital expenditures for the foreseeable future.
The Company's working capital at December 31, 1994 increased
to $33.0 million, compared to $22.9 million at December 31, 1993,
as described below. The Company's cash and equivalents totaled
$1.4 million at December 31, 1994, compared to $2.2 million at
December 31, 1993. At December 31, 1994, the Company had
approximately $129.2 million of outstanding indebtedness and $7.1
million of additional availability under the revolving credit
facility based on eligible collateral.
Cash Flows From Operating Activities
Net cash provided by operating activities was $2.0 million
during 1994, compared to $16.6 million during 1993. Accounts
receivable and inventories increased by $10.9 million and $5.6
million, respectively, during 1994, primarily due to the effects of
significant resin price increases during the year, and also due to
increased sales volume in the stretch film and injection molding
units.
Accounts payable and accrued expenses increased by $5.3
million during 1994 due to an increase in tooling construction
activity for the injection molding unit, with longer duration
payment terms for tooling vendors, and the effects of the resin
price increases during 1994.
Cash Flows From Investing Activities
Net cash used in investing activities was $28.3 million during
1994, compared to $6.4 million last year. Capital expenditures
totaled $16.4 million, compared to $10.2 million for 1993. This
increase is due to capital expansion programs, as well as
maintenance capital expenditures, principally in the film and
injection molding units. New stretch film production lines have
been installed in Atlantis Plastic Films, and productivity
improvements are being implemented for stretch and custom films.
In Atlantis Molded Plastics, the injection molding capital
expenditures include equipment additions, as well as plant
expansions, in order to provide continued support for this unit's
volume growth.
During May 1994, the Company utilized borrowings from its
revolving credit facility to acquire Advanced for approximately
$12.4 million (see Note 2 of the Company's Notes to Consolidated
Financial Statements).
Cash Flows From Financing Activities
Net cash provided by financing activities was $25.5 million
during 1994, compared to net cash used in financing activities of
$21.4 million for 1993. Net borrowings on the revolving credit
facility of $21.6 million were used to fund the acquisition of
Advanced, working capital needs, and the capital programs mentioned
above. In addition, borrowings of $5.8 million were used to
finance a portion of the film manufacturing equipment acquired
during the year.
During the first quarter of 1995, the Company also borrowed
approximately $4.8 million to finance equipment acquired during
1994, and established additional borrowing facilities to finance up
to $15 million of equipment purchases during 1995 and through May
1996.
Approximately $729,000 was used in the first quarter of 1994
as part of the common stock share repurchase program initiated
during 1993. The Company also used $852,000 for dividends on
common and preferred stock.
Accounting Pronouncements
As discussed in Note 5 of Notes to the Company's Consolidated
Financial Statements, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," effective January 1, 1994. This
Standard addresses the accounting and reporting for investments in
equity securities that have readily determinable fair value and for
all investments in debt securities. The adoption of this Standard
increased shareholders' equity by approximately $1,020,000, net of
tax, as of January 1, 1994 and decreased shareholders' equity by
approximately $284,000, net of tax, as of December 31, 1994.
Management's Responsibility for Financial Reporting
The Company's management is responsible for the preparation of
the financial statements in accordance with generally accepted
accounting principles and for the integrity of all the financial
data included in this Annual Report. In preparing the financial
statements, management makes informed judgments and estimates of
the expected effects of events and transactions that are currently
being reported.
Management maintains a system of internal accounting controls
that is designed to provide reasonable assurance that assets are
safeguarded and that transactions are executed and recorded in
accordance with management's policies for conducting its business.
This system includes policies which require adherence to ethical
business standards and compliance with all laws to which the
Company is subject. The internal controls process is continuously
monitored by direct management review.
The Board of Directors, through its Audit Committee, is
responsible for determining that management fulfills its
responsibility with respect to the Company's financial statements
and the system of internal accounting controls.
The Audit Committee, comprised solely of directors who are not
officers or employees of the Company, meets periodically with
representatives of management and the Company's independent
accountants to review and monitor the financial, accounting, and
auditing procedures of the Company in addition to reviewing the
Company's financial reports. The independent accountants have full
and free access to the Audit Committee.
/s/ Anthony F. Bova /s/ Paul Rudovsky
Anthony F. Bova Paul Rudovsky
President and Executive Vice President
Chief Executive Finance and Planning
Officer
Report of Independent Accountants
To the Board of Directors and Shareholders of Atlantis
Plastics, Inc.:
We have audited the accompanying consolidated balance sheets
of Atlantis Plastics, Inc. and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Atlantis Plastics, Inc. and subsidiaries as
of December 31, 1994 and 1993, and the consolidated results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand
L.L.P.
Coopers & Lybrand L.L.P.
Miami, Florida
February 6, 1995
Consolidated Income Statements
Years Ended December 31, 1994 1993
1992
Net sales $260,818,018 $220,163,453
$188,738,479
Cost of sales 209,245,165 176,760,274
151,567,533
Gross profit 51,572,853 43,403,179
37,170,946
Selling, general and
administrative expenses 29,199,663 23,867,112
18,825,106
Operating income 22,373,190 19,536,067
18,345,840
Interest income 135,074 480,749
853,994
Income related to litigation
settlements, net of costs - 2,212,486
4,604,306
Interest expense (13,212,867) (13,111,210)
(15,126,830)
Income from continuing
operations before income
taxes 9,295,397 9,118,092
8,677,310
Income tax provision (4,136,097) (3,906,880)
(3,897,480)
Minority interests in
operations - -
103,330
Income from continuing
operations 5,159,300 5,211,212
4,883,160
Income from discontinued
operations, less applicable
taxes 1,206,830 1,442,176
1,324,769
Gain on Loewenstein stock
transactions, less applicable
taxes - 1,884,237
-
Income before extraordinary
items 6,366,130 8,537,625
6,207,929
Extraordinary loss on early
extinguishment of debt, net - (4,642,883)
(433,005)
Net income $ 6,366,130 $ 3,894,742 $
5,774,924
Income Per Common Share
Primary:
Continuing operations $ .67 $ .66 $
.64
Discontinued operations .16 .19
.18
Gain on Loewenstein
stock transactions - .24
-
Income before
extraordinary items .83 1.09
.82
Extraordinary items, net - (.60)
(.06)
Net income $ .83 $ .49 $
.76
Fully diluted:
Continuing operations $ .67 $ .66 $
.62
Discontinued operations .16 .19
.17
Gain on Loewenstein
stock transactions - .24
-
Income before
extraordinary items .83 1.09
.79
Extraordinary items, net - (.60)
(.05)
Net income $ .83 $ .49 $
.74
Weighted average number of
shares used in computing
income per share:
Primary 7,509,979 7,699,740
7,355,136
Fully diluted 7,519,222 7,714,431
7,608,486
The accompanying Notes to Consolidated Financial Statements are an
integral part
of these financial statements.
