-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HC0RwQid+tIdg9xEZYNOggxE7XtNGW5Y+6a3OhhE5/pllNeUKIxdUNmrXodjNXAC IhP7fmBTlpiuFcTq8eUkQA== 0000950170-97-000336.txt : 19970329 0000950170-97-000336.hdr.sgml : 19970329 ACCESSION NUMBER: 0000950170-97-000336 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIS PLASTICS INC CENTRAL INDEX KEY: 0000811828 STANDARD INDUSTRIAL CLASSIFICATION: UNSUPPORTED PLASTICS FILM & SHEET [3081] IRS NUMBER: 650493540 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09487 FILM NUMBER: 97567825 BUSINESS ADDRESS: STREET 1: 1870 THE EXCHANGE STREET 2: STE 200 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7709881630 MAIL ADDRESS: STREET 1: 1870 THE EXCHANGE SUITE 200 STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30339 FORMER COMPANY: FORMER CONFORMED NAME: ATLANTIS GROUP INC /DE/ DATE OF NAME CHANGE: 19920703 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 {No Fee Required} FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 {No Fee Required} For the transition period from_________________________ to____________________ Commission file number 1-9487 ATLANTIS PLASTICS, INC. (Exact name of registrant as specified in its charter) FLORIDA 06-1088270 --------------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1870 THE EXCHANGE, SUITE 200, ATLANTA, GEORGIA 30339 ------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (800) 497-7659 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 (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of shares of Class A Common Stock held by non-affiliates of the registrant as of January 31, 1997, was approximately $34,391,213 based on a $9.88 average of the high and low sales prices for the Class A Common Stock on the American Stock Exchange on such date. For purposes of this computation, all executive officers, directors and 5% beneficial owners of the common stock of the registrant have been deemed to be affiliates. Such determination should not be deemed to be an admission that such directors, officers or 5% beneficial owners are, in fact, affiliates of the registrant. The number of shares of Class A Common Stock, $.10 par value, and Class B Common Stock, $.10 par value, of the registrant outstanding as of January 31, 1997 were 4,196,721 and 2,861,979, respectively. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the following document have been incorporated by reference into the parts indicated: The registrant's definitive Proxy Statement to be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this report - Part III. INDEX TO ITEMS -------------- PAGE ---- PART I Item 1. Business.............................................. 3 Item 2. Properties............................................ 9 Item 3. Legal Proceedings..................................... 9 Item 4. Submission of Matters to a Vote of Security Holders...................................... 9 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........................... 10 Item 6. Selected Financial Data............................... 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................ 12 Item 8. Financial Statements and Supplementary Data........... 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................. 35 PART III Item 10. Directors and Executive Officers of the Registrant........................................ 35 Item 11. Executive Compensation................................ 35 Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 35 Item 13. Certain Relationships and Related Transactions.......................................... 35 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................... 35 Exhibits................................................................ 38 Signatures.............................................................. 44 -2- PART I ITEM 1. BUSINESS THE COMPANY Atlantis Plastics, Inc., a Florida corporation ("Atlantis" or the "Company"), is a leading U.S. plastics manufacturer consisting of two operating segments: (i) Atlantis Plastic Films, which produces polyethylene stretch and custom films used in a variety of industrial and consumer applications, and (ii) Atlantis Molded Plastics, which produces molded plastic products for a variety of applications, including products and components for the appliance, automotive, and recreational vehicle industries. Atlantis Plastic Films accounts for approximately two-thirds of the Company's net sales and produces: (i) stretch films (multilayer plastic films that are used principally to wrap pallets of materials for shipping or storage), (ii) custom film products (high-grade laminating films, embossed films, and specialty film products targeted primarily to industrial and packaging markets), and (iii) institutional products such as aprons, gloves and tablecloths which are converted from polyethylene films. Atlantis Molded Plastics accounts for approximately one-third of the Company's net sales, and consists of two principal technologies, serving a wide variety of specific market segments, described as follows: (i) injection molded thermoplastic parts that are sold primarily to original equipment manufacturers and used in major household goods and appliances, power tools, agricultural and automotive products, and (ii) a variety of extruded plastic parts for both trim and functional applications (profile extrusion) that are incorporated into a broad range of consumer and commercial products such as recreational vehicles, residential windows and doors, office furniture and retail store fixtures. Plastic Containers, Inc. ("PCI"), the Company's manufacturer of blow molded milk, juice, water and industrial containers, was sold in November 1996. The Company's twelve plastics manufacturing facilities produce a wide spectrum of products for industrial, commercial and consumer markets. Management believes that the Company's diversification and broad range of capabilities reduce its exposure to economic downturns in specific industries and permit the Company to react efficiently to specific market opportunities. The Company was founded in 1984 and grew primarily through acquisitions in the plastics, insurance and furniture manufacturing industries. As more fully described below, in recent years the Company has concentrated its resources in certain segments of the plastics industry, and, as part of this strategic focus, has disposed of several non-strategic businesses and assets during 1995 and 1996. Profiles of the Company's businesses are outlined within the "Market Capabilities" section below. Descriptions of the Company's facilities are set forth within Item 2, "Properties." The Company's corporate headquarters office is located at 1870 The Exchange, Suite 200, Atlanta, Georgia, 30339, and its telephone number is (800) 497-7659. During 1995, the Company's new senior management group developed a strategic operating plan. The principal objectives of the plan, set forth below, were accomplished during 1995 and 1996: 1) Implementing a cost reduction plan, including a simplification of the Company's organizational structure. 2) Reconfiguring the stretch film sales organization to more effectively service its customer base at a lower cost. 3) Identifying and disposing of non-strategic businesses and assets. 4) Reducing investment in working assets, outstanding indebtedness, and interest expense. -3- For 1997 and beyond, Atlantis' growth and profit improvement strategies seek to capitalize on the Company's reputation for product quality and customer service, its existing manufacturing capabilities, and its reduced fixed and variable cost structure, which should allow it to compete more effectively for new business as a low-cost provider. Growth will result from improved distribution capabilities and new product development. Additionally, recent improvements in the Company's cash flow, capitalization and liquidity will allow it to consider potential acquisitions in the plastics industry. STRATEGIC OPERATING PLAN The strategic operating plan developed by the Company during 1995 focused on achieving the following results: IMPLEMENTATION OF A COST REDUCTION PLAN. Over the past two years, the Company has implemented a series of cost reduction programs which have, in total, reduced fixed and variable costs by over $7 million on an annualized basis. As part of these efforts, the Company's organization structure was simplified and decentralized, allowing a reduction in salaried headcount of approximately 22% and lowering annualized salaried personnel costs by approximately $2.6 million. The Company's injection molding unit significantly reduced its headcount, converted its manufacturing facilities to a continuous 7 day (24-hour) basis, and decentralized its engineering and administrative functions. These changes allowed this unit to improve operating efficiency and control. From 1995 to 1996, gross margin improved from 5% to 14%, while SG&A costs decreased by 11% percent. The Company closed its unprofitable Tulsa, Oklahoma custom film facility in August 1996, transferring certain of its production volume to its Mankato, Minnesota, and Cartersville, Georgia custom film facilities. The Tulsa facility was sold in December 1996. During the past year, the stretch film unit reduced headcount in all of its facilities, while increasing throughput on production lines. Stretch film production volume increased by 4% during 1996. Additional cost savings were realized through lower cost packaging. RECONFIGURATION OF THE STRETCH FILM SALES ORGANIZATION. During the fourth quarter of 1995, the Company reconfigured its stretch film sales organization, converting from an independent sales representative structure to one consisting primarily of direct sales personnel. This change was made in order to improve customer service, account/pricing control, market intelligence, and relationships with key customers, and also to reduce the Company's marketing costs. IDENTIFICATION AND DISPOSITION OF NON-STRATEGIC BUSINESSES AND ASSETS. In August 1995, the Company sold Western Pioneer Insurance Company ("Western Pioneer"), its property-casualty insurance subsidiary which had been classified as a discontinued operation, for $12.0 million to a Massachusetts-based property casualty insurer. During September 1995, the Company sold its 50% interest in the CKS/Rigal blow molding joint venture to its joint venture partner, for approximately $870,000. The net cash proceeds after expenses and taxes of approximately $9.8 million from these 1995 sales were applied to the Company's revolving credit facility. During November 1996, the Company sold PCI to a California-based plastics manufacturer for approximately $8.3 million. During December 1996, the Company sold its Tulsa custom manufacturing facility to a private investor group for $1.5 million. Also during December 1996, the Company sold its investment in WinsLoew Furniture, Inc. ("WinsLoew") stock to WinsLoew for approximately $9.3 million. The proceeds on the above-mentioned sales represent selling prices, prior to expenses and taxes. Net proceeds on the 1996 dispositions, after the payment of expenses and taxes, will approximate $14.5 million. A portion of the net cash proceeds after expenses from the PCI sale was used during the fourth quarter of 1996 to pay off the outstanding balance on the Company's revolving credit facility. See Note 2 of Notes to Consolidated Financial Statements for further information regarding these dispositions. IMPLEMENTATION OF AN ASSET MANAGEMENT PROGRAM TO REDUCE INVESTMENT IN WORKING ASSETS, NET DEBT AND NET INTEREST EXPENSE. Beginning in the second quarter of 1995, through a focus on reducing inventories and accounts receivable, and as a result of disposing of non-strategic businesses and assets as described above, net debt (total debt less cash on hand) was significantly reduced. Net debt was reduced from $115.2 million at year-end 1995 and a 1995 high of $142.0 million (May, 1995) to $92.0 million at year-end 1996. -4- BUSINESS GROWTH AND PROFIT IMPROVEMENT STRATEGIES The Company's general business strategy emphasizes the following elements: DEVELOPMENT OF NEW PRODUCTS AND BROADENING OF MARKET PENETRATION. Historically, the Company has enhanced its competitive position and operating profitability by developing and introducing products that permit the penetration of new markets, including new lines of thinner gauge polyethylene films. During 1996, the stretch film unit introduced three uniquely-engineered stretch film products which target all machine wrap applications and market segments. These films are designed to offer high performance characteristics, while utilizing more cost-effective materials and manufacturing processes. As its new products gain wider acceptance in the marketplace, the stretch film unit will seek broader penetration of the distributor network, as well as expanded direct sales efforts. The custom film unit intends to emphasize the production of ultra thin gauge films which offer greater cost savings to end users and new three-layer, co-extruded products which meet higher engineering specifications. The custom unit is also expanding its sales efforts within the converter packaging market segments. The injection molding unit significantly reduced its fixed and variable cost structure during 1996, providing greater flexibility in servicing its existing customers, and enabling this unit to expand its bidding for new business. During 1996, the profile extrusion unit expanded the sales of its proprietary products, including the Ply-J, which is used for trimming residential round top windows and the Boat Dock Bumper for the do-it-yourself market. The Company intends to continue to work with its suppliers and customers to develop new products that complement the Company's current product lines and can be produced using the Company's existing manufacturing capabilities. IMPROVED COST CONTROLS, MANUFACTURING EFFICIENCIES, AND QUALITY EMPHASIS. The Company continues to concentrate on reducing operating costs and improving manufacturing efficiencies with a strong emphasis on reducing scrap rates and overtime, increasing plant and equipment yields, reducing equipment downtime, and improving the purchasing cycle in order to reduce material costs. Quality is also an integral part of the products and services provided to customers. The Company has made extensive efforts to train its employees in Total Quality Management Systems. The three stretch film manufacturing facilities and the profile extrusion facility have been ISO 9002 certified. TARGETED ACQUISITIONS IN PLASTICS INDUSTRY. The plastics industry is highly fragmented, characterized by several large producers, and many smaller manufacturers that target specific regional markets. Management believes that the economics of the plastics industry and the growing importance of national customers create significant advantages for large, diversified plastics manufacturers. As a result of the initiatives undertaken by the Company during the past two years to reduce costs and improve its financial condition, the Company is now in a position to consider acquisition opportunities. There can be no assurance that suitable candidates will be available, or that the Company will be able to consummate acquisitions on satisfactory terms. At the present time, the Company has no plans, negotiations or oral or written agreements regarding future acquisitions. MARKET CAPABILITIES STRETCH FILMS. Utilizing two plants in Tulsa, Oklahoma and one plant in Nicholasville, Kentucky, Atlantis manufactures multilayer stretch film used principally to wrap pallets of material for storage or shipping. Stretch film is made from a combination of polyethylene resins and other materials and is manufactured using both blown and cast extrusion processes to meet rigid customer specifications. The resulting product is a very thin film which stretches up to 300%, clings to itself, and is puncture resistant. Atlantis purchases several types of linear low density resins and other materials to manufacture its stretch film products. The Company has contracts with resin manufacturers which allow it to achieve what it believes to be the best combination of price, resin availability, and new product development support. Management believes its relationships with its resin suppliers are very good. -5- The Company's stretch film products are sold primarily by direct sales personnel to industrial packaging distributors and, to a lesser degree, to end users. Since a majority of its products is sold to distributors, Atlantis places particular emphasis on assisting distributors in sales to end users. CUSTOM FILMS. Utilizing two plants located in Cartersville, Georgia and Mankato, Minnesota, Atlantis manufactures both low density and linear low density polyethylene films for a wide variety of packaging applications. As described above, during August 1996 the Tulsa custom facility was closed and was sold in December 1996. Approximately 20 different types of resin, delivered in pellet form, and approximately ten types of additives are used in the manufacturing process. Atlantis has supply contracts that fulfill most of its present requirements and believes that it has adequate sources available to meet remaining raw material needs. Relationships with its suppliers are considered very good. Atlantis has an internal sales staff to market its film products. Most custom film customers are in industrial markets and consume the film during their manufacturing and/or delivery processes. Significant growth is planned for converted market segments, where film is part of the end use product. Atlantis also converts film into institutional products such as plastic gloves, aprons and tablecloths at a second manufacturing facility located in Mankato, Minnesota. During the last several years, Atlantis has become one of the largest producers of polyethylene products for institutional food handling markets. With vertical integration of film supply and continued capital investment in automation, the Company believes that this business unit enjoys a low cost leadership position. INJECTION MOLDING. Atlantis produces custom thermoplastic parts by injection molding. These parts are used in large and small appliances (including refrigerators, air conditioners, dehumidifiers, dishwashers, and microwave ovens), agricultural and automotive products and hand-held power tools. Atlantis operates molding presses ranging from 30 to 1,000 tons and related secondary equipment at five plants located in Henderson, Kentucky, Ft. Smith, Arkansas, Warren, Ohio, and Nashville and Jackson, Tennessee. This wide variety of equipment configurations and plant locations enable it to fulfill customer requirements, including multiple components, various press sizes and secondary operations. During 1996, approximately 39% of the injection molding unit's sales (9% of the Company's net sales) were to the refrigeration and air conditioning divisions of Whirlpool Corporation ("Whirlpool"). This unit's efforts to diversify its customer base have reduced these percentages from 46% and 10%, respectively, in 1995. Although the injection molding unit has been a supplier to Whirlpool for over 40 years, there can be no assurance that a significant reduction in Whirlpool's volume, or the loss of Whirlpool as a customer, would not have a material adverse effect on the Company's financial condition or results of operations. The injection molding unit maintains an in-house sales and engineering staff which assists in the design of products to customer specifications, designs molds to produce those products, and oversees the construction of necessary molds. Its "program management" concept promotes early involvement with customers' engineers to assist with product and tooling design and the establishment of acceptable quality standards. Its Statistical Process Control ("SPC") systems enable it to meet these established quality standards on a cost-efficient basis. Management believes that its ability to offer SPC quality assurance, as well as value-added secondary operations such as hot stamping, silk screening and assembly, provide a competitive advantage in selling to national accounts. The majority of sales are generated by Company personnel. Independent sales representatives, calling primarily on industrial customers in the Midwest, account for the balance. The Company's