Consolidated Balance Sheets
Years Ended December 31, 1994 1993
Assets
Cash and equivalents $ 1,432,567 $ 2,170,060
Accounts receivable, less allowances for
doubtful accounts of $761,000 in 1994
and $561,000 in 1993 36,584,996 24,655,150
Inventories 22,854,778 16,651,066
Other current assets 6,353,248 4,317,130
Current assets 67,225,589 47,793,406
Property and equipment, net 61,255,540 48,402,486
Investment in WinsLoew Furniture, Inc. stock5,096,722 -
Net assets of discontinued operations 9,378,506 13,287,226
Goodwill, net of amortization 63,466,653 55,785,146
Other assets 5,098,953 5,699,736
$ 211,521,963 $170,968,000
Liabilities and Shareholders' Equity
Accounts payable and accrued expenses$ 32,398,197 $ 24,730,805
Current portion of long-term debt 1,859,821 205,867
Current liabilities 34,258,018 24,936,672
Long-term debt, net 127,374,389 102,173,744
Deferred income taxes 7,841,678 6,384,857
Other liabilities 1,625,530 2,339,538
Total liabilities 171,099,615 135,834,811
Commitments and contingencies (Notes 15 and 16)
Shareholders' equity:
Series A convertible preferred stock, $1.00 par
value, 20,000 shares authorized, issued and
outstanding in 1994 and 1993 2,000,000 2,000,000
Class A common stock, $.10 par value,
20,000,000 shares authorized, 4,082,437 and
4,012,576 shares issued and outstanding in
1994 and 1993, respectively 408,244 401,258
Class B common stock, $.10 par value, 7,000,000
shares authorized,3,002,363 and 3,358,272
shares issued and outstanding in 1994 and
1993, respectively 300,236 335,827
Additional paid-in capital 6,781,206 7,998,439
Unrealized holding losses, net of tax (284,219) -
Retained earnings 31,216,881 25,702,321
40,422,348 36,437,845
Less:
Treasury stock at cost, 237,293 Class A and B
common shares in 1993 - (1,304,656)
Total shareholders' equity, net 40,422,348 35,133,189
$ 211,521,963 $170,968,000
The accompanying Notes to Consolidated Financial Statements are an
integral part
of these financial statements.
Consolidated Statements of Shareholders' Equity
Years Ended Series A Class A Class B
December 31, 1994, Convertible Common Common
1993 and 1992 Preferred Stock Stock Stock
BALANCE,
December 31, 1991 $ 2,000,000 $ 367,862 $ 369,223
Net income - - -
Minority interest transactions - - -
Dividends on preferred stock - - -
Conversions of Class B common
stock - 30,996 (30,996)
Re-issuance of 120,400 Class A
common treasury shares - - -
BALANCE,
December 31, 1992 2,000,000 398,858 338,227
Net income - - -
Minority interest transactions - - -
Dividends on preferred stock - - -
Conversions of Class B common
stock - 2,400 (2,400)
Exercise of stock options - - -
Acquisition of 185,878 Class A
and B common treasury shares - - -
BALANCE,
December 31, 1993 2,000,000 401,258 335,827
Adjustment to opening balance
for change in method of
accounting for investment
securities, net of tax - - -
Net income - - -
Dividends on preferred and
common stock - - -
Conversions of Class B common
stock - 31,661 (31,661)
Exercise of stock options,
including tax benefit - 4,143 -
Acquisition of 122,184 Class A
common treasury shares - - -
Cancellation of treasury shares - (28,818) (3,930)
Adjustment of minority interest
obligation - - -
Decrease in unrealized gain,
net of tax - - -
BALANCE,
December 31, 1994 $ 2,000,000 $ 408,244 $ 300,236
(continued)
Years Ended Additional Unrealized
December 31, 1994, Paid-In Holding
Retained
1993 and 1992 Capital Gains (Losses)
Earnings
BALANCE,
December 31, 1991 $ 5,579,591 $ - $16,322,655
Net income - - 5,774,924
Minority interest transactions1,018,000 - -
Dividends on preferred stock - - (145,000)
Conversions of Class B common
stock - - -
Re-issuance of 120,400 Class A
common treasury shares (481,600) - -
BALANCE,
December 31, 1992 6,115,991 - 21,952,579
Net income - - 3,894,742
Minority interest transactions1,899,578 - -
Dividends on preferred stock - - (145,000)
Conversions of Class B common
stock - - -
Exercise of stock options (17,130) - -
Acquisition of 185,878 Class A
and B common treasury shares - - -
BALANCE,
December 31, 1993 7,998,439 - 25,702,321
Adjustment to opening balance
for change in method of
accounting for investment
securities, net of tax - 1,020,437 -
Net income - - 6,366,130
Dividends on preferred and
common stock - - (851,570)
Conversions of Class B common
stock - - -
Exercise of stock options,
including tax benefit 124,644 - -
Acquisition of 122,184 Class A
common treasury shares - - -
Cancellation of treasury shares(1,823,477) - -
Adjustment of minority interest
obligation 481,600 - -
Decrease in unrealized gain,
net of tax - (1,304,656) -
BALANCE,
December 31, 1994 $ 6,781,206 $ (284,219) $ 31,216,881
(continued)
Years Ended Total
December 31, 1994, Treasury Shareholders'
1993 and 1992 Stock Equity
BALANCE,
December 31, 1991 $ (721,168) $ 23,918,163
Net income - 5,774,924
Minority interest transactions - 1,018,000
Dividends on preferred stock - (145,000)
Conversions of Class B common
stock - -
Re-issuance of 120,400 Class A
common treasury shares 481,600 -
BALANCE,
December 31, 1992 (239,568) 30,566,087
Net income - 3,894,742
Minority interest transactions - 1,899,578
Dividends on preferred stock - (145,000)
Conversions of Class B common
stock - -
Exercise of stock options 45,265 28,135
Acquisition of 185,878 Class A
and B common treasury shares(1,110,353) (1,110,353)
BALANCE,
December 31, 1993 (1,304,656) 35,133,189
Adjustment to opening balance
for change in method of
accounting for investment
securities, net of tax - 1,020,437
Net income - 6,366,130
Dividends on preferred and
common stock - (851,570)
Conversions of Class B common
stock - -
Exercise of stock options,
including tax benefit 177,160 305,947
Acquisition of 122,184 Class A
common treasury shares (728,729) (728,729)
Cancellation of treasury shares1,856,225 -
Adjustment of minority interest
obligation - 481,600
Decrease in unrealized gain,
net of tax - (1,304,656)
BALANCE,
December 31, 1994 $ - $ 40,422,348
The accompanying Notes to Consolidated Financial Statements are an
integral part
of these financial statements.
Consolidated Statements of Cash Flows
Years Ended December 31, 1994 1993
1992
Cash Flows From Operating Activities
Net income $6,366,130 $3,894,742 $5,774,924
Adjustments to reconcile net income
to net cash provided by operating
activities:
Minority interests - -
(103,330)
Depreciation 7,820,556 6,508,786 5,708,977
Amortization of goodwill 1,803,256 1,652,381 1,593,629
Loan fee and other amortization 520,844 530,015 1,316,805
Gain on disposal of fixed assets(67,622) -
-
Loss on early extinguishment of
debt - 6,819,005 695,795
Gain on Loewenstein stock
transactions - (2,939,312)
-
Equity in earnings of Loewenstein - (868,393)
(1,144,241)
Change in assets and liabilities,
net of acquisitions of assets
of business:
Accounts receivable (10,917,758) (3,904,699)
(1,694,321)
Inventories (5,649,923) 2,449,928
(3,537,933)
Other current assets (2,027,752) (1,852,101) 609,143
Accounts payable and accrued
expenses 5,274,993 3,274,053
(193,503)
Deferred income taxes 456,165 1,570,212 922,201
Other liabilities (232,408) (926,344)
(536,123)
Other, net 96,087 209,505 262,783
Effects of discontinued
operations (1,393,908) 135,057 558,373
Total adjustments (4,317,470) 12,658,093 4,458,255
Net cash provided by operating
activities 2,048,660 16,552,835 10,233,179
Cash Flows From Investing Activities
Proceeds from sale of Loewenstein
stock 122,335 4,683,836
-
Purchases of marketable securities - -
(4,030,000)
Proceeds from sale of marketable
securities - 1,978,000 2,030,000
Proceeds from sale of fixed assets448,332 -
-
Decrease in Ameriwood investment - - 10,132,500
Capital expenditures (16,448,002) (10,240,646)
(6,487,176)
Payments for acquisition of
minority interests - -
(579,400)
Payment for acquisition of assets
of business (12,411,835) (2,789,024)
-
Net cash (used in) provided by
investing activities (28,289,170) (6,367,834) 1,065,924
Cash Flows From Financing Activities
Borrowings under revolving credit
agreements 37,590,865 18,636,409 8,300,000
Payments under revolving credit
agreements (15,988,054) (34,036,409)
(6,775,000)
Payments on long-term debt, and
repurchase of minority interest(524,353)(100,466,893)
(20,152,612)
Proceeds from issuance of
long-term debt 5,776,141 100,000,000 5,331,523
Dividends paid on preferred and
common stock (851,570) (145,000)
(145,000)
Net distributions to minority
shareholders - -
(64,317)
Deferred financing costs - (4,256,730)
(956,925)
Purchases of treasury stock (728,729) (1,110,353)
-
Proceeds from exercise of stock
options 228,717 28,135
-
Net cash provided by (used in)
financing activities 25,503,017 (21,350,841)
(14,462,331)
Net decrease in cash and
equivalents(737,493)(11,165,840)(3,163,228)
Cash and equivalents at beginning of
year 2,170,060 13,335,900 16,499,128
Cash and equivalents at end of year$ 1,432,567$
2,170,060$13,335,900
Cash paid during the year for:
Interest (net of amounts
capitalized) $12,611,565 $11,094,645 $13,873,639
Income taxes $ 4,300,080 $ 616,425 $ 2,757,583
During 1994 and 1993, the Company
purchased certain assets and
assumed certain liabilities of
Advanced Plastics, Inc. and
United Plastic Products for
$12,411,835 and $2,789,024,
respectively. Assets acquired,
liabilities assumed and
consideration paid for these
acquisitions were as follows:
Fair value of assets acquired$13,095,629$ 2,887,757 $
-
Liabilities assumed (683,794) (98,733) $
-
$12,411,835 $ 2,789,024 $
-
The accompanying Notes to Consolidated Financial Statements are an
integral part
of these financial statements.
Notes to Consolidated Financial Statements
Note 1. Nature of Business and Summary of Significant
Accounting Policies
During May 1994, Atlantis Group, Inc. changed its name to
Atlantis Plastics, Inc. ("Atlantis" or the "Company"), moved its
state of incorporation from Delaware to Florida, and canceled its
shares of Class A and Class B treasury stock then outstanding.
Atlantis is a leading U.S. manufacturer of polyethylene
stretch and custom films used in a variety of industrial and
consumer applications and molded plastic products for the
appliance, automotive, recreational vehicle, and dairy industries.
Atlantis Plastic Films manufactures stretch films which are
multilayer plastic films that are used principally to stretch-wrap
pallets of materials for shipping or storage and custom film
products which include high-grade laminating films, embossed films,
and specialty film products targeted primarily to industrial and
agricultural markets.
Atlantis Molded Plastics employs three principal technologies,
serving a wide variety of specific market segments: (i) injection
molded thermoplastic parts that are sold primarily to original
equipment manufacturers and used in major household appliances,
agricultural, and automotive products, (ii) a variety of standard
and custom extruded parts (profile extrusion) that are incorporated
into a broad range of consumer and commercial products, including
plastic moldings, trims, channels, seals and gaskets that are used
in recreational vehicles, residential doors and windows, office
furniture, and retail store fixtures, and (iii) blow molded milk,
juice, water and industrial containers in a variety of shapes and
sizes.
Discontinued operations in 1994 consist of the operations of
Western Pioneer, the Company's California property-casualty
insurance subsidiary. Prior to 1994, discontinued operations
include both Western Pioneer and the Company's interest in
Loewenstein Furniture Group, Inc. ("Loewenstein"). See Note 17.
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 year
presentation.
The following is a summary of the Company's significant
accounting policies:
Cash and equivalents
The Company classifies as cash and equivalents all highly
liquid investments which present insignificant risk of changes in
value and have maturities at the date of purchase of three months
or less. The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits. The Company
has not experienced any losses in such accounts.
Inventories
Inventories are stated at the lower of cost (first-in, first-
out) or market.
Property and equipment
Property and equipment are carried at cost less accumulated
depreciation and amortization. The provisions for depreciation and
amortization have been computed, using both straight-line and
accelerated methods, over the estimated useful lives of the
respective assets. Such useful lives generally fall within the
following ranges: buildings and improvements - 15 to 30 years;
office furniture and equipment - 5 to 10 years; manufacturing
equipment - 5 to 30 years; and vehicles - 3 to 8 years.
When assets are retired or otherwise disposed, the costs and
accumulated depreciation are removed from the respective accounts,
and any related profit or loss is recognized. Maintenance and
repair costs are charged to expense as incurred. Renewals and
improvements are capitalized.
Goodwill
Goodwill is being amortized on a straight-line basis over
forty years from the date of the respective acquisitions.
Accumulated amortization amounted to approximately $10,805,000 and
$9,002,000 at December 31, 1994 and 1993, respectively. On a
continual basis, the Company assesses the carrying value of
goodwill in order to determine whether an impairment has occurred,
taking into account both historical and forecasted results of
operations.
Amortization
Loan acquisition costs, related legal fees, and debt discount
are amortized over the respective terms of the related debt
utilizing the straight line and effective interest methods, as
appropriate.