injection molding customers generally place orders for goods based on their production requirements for the following three to four months with a non-binding estimate of requirements over six to twelve months. Management believes that the relatively long production cycles for its customers make these estimates reliable. See "Backlog." -6- A wide variety of materials, such as ABS, polystyrene, polyethylene, polycarbonate and nylon are used in the manufacturing process. The Company has multiple sources of supply for these materials. PROFILE EXTRUSION. At its Elkhart, Indiana manufacturing facility, Atlantis produces a variety of extruded plastic parts for both trim and functional applications that are incorporated into a broad range of consumer and commercial products. During 1996 the profile extrusion unit utilized approximately 2,000 different dies in fulfilling customer orders, and currently maintains a stock program for approximately 280 products. This unit's marketing and sales activities are conducted by in-house sales personnel that also oversee a network of independent sales representatives. These representatives in turn call on a diversified customer base in approximately 30 states. Atlantis supplies many industries, including manufacturers of recreational vehicles, residential windows and doors, office furniture, retail store fixtures, and marine products. The use of only five basic types of compound materials in manufacturing allows the purchasing of materials in bulk. These materials are polyvinyl chloride in rigid and flexible forms, polyethylene, polypropylene, and thermoplastic rubber. Atlantis believes that it has adequate sources available to meet its raw material needs. RAW MATERIALS The primary raw materials used by the Company in the manufacture of its products are various plastic resins, primarily polyethylene. The Company selects its suppliers primarily on the basis of quality, price, technical support and service. Virtually all of the Company's plastic resin supplies are manufactured within the United States. Although the plastics industry has from time to time experienced shortages of plastic resins, the Company has not to date experienced any such shortages. Management believes that there are adequate sources available to meet its raw material needs. The Company uses approximately 300 million pounds of plastic resins annually. Management believes that the Company's large volume purchases of plastic resin have generally resulted in lower raw material costs and enabled the Company to obtain shipments of raw materials even in periods of short supply. The primary plastic resins used by the Company are produced from petrochemical feedstocks mostly derived from natural gas liquids. Based on the supply and demand cycles in the petrochemical industry, substantial cyclical price fluctuations can occur. Consequently, plastic resin prices often fluctuate, and such prices fluctuated significantly during the 1994 - 1996 period, as further described in Item 7, "Management's Discussion and Analysis of Operations." While the Company has historically passed through changes in the cost of its raw materials to its customers, it may not always be able to pass through its raw material cost increases in the form of price increases, or such pass throughs may only occur after a time lag. To the extent that increases in the cost of plastic resin cannot be passed on to its customers, or that the duration of time lags associated with pass throughs becomes significant, such increases may have a material detrimental impact on the profitability of the Company. Furthermore, during periods when resin prices are falling, gross profits may suffer since the Company is selling product manufactured with resin purchased one to two months prior at higher prices. COMPETITION The Company's operating units face intense competition from numerous competitors, several of which have greater financial resources than Atlantis. In addition, the markets for certain of the Company's products are characterized by low cost of entry, or competition based primarily on price. Atlantis Plastic Films competes with a limited number of producers capable of national distribution and a greater number of smaller manufacturers that target specific regional markets and specialty film segments. Competition is based on quality, price, service (including the manufacturer's ability to supply customers in a timely manner), and product differentiation. Management believes the Atlantis Plastic Film units successfully compete on the basis of their established reputations for service and quality, as well as their respective positions as efficient, low-cost producers. -7- Atlantis Molded Plastics competes in a highly fragmented segment of the plastics industry, with a large number of regional manufacturers competing on the basis of customer service (including timely delivery and engineering/design capabilities), quality, product differentiation and price. Management believes that the Atlantis Molded Plastics units successfully compete based on their ability to offer extensive customer service, manufacturing efficiencies and a wide variety of products. BACKLOG The Company's total backlog at December 31, 1996 was $19.1 million, compared to $21.3 million at December 31, 1995. Management does not consider any specific month's backlog to be a significant indicator of sales trends due to the various factors that influence backlog, such as price changes which lead to customer inventory adjustments. EMPLOYEES As of December 31, 1996 the Company employed approximately 1,350 persons. Atlantis' overall employee relations are considered to be very good. PATENTS AND TRADEMARKS The Company has registered various trademarks with the United States Patent and Trademark Office and certain overseas trademark regulatory agencies. The Company also has applications pending for the registration of Patents and other trademarks. Management believes that the Company's trademark position is adequately protected in all markets in which the Company does business. Atlantis Plastic Films produces certain stretch film products under non-exclusive licenses granted by Mobil Oil Corporation, which are coterminous with the duration of Mobil's underlying patents. ENVIRONMENTAL REGULATION Actions by Federal, state and local governments concerning environmental matters could result in laws or regulations that could increase the cost of producing the products manufactured by the Company or otherwise adversely affect the demand for its products. At present, environmental laws and regulations do not have a material adverse effect upon the demand for the Company's products. Certain local governments have adopted ordinances prohibiting or restricting the use or disposal of certain plastic products that are among the types produced by the Company. If such prohibitions or restrictions were widely adopted, it could have a material adverse effect upon the Company. In addition, a decline in consumer preference for plastic products due to environmental considerations could have a material adverse effect upon the Company. In addition, certain of the Company's operations are subject to Federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of solid and hazardous wastes. Historically, the Company has not had to make significant capital expenditures for compliance with such laws and regulations. While the Company cannot predict with any certainty its future capital expenditure requirements for environmental regulatory compliance because of continually changing compliance standards and technology, the Company has not currently identified any of its facilities as requiring major expenditures for environmental remediation or to achieve compliance with environmental regulations. Accordingly, the Company has not accrued any amounts relating to achieving compliance with currently promulgated environmental laws and regulations. The Company does not currently have any insurance coverage for environmental liabilities and does not anticipate obtaining such coverage in the future. -8- ITEM 2. PROPERTIES During the first quarter of 1995, the Company relocated certain of its corporate functions from Miami, Florida to Atlanta, Georgia. The Atlanta headquarters office consist of approximately 9,250 square feet of space, with a present annual lease expense of approximately $111,000, expiring in June 1997. Atlantis' Miami offices consist of approximately 13,100 square feet of space that is shared with several entities controlled by the principal stockholders of the Company or their affiliates. The present annual lease expense of $329,000, as well as certain other general and administrative expenses, are allocated among the Company and these entities. See Part III Item 13 - "Certain Relationships and Related Transactions." This lease expires in August, 2003. The following table describes the manufacturing facilities owned or leased by the Company as of December 31, 1996. Substantially all of the owned facilities are pledged as security for debt. Management believes that the Company's manufacturing facilities are adequate to meet current needs and increases in sales volume for the foreseeable future. COMPANY AND LOCATION - -------------------- OWNED OR BUILDING AREA LEASED (SQUARE FEET) -------- ------------- ATLANTIS PLASTIC FILMS: Stretch Film, Tulsa, Oklahoma (two facilities)... Owned 189,300 Stretch Film, Nicholasville, Kentucky............ Owned 109,500 Custom Film, Mankato, Minnesota.................. Owned 140,000 Institutional Products, Mankato, Minnesota....... Leased 65,000 Custom Film, Cartersville, Georgia............... Leased 57,500 ATLANTIS MOLDED PLASTICS: Injection Molding, Henderson, Kentucky........... Owned 90,000 Injection Molding, Jackson, Tennessee............ Owned 50,000 Injection Molding, Nashville, Tennessee.......... Leased 68,000 Injection Molding, Ft. Smith, Arkansas.......... Owned 158,500 Injection Molding, Warren, Ohio.................. Owned 54,000 Profile Extrusion, Elkhart, Indiana.............. Owned 87,900 ITEM 3. LEGAL PROCEEDINGS The Company believes that it is not presently a party to any litigation the outcome of which would have a material adverse effect on its consolidated financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fiscal quarter ended December 31, 1996. -9- PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Class A Common Stock is traded on the American Stock Exchange (the "AMEX") and the Pacific Stock Exchange under the symbol "AGH." The following table sets forth the high and low sales prices for the Class A Common Stock on the AMEX for each quarter of the years 1995 and 1996. HIGH LOW ---- --- 1995 - ---- First Quarter 8 1/8 5 3/4 Second Quarter 7 7/8 6 3/8 Third Quarter 6 7/16 4 3/4 Fourth Quarter 5 1/4 3 3/8 1996 - ---- First Quarter 5 13/16 4 5/8 Second Quarter 5 7/8 4 7/8 Third Quarter 5 5/8 4 5/8 Fourth Quarter 11 3/8 5 1/2 As of January 31, 1997, there were approximately 210 holders of record of the 4,196,721 outstanding shares of Class A Common Stock. The closing sales price for the Class A Common Stock on January 31, 1997 was $10.00. Covenants relating to the Company's 11% Senior Notes restrict the Company from paying dividends, incurring new debt or taking certain other actions unless specified interest coverage ratio and other tests are met. The Company met the interest coverage ratio requirement for the trailing four quarters ended September 30 and December 31, 1996, and is therefore currently able to, among other things, pay dividends and incur new debt. During 1995, a decline in operating profitability caused the Company to fall below the interest coverage ratio requirement for the trailing four quarter periods ended September 30 and December 31, 1995, and March 31 and June 30, 1996. Accordingly, during those periods the Company could not pay dividends, and its ability to incur new debt or take certain other actions was restricted. PREFERRED STOCK In January 1997, the Company issued a mandatory conversion notice to the holder of the 20,000 outstanding shares of the Company's Series A Convertible Preferred Stock ("Preferred Stock"). The Preferred Stock was convertible into 210,244 shares of Class A common stock. After issuing the mandatory conversion notice, the Company reached an agreement with the Preferred Stock holder to repurchase all of the common shares resulting from the conversion notice for $2 million (the original price paid for the Preferred Stock by the holder), and completed the repurchase in late March, 1997. Prior to this conversion and repurchase, the Company's Preferred Stock entitled the holder to an annual cumulative dividend payable in equal semiannual installments of $72,500 on April 15 and October 15 of each year. As discussed above, the Company was prohibited from paying preferred dividends during the period that it was unable to meet the interest coverage ratio requirement relating to its 11% Senior Notes on a trailing four -10-
quarters basis. Since the Company met the requirement as of September 30, 1996, during October 1996 the Company paid the April 15 and October 15, 1996 Preferred Stock dividend payments. COMMON STOCK Prior to 1994, the Company did not pay cash dividends on any class of its Common Stock. During February 1994, the Company's Board of Directors approved a 2.5 cents per share quarterly dividend program beginning in April 1994, and consecutive quarterly dividends were paid through October 1995, after which the dividend program was discontinued. In November 1996, the Board of Directors authorized the repurchase of up to 1,000,000 shares of Atlantis Class A common stock, or 14% of the 7.1 million Class A and Class B common stock then outstanding. Through late March 1997 the Company has repurchased 320,344 shares (including the 210,244 common shares issued in connection with the conversion of preferred stock, as described above), and options for 55,125 shares, for total consideration of approximately $3.3 million. The Company intends to continue buying its shares in the open market, or in privately negotiated transactions, at times and prices deemed advantageous. ITEM 6. SELECTED FINANCIAL DATA The following table summarizes certain selected consolidated financial data of the Company for each of the years in the five-year period ended December 31, 1996. The selected consolidated financial data as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 have been derived from the Company's financial statements included in Item 8, which have been audited by Coopers & Lybrand L.L.P., independent accountants for the Company. The selected consolidated financial data should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto for the three-year period ended December 31, 1996, included in Item 8, and Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations". YEARS ENDED DECEMBER 31, 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------------- (In millions, except per share data) INCOME DATA Net Sales $ 267.1 $ 281.1 $ 260.8 $ 220.2 $ 188.7 Income (Loss) from Continuing Operations 8.1 (13.6) 5.2 5.2 4.9 Net Income (Loss) 8.1 (13.1) 6.4 3.9 5.8 PER SHARE DATA (PRIMARY - SEE NOTE) Income (Loss) from Continuing Operations $1.06 ($1.90) $0.67 $0.66 $0.64 Net Income (Loss) $1.06 ($1.83) $0.83 $0.49 $0.76 FINANCIAL DATA Total Assets $ 177.9 $ 180.5 $ 211.5 $ 171.0 $ 172.6 Total Debt 107.9 116.5 129.2 102.4 114.6 Cash Dividends Declared per Common Share $ -- $ 0.08 $ 0.10 $ -- $ --
NOTE: For 1996, fully diluted income per share from continuing operations and fully diluted net income per share were $0.99. For 1992, fully diluted income per share from continuing operations was $0.62, and fully diluted net income per share was $0.74. -11-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Atlantis is a leading U.S. manufacturer of polyethylene stretch and custom films used in a variety of industrial and consumer applications and molded plastic products for the appliance, agricultural, automotive, recreational vehicle, and residential window industries. Discontinued operations in 1995 and 1994 consisted of the operations of Western Pioneer, the Company's California property-casualty insurance subsidiary which was sold on August 31, 1995. As more fully described in Item 1. "Business," during 1995 the Company's new senior management group developed and implemented a strategic operating plan which focused on achieving a number of objectives during 1995 and 1996. The implementation of certain aspects of the strategic operating plan caused the Company to incur various nonrecurring costs during 1995, which have been segregated within the "Impairment of long-lived assets and restructuring charges" category of the accompanying 1995 Income Statement. Sales, gross profit and operating income (loss) for the years ended December 31, 1996, 1995 and 1994 were as follows: (IN THOUSANDS) YEARS ENDED DECEMBER 31, 1996 1995 1994 SALES AMOUNT % TOTAL AMOUNT % TOTAL AMOUNT % TOTAL - ----- ------ ------- ------ ------- ------ ------- Atlantis Plastic Films $177,851 67% $192,806 69% $173,947 67% Atlantis Molded Plastics 89,268 33% 88,258 31% 86,871 33% -------- ---- -------- ---- -------- ----- Total $267,119 100% $281,064 100% $260,818 $100% ======== ==== ======== ==== ======== ===== GROSS PROFIT AMOUNT % SALES AMOUNT % SALES AMOUNT % SALES - ------------ ------- ------- -------- ------- ------- ------- Atlantis Plastic Films $29,516 17% $30,311 16% $36,084 21% Atlantis Molded Plastics 16,226 18% 9,604 11% 15,489 18% ------- --- ------- --- ------- --- Total $45,742 17% $39,915 14% $51,573 20% ======= ======= ======= OPERATING INCOME (LOSS) AMOUNT % SALES AMOUNT % SALES AMOUNT % SALES - ----------------------- ------- ------- ------ ------- ------ ------- Atlantis Plastic Films $10,117 6% $1,982 1% $13,455 8% Atlantis Molded Plastics 8,273 9% (2,697) (3%) 8,918 10% ------- -- ------ ---- ------- --- Total $18,390 7% ($715) (0%) $22,373 9% ======= ====== =======