Federal income taxes
The Company and its subsidiaries file consolidated Federal
income tax returns. Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes" which requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the difference between the
financial statements and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences
are expected to reverse. Prior to 1993, deferred taxes were
computed in accordance with APB Opinion No. 11, "Accounting for
Income Taxes," based on timing differences in the recognition of
income and expense for financial reporting and for income tax
purposes.
Per share data
Primary earnings per share are computed by dividing net income
after deduction of annual preferred dividend requirements, by the
weighted average number of shares and dilutive share equivalents
outstanding during each year. The Company's convertible preferred
stock was determined not to be a common share equivalent in
computing primary earnings per share (see Note 9). In computing
fully diluted income per share, the assumed conversion of the
convertible preferred stock was not material.
Note 2. Acquisition
During May 1994, the Company purchased substantially all of
the assets (excluding cash) and assumed all of the liabilities
(excluding interest bearing indebtedness and other amounts due to
the seller) of Advanced Plastics, Inc. ("Advanced"), an injection
molder located in Warren, Ohio, for approximately $12.4 million.
The Company also purchased real estate leased by Advanced and owned
by the seller. The acquisition was funded with borrowings from the
Company's revolving credit facility. The acquisition has been
accounted for using the purchase method, and accordingly, the
results of operations of Advanced have been included in the
consolidated income statements since the date of the acquisition.
The assets and liabilities of Advanced have been recorded at their
estimated fair market values at the acquisition date. Total
goodwill associated with this acquisition amounted to $9,485,000.
The following table presents unaudited pro forma operating
results for the Company for the years ended December 31, 1994 and
1993, as if the acquisition of Advanced had occurred on January 1,
1993. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would
have occurred had the acquisition actually occurred on January 1,
1993, or of results that may occur in the future.
1994 1993
Net sales $264,900,000 $230,513,000
Income from continuing operations 5,317,000 5,717,000 (A)
Net income 6,524,000 4,400,000 (A, B, C)
Income per common share:
Continuing operations $ .69 $ .72 (A)
Net income $ .85 $ .55 (A, B, C)
Weighted average shares
outstanding 7,510,000 7,700,000
(A) 1993 includes income from litigation settlements, net of costs
of $1,438,000, and net of tax ($.19 per share).
(B) 1993 includes an extraordinary loss on early extinguishment of
debt of $4,644,000, net of tax ($.60 per share).
(C) 1993 includes a gain on the Loewenstein stock transaction of
$1,884,000, net of tax ($.24 per share).
Note 3. Inventories
Inventories at December 31, 1994 and 1993 consisted of the
following:
1994 1993
Raw materials $13,916,930 $ 8,363,024
Work in progress 459,685 222,763
Finished goods 8,478,163 8,065,279
Total $22,854,778 $16,651,066
Note 4. Property and Equipment
Property and equipment at December 31, 1994 and 1993 consisted
of the following:
1994 1993
Land $ 2,331,690 $ 2,250,275
Buildings and improvements 17,282,762 15,383,025
Office furniture and
equipment 4,852,594 4,147,973
Manufacturing equipment 79,434,752 61,927,669
Vehicles 871,868 1,024,234
Total 104,773,666 84,733,176
Accumulated depreciation and
amortization (43,518,126) (36,330,690)
Net $ 61,255,540 $ 48,402,486
Note 5. Investments in Debt and Equity Securities
Effective January 1, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities",
which addresses the accounting and reporting for investments in
equity securities that have readily determinable fair value and for
all investments in debt securities.
The Standard classifies investments into one of three
categories: held-to-maturity, available-for-sale, or trading. Debt
securities that an enterprise has the positive intent and ability
to hold to maturity are classified as held-to-maturity and reported
at amortized cost. Debt and equity securities that are bought and
held principally for the purpose of selling them in the near term
are classified as trading securities and reported at fair value
with unrealized gains and losses included in earnings. Debt and
equity securities, not classified as either held-to-maturity
securities or trading securities, are classified as available-for-
sale and reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of
shareholders' equity. If a decline in fair value is judged to be
other than temporary, the cost basis of the individual security is
written down to fair value, and the amount of the write-down is
included in earnings. The Company has classified all investments
as available-for-sale.
The adoption of this Standard impacted the accounting for
Western Pioneer's investment portfolio and the Company's interest
in WinsLoew Furniture, Inc. ("WinsLoew"), the successor by merger
to Loewenstein, decreasing shareholders' equity by approximately
$284,000, net of tax, as of December 31, 1994.
The following table summarizes the cost and fair value of the
Company's investments at December 31, 1994 based on quoted market
prices:
Cost Gains Losses
Fair Value
WinsLoew Stock $ 4,506,557 $ 590,165 $ - $ 5,096,722
Western Pioneer
Investment Portfolio:
State, municipal
and political
subdivision bonds20,537,093 - 894,237 19,642,856
Preferred stock 1,964,063 - 126,563 1,837,500
Total $27,007,713 $ 590,165 $ 1,020,800 $26,577,078
In light of the present federal securities law restrictions
associated with the disposal of WinsLoew stock, pursuant to SFAS
No. 115 only the portion of the stock that could be reasonably
disposed of within one year is considered to have a readily
determinable fair value. However, without taking into
consideration present federal securities law restrictions, the pre-
tax unrealized gain on WinsLoew stock equaled $1,435,000 at
December 31, 1994.
The amortized cost and fair value, respectively, of debt
securities at December 31, 1994, by contractual maturity, due after
one year through five years, are $1,494,000 and $1,493,000; due
after five years through ten years, are $19,043,000 and
$18,150,000, totalling $20,537,000 and $19,643,000.
Note 6. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the
following at December 31, 1994 and 1993:
1994 1993
Accounts payable $ 16,991,936 $ 11,208,877
Accrued interest 4,166,415 4,199,225
Accrued compensation, vacation
and profit sharing 4,188,067 2,800,782
Customer deposits and commissions 693,246 470,015
Income taxes payable 572,022 1,336,935
Accrued construction in
progress 1,898,695 923,978
Other 3,887,816 3,790,993
Total $ 32,398,197 $ 24,730,805
Note 7. Long-term Debt
Long-term debt consisted of the following at December 31, 1994
and 1993:
1994 1993
Senior notes $100,000,000 100,000,000
Revolving credit facility 21,602,811 -
Other senior and subordinated
indebtedness 7,631,399 2,379,611
Total long-term debt 129,234,210 102,379,611
Current portion (1,859,821) (205,867)
Long-term debt, net $127,374,389 $ 102,173,744
During the first quarter of 1993, the Company refinanced
substantially all of its existing indebtedness through a $100
million, 11% Senior Note offering due February 15, 2003 (the
"Notes"), and borrowings under a $30 million revolving credit
facility which matures in 1998. During 1993, an extraordinary loss
of $4.6 million was recorded related to debt extinguishments,
representing redemption premiums and the write-off of deferred loan
fees and unamortized discounts.
The Notes are senior unsecured obligations of the Company,
with the Company's plastics subsidiaries guaranteeing the payment
of principal and interest. The Company's discontinued operation
and investment in WinsLoew are generally not subject to the
indenture, and the discontinued operation has not guaranteed any
obligations under the Notes. The Notes may not be redeemed prior
to February 15, 1998. On and after that date and until February
15, 2001, the Company may redeem all or any portion of the Notes at
redemption prices ranging from 104.125% to 101.375% of the
principal amount. After February 15, 2001, the Company may redeem
all of any portion of the Notes at 100% of the principal amount.
The Company must redeem $25 million of the Notes on February 15,
2001 and 2002, which will retire 50% of the Notes prior to
maturity.
Covenants relating to the Notes prohibit the Company from
making certain payments or taking certain actions as described in
the related indenture. Among other restrictions, the Company and
its subsidiaries may not make certain restricted payments,
including dividend payments, stock redemptions or repurchases, or
investments in affiliates during the existence and continuation of
an event of default under the Notes, or if immediately after giving
effect to such restricted payment, certain net equity or other
tests are violated. The Company and its subsidiaries are
prohibited from incurring new debt or otherwise becoming directly
or indirectly obligated with respect to any debt unless certain
interest coverage ratio tests are met.
Borrowings on the revolving credit facility are subject to a
borrowing base formula which is based on eligible collateral
(accounts receivable, inventories and fixed assets of the
subsidiaries), and interest is computed using either LIBOR based
rates plus 3%, or prime plus 1.5%, or a combination of both. At
December 31, 1994, the unused availability on the revolving credit
facility was $7,100,000. At December 31, 1994 the 30-day LIBOR
rate and the prime rate were 6.1% and 8.5%, respectively.
Under the terms of the revolving credit facility, the Company
and its subsidiaries are required to, among other things, maintain
certain financial ratios and minimum specified levels of net worth;
refrain from paying dividends unless certain requirements are met;
refrain from incurring additional indebtedness, or guaranteeing the
obligations of others; and limit capital expenditures.
The other senior and subordinated indebtedness outstanding at
December 31, 1994 consists of industrial revenue bonds which were
not refinanced in 1993, along with capitalized lease obligations
entered into during 1993 and $5.8 million of equipment financings
entered into during 1994. At December 31, 1994 and 1993, the
weighted average interest rates on these borrowings were 7.8% and
6.5%, respectively.
Scheduled maturities of indebtedness in each of the next five
years are as follows:
1995 $ 1,859,821
1996 913,986
1997 924,888
1998 22,496,433
1999 830,526
Thereafter 102,208,556
Total $129,234,210
Based on the quoted market price of the Notes, and the
borrowing rates available to the Company for loans with similar
terms and average maturities, the fair value of the Company's
indebtedness at December 31, 1994 and 1993 was $123,334,000 and
$107,380,000, respectively.
Note 8. Minority Interests
In December 1992, the Company acquired the outstanding
minority interest in Cyanede Plastics, Inc. ("Cyanede") for, among
other things, 120,400 shares of treasury stock with a cost and
market value of $481,600. In connection with this transaction,
the Company granted the former Cyanede minority shareholders the
right to require the Company to repurchase such stock in 1995 at a
specified formula price based on Cyanede's 1994 earnings, and
established a liability of $481,600 to be utilized in the event
that the repurchase provision was exercised. Based on the
calculation of the formula price, the Company believes that the
repurchase provision will not be exercised and accordingly, has
reclassified the carrying value of the repurchase obligation to
additional paid-in capital as of December 31, 1994.
In November 1992, Atlantis acquired the Linear Films, Inc.
("Linear") minority interest and $7 million of the $20 million
outstanding principal amount of Linear's subordinated debt for a
cash payment of $7.3 million. In conjunction with the Company's
1993 refinancing, Atlantis acquired the remaining $13 million
outstanding principal amount for a cash payment of $13.2 million.
The Company allocated the cash payments between the debt and the
minority interest based on the estimated fair values of each
instrument. In this connection, extraordinary losses of $640,000
and $394,000, net of income taxes, were recognized in 1993 and
1992, respectively, related to the Linear debt extinguishment; and
credits to additional paid-in capital of $1,900,000 and $1,018,000
were recognized in 1993 and 1992, respectively, related to the
redemption of the Linear minority interest.
Note 9. Capital Stock
Generally, the Class A Common Stock has one vote per share and
the Class B Common Stock has ten votes per share. Holders of the
Class B Common Stock are entitled to elect 75% of the Board of
Directors; holders of Class A Common Stock are entitled to elect
the remaining directors.
Each share of Class B Common Stock is convertible, at the
option of the holder thereof, into one share of Class A Common
Stock. Class A Common Stock is not convertible into shares of any
other equity security.
During February 1994, the Company's Board of Directors
approved a 2.5 cents per share quarterly dividend program beginning
in April 1994.
As part of a share repurchase program initiated by the Company
during 1993, 122,184 and 185,878 shares of Class A and B Common
Stock were repurchased during 1994 and 1993 at a total cost of
approximately $729,000 and $1,110,000, respectively.
Each share of Series A Convertible Preferred Stock has a
liquidation preference of $100 and entitles the holder to an annual
cumulative dividend, payable in equal semiannual installments, of
$7.25. The shares of Series A Convertible Preferred Stock may be
redeemed in whole or part through October 15, 1995 at the option of
the Company for a price of $299.25 per share in 1995, plus any
accrued but unpaid dividends. The holders of the Series A
Convertible Preferred Stock have the right to elect one director of
the Company in the event three or more dividend payments on the
Series A Convertible Preferred Stock are in arrears.
The Series A Convertible Preferred Stock is convertible at the
option of the holder thereof into an aggregate of 205,074 shares of
Class A Common Stock. The Company has the right to compel
conversion of the Series A Convertible Preferred Stock, if the
Class A Common Stock has a market value in excess of specified
percentages (100.725% in 1995, decreasing to 100% in 1996) of the
Series A Convertible Preferred Stock's conversion price. The
current conversion price is $9.75.