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995 SALES Sales for 1996 equaled $267.1 million, approximately 5% below last year's sales of $281.1 million. The decline in sales during 1996 compared to the prior year occurred primarily within the Atlantis Plastic Films stretch film unit. The stretch film unit posted a 7% increase in volume in pounds sold during 1996, offset by lower average film selling prices resulting from lower average resin prices during 1996. Within the custom film and institutional product units, volume in pounds sold increased by 6%. Atlantis Molded Plastics 1996 sales equaled $89.3 million, slightly ahead of 1995 sales of $88.3 million. GROSS PROFIT Gross profit as a percentage of sales for 1996 equaled 17%, well ahead of the 1995 gross profit percentage of 14%. The strong improvement was primarily due to the positive impact of a number of initiatives associated with the Company's strategic operating plan implemented during the latter half of 1995 and throughout 1996. -12- The Atlantis Plastic Films 1996 gross profit percentage equaled 17%, ahead of last year's percentage of 16%. The improved film profitability as a percentage of sales related to the Company's various cost reduction programs, as described in Item 1. "Business,"-Strategic Operating Plan. While the Atlantis Plastic Films 1996 gross profit percentage improved compared to the 1995 percentage, the stretch film unit continues to be impacted by intense price competition resulting primarily from industry-wide overcapacity. Efforts to improve the future profitability of this unit include the 1996 introduction of three new machine wrap stretch film products offering high performance characteristics while utilizing more cost-effective materials and manufacturing processes, as well as targeted cost reductions in the areas of production and overhead expense. The Atlantis Molded Plastics 1996 gross profit percentage equaled 18%, significantly ahead of the 11% gross profit percentage for 1995. The strong improvement compared to 1995 was primarily attributable to a significant decrease in production and overhead costs, together with improvements in scheduling and related reductions in overtime expense, in the injection molding unit. In addition, the profile extrusion unit continued to maintain its high gross profit margins, and the blow molding unit posted stronger 1996 profit margins compared to 1995 levels. The blow molding unit was sold in November 1996 (see Note 2 of Notes to Consolidated Financial Statements). SELLING, GENERAL AND ADMINISTRATIVE EXPENSE The Company's 1996 selling, general and administrative ("SG&A") expense was $27.4 million, 7% lower than the $29.4 million in 1995. SG&A expense for 1996 includes incentive compensation expense related to improved operating results. Excluding these costs, SG&A expense for 1996 decreased significantly compared to 1995, primarily due to the previously described cost reduction programs initiated by the Company during 1995 and 1996. OTHER INCOME (EXPENSE) As more fully described in Note 2 of Notes to the Consolidated Financial Statements, during the fourth quarter of 1996, the Company disposed of PCI, the Tulsa custom facility, and the Company's investment in WinsLoew stock. These transactions generated a total pretax gain of $6.7 million, and an after tax gain of $5.1 million, or $0.68 per share (primary). NET INTEREST EXPENSE AND INCOME TAXES Net interest expense during 1996 of $12.6 million was 11% lower than the $14.2 million posted in the prior year. The decrease can be attributed to reduced debt levels during 1996, resulting from the following factors: (i) lower average working capital levels during 1996 compared to 1995, (ii) debt paydowns from the proceeds generated by the 1995 and 1996 sales of non-strategic businesses and assets, and (iii) lower effective interest rates as a result of the Company's 1995 refinancing of debt from the revolving credit facility to equipment financing programs with lower interest rates, and the 1995 and 1996 repurchases of the Company's 11% Senior Notes, discussed below. The Company's effective tax rates differed from the applicable statutory rates during 1996 and 1995 primarily due to nondeductible goodwill amortization. In addition, the 1996 effective tax rate was also impacted by the sale of PCI, which generated a gain for book purposes, and a loss for tax purposes (see Note 8 of Notes to Consolidated Financial Statements). EXTRAORDINARY GAIN (LOSS) During July 1996, the Company repurchased, at a slight discount, $5.7 million of its 11% Senior Notes in the open market, which resulted in an after tax extraordinary loss of ($73,000), principally related to the write-off of unamortized loan origination costs. During December 1995, the Company repurchased, at a discount, $4.8 million of its 11% Senior Notes in the open market, and recognized an after tax extraordinary gain of $254,000. -13- INCOME (LOSS) As a result of the factors described above, 1996 operating income equaled 7% of sales, or $18.4 million, compared to an operating loss of ($715,000) in 1995. Income from continuing operations and net income were $8.1 million, or $1.06 per share in 1996, compared to a 1995 loss from continuing operations of ($13.6) million, or ($1.90) per share, and a net loss of ($13.1) million, or ($1.83) per share. The above-mentioned per share amounts represent primary earnings per share. COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994 SALES The Company's 1995 sales of $281.1 million were 8% ahead of 1994 sales, with the sales growth occurring primarily within Atlantis Plastic Films due to higher average selling prices, partially offset by a decline in volume compared to 1994. Atlantis Plastic Films sales for 1995 totalled $192.8 million, 11% ahead of 1994 film sales of $173.9 million. During the last nine months of 1994, plastic resin prices increased by over 75%, causing film product demand to rise beyond normal levels as customers increased inventories in order to avoid purchases at anticipated higher selling prices. During the second quarter of 1995, the film market, anticipating resin price declines, experienced a significant weakening in demand as customers postponed purchases in order to reduce abnormally high inventories created during the preceding period and to maximize product purchases at expected future lower prices. Resin prices started declining in June 1995, and fell approximately 29% from early June through December 1995. Atlantis Molded Plastics sales during 1995 of $88.3 million exceeded 1994 sales of $86.9 million by 2%, with a slight decline in sales for the Company's injection molding unit, offset by increased sales within the profile extrusion and blow molding units. The lack of sales growth within the injection molding unit was caused by several factors, including: (i) a decline in sales of refrigeration-related parts compared to last year, and (ii) the effects of a negotiated price reduction with a major customer. GROSS PROFIT The Company's 1995 gross profit of $39.9 million, or 14% of sales, declined sharply both in dollar and percentage terms from the 1994 gross profit of $51.6 million, or 20% of sales. The 1995 decline was due primarily to the adverse impact of the film inventory correction described above, and lower injection molding profitability compared with 1994. Atlantis Plastic Films posted 1995 gross profit of $30.3 million, or 16% of sales, compared to 1994 gross profit of $36.1 million, or 21% of sales. The 1995 second and third quarter customer inventory correction and resulting decline in demand, described above, reduced sales volume in pounds, and also reduced selling prices due to competitive market pressures. Weak market demand during this time period caused selling prices to drop more rapidly than plastic resin costs. As a result, during 1995 the differential between film selling prices and plastic resin costs (the major raw material component of the Company's film products) declined compared to 1994. Film gross profits also continued to be affected by inefficiencies at the Tulsa, Oklahoma custom film facility. As a result, during late 1995 this facility was downsized, and was closed during August 1996. This facility was subsequently sold in December 1996. The Atlantis Molded Plastics 1995 gross profit of $9.6 million, or 11% of sales, decreased substantially compared to 1994 gross profit of $15.5 million, or 18% of sales. This decline in profitability resulted primarily from a variety of factors within the injection molding unit, including the decline in sales and price reduction described above, manufacturing inefficiencies within certain phases of the production process, and unusually high overtime due to these manufacturing inefficiencies. The Atlantis Molded Plastics 1995 gross profit was also adversely impacted by lower blow molding profitability, partially offset by stronger profile extrusion gross profits compared to 1994. In order to address the injection molding issues described above, the Company implemented a number of personnel and process improvement changes during the fourth quarter of 1995. The Company's injection molding unit significantly reduced -14- overtime and salaried headcount, initiated continuous operations at its Henderson, Kentucky facility (this change was subsequently implemented at the remaining injection molding facilities during the first half of 1996), and initiated the decentralization of its engineering and administrative functions which were formerly conducted only at the Henderson facility. The Company's profile extrusion unit posted record sales and profitability during 1995 compared to 1994, achieving gross margins in excess of 34%. The 1995 decline in blow molding profitability resulted from continued competitive pricing pressures within the dairy plastic container markets. However, during the fourth quarter of 1995 blow molding profit margins improved due to increases in sales of industrial containers, combined with reductions in manufacturing costs. As previously discussed, the Company sold its 50% blow molding joint venture interest during 1995, and sold PCI in late 1996. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE SG&A during 1995 equaled $29.4 million, or 10% of sales, compared to 1994 SG&A of $29.2 million, or 11% of sales. SG&A expense for 1995 included lower incentive compensation expense resulting from the 1995 decline in profitability, and lower compensation expense due to a reduction in salaried headcount. SG&A expense during 1995 included approximately $600,000 recorded during the third quarter representing an increase in the reserve for bad debts related to a potentially uncollectable account receivable within the injection molding unit. IMPAIRMENT OF LONG-LIVED ASSETS AND RESTRUCTURING CHARGES In connection with the Company's adoption of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" during the fourth quarter of 1995, the Company recorded noncash charges of approximately $10.6 million for the impairment of long-lived assets associated with the Tulsa custom film facility, and for the reduction in carrying value of PCI in connection with its proposed sale. Of this amount, goodwill write-offs equaled approximately $8.9 million with no associated tax benefit, and fixed asset write-downs equaled approximately $1.7 million pretax, or $1.0 million after tax. During 1995, the Company also recorded restructuring charges of approximately $1.9 million related to: (i) the first quarter 1995 reorganization of its senior management group (approximately $750,000), (ii) the third and fourth quarter 1995 reconfiguration of its stretch film sales organization (approximately $800,000), and (iii) the fourth quarter 1995 headcount reduction costs associated with the restructuring of the Tulsa custom facility and the injection molding unit (approximately $350,000). NET INTEREST EXPENSE AND TAXES Net interest expense increased from $13.1 million in 1994 to $14.3 million in 1995, primarily due to the higher debt balances maintained during the first half of 1995. The significant reduction in debt achieved during the second half of 1995 reduced net interest expense, with net interest expense for the fourth quarter of 1995 of $3.3 million, compared to $3.4 million during the fourth quarter of 1994 and $3.8 million during the second quarter of 1995. The Company's effective tax rates during 1995 and 1994 were affected by non-deductible goodwill amortization, with the 1995 tax rate also affected by the tax impact of the September 1995 sale of the Company's 50% interest in the CKS/Rigal blow molding joint venture. DISCONTINUED OPERATIONS Western Pioneer was sold in August 1995 for $12.0 million. The after tax gain recognized on the sale was approximately $483,000. Western Pioneer's loss from operations for the period prior to its sale during 1995 totaled $251,000, compared to its 1994 income from operations of $1.2 million. The 1995 decline in income was due to: (i) a significant increase in new policies during -15- 1995, with new business historically less profitable than continuing business, and (ii) poorer than normal weather conditions during the winter of 1994-1995, which caused an increase in accidents and claims during 1995. INCOME (LOSS) As a result of the factors described above, particularly the impact of the impairment of long-lived assets and the other restructuring charges, and the decline in gross profit, the 1995 operating loss equaled ($715,000), compared to 1994 operating income of $22.4 million. The 1995 loss from continuing operations equaled ($13.6) million, or ($1.90) per share, compared to income from continuing operations of $5.2 million, or $0.67 per share for the year ended 1994. The 1995 net loss equaled ($13.1) million, or ($1.83) per share, compared to 1994 net income of $6.4 million, or $0.83 per share. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital at December 31, 1996 totaled approximately $36.4 million (including cash and equivalents of $15.9 million), compared to $23.2 million (including cash and equivalents of $1.3 million) at December 31, 1995. The increase in cash and equivalents at year-end 1996 resulted primarily from the cash proceeds generated by the fourth quarter 1996 sales of PCI, the Tulsa custom facility, and the Company's investment in WinsLoew stock. On December 31, 1996, there were no borrowings on the Company's revolving credit facility and gross availability equaled $30.0 million. Unused availability, net of outstanding letters of credit of approximately $1.5 million, equaled $28.5 million. In addition, at year-end the Company had approximately $6.1 million of unused availability under an existing equipment financing program. Also see Item 5, "Market for the Registrant's Common Equity and Related Stockholder Matters" for certain information regarding the Company's compliance with covenants relating to the Company's 11% Senior Notes, and for information regarding the Company's 1997 mandatory conversion of Preferred Stock into 210,244 common shares and subsequent repurchase of those common shares. The Company's principal needs for liquidity, on both a short- and long-term basis, relate to working capital (principally accounts receivable and inventories), debt service, and capital expenditures. The Company presently does not have any material commitments for future capital expenditures, and expects to meet its short- and long-term liquidity needs with cash on hand, funds generated from operations, and funds available under its revolving credit facility. CASH FLOWS FROM OPERATING ACTIVITIES During 1996, net cash provided by operating activities was approximately $11.6 million, compared to $14.0 million last year. The Company's 1996 dispositions of businesses and assets generated a pretax gain of $6.7 million, as more fully discussed in Note 2 of Notes to Consolidated financial Statements. Accounts receivable increased by $1.8 million, primarily within the injection molding unit due to a decrease in reserve for bad debts and stronger year-end 1996 sales compared to year-end 1995. Inventories decreased by approximately $400,000, primarily within the film units. The $2.2 million decrease in other current assets is principally due to the realization of year-end 1995 income taxes receivable related to the Company's 1995 taxable loss. Accounts payable and accrued expenses at December 31, 1996 decreased by $1.1 million compared to the 1995 year-end balance due to higher than normal accounts payable at year-end 1995, partially offset by 1996 accruals for incentive compensation related to improved operating results. CASH FLOWS FROM INVESTING ACTIVITIES Net cash generated from investing activities during 1996 equaled $11.8 million, compared to cash used in investing activities of $750,000 during 1995. During 1996, approximately $18.6 million of proceeds after expenses, but prior to income taxes, were generated from the dispositions of businesses and assets, as follows: PCI sale - $7.0 million, Tulsa facility sale - $1.5 million, WinsLoew stock sale - $9.3 million, and other asset sales - $800,000. -16- During 1996, capital expenditures of $6.8 million were significantly below last year's capital expenditures of $13.8 million, which included expenditures relating to two new film lines, the expansion of capacity at the injection molding unit, and the purchase of the new profile extrusion manufacturing facility. As part of Atlantis' ongoing capital spending program, the Company has converted, or is in the process of converting, its information systems in order to accomodate the year 2000 century date change. Due to the nature and timing of the Company's capital expenditures, capital spending during 1996 is not necessarily indicative of the level of spending to be expected in future years. CASH FLOWS FROM FINANCING ACTIVITIES Net cash used in financing activities during 1996 was $8.8 million, compared to $13.4 million during 1995. During 1996, $5.7 million was used to repurchase 11% Senior Notes, with the remainder used primarily for principal payments on long-term debt. During December 1996, the Company refinanced $3.7 million of equipment financing debt with another lender at a lower interest rate. ACCOUNTING PRONOUNCEMENTS In February 1997, SFAS No. 128, "Earnings Per Share" was issued. SFAS No. 128 specifies the computation, presentation, and disclosure requirements for Earnings Per Share ("EPS"), and is designed to improve the EPS information provided in financial statements by simplifying the existing computational guidelines, revising the disclosure requirements, and increasing the comparability of EPS data on an international basis. SFAS 128 must be implemented no later than fiscal year 1997. The Company has not yet determined the effect on operating results of implementing the statement, however, the adoption of SFAS 128 is not expected to have a materially adverse effect on consolidated financial position. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE(S) ------- Management's Responsibility for Financial Reporting................... 18 Report of Independent Accountants..................................... 19 Consolidated Income Statements For the Years Ended December 31, 1996, 1995 and 1994................................................. 20 Consolidated Balance Sheets as of December 31, 1996 and 1995.......... 21 Consolidated Statements of Shareholders' Equity For the Years Ended December 31, 1996, 1995 and 1994 ................................... 22 Consolidated Statements of Cash Flows For the Years Ended December 31, 1996, 1995 and 1994 ................................................ 23 Notes to Consolidated Financial Statements............................ 24 -17- MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The Company's management is responsible for the preparation of the consolidated financial statements in accordance with generally accepted accounting principles and for the integrity of all the financial data included in this Form 10-K. In preparing the consolidated financial statements, management makes informed judgments and estimates of the expected effects of events and transactions that are currently being reported. Management maintains a system of internal accounting controls that is designed to provide reasonable assurance that assets are safeguarded and that transactions are executed and recorded in accordance with management's policies for conducting its business. This system includes policies which require adherence to ethical business standards and compliance with all laws to which the Company is subject. The internal controls process is continuously monitored by direct management review. The Board of Directors, through its Audit Committee, is responsible for determining that management fulfills its responsibility with respect to the Company's consolidated financial statements and the system of internal accounting controls. The Audit Committee, comprised solely of directors who are not officers or employees of the Company, meets periodically with representatives of management and the Company's independent accountants to review and monitor the financial, accounting, and auditing procedures of the Company in addition to reviewing the Company's financial reports. The Company's independent accountants have full and free access to the Audit Committee. ANTHONY F. BOVA PAUL RUDOVSKY PRESIDENT AND CHIEF EXECUTIVE VICE PRESIDENT, EXECUTIVE OFFICER FINANCE AND ADMINISTRATION -18- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Atlantis Plastics, Inc.: We have audited the accompanying consolidated balance sheets of Atlantis Plastics, Inc. and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlantis Plastics, Inc. and subsidiaries as of December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Atlanta, Georgia Coopers & Lybrand L.L.P. February 7, 1997, except for Note 7, as to which the date is March 28, 1997 -19-