Note 10. Income Taxes
The income tax provision for the years ended December 31,
1994, 1993 and 1992 consisted of the following:
1994 1993 1992
Continuing operations $4,136,103 $3,906,880 $3,897,480
Discontinued operations 330,880 1,319,815 193,595
Extraordinary loss - (2,176,122) (262,790)
Total $4,466,983 $3,050,573 $3,828,285
Current Federal income
tax expense $3,588,164 $2,056,125 $2,539,194
Deferred Federal income
tax expense 387,850 511,371 780,147
State income tax expense 490,969 483,077 508,944
Total income tax provision $4,466,983 $3,050,573 $3,828,285
The following table provides a reconciliation between the
Federal income tax rate and the Company's effective income tax
rate:
1994 1993 1992
Income tax at Federal
income tax rate 34% 34% 34%
Nontaxable interest income (3) (3) (4)
State income taxes 3 4 4
Amortization of goodwill 5 8 6
Other, net 2 1 -
Effective tax rate 41% 44% 40%
At December 31, 1994 and 1993, deferred tax assets and
liabilities consisted of the following:
1994 1993
Total deferred income taxes
(credits), net:
Continuing operations $ 6,730,540 $ 5,644,322
Discontinued operations (427,357) (267,417)
$ 6,303,183 $ 5,376,905
Deferred tax liabilities continuing
operations:
Excess of tax over book basis of
property and equipment $ 6,763,257 $ 6,458,889
Excess of book over tax basis of
investment in WinsLoew/Loewenstein 1,593,995 1,491,029
Other, net 92,707 19,599
Deferred tax liabilities 8,449,959 7,969,517
Deferred tax assets - continuing operations:
Reserves and accrued expenses not yet
deductible for tax purposes (1,662,485) (1,519,300)
Alternative minimum tax credit
carryforwards - (727,148)
Capitalized inventory costs (56,934) (78,747)
Deferred tax assets (1,719,419) (2,325,195)
Deferred income taxes, net - continuing
operations: $6,730,540 $5,644,322
Included in:
Other current assets $(1,111,138) $(740,535)
Deferred income taxes 7,841,678 6,384,857
$6,730,540 $5,644,322
In 1992, deferred income taxes (credits) resulted from timing
differences in the recognition of income and expenses for financial
reporting and income tax purposes. The tax effect of the principal
timing differences for the year ended December 31, 1992 was as
follows:
Depreciation $(80,751)
Consulting and legal expense 611,742
Restructuring charges 205,000
Alternative minimum tax 597,514
Proposition 103 settlement (639,200)
Equity in undistributed earnings 389,041
Loss on debt extinguishment (213,174)
Other, net (90,025)
$ 780,147
Note 11. Stock Option Plans
The Company's Stock Option Plans ("Option Plans") are designed
to serve as an incentive for retaining qualified and competent
employees, directors and agents. The Board of Directors of the
Company administers and interprets the Option Plans and is
authorized to grant options thereunder to approximately 30 persons
who provide management related services to the Company, including
officers and key employees of the Company and its subsidiaries,
non-employee directors and Trivest, Inc. (See Note 14).
Options may be granted under the Option Plans on such terms
and at such prices as determined by the Board (or appropriate
committee thereof); provided, however, that the exercise price of
certain options will not be less than 90% of the fair market value
of the Class A Common Stock on the date of grant. Each option will
be exercisable after the period or periods specified in the option
agreement, but no option shall be exercisable after the expiration
of ten years from the date of grant. Options granted under the
Option Plans are not transferable other than by will or by the laws
of descent and distribution.
The Option Plans also authorize the Company to make loans to
optionees to exercise their options. Information with respect to
the Option Plans is as follows:
1994 1993 1992
Options outstanding at 1/11,304,579 1,088,358 849,658
Granted 125,500 273,167 238,700
Exercised (64,189) (3,946) -
Cancelled (3,571) (53,000) -
Options outstanding at 12/311,362,319 1,304,579 1,088,358
Option prices per share $1.00-$6.38 $1.00-$6.25 $1.00-$4.40
Exercise prices of shares
exercised $1.38-$5.63 $2.88-$3.38 -
Options exercisable at 12/31879,373 761,152 609,838
Options available for grant
at 12/31 624,546 746,475 966,642
The terms of the Company's Disinterested Directors Stock
Option Plan ("DSOP") are substantially identical to the terms of
the Option Plans, except that the only class of persons eligible to
receive options under the DSOP are directors of the Company who are
not employees of the Company and are not directors or officers of
Trivest, Inc. Information with respect to the DSOP is as follows:
1994 1993 1992
Options outstanding at 1/1 105,936 110,250 110,250
Exercised (9,240) (4,314) -
Options outstanding at 12/31 96,696 105,936 110,250
Option prices per share $3.38-$4.40 $3.38-$4.40 $3.38-$4.40
Exercise prices of shares
exercised $3.63 $3.38-$3.63 -
Options exercisable at 12/31 96,696 102,786 80,324
Options available for grant
at 12/31 - - -
Note 12. Business Segments
The Company considers its continuing operations to comprise
two segments: Atlantis Plastic Films and Atlantis Molded Plastics.
During 1994, 1993 and 1992, an Atlantis Molded Plastics customer
accounted for approximately 13%, 15%, and 12%, respectively, of the
Company's net sales. Summary data for 1994, 1993 and 1992 is as
follows:
Atlantis Atlantis
Plastic Molded Corporate
Films Plastics
1994
Net sales $173,947,000 $86,871,000 $ -
Operating income 13,455,000 8,918,000 -
Identifiable assets 124,557,000 67,172,000 19,793,000
Capital expenditures 9,702,000 6,687,000 59,000
Depreciation and amortization6,663,000 2,918,000 564,000
1993
Net sales $150,065,000 $70,098,000 $ -
Operating income 10,854,000 8,682,000 -
Identifiable assets 106,257,000 43,649,000 21,062,000
Capital expenditures 6,475,000 3,729,000 37,000
Depreciation and amortization5,899,000 2,336,000 456,000
1992
Net sales $134,429,000 $54,309,000 $ -
Operating income 10,893,000 7,453,000 -
Identifiable assets 104,538,000 37,895,000 30,214,000
Capital expenditures 2,042,000 4,436,000 9,000
Depreciation and amortization6,342,000 2,082,000 195,000
(continued)
Consolidated
1994
Net sales $260,818,000
Operating income 22,373,000
Identifiable assets 211,522,000
Capital expenditures 16,448,000
Depreciation and amortization10,145,000
1993
Net sales 220,163,000
Operating income 19,536,000
Identifiable assets 170,968,000
Capital expenditures 10,241,000
Depreciation and amortization8,691,000
1992
Net sales $188,738,000
Operating income 18,346,000
Identifiable assets 172,647,000
Capital expenditures 6,487,000
Depreciation and amortization8,619,000
Corporate assets consist primarily of cash and equivalents, the
investment in
WinsLoew stock and net assets of discontinued operations.
Note 13. Profit Sharing and Retirement Plans
Atlantis and certain of its subsidiaries have profit sharing
and defined contribution retirement plans. Generally, such plans
cover all employees who have attained the age of 21 and have at
least one year of service. Contributions to the plans are
determined by the individual companies' Boards of Directors on an
annual basis. Related expenses applicable to continuing operations
were approximately $1,067,000, $855,000 and $962,000 for the years
ended December 31, 1994, 1993 and 1992, respectively.
Note 14. Related Parties
A management agreement exists between the Company and Trivest,
Inc. ("Trivest"). Trivest has certain common shareholders,
officers and directors with the Company. Fees charged to expense
under this agreement, including the portion related to discontinued
operations, amounted to $399,000, $326,000 and $320,000 for the
years ended December 31, 1994, 1993 and 1992, respectively. This
agreement expires in December 1997. In addition to the above fees,
Atlantis paid Trivest an acquisition fee of $405,000 relating to
the May 1994 acquisition of Advanced.