ATLANTIS PLASTICS, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, except per share amounts) - ------------------------------------------------ ----------- ----------- ----------- YEARS ENDED DECEMBER 31, 1996 1995 1994 - ------------------------------------------------ ----------- ----------- ----------- Net sales $ 267,119 $ 281,064 $ 260,818 Cost of sales 221,377 239,969 209,245 ----------- ----------- ----------- Gross profit 45,742 41,095 51,573 Selling, general and administrative expenses 27,352 29,357 29,200 Impairment of long-lived assets and restructuring charges -- 12,453 -- ----------- ----------- ----------- Operating income (loss) 18,390 (715) 22,373 Net interest expense 12,638 14,179 13,078 Other income (expense) 6,718 (338) -- ----------- ----------- ----------- Income (loss) from continuing operations before 12,470 (15,232) 9,295 income taxes Income tax provision (benefit) 4,396 (1,674) 4,136 ----------- ----------- ----------- Income (loss) from continuing operations 8,074 (13,558) 5,159 Income (loss) from discontinued operations, net of income taxes 96 (251) 1,207 Gain on disposition of discontinued operations, net of income taxe -- 483 -- ----------- ----------- ----------- Income (loss) before extraordinary item 8,170 (13,326) 6,366 Extraordinary gain (loss) on early extinguishment of debt, net of income taxes (73) 254 -- ----------- ----------- ----------- Net income (loss) $ 8,097 ($ 13,072) $ 6,366 =========== =========== =========== Net income (loss) Per Common Share Primary: Continuing operations $ 1.06 ($ 1.90) $ 0.67 Discontinued operations 0.01 (0.04) 0.16 Gain on disposition of discontinued operations -- 0.07 -- ----------- ----------- ----------- Income (loss) before extraordinary item 1.07 (1.87) 0.83 Extraordinary item (0.01) 0.04 -- ----------- ----------- ----------- Net income (loss) $ 1.06 ($ 1.83) $ 0.83 =========== =========== =========== Fully diluted: Continuing operations $ 0.99 ($ 1.90) $ 0.67 Discontinued operations 0.01 (0.04) 0.16 Gain on disposition of discontinued operations -- 0.07 -- ----------- ----------- ----------- Income (loss) before extraordinary item 1.00 (1.87) 0.83 Extraordinary item (0.01) 0.04 -- ----------- ----------- ----------- Net income (loss) $ 0.99 ($ 1.83) $ 0.83 =========== =========== =========== Weighted average number of shares used in computing income (loss) per share: Primary 7,524,292 7,208,173 7,509,979 Fully diluted 8,201,917 7,208,173 7,509,979 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
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ATLANTIS PLASTICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) - ------------------------------------------------------------------------------- -------- -------- AS OF DECEMBER 31, 1996 1995 - ------------------------------------------------------------------------------- -------- -------- ASSETS Cash and equivalents $ 15,905 $ 1,255 Accounts receivable, less allowance for doubtful accounts of $633 in 1996 and $1,530 in 1995 28,364 28,250 Inventories 16,984 18,544 Other current assets 4,825 7,044 -------- -------- Current assets 66,078 55,093 Property and equipment, net 58,523 64,333 Investment in WinsLoew Furniture, Inc. stock - 4,798 Goodwill, net of accumulated amortization 50,532 52,680 Other assets 2,768 3,557 -------- -------- $177,901 $180,461 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued expenses $ 27,131 $ 28,725 Current portion of long-term debt 2,517 3,168 -------- -------- Current liabilities 29,648 31,893 Long-term debt, less current portion 105,365 113,294 Deferred income taxes 6,886 6,610 Other liabilities 1,093 1,372 -------- -------- Total liabilities 142,992 153,169 -------- -------- Commitments and contingencies Shareholders' equity: Series A convertible preferred stock; $1.00 par value; 20,000 shares authorized, issued and outstanding in 1996 and 1995 2,000 2,000 Class A common stock; $.10 par value; 20,000,000 shares authorized, 4,225,823 and 4,192,823 shares issued and outstanding in 1996 and 1995 423 419 Class B common stock; $.10 par value; 7,000,000 shares authorized, 2,899,977 shares issued and outstanding in 1996 and 1995 290 290 Additional paid-in capital 6,968 6,828 Unrealized holding gain, net of tax - 287 Retained earnings 25,228 17,468 -------- -------- Total shareholders' equity 34,909 27,292 -------- -------- $177,901 $180,461 ======== ======== The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
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ATLANTIS PLASTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in thousands) - ----------------------------- ----------- --------- --------- ---------- ----------- --------- -------- -------- SERIES A UNREALIZED TOTAL YEARS ENDED CONVERTIBLE CLASS A CLASS B ADDITIONAL HOLDING SHARE- DECEMBER 31, 1996, PREFERRED COMMON COMMON PAID-IN GAINS RETAINED TREASURY HOLDERS' 1995 AND 1994 STOCK STOCK STOCK CAPITAL (LOSSES) EARNINGS STOCK EQUITY - ----------------------------- ----------- --------- --------- ---------- ----------- --------- -------- -------- BALANCE, December 31, 1993 $2,000 $401 $336 $7,998 $- $25,702 ($1,304) $35,133 Adjustment to opening balance for change in method of accounting for investment securities, net of tax - - - - 1,020 - - 1,020 Net income - - - - - 6,366 - 6.366 Dividends on preferred and common stock - - - - - (851) - (851) Conversions of Class B common stock - 32 (32) - - - - - Exercise of stock options, including tax benefit - 4 - 124 - - 177 305 Purchases of 122,184 Class A common treasury stock - - - - - - (729) (729) Cancellation of treasury shares - (29) (4) (1,823) - - 1,856 - Adjustment of minority interest obligation - - - 482 - - - 482 Decrease in unrealized gain, net of tax - - - - (1,304) - - (1,304) - ------------------------------------------------------------------------------------------------------------------------ BALANCE, December 31, 1994 2,000 408 300 6,781 (284) 31,217 - 40,422 Net loss - - - - - (13,072) - (13,072) Dividends on preferred and common stock - - - - - (677) - (677) Conversions of Class B common stock 10 (10) - - - - - Exercise of stock options, including tax benefit - 1 - 47 - - - 48 Increase in unrealized gain, net of tax - - - - 571 - - 571 - ------------------------------------------------------------------------------------------------------------------------ BALANCE, December 31, 1995 2,000 419 290 6,828 287 17,468 - 27,292 Net income - - - - - 8,097 - 8,097 Decrease in unrealized gain, net of tax - - - - (287) - - (287) Exercise of stock options, including tax benefit - 6 - 166 - - - 172 Purchases of Class A common stock - - - - - - (256) (256) Cancellation of Class A common stock - (2) - (26) - (228) 256 - Dividends on preferred stock - - - - - (109) - (109) - ------------------------------------------------------------------------------------------------------------------------ BALANCE, December 31, 1996 $2,000 $423 $290 $6,968 $ - $25,228 $ - $34,909 ========= ========= ========= ========== ========= =========== ========== =========== The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
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ATLANTIS PLASTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) - ---------------------------------------------------------------------------------- -------- -------- -------- YEARS ENDED DECEMBER 31, 1996 1995 1994 - ---------------------------------------------------------------------------------- -------- -------- -------- Cash Flows From Operating Activities Net income (loss) $ 8,097 ($13,072) $ 6,366 -------- -------- -------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 7,810 8,284 7,821 Amortization of goodwill 1,603 1,900 1,803 Loan fee and other amortization 548 522 521 Provision for impairment of long-lived assets -- 10,551 -- Loss (gain) on early extinguishment of debt 112 (392) -- Gain on dispositions of businesses and assets (6,718) (814) Provision for losses on properties held for sale -- 568 -- Change in assets and liabilities, net of dispositions and acquisitions of businesses: (Increase) decrease in accounts receivable (1,766) 8,335 (10,918) Decrease (increase) in inventories 411 4,311 (5,650) Decrease (increase) in other current assets 2,205 (691) (2,028) (Decrease) increase in accounts payable and accrued expenses (1,088) (3,673) 5,275 Increase (decrease) in deferred income taxes 544 (1,232) 456 Decrease in other liabilities (238) (254) (232) Other, net 106 664 29 Effects of discontinued operations -- (1,033) (1,394) -------- -------- -------- Total adjustments 3,529 27,046 (4,317) -------- -------- -------- Net cash provided by operating activities 11,626 13,974 2,049 -------- -------- -------- Cash Flows From Investing Activities Proceeds from dispositions of businesses and assets 18,583 13,014 571 Payment for acquisition of assets of business -- -- (12,412) Capital expenditures (6,750) (13,764) (16,448) -------- -------- -------- Net cash provided by (used in) investing activities 11,833 (750) (28,289) -------- -------- -------- Cash Flows from Financing Activities Borrowings under revolving credit agreements 27,435 27,916 37,591 Repayments under revolving credit agreements (27,435) (49,519) (15,988) Payments on long-term debt (12,258) (6,808) (524) Proceeds from issuance of long-term debt 3,678 15,639 5,776 Dividends on preferred and common stock (145) (677) (852) Purchases of common stock (256) -- (729) Proceeds from exercise of stock options 172 47 229 -------- -------- -------- Net cash (used in) provided by financing activities (8,809) (13,402) 25,503 Net increase (decrease) in cash and equivalents 14,650 (178) (737) Cash and equivalents at beginning of year 1,255 1,433 2,170 -------- -------- -------- Cash and equivalents at end of year $ 15,905 $ 1,255 $ 1,433 ======== ======== ======== Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 12,241 $ 14,017 $ 12,612 Income taxes $ 1,630 $ 1,404 $ 4,300
Note: In 1994, the Company purchased certain assets and liabilities of Advanced Plastics, Inc. with a fair value of approximately $13.1 million and $700,000, respectively, for total consideration of approximately $12.4 million. The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Atlantis is a leading U.S. manufacturer of polyethylene stretch and custom films used in a variety of industrial and consumer applications and molded plastic products for the appliance, automotive, recreational vehicle, and dairy industries. Atlantis Plastic Films manufactures stretch films which are multilayer plastic films that are used principally to wrap pallets of materials for shipping or storage and custom film products which include high-grade laminating films, embossed films, and specialty film products targeted primarily to industrial and packaging markets. Atlantis Molded Plastics employs two principal technologies, serving a wide variety of specific market segments: (i) injection molded thermoplastic parts that are sold primarily to original equipment manufacturers and used in major household appliances, agricultural and automotive products, and (ii) a variety of extruded plastic parts for trim and functional applications (profile extrusion) that are incorporated into a broad range of consumer and commercial products such as recreational vehicles, residential doors and windows, office furniture and retail store fixtures. Discontinued operations in 1995 and 1994 consisted of the operations of Western Pioneer which was sold on August 31, 1995. The following is a summary of the Company's significant accounting policies: BASIS OF PRESENTATION The consolidated financial statements include the accounts of Atlantis and its subsidiaries, all of which are wholly-owned. With regard to the Company's former 50% interest in the CKS/Rigal joint venture (sold during September, 1995), the Company recorded its proportionate share of the joint venture's results of operations, during the periods that the Company owned the investment, using the equity method of accounting. All material intercompany balances and transactions have been eliminated. CASH AND EQUIVALENTS The Company classifies as cash and equivalents all highly liquid investments which present insignificant risk of changes in value and have maturities at the date of purchase of three months or less. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market. PROPERTY AND EQUIPMENT Property and equipment are carried at cost less accumulated depreciation and amortization. The provisions for depreciation and amortization have been computed, using both straight-line and accelerated methods, over the estimated useful lives of the respective assets. Such useful lives generally fall within the following ranges: buildings and improvements - 15 to 30 years; office furniture and equipment - 5 to 10 years; manufacturing equipment - 5 to 30 years; and vehicles - 3 to 8 years. When assets are retired or otherwise disposed, the costs and accumulated depreciation are removed from the respective accounts, and any related profit or loss is recognized. Maintenance and repair costs are charged to expense as incurred. Additions and improvements are capitalized. GOODWILL Goodwill represents the excess of the purchase price over the fair value of identifiable assets and liabilities of acquired businesses. Goodwill is amortized on a straight-line basis over forty years from the date of the respective acquisitions. Accumulated amortization, excluding the goodwill writeoffs described in Note 14, amounted to approximately $14.3 million and $12.7 million at December 31, 1996 and 1995, respectively. LONG-LIVED ASSETS In the fourth quarter of 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121 -24- requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present, and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. The statement also requires that impairment losses be recorded on long-lived assets to be disposed of when the carrying value of the asset exceeds the fair value (usually based on discounted cash flows) less the estimated selling costs. Under this method, the Company reviews for impairment whenever events or changes in circumstances indicate that the carrying amount of any of its assets may not be recoverable. REVENUE RECOGNITION The Company primarily recognizes revenue when goods are shipped to customers. AMORTIZATION Loan acquisition costs and related legal fees are amortized over the respective terms of the related debt utilizing either: (i) the effective interest method, or (ii) the straight line method when the results do not materially differ from the effective interest method. INCOME TAXES The Company and its subsidiaries file consolidated Federal income tax returns. The Company records income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. PER SHARE DATA Primary earnings (loss) per share are computed by dividing net income (loss) after deduction of annual preferred dividend requirements, by the weighted average number of shares and dilutive share equivalents outstanding during each year. The Company's convertible preferred stock was determined not to be a common share equivalent in computing primary earnings per share. In computing 1996 fully diluted income per share, the convertible preferred stock was assumed to be converted into 210,244 shares of common stock. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. RECLASSIFICATIONS Certain amounts included in prior period financial statements have been reclassified to conform with the current year presentation. NOTE 2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES AND ASSETS ACQUISITION During May 1994, the Company purchased substantially all of the assets (excluding cash) and assumed all of the liabilities (excluding interest bearing indebtedness and other amounts due to the seller) of Advanced Plastics, Inc. ("Advanced"), an injection molder located in Warren, Ohio, for approximately $12.4 million. The Company also purchased real estate leased by Advanced and owned by the seller. The acquisition was accounted for using the purchase method, and accordingly, the results of operations of Advanced have been included in the consolidated income statements since the date of the acquisition. DISPOSITIONS In August 1995, the Company sold Western Pioneer for $12.0 million, generating a pretax gain of $914,000, and an after tax gain of $483,000. In September 1995, the Company sold its 50% interest in the CKS/Rigal blow molding joint venture for approximately $870,000, generating a pretax loss of $100,000, and an after tax gain of $37,000. The net cash proceeds after expenses from these 1995 sales were applied to the Company's revolving credit facility. During the fourth quarter of 1996 the Company completed the following transactions, generating a total pretax gain of $6.7 million: (i) in November, the Company sold PCI for approximately $8.3 million, generating a pretax gain of approximately $1.4 million, and an after tax gain of approximately $1.9 million, (ii) in December, the Company sold its Tulsa custom -25- manufacturing facility for $1.5 million, generating a pretax gain of approximately $350,000, and an after tax gain of approximately $210,000, and (iii) also during December, the Company sold its investment in WinsLoew Furniture, Inc. stock to WinsLoew for approximately $9.3 million, generating a pretax gain of approximately $4.9 million, and an after tax gain of approximately $2.9 million. A portion of the net cash proceeds after expenses from the PCI sale was used during the fourth quarter of 1996 to pay off the outstanding balance on the Company's revolving credit facility. As of December 31, 1995 the cost, unrealized gain and fair value of the WinsLoew investment, which was classified as available-for-sale, were $4.4 million, $435,000, and $4.8 million, respectively. WinsLoew is affiliated with Atlantis through its relationship with Trivest, Inc. ("Trivest") see Note 12. NOTE 3. INVENTORIES Inventories at December 31, 1996 and 1995 consisted of the following: (IN THOUSANDS) 1996 1995 ---- ---- Raw materials $9,649 $9,382 Work in progress 204 465 Finished goods 7,131 8,697 ------- ------- TOTAL $16,984 $18,544 ======= ======= NOTE 4. PROPERTY AND EQUIPMENT Property and equipment at December 31, 1996 and 1995 consisted of the following: (IN THOUSANDS) 1996 1995 ---- ---- Land $2,203 $2,886 Building & improvements 17,265 18,638 Office furniture & equipment 5,526 5,036 Manufacturing equipment 84,690 88,219 Vehicles 398 826 ------- ------- TOTAL 110,082 115,605 Accumulated depreciation and amortization (51,559) (51,272) ------- ------- NET $58,523 $64,333 ======= ======= As more fully described in Note 14, during the fourth quarter of 1995 the Company wrote down certain fixed assets at its Tulsa custom facility by approximately $1.7 million. -26- NOTE 5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following at December 31, 1996 and 1995: (IN THOUSANDS) 1996 1995 ---- ---- Accounts payable $8,628 $14,631 Accrued interest 3,722 4,058 Accrued compensation, vacation & profit sharing 3,845 2,439 Accrued health & safety expense 1,310 1,854 Customer deposits and commissions 1,502 862 Income taxes payable 1,967 171 Accrued construction in progress 2,252 1,439 Other 3,905 3,271 ------- ------- TOTAL $27,131 $28,725 ======= ======= NOTE 6. LONG-TERM DEBT Long-term debt consisted of the following at December 31, 1996 and 1995: (IN THOUSANDS) 1996 1995 ---- ---- Senior Notes $89,500 $95,200 Revolving credit facility - - Other indebtedness 18,382 21,262 ------- ------- TOTAL LONG-TERM DEBT 107,882 116,462 Current portion (2,517) (3,168) -------- -------- LONG-TERM DEBT, NET $105,365 $113,294 ======== ======== During early 1993, the Company refinanced substantially all of its existing indebtedness through a $100 million, 11% Senior Note offering due February 15, 2003 (the "Notes"), and borrowings under a $30.0 million revolving credit facility which matures in February 1998. During July 1996, the Company repurchased, at a slight discount, $5.7 million of its Notes in the open market, which resulted in an after tax extraordinary loss of $73,000, principally related to the write-off of unamortized loan origination costs. During December 1995, the Company repurchased, at a discount, $4.8 million of its Notes in the open market, and recognized an extraordinary gain of $254,000, net of tax. The Notes are senior unsecured obligations of the Company, with all of the Company's plastics subsidiaries jointly, severally and unconditionally guaranteeing the payment of principal and interest. The Notes may not be redeemed prior to February 15, 1998. On and after that date and until February 15, 2001, the Company may redeem all or any portion of the Notes at redemption prices ranging from 104.125% to 101.375% of the principal amount. After February 15, 2001, the Company may redeem all or any portion of the Notes at 100% of the principal amount. The Company must redeem $14.5 million and $25.0 million, respectively, of the Notes on February 15, 2001 and 2002. Covenants relating to the Notes restrict the Company from paying dividends, incurring new debt or taking certain other actions unless specified interest coverage ratio and other tests are met. The Company met the interest coverage ratio requirement for the trailing four quarters ended September 30 and December 31, 1996, and is therefore currently able to, among other things, pay dividends and incur new debt. During 1995, a decline in operating profitability caused the Company to fall below the interest coverage ratio requirement for the trailing four quarter periods ended September 30 and December 31, 1995, and March 31 and June 30, -27- 1996. Accordingly, during those periods the Company could not pay dividends, and its ability to incur new debt or take certain other actions was restricted. Under the terms of the revolving credit facility, the Company and its subsidiaries are required to, among other things, maintain certain financial ratios and minimum specified levels of net worth, refrain from paying dividends unless certain requirements are met, refrain from incurring additional indebtedness, or guaranteeing the obligations of others, and limit capital expenditures. At December 31, 1996, the gross availability on the revolving credit facility equaled $30.0 million. Unused availability, net of outstanding letters of credit of approximately $1.5 million, equaled $28.5 million. In addition, at year-end the Company had approximately $6.1 million of unused availability under an existing equipment financing program. Borrowings on the revolving credit facility are subject to a borrowing base formula which is based on eligible collateral (accounts receivable, inventories and fixed assets of the subsidiaries). Interest is computed using either LIBOR or prime-based rates plus a margin. Effective December 31, 1996 the Company favorably amended the revolving credit facility provisions governing interest rates and other fees charged by the lender. The LIBOR and prime-based interest rate margins on the facility are now determined by a formula based upon the Company's ratio of cash flow to net indebtedness, as defined in the amendment. At December 31, 1996 the LIBOR and prime rate margins were 1.75% and 0%, respectively, compared to 3% and 1.5%, respectively, at December 31, 1995. The 30-day LIBOR rate and the prime rate were 5.70% and 8.25%, respectively, at December 31, 1996. Other indebtedness of approximately $18.4 million consists of equipment and other collateralized financings entered into during 1994 through 1996, along with industrial revenue bonds and capitalized lease obligations entered into prior to 1994. At December 31, 1996 and 1995, the weighted average interest rates on these borrowings were 7.97% and 8.40%, respectively, with 85% of the total at floating interest rates, and the remainder at fixed interest rates as of December 31, 1996. Scheduled maturities of indebtedness in each of the next five years are as follows (in thousands): YEAR AMOUNT ---- ------ 1997 $2,517 1998 3,477 1999 2,505 2000 2,851 2001 16,846 Thereafter 79,686 -------- TOTAL $107,882 ======== Based on the quoted market price of the Notes, and the borrowing rates available to the Company for loans with similar terms and average maturities, the fair value of the Company's indebtedness at December 31, 1996 and 1995 was $111.5 million and $106.5 million, respectively. NOTE 7. CAPITAL STOCK Generally, the Class A Common Stock has one vote per share and the Class B Common Stock has ten votes per share. Holders of the Class B Common Stock are entitled to elect 75% of the Board of Directors; holders of Class A Common Stock are entitled to elect the remaining 25%. Each share of Class B Common Stock is convertible, at the option of the holder thereof, into one share of Class A Common Stock. Class A Common Stock is not convertible into shares of any other equity security. -28- During February 1994, the Company's Board of Directors approved a 2.5 cents per share quarterly dividend program beginning in April 1994, and consecutive quarterly dividends were paid through October 1995, after which the dividend program was discontinued . In November 1996, the Board of Directors authorized the repurchase of up to 1,000,000 shares of Atlantis Class A Common Stock, or 14% of the 7.1 million Class A and Class B Common Stock then outstanding. Through late March 1997 the Company has repurchased 320,344 shares (including 210,244 shares issued in connection with the conversion of preferred stock), and options for 55,125 shares, for total consideration of approximately $3.3 million. The Company intends to continue to buy its shares in the open market, or in privately negotiated transactions, at times and prices deemed advantageous. Prior to the 1997 conversion of Preferred Stock into common stock and subsequent repurchase of that common stock, each share of Preferred Stock had a liquidation preference of $100, and the holder of the Preferred Stock was entitled to an annual cumulative dividend, payable in equal semiannual installments of $72,500 on April 15 and October 15 of each year. NOTE 8. INCOME TAXES The income tax provision (benefit) for the years ended December 31, 1996, 1995 and 1994 consisted of the following: (IN THOUSANDS) 1996 1995 1994 ---- ---- ---- Continuing operations $4,396 ($1,674) $4,136 Discontinued operations 51 (445) 331 Tax effect from sale of Western Pioneer -- 432 -- Extraordinary (loss) gain (39) 137 -- ------ ------- ------ TOTAL $4,408 ($1,550) $4,467 ====== ======= ====== Current Federal income tax expense $2,607 $108 $3,588 Deferred Federal income tax expense (benefit) 1,182 (1,601) 388 State income tax expense (benefit) 619 (57) 491 ------ -------- ------ TOTAL INCOME TAX PROVISION (BENEFIT) $4,408 ($1,550) $4,467 ====== ======== ====== The following table provides a reconciliation between the Federal income tax rate and the Company's effective income tax rate for the years ended December 31, 1996, 1995 and 1994: 1996 1995 1994 ---- ---- ---- Federal income tax rate 34% (34%) 34% Disposition of PCI (9) -- -- Impairment of long-lived assets -- 20 -- State income taxes 3 (1) 3 Amortization of goodwill 4 4 5 Other, net 3 (1) (1) - --- --- Effective tax rate 35% (12%) 41% === === === -29- At December 31, 1996 and 1995, deferred tax assets and liabilities consisted of the following: (IN THOUSANDS) 1996 1995 ---- ---- DEFERRED TAX LIABILITIES- Excess of book over tax basis of property and equipment $7,154 $6,667 Goodwill 383 232 Excess of book over tax basis of investment in WinsLoew -- 1,550 Other, net 224 52 ----- ----- TOTAL DEFERRED TAX LIABILITIES 7,761 8,501 ----- ----- DEFERRED TAX ASSETS - Reserves and accrued expenses not yet deductible for tax purposes 2,301 2,420 Alternative minimum tax credit carryforwards -- 975 Capitalized inventory costs 34 64 ----- ----- TOTAL DEFERRED TAX ASSETS 2,335 3,459 ----- ----- DEFERRED INCOME TAXES, NET $5,426 $5,042 ===== ===== At December 31, 1996 and 1995, classification of net current deferred tax assets and liabilities and net noncurrent tax assets and liabilities is as follows: Deferred income taxes $6,886 $6,610 Less: Other current assets 1,460 1,568 ------ ------ $5,426 $5,042 ====== ====== NOTE 9. STOCK OPTION PLANS The Company's Stock Option Plans ("Option Plans") are designed to serve as an incentive for retaining qualified and competent employees, directors and agents. Options may be granted under the Option Plans on such terms and at such prices as determined by the Compensation Committee of the Board of Directors (consisting only of outside directors); provided, however, that the exercise price of options granted under the Option Plans will not be less than 90% of the market value of the Class A Common Stock on the date of grant. To date, the exercise price of all options granted under the Option Plans has been equal to or greater than the fair market value of the Class A Common Stock on the date of grant. Each option will be exercisable after the period or periods specified in the option agreement, but no option shall be exercisable after the expiration of ten years from the date of grant. Options granted under the Option Plans are not transferable other than by will or by the laws of descent and distribution. The Option Plans also authorize the Company to make loans to optionees to exercise their options. The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issues to Employees," and related interpretations in accounting for its plans. Accordingly, no compensation expense has been recognized for its stock-based compensation plans. Had compensation cost for the Company's stock option plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation," the Company's 1996 net income and earnings per share (primary) would have been reduced by approximately $160,000 and $0.02 per share, respectively, and the Company's 1995 net loss and loss per share would have been increased by $118,000 and $0.02, respectively. The fair value of the options was estimated at the date of grant using the Black-Scholes option-pricing model with the following -30- weighted average assumptions used for 1996 and 1995, respectively: dividend yield of 0% for both years; volatility of 45% for both years; risk-free interest rates of 6.7% and 7.4%; and an expected life of 6 years for both years. Information with respect to the Option Plans is as follows (in thousands of shares, except prices per share): 1996 1995 1994 ----- ----- ---- OPTIONS OUTSTANDING AT JANUARY 1ST 1,719 1,459 1,410 Granted 145 501 126 Exercised (60) (8) (73) Canceled (32) (233) (4) ------ ----- ------ OPTIONS OUTSTANDING AT DECEMBER 31ST 1,772 1,719 1,459 ====== ===== ====== WEIGHTED AVERAGE OPTION PRICES PER COMMON SHARE: OPTIONS OUTSTANDING AT JANUARY 1ST $5.12 $4.19 $3.94 Granted at fair market value $6.32 $6.27 $6.38 Granted at above fair market value N/A $10.38 N/A Exercised $2.86 $5.89 $3.11 Canceled $6.02 $5.28 $4.99 OUTSTANDING AT DECEMBER 31ST $5.28 $5.12 $4.19 Weighted-average fair value of options granted at fair market value during the year $3.36 $3.40 $3.27 Weighted-average fair value of options granted at above fair market value during the year N/A $ 2.25 N/A Options exercisable at December 31st 1,164 1,207 976 Options available for grant at December 31st 193 257 625 The following table summarizes information about stock options outstanding at December 31, 1996:
OPTIONS OUTSTANDING ------------------- OPTIONS EXERCISABLE WEIGHTED- ------------------- WEIGHTED- NUMBER AVERAGE WEIGHTED NUMBER AVERAGE RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE EXERCISE EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/96 PRICE --------------- ----------- ---------------- ---------------- ----------- ----- $1.38 -$ 2.99 85,460 5.08 $ 2.70 75,340 $2.68 $3.00 - $4.99 953,381 2.52 $ 3.84 868,381 $3.75 $5.00 - $6.99 448,094 7.52 $ 5.96 173,535 $5.91 $7.00 - $8.99 135,500 8.17 $ 8.45 27,100 $8.45 $9.00 - $11.88 150,000 8.69 $11.00 20,000 $11.88
-31- NOTE 10. BUSINESS SEGMENTS The Company considers its continuing operations to comprise two segments: Atlantis Plastic Films and Atlantis Molded Plastics. During 1996, 1995 and 1994, an Atlantis Molded Plastics customer accounted for approximately 9%, 10%, and 13%, respectively, of the Company's net sales. Summary data for 1996, 1995 and 1994 is as follows (in thousands): ATLANTIS ATLANTIS PLASTIC MOLDED FILMS PLASTICS CORPORATE CONSOLIDATED -------- -------- --------- ------------ 1996 - ---- Net sales $177,851 $89,268 $ -- $267,119 Operating income 11,740 6,650 -- 18,390 Identifiable assets 108,586 53,519 15,796 177,901 Capital expenditures 4,084 2,026 640 6,750 Depreciation & amortization 6,002 3,393 566 9,961 1995 - ---- Net sales $192,806 $88,258 $ -- $281,064 Operating income (loss) 1,982 (2,697) -- (715) Identifiable assets 111,831 56,419 12,211 180,461 Capital expenditures 7,616 5,472 676 13,764 Depreciation & amortization 6,638 3,511 557 10,706 1994 - ---- Net sales $173,947 $86,871 $ -- $260,818 Operating income 13,455 8,918 -- 22,373 Identifiable assets 124,557 67,172 19,793 211,522 Capital expenditures 9,702 6,687 59 16,448 Depreciation & amortization 6,663 2,918 564 10,145 NOTE 11. PROFIT SHARING AND RETIREMENT PLANS Atlantis and certain of its subsidiaries have profit sharing and defined contribution retirement plans. Generally, such plans cover all employees who have attained the age of 21 and have at least one year of service. Contributions to the plans are determined by the individual companies' Boards of Directors on an annual basis. Related expenses applicable to continuing operations were approximately $1.1 million, $812,000 and $1.1 million for the years ended December 31, 1996, 1995 and 1994, respectively. NOTE 12. RELATED PARTIES A management agreement exists between the Company and Trivest, an affiliate of a major shareholder. Trivest and the Company have certain common officers, directors and shareholders. Fees charged to expense under this agreement, including the portion related to discontinued operations, amounted to $497,000, $478,000, and $399,000 for the years ended December 31, 1996, 1995 and 1994, respectively. This agreement expires in December 1997. In addition to the above fees, Atlantis paid Trivest an acquisition fee of $405,000 relating to the May 1994 acquisition of Advanced. Atlantis shares its Miami, Florida office space with several related entities. Rent expense for this office space, as well as certain other non-direct general and administrative expenses, are allocated among Atlantis and these entities. -32- NOTE 13. COMMITMENTS AND CONTINGENCIES The Company is, from time to time, involved in routine litigation. None of such litigation, in which the Company is presently involved, is believed to be material to its financial condition or results of operations. As part of Atlantis' ongoing capital spending program, the Company has converted, or is in the process of converting, its information systems in order to accomodate the year 2000 century date change. Atlantis and its subsidiaries lease various office space, buildings, transportation and production equipment with terms in excess of one year. Total expense under these agreements for the years ended December 31, 1996, 1995 and 1994 was approximately $1.7 million, $1.5 million and $2.2 million, respectively. The total minimum rental commitments under long-term, noncancelable operating leases at December 31, 1996 consisted of the following (in thousands): YEAR AMOUNT ---- ------ 1997 $1,613 1998 1,347 1999 581 2000 355 2001 329 Thereafter 548 ------ TOTAL $4,773 ====== NOTE 14. IMPAIRMENT OF LONG-LIVED ASSETS AND OTHER RESTRUCTURING CHARGES In accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," during the fourth quarter of 1995 the Company wrote off certain goodwill and wrote down certain fixed assets, as discussed below. The Company's Tulsa custom film facility was unprofitable during 1995, had experienced operating losses in prior periods, and was expected to continue to incur operating losses in the future if the fourth quarter 1995 restructuring of the business was not undertaken. As part of that restructuring, the Company estimated the facility's future cash flows from its operations and its eventual disposition, compared those amounts to its carrying value, and determined that an impairment loss should be recognized. Accordingly, during the fourth quarter of 1995 goodwill associated with the facility was written off, and its fixed assets were written down to fair value. This facility was closed in August 1996, and was subsequently sold in December 1996 (see Note 2). Also during the fourth quarter of 1995, the Company decided to dispose of PCI as part of its strategy to focus its resources on the manufacture of film products and selected molded products. The Company determined that the carrying value of this operation exceeded its fair value, and determined the amount of the impairment charge by developing its best estimate of the fair value of the long-lived assets and comparing it to the carrying value of those long-lived assets. As a result, the majority of the goodwill associated with this business was written off during the fourth quarter of 1995. During 1996, PCI's profitability improved compared to 1995 levels, and in 1996, PCI was sold for approximately $8.3 million (see Note 2). The fourth quarter 1995 noncash charges for the impairment of long-lived assets associated with the Tulsa custom film facility and the reduction in carrying value of PCI totaled $10.6 million. Of this amount, goodwill write-offs totalled approximately $8.9 million (with no associated tax benefit), and fixed asset write-downs totalled approximately $1.7 million pretax, or $1.0 million after tax. During 1995, the Company also recorded restructuring charges of approximately $1.9 million related to: (i) the first quarter 1995 reorganization of its senior management group (approximately $750,000), (ii) the third and fourth quarter 1995 reconfiguration of its stretch film sales organization (approximately $800,000), and (iii) the fourth quarter 1995 headcount -33- reduction costs associated with the restructuring of the Tulsa custom facility and the injection molding unit (approximately $350,000). As of December 31, 1996 all amounts relating to these matters have been paid. NOTE 15. DISCONTINUED OPERATIONS Discontinued operations in 1995 consisted of the operations of Western Pioneer. The Western Pioneer sale contract contains a provision which requires that the adequacy of Western Pioneer's loss reserves as of March 31, 1995 (the "Original Loss Reserves") be evaluated during the fourth quarter of 1997 (with provisions for extension of the evaluation to a later date). The Original Loss Reserves will be evaluated by comparison of the Original Loss Reserve amount to the sum of the actual payments made from March 31, 1995 to the evaluation date, plus the remaining loss reserves related to the coverage in place at March 31, 1995 (together, the "Actual Loss Reserves"). To the extent that the Original Loss Reserves are greater or less than the Actual Loss Reserves, the Company will receive an additional payment from, or make an additional payment to, the purchaser of Western Pioneer, subject to certain deductions. At the present time, the Company does not anticipate that it will be required to make an additional payment in the future related to this contract provision. During 1996, the Company sold vacant land acquired in connection with the Western Pioneer sale and recognized a net after tax loss of approximately $47,000. In addition, during 1996 the Company recognized additional income on the sale of Western Pioneer of approximately $143,000, net of tax, related to certain tax benefits due to the Company. The following table summarizes Western Pioneer's operating results for the eight months ended August 31, 1995 and the year ended December 31, 1994: (IN THOUSANDS) 1995 1994 ---- ---- Revenues $17,621 $23,306 Expenses 17,872 22,099 ------ ------ Net income (loss) $ (251) $ 1,207 ====== ====== NOTE 16. ACCOUNTING PRONOUNCEMENTS In February 1997, SFAS No. 128, "Earnings Per Share" was issued. SFAS No. 128 specifies the computation, presentation, and disclosure requirements for Earnings Per Share ("EPS"), and is designed to improve the EPS information provided in financial statements by simplifying the existing computational guidelines, revising the disclosure requirements, and increasing the comparability of EPS data on an international basis. SFAS 128 must be implemented no later than fiscal year 1997. The Company has not yet determined the effect on operating results of implementing the statement, however, the adoption of SFAS 128 is not expected to have a materially adverse effect on consolidated financial position. NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED) Unaudited consolidated quarterly financial data for the years ended December 31, 1996 and 1995 is as follows:
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER ----------- ----------- ----------- ----------- 1996 1995 1996 1995 1996 1995 1996 1995 ---- ---- ---- ---- ---- ---- ---- ---- NET SALES $64,273 $77,857 $70,576 $68,344 $68,211 $70,911 $64,059 $63,952 GROSS PROFIT 11,501 14,170 12,892 8,377 11,566 9,390 9,783 9,158 INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 335 943 1,344 (1,726) 1,322 (1,277) 5,073 (11,498) NET INCOME (LOSS) 335 951 1,297 (2,341) 1,392 (439) 5,073 (11,243) INCOME (LOSS) BEFORE EXTRAORDINARY ITEM PER COMMON SHARE- PRIMARY (SEE NOTE) $0.04 $0.12 $0.17 ($0.23) $0.17 ($0.17) $0.65 ($1.62)