Atlantis shares office space with several related entities.
Rent expense, as well as certain non-direct general and
administrative expenses, are allocated among Atlantis and these
entities.
Note 15. Litigation
The Company is, from time to time, involved in routine
litigation. None of such litigation, in which the Company is
presently involved, is believed to be material to its financial
position or results of operations. Set forth below is a description
of certain non-routine litigation which Atlantis or its
subsidiaries were parties.
Charter-Crellin, Inc.
In December 1989, Atlantis filed a complaint against Charter-
Crellin, Inc., and certain related parties alleging fraud and
misrepresentation relating to a July 8, 1988 stock purchase
agreement between Atlantis and Charter-Crellin, Inc. This lawsuit
was settled during January 1993, with Atlantis receiving $2.5
million in cash. All litigation relating to this claim has been
dismissed.
Ameriwood
During 1992, Atlantis settled certain litigation involving
Ameriwood Industries and various related defendants. The Company
received $16.1 million in cash and recognized a pre-tax gain of
approximately $4.6 million. As part of the settlement, Atlantis
conveyed to Ameriwood its shares of Ameriwood common stock.
Note 16. Commitments
Atlantis and its subsidiaries lease various office space,
buildings, transportation and production equipment with terms in
excess of one year. Total expense under these agreements for the
years ended December 31, 1994, 1993 and 1992 was approximately
$2,150,000, $2,565,000 and $2,473,000, respectively.
The total minimum rental commitments under operating leases at
December 31, 1994 consisted of the following:
Year Amount
1995 $1,621,000
1996 1,282,000
1997 882,000
1998 553,000
1999 432,000
Thereafter 1,283,000
Total $6,053,000
Note 17. Discontinued Operations
Discontinued operations in 1994 consist of the operations of
Western Pioneer, the Company's California property-casualty
insurance subsidiary. Prior to 1994, discontinued operations
included both Western Pioneer and the Company's interest in
Loewenstein.
At December 31, 1993, the net assets of Western Pioneer and
the investment in Loewenstein were presented as net assets of
discontinued operations in the accompanying balance sheet, as
follows:
Net assets of Western Pioneer $8,658,334
Investment in Loewenstein 4,628,892
Net assets of discontinued operations $13,287,226
For the years ended December 31, 1994, 1993 and 1992, income
associated with discontinued operations was as follows:
1994 1993
1992
Western Pioneer $1,206,630 $880,580 $568,837
Loewenstein - 561,596 755,932
Income from discontinued
operations, less applicable
taxes $1,206,830 $1,442,176 $1,324,769
Gain on sale of
Loewenstein stock $ - $1,285,061 $ -
Gain related to Loewenstein
public offering - 599,176 -
Gain on Loewenstein stock
transactions, less
applicable taxes $ - $1,884,237 $ -
The Company's interest in Loewenstein's net income represented
49% of the net income from January 1, 1992 to October 6, 1993; and
20% from October 7, 1993 to December 31, 1993.
WinsLoew Investment
In October 1993, Atlantis sold a portion of its stock in
Loewenstein as part of an initial public offering. The sale
resulted in an after-tax gain of approximately $1.9 million,
including approximately $600,000 related to the Company's write-up
of its remaining investment in Loewenstein based upon the
difference between the post-offering book value per share of
Loewenstein and the carrying value of Atlantis' remaining
investment.
The Loewenstein initial public offering reduced Atlantis'
investment in Loewenstein from 49% to approximately 20%. On
February 14, 1994, Loewenstein acquired New West Industries, Inc.
for stock, the issuance of which further reduced Atlantis'
ownership of Loewenstein to approximately 18%. During December
1994, Loewenstein and another furniture manufacturer were merged
into WinsLoew Furniture, Inc., and Atlantis' ownership interest
decreased to approximately 10% of WinsLoew's outstanding shares.
The Company's interest is subject to further reduction to
approximately 9% in the event that certain stock options are
exercised. In light of the foregoing transactions, the Company
began accounting for this investment under the cost method in 1994.
The following table provides 1993 and 1992 condensed income
statement data for Loewenstein:
1993 1992
Net sales $45,273,000 $40,124,000
Operating income 4,867,000 5,250,000
Net income 1,772,000 2,044,000
Western Pioneer
During October 1994, the Company announced that the previously
disclosed agreement for the sale of Western Pioneer to an insurance
company based in Seattle, Washington had terminated by its terms.
The Company expects to dispose of Western Pioneer during 1995, and
has engaged an outside broker to assist it in pursuing potential
sale opportunities. In this connection, a selling memorandum was
prepared and distributed to potential buyers. The Company has
received expressions of interest from several parties; however, no
arrangement or understanding exists for a sale at the present time.
The Company believes that the ultimate sale proceeds will equal or
exceed Western Pioneer's net assets.
The following tables summarize operating results and specific
balance sheet items of Western Pioneer, which have been segregated
in the accompanying financial statements:
Years Ended December 31, 1994 1993 1992
Revenues
Insurance premiums
earned $22,061,000 $18,062,000 $17,784,000
Interest and dividends 1,218,000 1,187,000 1,450,000
Other 27,000 68,000 31,000
23,306,000 19,317,000 19,265,000
Expenses
Losses and loss adjustment
expenses 14,946,000 13,065,000 12,149,000
Selling, general and
administrative 6,660,000 5,540,000 5,415,000
Proposition 103 settlement - - 1,442,000
21,606,000 18,605,000 19,006,000
Operating income 1,700,000 712,000 259,000
Gain on sales of marketable
securities - 183,000 555,000
Loss on demolition of
building (151,000) - -
Interest expense (11,000) (56,000) (440,000)
Income tax (provision) benefit(331,000) 42,000 195,000
Income from discontinued
operations - Western Pioneer$1,207,000 $881,000 $569,000
As of December 31, 1994 1993
Assets
Cash and equivalents $1,363,000 $921,000
Receivables 3,387,000 1,781,000
Marketable securities 21,480,000 21,116,000
Deferred policy acquisition costs 1,802,000 1,333,000
Property and equipment, net 792,000 824,000
Deferred income taxes 427,000 267,000
Other assets 521,000 766,000
Assets of discontinued operations 29,772,000 27,008,000
Liabilities
Unearned insurance premiums 7,542,000 5,419,000
Reserve for insurance losses
and loss adjustment expenses 11,248,000 12,478,000
Other liabilities 1,603,000 453,000
Liabilities of discontinued operations20,393,000 18,350,000
Net assets - Western Pioneer $9,379,000 $8,658,000
Marketable securities
The cost of marketable securities that individually exceeded
ten percent of Western Pioneer's shareholder's equity as of
December 31, 1994 and 1993 were as follows:
1994 1993
Federal Home Loan Mortgage Corp.