Note: For the fourth quarter of 1996, fully diluted income before extraordinary item per common share equaled $0.62. -34- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company has had no changes in or disagreements with its independent accountants on accounting and financial disclosure. PART III ITEMS 10, 11, 12, AND 13. The information called for by Items 10, 11, 12, and 13 is incorporated by reference to the registrant's Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (A) DOCUMENTS FILED AS A PART OF THIS REPORT: PAGE(S) ------- (1) Financial Statements: Report of Independent Accountants.................... 19 Consolidated Income Statements....................... 20 Consolidated Balance Sheets.......................... 21 Consolidated Statements of Shareholders' Equity...... 22 Consolidated Statements of Cash Flows................ 23 Notes to Consolidated Financial Statements........... 24 (2) Financial Statement Schedules: The following Financial Statement Schedule for the years ended December 31, 1994, 1995 and 1996 is submitted herewith: Report of independent accountants on Financial Statement Schedule.......................... 36 Schedule II Valuation and Qualifying Accounts.......... 37 All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because the required information is contained in the financial statements and notes thereto or because such schedules are not required or applicable. -35- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Atlantis Plastics, Inc.: In connection with our audits of the consolidated financial statements of Atlantis Plastics, Inc., as of December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996, which financial Statements are included in this Annual Report on Form 10-K, we have also audited the financial statement schedule listed in Item 14(A)2 herein. In our opinion, this financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included herein. Atlanta, Georgia Coopers & Lybrand L.L.P. February 7, 1997 -36-
Atlantis Plastics, Inc. Schedule II - Valuation and Qualifying Accounts for the years ended December 31 BALANCE AT CHARGED TO CHARGED BALANCE BEGINNING COSTS AND TO OTHER AT END CLASSIFICATION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR ---------- ---------- -------- ---------- ------- 1996 Allowances reducing the assets in the balance sheet: Doubtful accounts receivable $1,530 $ 143 $- $1,040 $ 633 Reserve for inventory obsolesence 342 91 - 15 418 ------ ------ -- ------ ------- Total $1,872 $ 234 $0 $1,055 $1,051 ====== ====== == ====== ======= 1995 Allowances reducing the assets in the balance sheet: Doubtful accounts receivable $ 761 $1,152 $- $ 383 $1,530 Reserve for inventory obsolesence 266 140 - 64 342 ------ ------ -- ------ ------ Total $1,027 $1,292 $0 $ 447 $1,872 ====== ====== == ====== ====== 1994 Allowances reducing the assets in the balance sheet: Doubtful accounts receivable $ 258 $ 618 $- $ 115 $ 761 Reserve for inventory obsolesence 103 163 - - 266 ------ ------ -- ------- ------ Total $ 361 $ 781 $0 $ 115 $1,027 ====== ====== == ======= ======
-37- (3) Exhibits (An asterisk to the left of an exhibit number denotes a management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.) 2.1 Agreement and Plan of Merger by and between Atlantis Plastics, Inc., a Florida corporation and Atlantis Group, Inc., a Delaware corporation, dated as of April 22, 1994. (2)(1) 3.1 Registrant's Articles of Incorporation (3.1)(1) 3.2 Registrant's Bylaws (February 1988) (3.2)(1) 4.1 Form of Stock Certificate evidencing ownership of Registrant's Class A Common Stock(10) 4.2 Trust Indenture between Registrant and American Stock Transfer and Trust Company (4.2)(7) 4.3 Form of Senior Note, dated February 15, 1993 (4.3)(7) *10.1 Registrant's Amended and Restated Stock Option Plan, dated as of March 16, 1989 (10.1)(4) *10.2 Registrant's 1987 Disinterested Directors Stock Option Plan (10.2)(2) *10.3 Registrant's Amended and Restated 1990 Stock Option Plan (10.2)(4) *10.4 Fourth Amended and Restated Management Agreement between Registrant and Trivest, Inc. (10.5)(6) *10.5 Second Amended and Restated Employment Agreement, dated January 1, 1990 between Registrant and Earl W. Powell (10.6)(3) *10.6 First Amendment To Second Amended and Restated Employment Agreement, dated as of April 1, 1992, between Registrant and Earl W. Powell (10.7)(7) *10.7 Employment Agreement, dated January 1, 1990, between Registrant and Phillip T. George, M.D. (10.7)(3) *10.8 First Amendment to Employment Agreement, dated as of April 1, 1992, between the Registrant and Phillip T. George, M.D. (10.9)(7) 10.9 Form of Indemnification Agreement (10.47)(9) 10.10 Office Lease, dated as of December 31, 1993, between Grand Bay Plaza Joint Venture and the Registrant, and First Addendum thereto. (10.12)(8) 10.11 Settlement Agreement by and between Mobil Oil Corporation and Linear Films, Inc. of Civil Action No. 87 civ. 874-B in the Northern District of Oklahoma, effective as of February 21, 1992 (10.40)(5) 10.12 License Agreement by and between Mobil Oil Corporation and Linear Films, Inc. for use of U.S. Patent No. 4,518,654, effective as of February 21, 1992 (10.41)(5) 10.13 Loan Contract, dated October 30, 1987, between State of Minnesota and National Poly Products, Inc. (10.11)(2) -38- 10.14 Letter of Consent to the Loan Contract between State of Minnesota and National Poly Products, Inc., dated October 30, 1991 (10.43)(5) 10.15 Letter of Consent to the Loan Contract between State of Minnesota and National Poly Products, Inc., dated January 13, 1992 (10.44 )(5) 10.16 Consent and Acknowledgement to the Loan Contract between State of Minnesota and National Poly Products, Inc., dated February 18, 1993 (10.22)(7) 10.17 Loan Agreement between Arkansas Development Finance Authority and Cyanede, dated March 18, 1992 (10.69)(6) 10.18 Promissory Note from Cyanede to the Arkansas Development Finance Authority, in the amount of $1,600,000, dated June 1, 1992 (10.70)(6) 10.19 Office Lease, dated as of April 1, 1992, between Euram 1870 Exchange Associates and National Poly Products, Inc. (10.78)(6) 10.20 Subordination and Attornment Agreement between State Farm Life Insurance Company and National Poly Products, Inc. dated April 6, 1992 (10.78)(6) 10.21 Intercreditor Agreement between Heller Financial, Inc., Arkansas Development Finance Authority and Worthen Trust Company, Inc. (10.40)(7) 10.22 Asset Purchase Agreement, dated May 17, 1994, among the Registrant, Advanced Plastics, Inc. and Frederick R. Warren. (2.1)(9) 10.23 Credit Agreement, dated February 22, 1993, between the Registrant and Heller Financial, Inc. (the "Heller Credit Agreement") (10.39)(7) 10.24 First Amendment and Waiver, dated March 28, 1994, to Heller Credit Agreement. (10.29)(10) 10.25 Consent Letter, dated May 23, 1994, to Heller Credit Agreement. (10.30)(10) 10.26 Second Amendment, dated August 15, 1994, to Heller Credit Agreement. (10.31)(10) 10.27 Consent Letter, dated September 9, 1994, to Heller Credit Agreement. (10.32)(10) 10.28 Consent Letter, dated February 13, 1995, to Heller Credit Agreement. (10.33)(10) 10.29 Consent and Waiver Letter, dated February 24, 1995, to Heller Credit Agreement. (10.34)(10) 10.30 Third Amendment to Heller Credit Agreement and Consent, dated as of March 30, 1995. (10.3)(11) 10.31 Fourth Amendment to Heller Credit Agreement, dated as of September 30, 1995. (10.2)(13) 10.32 Fifth Amendment to Heller Credit Agreement, dated as of December 31, 1995. (10.33)(14) 10.33 Sixth Amendment to Heller Credit Agreement, dated as of December 30, 1995. (10.1)(16) 10.34 Seventh Amendment to Heller Credit Agreement, dated as of September 5, 1996. (10.2)(16) -39- 10.35 Eighth Amendment to Heller Credit Agreement, dated as of November 6, 1996.(18) 10.36 Ninth Amendment to Heller Credit Agreement, dated as of January 31, 1997.(18) 10.37 Lease with option to purchase Real Estate between Atlantis Plastic Films, Inc. and the City of Mankato, Minnesota, dated as of March 2, 1995. (10.35)(10) *10.38 Employment Agreement, dated February 1, 1995, between the Registrant and Anthony F. Bova. (10.1)(11) *10.39 Amendment dated April 8, 1996 to Employment Agreement dated February 1, 1995 between Registrant and Anthony F. Bova. (10.1)(15) *10.40 Employment Agreement, dated March 6, 1995, between the Registrant and Paul Rudovsky. (10.2)(11) *10.41 Amendment dated Arpil 8, 1996 to Employment Agreement dated March 6, 1995 between Registrant and Paul Rudovsky. (10.2)(15) 10.42 Master Security Agreement and Promissory Note between Cyanede Plastics, Inc. and General Electric Capital Corporation ("GECC") in the amount of $2,673,919, dated as of February 23, 1995. (10.4)(11) 10.43 Corporate Guaranty of the Registrant of the obligations of Cyanede Plastics, Inc. to GECC, dated as of February 23, 1995. (10.5)(11) 10.44 Master Security Agreement and Promissory Note between Pierce Plastics, Inc. and GECC in the amount of $221,790, dated as of February 23, 1995. (10.6)(11) 10.45 Corporate Guaranty of the Registrant of the obligations of Pierce Plastics, Inc. to GECC, dated as of February 23, 1995. (10.7)(11) 10.46 Master Security Agreement and Promissory Note between Atlantis Plastic Films, Inc. (as successor by merger to Linear Films, Inc.) and GECC in the amount of $900,000, dated as of February 23, 1995. (10.10)(11) 10.47 Promissory Note from Atlantis Plastic Films, Inc. to GECC in the amount of $650,000, dated as of February 23, 1995. (10.11)(11) 10.48 Corporate Guaranty of the Registrant of the obligations of Atlantis Plastic Films, Inc. to GECC dated as of February 23, 1995. (10.12)(11) 10.49 Loan and Security Agreement by the Among Atlantis Plastic Films, Inc., Cyanede Plastics, Inc., Pierce Plastics, Inc., Plastic Containers, Inc. and The CIT/Equipment Group Financing, Inc. ("CIT"), dated as of 4/13/95. (10.13)(11) 10.50 First Amendment to Loan and Security Agreement by and among Atlantis Plastic Films, Inc., Atlantis Plastics Injection Molding, Inc. (formerly known as Cyanede Plastics, Inc.) Pierce Plastics, Inc., Plastic Containers, Inc. and CIT dated to be effective as of December 31, 1995. (10.47)(14) -40- 10.51 Second Amendment to Loan and Security Agreement by and among Atlantis Plastic Films, Inc., Atlantis Plastics Injection Molding, Inc. (formerly known as Cyanede Plastics, Inc.) Pierce Plastics, Inc. and CIT dated to be effective as of December 31, 1996.(18) 10.52 Promissory Note from Atlantis Plastic Films, Inc., Cyanede Plastics, Inc., Pierce Plastics, Inc., and Plastic Containers, Inc. to CIT in the amount of $15,000,000, dated as of April 13, 1995. (10.14)(11) 10.53 Guaranty of the Registrant of the obligations of Atlantis Plastic Films, Inc. to CIT, dated as of April 13, 1995. (10.15)(11) 10.54 Credit Agreement between Atlantis Plastics Injection Molding, Inc. and the Registrant and National City Bank, Northeast, dated as of May 19, 1995. (10.16)(12) 10.55 First Amendment to National City Bank, Northeast, Credit Agreement, dated as of September 30, 1995. (10.3)(13) 10.56 Second Amendment to National City Bank, Northeast, Credit Agreement, dated to be effective as of December 31, 1995. (10.52)(14) 10.57 Amendment and Restatement of Promissory Note by and between Atlantis Plastics Injection Molding, Inc. and the Registrant and National City Bank, Northeast, dated as of January 30, 1997.(18) 10.58 Stock Purchase Agreement for the acquisition of Western Pioneer Insurance Company by and between the Commerce Insurance Company, a Massachusetts Corporation and the Registrant, dated as of May 18, 1995.(10.17)(12) 10.59 Demand Promissory Note from Atlantis Plastic Films, Inc. to GECC in the amount of $1,280,579.70, dated as of May 8, 1995. (10.18)(12) 10.60 Purchase Agreement for the acquisition of the Joint Venture Interest of Rigal Plastics, Inc. in CKS/Rigal Plastics, by and between CKS Plastics, Inc., a Florida corporation and the Registrant, dated as of July 31, 1995. (10.1)(13) 10.61 Stock Purchase Agreement dated as of October 18, 1996 among Reid Plastics, Inc., Atlantis Molded Plastics, Inc. and Plastic Containers, Inc.(2.1)(17) 11.1 Calculation of Earnings Per Share(18) 21.1 Registrant's Subsidiaries(18) 23.1 Consent of Coopers & Lybrand L.L.P.(18) 27.1 Financial Data Schedule (for SEC use only) - -------------- (1) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Form 8-B filed June 7, 1994. (2) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987. -41- (3) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. (4) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's registration statement on Form S-8 (No. 33-41012). (5) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991. (6) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's registration statement on Form S-2 (33-53152). (7) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. (8) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. (9) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Report on Form 8-K filed June 3, 1994. (10) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. (11) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995. (12) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995. (13) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Quarterly Report on Form 10-Q for the ended September 30, 1995. (14) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995. (15) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. (16) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Quarterly Report on Form 10-Q for the ended September 30, 1996. (17) Incorporated by reference to the exhibit shown in parentheses and filed with the Registrant's Report on Form 8-K dated November 27, 1996. (18) Filed herewith. (B) REPORTS ON FORM 8-K During the fourth quarter of 1996, the Registrant filed a current report on Form 8-K, dated November 27, 1996. -42- (C) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K The index to exhibits that are listed in Item 14(a)(3) of this report and not incorporated by reference follows the "Signatures" section hereof and is incorporated herein by reference. (D) FINANCIAL STATEMENT SCHEDULES REQUIRED BY REGULATION S-X See Item 14 (a) 2. -43-
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ATLANTIS PLASTICS, INC. Date: March 28, 1997 By:/S/ PAUL RUDOVSKY ------------------------------- PAUL RUDOVSKY EXECUTIVE VICE PRESIDENT, FINANCE AND ADMINISTRATION (PRINCIPAL FINANCIAL OFFICER) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. SIGNATURE TITLE DATE --------- ----- ---- /S/ EARL W. POWELL Chairman of the Board March 28, 1997 -------------------------------------------- EARL W. POWELL Director and /S/ PHILLIP T. GEORGE, M.D. Vice Chairman March 28, 1997 -------------------------------------------- PHILLIP T. GEORGE, M.D. President and Chief Executive Officer /S/ ANTHONY F. BOVA (Principal Executive Officer) March 28, 1997 -------------------------------------------- ANTHONY F. BOVA Executive Vice President Finance and Administration /S/ PAUL RUDOVSKY (Principal Financial Officer) March 28, 1997 -------------------------------------------- PAUL RUDOVSKY /S/ CHARLES D. MURPHY, III Director March 28, 1997 -------------------------------------------- CHARLES D. MURPHY, III /S/ CHESTER B. VANATTA Director March 28, 1997 -------------------------------------------- CHESTER B. VANATTA /S/ LARRY D. HORNER Director March 28, 1997 -------------------------------------------- LARRY D. HORNER /S/ CESAR ALVAREZ Director March 28, 1997 -------------------------------------------- CESAR ALVAREZ
-44- INDEX TO EXHIBITS PAGE NUMBER IN SEQUENTIAL EXHIBIT NUMBERING SYSTEM - ------- ---------------- 10.35 Eighth Amendment to Heller Credit Agreement, dated as of November 6, 1996. 10.36 Ninth Amendment to Heller Credit Agreement, dated as of January 31, 1997. 10.51 Second Amendment to Loan and Security Agreement by and among Atlantis Plastic Films, Inc., Atlantic Plastics Injection Molding, Inc. (formerly known as Cyanede Plastics, Inc.) Pierce Plastics, Inc. and CIT dated to be effective as of December 31, 1996. 10.57 Amendment and Restatement of Promissory Note by and between Atlantis Plastics Injection Molding, Inc. and the Registrant and National City Bank, Northeast, dated as of January 30, 1997. 11.1 Calculation of Earnings Per Share 21.1 Registrant's Subsidiaries 23.1 Consent of Coopers & Lybrand L.L.P. 27.1 Financial Data Schedule (for SEC use only) EX-10.35 2 EXHIBIT 10.35 EIGHTH AMENDMENT TO CREDIT AGREEMENT This Eighth Amendment to Credit Agreement, dated as of November 6, 1996 (this "Agreement") is between Atlantis Plastics, Inc., a Florida corporation ("Borrower") and Heller Financial, Inc., a Delaware corporation for itself as Agent and as Lender ("Heller"). RECITALS A. Borrower and Heller are parties to that certain Credit Agreement dated as of February 22, 1993 (as amended from time to time the "Credit Agreement"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in this Credit Agreement. B. Heller and Borrower desire to further amend the Credit Agreement as provided herein. NOW THEREFORE, in consideration of the foregoing, the covenants and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. AMENDMENTS TO THE CREDIT AGREEMENT. A. The definition of "Adjusted Tota1 Debt" as set forth in Section 1.1 of the Credit Agreement is hereby amended by adding the following after the word "Month" and before the period,(".") in the last line of said definition: "less Borrower's cash on hand (to the extent but only to the extent such amount is expressed as a positive number) as of the last day of the Fiscal Month provided, however, if on any date of determination there is an outstanding balance under the Revolving Loan, and Borrower's cash on hand exceeds $1,000,000, the amount of cash on hand in excess of $1,000,00O shall be excluded from this calculation." B. Section l.1 of the Credit Agreement is further amended by adding the following new definitions in their proper alphabetical order: "Eighth Amendment" means that certain Eighth Amendment to Credit Agreement dated as of November 6, 1996 executed between Borrower and Heller and acknowledged by the Subsidiary Guarantors. "Eighth Amendment Effective Date" means the first date on which each of the conditions set forth in Paragraph 3 of the Eighth Amendment shall have been satisfied. C. Clause (d) of the first sentence of subsection 2.4(C)(2) is hereby amended by adding the following after the words "Net Proceeds" and before the period (".") which concludes said sentence: "Provided, however, with respect to the Net Proceeds from an Asset Disposition to be received by Borrower in connection with the sale by Borrowrer of One Hundred Percent (100%) of the stock of PCI (the "PCI Proceeds") to Reid Plastics, Inc., a California corporation pursuant to the terms of that certain Stock Purchase Agreement dated as of October 18, 1996 (the "PCI Stock Purchase Agreement") only, Borrower shall be permitted, notwithstanding any provision of Section 7.7 or in the definition of Permitted Investments to the contrary (but provided that all of the conditions set forth in Section 7.7 shall have been satisfied), to use the PCI Proceeds to repurchase Borrower's Senior Notes and for other general corporate purposes". D. Section 6.4 of the Credit Agreement shall be amended by adding the following as a new paragraph: For purposes of calculating the ratio of Adjusted Tota1 Debt to EBIDAT as provided in this Section 6.4, Borrower's EBIDAT for each Trailing Twelve-Fisca1 Month Period ending on the last day of each of Borrower's Fiscal Quarters ending on December 31, 1996, March 31, 1997, June 30, 1997 and September 30, l997, there shall be excluded from each such calculation any contribution to Borrower's EBIDAT made by PCI on or before the Eighth Amendment Effective Date which would have been otherwise properly included in Borrower's EBIDAT for the re1evant Trailing Twelve-Fiscal Month then ending. E. Clause (iii) of Section 7.7 is hereby amended by inserting the following immediately before the word "the" which is the first word of said clause prior to its amendment hereby: "except as permitted by clause (d) of subsection 2.4(C)(2) as amended by the Eighth Amendment," F. OMNIBUS AMENDMENT TO CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS. By their respective signatures below, Borrower, Agent and Lender each agree that from and after the Eighth Amendment Effective Date PCI shall cease, for all purposes, to be a Loan Party or Subsidiary Guarantor under the Credit Agreement 2 and the Loan Documents including, without limitation, the Notes and from and after the Eighth Amendment Effective Date PCI shall be released from any and all duties and liabilities to Heller as a Loan Party or Subsidairy Guarantor under the Credit Agreement or any Loan Document, and the security interest granted in the Collateral of PCI is released and discharged. 2. REPRESENTATIONS AND WARRANTIES. To induce Heller to enter into this Agreement, Borrower represents and warrants to Heller that: (a) AUTHORITY AND BINDING EFFECT. The execution, delivery, and performance by Borrower of this Agreement is within its corporate power, has been duly authorized by all necessary corporate action (including, without limitation, shareholder approval), has received all necessary government approvals (if any shall be required), and does not and will not contravene or conflict with any provision of law applicable to Borrower, the Certificate of Incorporation or Bylaws of Borrower, or any order, judgment, or decree of any court or other agency of government or any agreement instrument, or document binding upon Borrower including, without limitation, that certain Indenture dated as of February 22, 1993, naming American Stock Tranfer & Trust Company as Trustee relating to Borrower's 11% Senior Notes due 2003; and the Credit Agreement as heretofore amended and as amended as of the date hereof is the legal, valid, and binding obligation of Borrower enforceable against Borrower in accordance with its terms. (b) NO DEFAULT. No Default or Event of Default under the Credit Agreement, as amended hereby, has occurred and is continuing. 3. CONDITIONS. The effectiveness of this Agreement and the amendments to the Credit Agreement set forth herein are subject to the satisfaction of each of the following conditions precedent or concurrent: (a) CLOSING OF THE SALE OF PCI. The sale of PCI to Reid Plastics, Inc. shall have closed and Borrower shall have confirmed receipt, to Agent, in writing, of Net Proceeds from such sale in an amount not less than $6,000,000; and (b) EXECUTION OF EIGHTH AMENDMENT. Borrower shall have executed and delivered this Eighth Amendment to Agent for the Benefit of Lenders together with an Acknowledgment executed by each of the Subsidiary Guarantors in the form of Exhibit A appended hereto. 3 4. MISCELLANEOUS (a) CAPTIONS. Section captions used in this Agreement are for convenience only, and shall not affect the construction of this Agreement. (b) GOVERNING LAW. This Agreement shall be a contract made under and governed by the laws of the State of Illinois, without regard to conflict of laws principles. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (c) COUNTERPARTS. This Agreement may be executed in counterparts, each of which counterparts shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same Agreement. (d) SUCCESSORS AND ASSIGNS. This Agreement shal1 be binding upon Borrower and Heller and their respective successors and assigns, and shall inure to the sole benefit of Borrower and Heller and the successors and assigns of Borrower and Heller. (e) REFERENCES. Any reference to the Credit Agreement or the Financing Agreements contained in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Agreement shall be deemed to include this Agreement unless the context shall otherwise require. (f) CONTINUED EFFECTIVENESS. Notwithstanding anything contained herein, the terms of this Agreement are not intended to and do not serve to effect a novation as to the Credit Agreement. The parties hereto expressly do not intend to extinguish the Credit Agreement. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Credit Agreement which is evidenced by the notes provided for therein and secured by the Collateral. The Credit Agreement as amended hereby and each of the Loan Documents remain in full force and effect. 4 Delivered at Chicago, Illinois, as of the date and year first above written. ATLANTIS PLASTICS, INC. (f/k/a Atlantis Group, Inc.) By: /S/ ------------------------------- Name Printed: ---------------------- Title: ----------------------------- HELLER FINANCIAL, INC., for itself and as Agent for the Lenders By: /S/ ------------------------------- Name Printed: ---------------------- Title: ----------------------------- 5 EXHIBIT A ACKNOWLEDGMENT OF CONSENT The undersigned have entered into various Corporate Guaranties in favor of Heller as Lender and Agent in connection with various loans made to Atlantis Plastics, Inc., formerly known as Atlantis Group, Inc. Thc undersigned has reviewed the foregoing and consents to thc amendment contemplated thereunder. In connection with the foregoing, the undersigned acknowledges and confirms that each Corporate Guaranty will continue to guarantee and secure, to the fullest extent provided thereby, the payment and performance of all Borrower's Obligations (as defined in each Corporate Guaranty) including without limitation the payment and performance of all Obligations (as defined in the Credit Agreement) of the Borrower now or hereafter existing under or in respect of the Credit Agreement, as amended from time to time. Each of the undersigned confirms and agrees that their respective Corporate Guranty shall continue to be in full force and effect and is hereby confirmed and ratified in all respects. IN WITNESS WHEREOF, the undersigned has caused this Acknowledgement and Consent to be duly executed by its officer thereunto duly authorized as of November__, 1996. ATLANTIS MOLDED PLASTICS, INC. ATLANTIS PLASTIC FILMS, INC. (successor by Merger of Linear Films, Inc. and National Poly Products, Inc. By: /S/ By: /S/ ----------------- ------------------ Title: Title: ATLANTIS PLASTIC INJECTION PIERCE PLASTICS, INC. MOLDING, INC. (f/k/a CYANEDE PLASTICS, INC.) By: /S/ By: /S/ ----------------- ------------------ Title: Title: 6 EX-10.36 3 EXHIBIT 10.36 CONSENT AND NINTH AMENDMENT TO CREDIT AGREEMENT This Consent and Ninth Amendment to Credit Agreement, dated as of January 31, 1997 (this "Agreement"), is between ATLANTIS PLASTICS, INC., a Florida corporation ("Borrower"), and HELLER FINANCIAL, INC., a Delaware corporation in its individual capacity as a Lender and in its capacity as agent for the Lenders, "Agent". W I T N E S S E T H: WHEREAS, Agent, Borrower and Lenders are parties to that certain Credit Agreement dated as of February 22, 1993 (as heretofore amended, the "Credit Agreement"; capitalized terms not otherwise defined herein shall have the definitions provided therefor in the Credit Agreement) and to certain other documents executed in connection with the Credit Agreement; and WHEREAS, the parties wish to further amend the Credit Agreement as provided herein; NOW, THEREFORE, the parties agree as follows: 1. AMENDMENTS TO THE CREDIT AGREEMENT. (a) The definitions of "Base Rate Loans" and "LIBOR Rate Loans" contained in subsection 1.1 of the Credit Agreement are hereby amended and restated as follows: "Base Rate Loans" means Loans bearing interest at rates determined by reference to the Base Rate. "LIBOR Rate Loans" means Loans bearing interest at rates determined by reference to the LIBOR. (b) The following definition is hereby inserted into subsection 1.1 of the Credit Agreement in alphabetical order: "Ninth Amendment Effective Date" means December 31, 1996. (c) Subsection 2.2(A) of the Credit Agreement is hereby amended and restated as follows: (A) RATE OF INTEREST. (1) So long as no Event of Default has occurred and is continuing, from the Ninth Amendment Effective Date with respect to the Revolving Loans outstanding at the Ninth Amendment Effective Date and from the date all future Revolving Loans are made and the date all other Obligations become due, depending upon Borrower's election from time to time, as permitted herein, to have portions of the Loans accrue interest based upon the LIBOR, the Loans and the other Obligations shall bear interest at the rates set forth in below: The Revolving Loan and all other Obligations shall bear interest as follows: (a) If a Base Rate Loan, then at the sum of the Base Rate PLUS the Base Rate Margin. (b) If a LIBOR Loan, then at the sum of the LIBOR PLUS the LIBOR Margin. "Base Rate Margin" shall mean, (i) for the period commencing on the Ninth Amendment Effective Date and ending on the day preceding the first Business Day of the calendar month commencing immediately after the receipt by Agent of the next Compliance Certificate delivered by Borrower (the first Business Day of the calendar month commencing immediately after the receipt by Agent of each Compliance Certificate delivered by Borrower being hereinafter referred to as an "Adjustment Date"), the applicable percent per annum set forth in the pricing table below opposite the Adjusted Total Debt to EBIDAT ratio, assuming that the Adjusted Total Debt to EBIDAT ratio equals 4.50 to 1.00, and (ii) during the period commencing on each Adjustment Date and ending on the day preceding each subsequent Adjustment Date (each such period being hereinafter referred to as a "Calculation Period"), the applicable percent per annum set forth in the pricing table below opposite the Adjusted Total Debt to EBIDAT ratio calculated for such Calculation Period. "LIBOR Margin" shall mean (i) for all LIBOR Rate Loans having an Interest Period (as defined in subsection 2.2(B)(1)) commencing during the period commencing on the Ninth Amendment Effective Date and ending on the day preceding the first Adjustment), the applicable percent per annum set forth in the pricing table below opposite the Adjusted Total Debt to EBIDAT ratio, assuming that the Adjusted Total Debt to EBIDAT ratio equals 4.50 to 1.00, and (ii) for all LIBOR Rate Loans having an Interest Period commencing during the period commencing on an Adjustment Date and ending on the day preceding the subsequent Adjustment, the applicable percent per annum set forth in the pricing table below opposite the Adjusted Total Debt to EBIDAT ratio calculated for such Calculation Period. 2 PRICING TABLE - ------------------------------------------------------------------------------- ADJUSTED TOTAL BASE RATE MARGIN LIBOR MARGIN DEBT TO EBIDAT RATIO - ------------------------------------------------------------------------------- Revolving Revolving Loans Loans - ------------------------------------------------------------------------------- Greater than 4.75x 1.00% 2.75% - ------------------------------------------------------------------------------- Greater than 4.50 but less than or equal to 0.75% 2.50% 4.75x - ------------------------------------------------------------------------------- Greater than 4.00 but less than or equal to 0.50% 2.25% 4.50x - ------------------------------------------------------------------------------- Greater than 3.50 but less than or equal to 0.25% 2.00% 4.00x - ------------------------------------------------------------------------------- Equal to or less than 3.50x 0.00% 1.75% - ------------------------------------------------------------------------------- If Borrower shall fail to deliver a Compliance Certificate by the date required pursuant to subsection 5.1(C), effective as of the first Business Day of the immediately succeeding calendar month and continuing through the day preceding the next succeeding Adjustment Date, each applicable Base Rate Margin and each applicable LIBOR Rate Margin shall be conclusively presumed to equal the highest applicable Base Rate Margin and the highest applicable LIBOR Margin specified in the pricing table set forth above. (2) At the election of Agent, in its sole discretion, after the occurrence of an Event of Default and for so long as such Event of Default continues, the Loans and all other Obligations shall bear interest until paid in full at a rate per annum (meaning 360 days) that is two percent (2.0%) in excess of the rate of interest otherwise payable under this Agreement; PROVIDED that, in the case of LIBOR Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective, such LIBOR Rate Loans shall thereupon become Base Rate Loans and thereafter bear interest payable upon demand at a rate which is two percent (2.0%) per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. (d) Subsection 2.3(B) of the Credit Agreement is hereby amended by reducing the unused facility fee from 0.5% per annum to 0.375% per annum. (e) Subsection 2.3(C) of the Credit Agreement is hereby amended by reducing the Letter of Credit and Guaranty fees from 2.5% per annum to 1.75% per annum. 3 (f)Subsection 6.4 of the Credit Agreement is hereby amended by adding the following as a new paragraph: For purposes of calculating the ratio of Adjusted Total Debt to EBIDAT as provided in this section 6.4, Borrower's EBIDAT for each Trailing Twelve-Fiscal Month Period ending on the last day of each of Borrower's Fiscal Quarters ending on March 31, 1997, June 30, 1997, September 30, 1997 and December 31, 1997, there shall be excluded from each such calculation any contribution to Borrower's EBIDAT attributable to the Tulsa-Custom business which otherwise would have been included in Borrower's EBIDAT for the relevant Trailing Twelve-Fiscal Month Period then ending. 2. CONSENTS. (a) Subsection 7.7 of the Credit Agreement prohibits Borrower or any Subsidiary from disposing of assets unless certain specified conditions have been met. Borrower has requested that Lenders consent to the sale by its Subsidiary of certain assets of the Custom Film business located in Tulsa, Oklahoma ("Tulsa-Custom Assets") for an amount not less than $1,500,000 in the aggregate. Lenders hereby consent to the sale by Borrower's Subsidiary of the Tulsa-Custom Assets. (b) At Borrower's request, Lenders hereby consent to Borrower using the Net Proceeds from the sale of the Tulsa-Custom Assets to repurchase Borrower's Senior Notes and for other general corporate purposes. 3. REPRESENTATIONS AND WARRANTIES. To induce Agent and Lenders to enter into this Agreement, Borrower represents and warrants to Heller that: (a) AUTHORITY AND BINDING EFFECT. The execution, delivery, and performance by Borrower of this Agreement is within its corporate power, has been duly authorized by all necessary corporate action (including, without limitation, shareholder approval), has received all necessary government approvals (if any shall be required), and does not and will not contravene or conflict with any provision of law applicable to Borrower, the Certificate of Incorporation or Bylaws of Borrower, or any order, judgment, or decree of any court or other agency of government or any agreement, instrument, or document binding upon Borrower; and the Credit Agreement as heretofore amended and as amended as of the date hereof is the legal, valid, and binding obligation of Borrower enforceable against Borrower in accordance with its terms. (b) NO DEFAULT. No Default or Event of Default under the Credit Agreement, as amended hereby, has occurred and is continuing. 4. MISCELLANEOUS. (a) CAPTIONS. Section captions used in this Agreement are for convenience only, and shall not affect the construction of this Agreement. 4 (b) GOVERNING LAW. This Agreement shall be a contract made under and governed by the laws of the State of Illinois, without regard to conflict of laws principles. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (c) COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. (d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon Agent, Borrower and Lenders and their respective successors and assigns, and shall inure to the sole benefit of Agent, Borrower and Lenders and the successors and assigns of Agent, Borrower and Lenders. (e) REFERENCES. Any reference to the Credit Agreement contained in any notice, request, certificate, or other document executed concurrently with or after the execution and delivery of this Agreement shall be deemed to include this Agreement unless the context shall otherwise require. (f) CONTINUED EFFECTIVENESS. Notwithstanding anything contained herein, the terms of this Agreement are not intended to and do not serve to effect a novation as to the Credit Agreement. The parties hereto expressly do not intend to extinguish the Credit Agreement. Instead, it is the express intention of the parties hereto to reaffirm the indebtedness created under the Credit Agreement which is evidenced by the Notes and secured by the Collateral. The Credit Agreement as amended hereby and each of the other Loan Documents remains in full force and effect. (g) COSTS, EXPENSES AND TAXES. Borrower affirms and acknowledges that subsection 10.1 of the Credit Agreement applies to this Agreement and the transactions and Agreements and documents contemplated hereunder. 5 Delivered at Chicago, Illinois, as of the day and year first above written. ATLANTIS PLASTICS, INC. By:______________________________ Name Printed:____________________ Title:___________________________ HELLER FINANCIAL, INC., Individually and as Agent By:______________________________ Name Printed:____________________ Title:___________________________ 6 ACKNOWLEDGMENT Each of Atlantis Molded Plastics, Inc., Atlantis Plastic Injection Molding, Inc. (f/k/a Cyanede Plastics, Inc.), Atlantis Plastic Films, Inc. and Pierce Plastics, Inc. hereby acknowledges and consents to the terms of this Agreement and hereby affirms, ratifies and confirms all of the terms and provisions of the such entity's Guaranty in favor of Agent and Lenders. ATLANTIS MOLDED PLASTICS, INC. By:_______________________________ Name Printed:_____________________ Title:____________________________ ATLANTIS PLASTICS INJECTION MOLDING, INC. By:_______________________________ Name Printed:_____________________ Title:____________________________ ATLANTIS PLASTICS FILMS, INC. By:_______________________________ Name Printed:_____________________ Title:____________________________ PIERCE PLASTICS, INC. By:_______________________________ Name Printed:_____________________ Title:____________________________ 7 EX-10.51 4 EXHIBIT 10.51 AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT ("AMENDMENT NO. 2") dated as of December 31, 1996, by and among ATLANTIS PLASTICS FILMS, INC., a Delaware corporation ("FILMS"), ATLANTIS PLASTICS INJECTION MOLDING, INC. (formerly known as CYANEDE PLASTICS, INC.), a Kentucky corporation ("MOLDING"), and PIERCE PLASTICS, INC., a Delaware corporation ("PIERCE"), (Films, Molding, and Pierce are herein referred to individually as "DEBTOR" and collectively as "DEBTORS") and THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT"), a New York corporation. WHEREAS, Debtors and CIT entered into a Loan and Security Agreement, dated as of April 13, 1995 pursuant to which CIT made a loan to Debtors in the original principal amount not to exceed $15,000,000; WHEREAS, Debtors and CIT entered into a First Amendment to Loan and Security Agreement dated to be effective as of December 31, 1995 (the Loan and Security Agreement, as amended, the "ORIGINAL LOAN AGREEMENT"); WHEREAS, pursuant to a letter dated November 12, 1996, CIT agreed to release, and thereby did release, Plastic Containers, Inc. from any and all obligations as a "Debtor" under the Original Loan Agreement; and WHEREAS, CIT and Debtors have agreed to enter into this Amendment No. 2 in order to permit additional Loans to be made pursuant to the terms of the Original Loan Agreement, as amended by the terms hereof; NOW, THEREFORE, in consideration of the premises and in order to induce CIT to amend the Original Loan Agreement, and intending to be bound hereby, the parties hereto hereby agree as follows: 1. DEFINED TERMS. All capitalized terms which are used herein and not otherwise defined herein shall have the meanings set forth in the Original Loan Agreement. 