Preferred Stock $1,964,063 $1,964,063
A summary of net investment income for the years ended December 31,
1994, 1993 and 1992 is as follows:
1994 1993 1992
Interest on bonds $1,006,000 $863,000 $1,108,000
Dividends on equity
securities 148,000 148,000 74,000
Interest on short-term
cash investments 64,000 176,000 268,000
Total investment income1,218,000 1,187,000 1,450,000
Investment expense (155,000) (143,000) (45,000)
Net investment income $1,063,000 $1,044,000 $1,405,000
The following table summarizes the gains and losses, net of
applicable taxes, on investments in marketable securities for the
years ended December 31, 1994, 1993, and 1992:
1994 1993 1992
Realized gains $ - $121,000 $366,000
Unrealized gains
(losses) (1,257,000) 598,000 (459,000)
Realized and unrealized
gains (losses) ($1,257,000) $719,000 $(93,000)
Deferred policy acquisition costs
Commissions, taxes and other policy acquisition costs are
deferred and amortized over the policy periods in which the related
premiums are earned. Amortization of deferred policy acquisition
costs was $5,601,000, $4,862,000 and $4,339,000 during the years
ended December 31, 1994, 1993 and 1992, respectively.
Insurance premiums earned
Insurance premiums written are earned ratably over the related
policy term. Premiums written in 1994, 1993 and 1992 amounted to
$24,184,000, $19,179,000 and $17,559,000, respectively, which were
net of premiums ceded to the reinsurer amounting to $1,222,000,
$823,000 and $698,000 in 1994, 1993, and 1992, respectively.
Reinsurance
Under a reinsurance agreement, the maximum retention on any
loss under insurance policies issued by Western Pioneer for all
lines of business is $25,000 on losses occurring after September 1,
1993; $25,000 for all lines of business except comprehensive and
collision on losses occurring between July 1, 1991 and August 31,
1993; and $20,000 on losses occurring prior to June 30, 1991, plus
the pro rata share of loss adjustment expenses, not to exceed
$5,000. Risks in excess of these limits are reinsured to
applicable policy limits. Premiums ceded to the reinsurer, net of
commissions received, aggregated $833,000, $518,000 and $454,000
during the years ended December 31, 1994, 1993 and 1992,
respectively.
Reinsurance recoverable on paid losses aggregated
approximately $185,000 and $342,000 at December 31, 1994 and 1993,
respectively. The estimated amounts recoverable from the reinsurer
that related to unpaid losses, aggregating approximately $274,000
and $265,000 at December 31, 1994 and 1993, respectively, have been
deducted from the liability for insurance losses and loss
adjustment expenses. A contingent liability exists with respect to
reinsurance that would become an actual liability of Western
Pioneer in the event that the reinsurer should be unable to meet
the obligations it has assumed under the reinsurance agreement.
Dividends
Insurance regulations generally limit Western Pioneer's
dividends to net investment income.
Quarterly Financial Highlights
(In thousands, except per share amounts)1st Quarter 2nd Quarter
Quarterly Financial Data (Unaudited)1994 1993(B) 1994 1993
Net sales $54,128 $52,401 $63,543 $57,394
Gross profit 10,733 9,782 12,588 11,475
Income from continuing operations 797 1,919 1,356 1,063
Core earnings (A) 797 295 1,356 1,210
Net income (loss) 785 (2,649) 1,490 1,608
Income from continuing operations
per common share (primary) $.10 $.26 $.18 $.13
Core earnings per share (primary) (A)$.10 $.04 $.18 $.11
(continued)
(In thousands, except per share amounts)3rd Quarter 4th Quarter
Quarterly Financial Data (Unaudited)1994 1993 1994 1993(C)
Net sales $69,563 $56,238 $73,584 $54,130
Gross profit 12,940 11,056 15,312 11,090
Income from continuing operations 1,267 1,175 1,739 1,054
Core earnings (A) 1,267 1,214 1,739 1,054
Net income (loss) 1,626 1,730 2,466 3,206
Income from continuing operations
per common share (primary) $.16 $.15 $.23 $.13
Core earnings per share (primary) (A)$.16 $.11 $.23 $.13
(A) Core earnings represent income from continuing operations
excluding litigation settlements and costs, net of tax.
(B) During the first quarter of 1993, a pre-tax gain of
approximately $2.2 million was recognized resulting from the
settlement of the Company's Charter-Crellin litigation, and a
$4.6 million extraordinary loss was recorded related to the
Company's refinancing of indebtedness.
(C) During the fourth quarter of 1993, a $1.9 million after-tax
gain was recognized within discontinued operations from the
Company's Loewenstein stock transactions.
Market for Common Stock
The Company's Class A Common Stock trades on the American
Stock Exchange under the symbol "AGH". The Company had 244
shareholders of record as of January 31, 1995. The following table
shows high and low sales prices for 1994 and 1993.
1st Quarter 2nd Quarter
Quarterly Common Stock Data 1994 1993 1994 1993
High sales prices 6 5/8 6 3/4 7 1/8 5 3/4
Low sales prices 5 1/2 5 5 1/4 4 3/4
(continued)
3rd Quarter 4th Quarter
Quarterly Common Stock Data 1994 1993 1994 1993
High sales prices 6 5/8 6 3/4 6 1/8 6 1/2
Low sales prices 5 7/8 4 7/8 5 1/2 5 1/4
During February 1994, the Company's Board of Directors
approved a 2.5 cents per share quarterly dividend program beginning
in April 1994.
EXHIBIT 22.1
ATLANTIS PLASTIC FILMS, INC., a Delaware corporation
ATLANTIS MOLDED PLASTICS, INC., a Florida corporation
CYANEDE PLASTICS, INC., a Kentucky corporation
PIERCE PLASTICS, INC., a Delaware corporation
PLASTIC CONTAINERS, INC., an Alabama corporation
RIGAL PLASTICS, INC., a Florida corporation
WESTERN PIONEER INSURANCE COMPANY, a California corporation
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Atlantis Plastics, Inc. on Form S-8 (Registration
Nos. 33-25983 and 33-41012) of our report dated February 6, 1995 on
our audit of the consolidated financial statements and financial
statement schedules of Atlantis Plastics, Inc. as of December 31,
1994 and 1993 and for the years ended December 31, 1994, 1993 and
1992 which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Miami, Florida
March 29, 1995
EX-27
2
5
1
US$
12-MOS
DEC-31-1994
JAN-01-1994
DEC-31-1994
1
1,432,567
0
37,345,804
760,808
22,854,778
67,225,589
104,773,666
43,518,126
211,521,963
34,258,018
127,374,389
708,480
0
2,000,000
37,713,868
211,521,963
260,818,018
260,818,018
209,245,165
209,245,165
28,701,482
498,181
13,212,867
9,295,397
4,136,097
5,159,300
1,206,830
0
0
6,366,130
0.83
0.83