2. AMENDMENTS TO ORIGINAL LOAN AGREEMENT. (a) Notwithstanding anything to the contrary contained in the Original Loan Agreement, its terms are hereby amended MUTATIS MUTANDIS, as follows: (i) There shall be three additional Loans made. (A) The first two loans ("A Loans") shall be in the aggregate maximum principal amount of $5,000,000.00, and the proceeds of the A Loans shall be used to refinance the purchase of certain used Equipment including used Equipment currently existing as collateral of the General Electric Credit Corporation ("GECC"). The refinancing of the GECC collateral shall be the subject of a separate Loan. The term of the A Loans shall be for sixty (60) months, and the A Loans shall bear interest at a rate per annum equal, at the Debtor's option, to the Treasury Rate plus 2.00% or the LIBOR Rate plus 2.00%. If the interest rate initially chosen is based on the LIBOR Rate, the Debtors shall have until December 31, 1997, to elect to convert the A Loans to Loans bearing an interest rate equal to the Treasury Rate plus 2.00%, all pursuant to the applicable terms of Subsection 2.2(b) of the Original Loan Agreement. The A Loans shall be evidenced by a note ("A Note") substantially in the form of Exhibit A (Fixed Interest Rate) or Exhibit A-1 (Floating Interest Rate) attached hereto. (B) The third loan ("B Loan") shall be in the maximum principal amount of $2,500,000.00, and the proceeds of the B Loan shall be used to finance the purchase of certain new Equipment which CIT shall have found acceptable in its sole discretion. The term of the B Loan shall be for eighty-four (84) months, and the B Loan shall bear interest at a rate per 1 annum equal, at the Debtors' option, to the Treasury Rate plus 2.00% or the LIBOR Rate plus 2.00%. If the interest rate intially chosen is based on the LIBOR Rate, the Debtors shall have until December 31, 1997, to elect to convert the B Loan to a Loan bearing an interest rate equal to the Treasury Rate plus 2.00%, all pursuant to the applicable terms of Subsection 2.2(b) of the Original Loan Agreement. The B Loan shall be evidenced by a note ("B Note") substantially in the form of Exhibit B (Fixed Interest Rate) or Exhibit B-1 (Floating Interest Rate) attached hereto. (iii) The Debtors shall likewise have until December 31, 1997, to convert any Drawdowns made before January 1, 1996, to a Loan or Loans ("C Loan") bearing an interest rate equal to the Treasury Rate plus 2.25%, all pursuant to the applicable terms of Subsection 2.2(b) of the Original Loan Agreement. The C Loan shall be evidenced by a Note ("C Note") substantially in the form of Exhibit C attached hereto. (b)(i) For purposes of the A Loans and any C Loan the original term of which was five (5) years the term "Treasury Rate" shall be defined as follows: "TREASURY RATE" shall mean with respect to the Loan if Debtors elect a Fixed Interest Rate, the rate per annum equal to the yield to maturity for the U.S. Treasury security having a remaining term to maturity closest to three (3) years as at the close of business of the third Business Day prior to the conversion of the interest rate, as reported on page 5 ("U.S. Treasury and Money Markets") of the information provided by Telerate Systems Incorporated. (ii) For purposes of the B Loan and any C Loan the original term of which was seven (7) years the term "Treasury Rate" shall be defined as follows: "TREASURY RATE" shall mean with respect to the Loan if Debtors elect a Fixed Interest Rate, the rate per annum equal to the yield to maturity for the U.S. Treasury security having a remaining term to maturity closest to five (5) years as at the close of business of the third Business Day prior to the conversion of the interest rate, as reported on page 5 ("U.S. Treasury and Money Markets") of the information provided by Telerate Systems Incorporated. (c) Subsection 9.4 of the Original Loan Agreement is hereby amended in its entirety to read as follows: 9.4 COMMITMENT FEE. CIT acknowledges receipt from Guarantor of a commitment fee in the amount of $75,000 (the "Commitment Fee"). CIT agrees to refund the Commitment Fee to Guarantor, after the expiration of the commitment period hereunder and completion by CIT of all follow-up matters related to the transactions contemplated hereby, such refund to be, however, net any out-of-pocket fees, costs, disbursements and expenses incurred by CIT in connection with the transactions contemplated hereby. (d) CIT's obligation to make any Loan pursuant to this Amendment No. 2 shall terminate on March 31, 1997. 3. REPRESENTATIONS AND WARRANTIES. In order to induce CIT to enter into this Amendment No. 2, each Debtor represents and warrants to CIT for itself as follows: (a) REAFFIRMATION. Debtor hereby repeats each of the representations and warranties set forth in the Original Loan Agreement, except as otherwise amended by this Amendment No. 2 as if set 2 forth at length herein. (b) POWER AND AUTHORITY. Debtor has full corporate power, authority and legal right to execute and deliver this Amendment No. 2 and the A Note and B Note and to perform its obligations hereunder and thereunder. (c) FINANCIAL CONDITION OF DEBTORS AND GUARANTOR. The financial statements of each Debtor and Guarantor as at and for the period ended ___________________, 1996, copies of which have heretofore been delivered to CIT, are complete and correct, have been prepared in accordance with generally accepted accounting principles, and present fairly the financial position of each Debtor and Guarantor, respectively, as at said dates and the results of its operations for the period ended on said dates. There are no known material contingent liabilities or material liabilities for taxes which are not reflected in said financial statements or the notes thereto and there has been no material adverse change in the financial condition, business or operations of any Debtor or Guarantor since said dates. (d) REAFFIRMATION OF SECURITY INTEREST. The first and only lien on and security interest granted by Debtors to CIT in the Collateral shall continue in full force and effect and shall continue to secure all Obligations including, without limitation, the Obligations of Debtors incurred pursuant to this Amendment No. 2. (e) NO DEFAULTS. Upon the effectiveness of this Amendment No. 2, no Default or Event of Default shall exist under the Original Loan Agreement, as amended hereby, and no default or event of default shall exist under any agreement of Guarantor and/or Debtors or any of their respective affiliates with Heller Financial, Inc. or National City Bank, Northeast. 4. CONDITIONS PRECEDENT TO EFFECTIVE OF AMENDMENT NO. 2. This Amendment No. 2 shall become effective on the date on which all of the following conditions precedent have been fulfilled: (a) CIT shall have received this Amendment No. 2 duly executed by each Debtor and Guarantor. (b) CIT shall have received the Supplements and the A Note and the B Note, duly executed by Debtors. (c) Debtors shall have received from Heller Financial, Inc., GECC, National City Bank, Northeast, and any other necessary party waivers of all events of default arising under the agreements between each such lender and Guarantor and its subsidiaries and all necessary lien releases. 5. MISCELLANEOUS. (a) COUNTERPARTS. This Amendment No. 2 may be executed by the parties hereto in any number of separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. (b) CONSTRUCTION. Any provision of this Amendment No. 2 which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by law, each Debtor hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect. (c) NO FURTHER WAIVERS. Except as expressly amended hereby, the Original Loan Agreement, all representations, warranties, terms, covenants an conditions of the Original Loan Agreement, the Original Note, the Contribution Agreement, each of the Drawdown Requests and Progress Payment Certificates shall remain unamended and not waived and shall continue to be in full force and effect. No amendment of any provision of this Amendment No. 2 shall be effective unless it is in writing and signed by each Debtor and CIT , and no waiver of any provision of this Amendment No. 2, nor 3 consent to any departure by Debtors therefrom, shall be effective unless it is in writing and signed by CIT, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No failure on the part of CIT to exercise, and no delay in exercising, any right, power or privilege hereunder or under the Original Loan Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of CIT provided herein are cumulative and are in addition to, not exclusive of, any rights or remedies provided by law. (d) INDEMNITY. Debtors, jointly and severally agree to pay, indemnify and hold harmless CIT and its affiliates from and against any and all claim, losses, obligation, damages, penalties, actions, judgments, suits, liabilities and out-of-pocket costs and disbursements (including, without limitation, the reasonable fees, disbursements and other charges of counsel to CIT, including attorney's fees and legal expenses incurred by CIT in the collection or enforcement of its rights hereunder, under the Original Loan Agreement or in connection with any bankruptcy proceeding involving any Debtor or Guarantor and/or the Equipment, including relief from stay motions, cash collateral disputes, assumption/rejection motions and disputes concerning any proposed disclosure statement and plan proposed during any such case). (e) TRIAL BY JURY; JURISDICTION. EACH DEBTOR AND CIT HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDMENT NO. 2 OR ANY OTHER DOCUMENT EXECUTED AND DELIVERED BY DEBTORS IN CONNECTION HEREWITH. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of December __, 1996. ATLANTIS PLASTIC FILMS, INC. By: /s/ ------------------------------ Title: --------------------------- ATLANTIS PLASTICS INJECTION MOLDING, INC. By: /s/ ------------------------------ Title: --------------------------- PIERCE PLASTICS, INC. By: /s/ ------------------------------ Title: --------------------------- THE CIT GROUP/EQUIPMENT FINANCING, INC. By: /s/ ------------------------------ Title: --------------------------- 4 Guarantor hereby agrees with the foregoing and ratifies and reaffirms its Guaranty, including the First Amendment and Ratification of Guaranty, dated to be effective as of December 31, 1995. ATLANTIS PLASTICS, INC. By: /s/ -------------------------------- Title: ----------------------------- 5 EX-10.57 5 EXHIBIT 10.57 AMENDMENT AND RESTATEMENT OF PROMISSORY NOTE This Amendment and Restatement of Promissory Note is executed at Youngstown, Ohio, on January 30, 1997 by and between ATLANTIS PLASTICS INJECTION MOLDING, INC., a Kentucky corporation, and ATLANTIS PLASTICS, INC., a Florida corporation (collectively, the "Borrower") and NATIONAL CITY BANK, NORTHEAST (the "Bank"). PRELIMINARY STATEMENTS 1. Bank extended a loan to the Borrower in the amount of Five Hundred Seventy-eight Thousand and No/100ths Dollars ($578,000.00) as evidenced by a promissory note dated May 17, 1995 (the "Note"). 2. The Note has an outstanding principal balance of Five Hundred Sixteen Thousand Nine Hundred Ninety-one and No/100ths Dollars ($516,991.00). 3. The Bank and the Borrower desire to modify the Note and to restate the terms, conditions, and provisions thereof to reflect such modification. 4. Borrower and Bank ratify and confirm all of the terms and conditions of the Note not specifically amended herein and all of those terms and conditions of all other documents between Borrower and Bank pertaining to the indebtedness evidenced by the Note, including, without limitation, the Open End Mortgage and Security Agreement given by Borrower dated May 17, 1995 for the purpose of securing the Note, as recorded in Official Record 933, Page 40 of Trumbull County, Ohio Records (the "Mortgage"). 5. Borrower does not have any claim, offset, or defense against the Bank. AGREEMENT For valuable considerations as hereinafter granted each to the other and intending to be legally bound, the parties acknowledge the preliminary statements and amend and restate the terms, conditions, and provisions of the Note as follows: FOR VALUE RECEIVED, ATLANTIS PLASTICS INJECTION MOLDING, INC., a Kentucky corporation whose address is Highway 60, West, P.O. Box 3, Henderson, Kentucky 42420 and ATLANTIS PLASTICS, INC., a Florida corporation whose address is 1870 The Exchange, Suite 200, Atlanta, Georgia 30339 (collectively, the "Borrower") promises to pay to the order of NATIONAL CITY BANK, NORTHEAST (the "Bank"), a national banking association having its main office at One Cascade Plaza, Akron, Ohio 44308, at Bank's main office (or at such other place as Bank may from time to time designate by written notice) in lawful money of the United States of America, the principal sum of FIVE HUNDRED SIXTEEN THOUSAND NINE HUNDRED NINETY-ONE AND NO/100THS DOLLARS together with interest, all as provided below. 1. INTEREST. The Principal Balance shall at all times bear interest at a rate equal to the Contract Rate, provided that so long as any principal of or accrued interest on any this Note overdue, the Principal Balance and all overdue interest thereon shall bear interest at a fluctuating rate equal to two percent (2%) per annum above the rate that would otherwise be applicable, but in no case less than two and one-fourth percent (2-1/4%) per annum above the Prime Rate; PROVIDED FURTHER that in no event shall any principal of or interest on this Note bear interest at any time after Maturity at a lesser rate than the rate applicable thereto immediately after Maturity. The "CONTRACT RATE" shall at all times be a fluctuating rate (the "PRIME MARGIN RATE") equal to three quarters of one percent (3/4%) in excess of the Prime Rate, provided that Borrower shall have the right from time to time to irrevocably elect a fixed rate (the "LIBOR MARGIN RATE") equal to the sum of two and one half percent (2-1/2%) per annum plus LIBOR as the Contract Rate applicable to the Principal Balance during a Contract Period by specifying the term of the Contract Period and the Principal Balance that such Borrower expects to have outstanding on the first day thereof (giving effect to any payments to be made on or before that day) in a notice given to Bank orally or in writing not later than 10:00 a. m., Main-Office Time, of the third (3rd) Eurodollar Banking Day preceding the first day of that Contract Period, and stating that such Borrower is election the LIBOR Margin Rate. Interest on this Note shall be payable monthly commencing on January 20, 1997 and continuing on the twentieth day of each month until Maturity, and on demand thereafter. At the end of each Contract Period during which the LIBOR Margin Rate is the Contract Rate, the Principal Balance shall bear interest at the Prime Margin Rate unless either Borrower shall have elected otherwise as hereinbefore provided. Bank shall be entitled to fund and maintain its funding of all or any part of the Principal Balance in any manner Bank may from time to time deem advisable, Borrower acknowledging that all determinations relating to the LIBOR Margin Rate shall be made as if Bank had actually funded and maintained the Principal Balance by the purchase of deposits in an amount similar to the amount of the Principal Balance, with a maturity similar to the Contract Period during which the LIBOR Margin Rate was elected, and bearing interest at LIBOR. 2. INEFFECTIVE ELECTIONS. Notwithstanding any provision or inference to the contrary, Bank shall have the right in its discretion, without notice to Borrower, to deem ineffective any election of a Contract Rate if (a) at the time of that election or on the first day of the Contract Period specified in the notice thereof, there shall exist or there would occur any Event of Default, (b) any representation, warranty, or other statement made by any Person (other than Bank) in any Related -2- Writing (other than any financial statement) would, if made either at the time of that election or on the first day of the Contract Period specified in the notice thereof, be untrue or incomplete in any respect, (c) after giving effect to that election, more than one Contract Rate would be applicable to the Principal Balance, (d) Bank shall determine that (i) dollar deposits of the appropriate amount and maturity are not available in the market selected by Bank for the purpose of funding the Principal Balance at LIBOR, (ii) circumstances affecting that market make it impracticable for Bank to ascertain LIBOR, or (iii) any governmental authority has asserted that it is unlawful for Bank to fund, make, or maintain loans bearing interest based on LIBOR, (e) after giving effect to that election, the actual Principal Balance is or would be, on the first day of the Contract Period specified in the notice of that election, different than the expected Principal Balance specified in that notice, (f) any principal payment is scheduled to become due during the Contract Period specified in the notice of that election, (g) the expected Principal Balance specified in the notice of that election is less than Fifty Thousand and No/100ths Dollars ($50,000.00), or (h) the Contract Period specified in the notice of that election would end after the scheduled due date of the last principal payment under this Note, giving effect to any prepayments. Bank's books and records shall be conclusive (absent manifest error) as to whether Bank shall have deemed any such election ineffective. 3. PREMIUM: INEFFECTIVE AND UNLAWFUL ELECTIONS. If Bank shall deem ineffective any election of any Contract Rate, Borrower shall pay to Bank, on Bank's demand, a premium based on the amount the expected Principal Balance specified in the notice of that election and computed for the Contract Period specified in that notice at a rate per annum equal to the excess, if any, of the Contract Rate so elected over the Reinvestment Rate. If any governmental authority shall assert that it is unlawful for Bank to fund, make or maintain loans bearing interest based on LIBOR, then, and in each such case, notwithstanding any provision or inference to the contrary, the Principal Balance shall thereupon bear interest at the Prime Margin Rate, and Borrower shall pay to Bank, on Bank's demand, (a) all unpaid interest theretofore accruing at the LIBOR Margin Rate and (b) a premium based on the amount of the principal theretofore bearing interest at the LIBOR Margin Rate and computed for the remainder of the Contract Period therefor, at a rate equal to the excess, if any, of the Contract Rate theretofore applicable over the Reinvestment Rate. 4. REPAYMENT. Subject to section 7, the principal of this Note shall be due and payable in forty-one (41) instalments, commencing on January 20, 1997, and continuing on the twentieth day of each month thereafter until paid in full, each such instalment except the final instalment to be in a principal amount equal to Three Thousand Two Hundred Eleven and No/100ths Dollars ($3,211.00) (the "AMORTIZATION AMOUNT"), and the final instalment to be an amount equal to all unpaid principal of this Note. Borrower shall have the right to prepay the principal of this Note in whole or in part at any time before maturity, PROVIDED that if any payment (whether a prepayment or a payment following any acceleration of the due date thereof) is made before the last day of a Contract Period during which the LIBOR Margin Rate is the Contract Rate applicable to the Principal Balance, then, and -3- in each such case, Borrower shall, concurrently with the payment, pay to Bank (i) the accrued interest on the principal being paid and (ii) a premium based on the principal amount paid and computed for the period from the date of payment to the last day of the Contract Period in question at a rate per annum equal to the excess, if any, of the Contract Rate theretofore applicable over the Reinvestment Rate. 5. COLLATERAL. This Note is secured by a mortgage of even date herewith on property located in the Township of Howland, Trumbull County Ohio. Reference is made thereto for rights as to acceleration or default of this Note. 6. DEFINITIONS. As used in this Note, except where the context clearly requires otherwise, "BANKING DAY" means any day (other than any Saturday, Sunday or legal holiday) on which Bank's main office is open to the public for carrying on substantially all of its banking functions; "CONTRACT PERIOD" means a period selected by a Borrower, PROVIDED that each Contract Period shall commence on a Eurodollar Banking Day and end one (1) month, three months (3), or six (6) months thereafter, PROVIDED that (a) if any such Contract Period otherwise would end on a day that is not a Eurodollar Banking Day, it shall end instead on the next following Eurodollar Banking Day unless that day falls in another calendar month, in which latter case the Contract Period shall end instead on the next preceding Eurodollar Banking Day and (b) if any such Contract Period commences on a day for which there is no numerical equivalent in the calendar month in which that Contract Period is to end, it shall end on the last Eurodollar Banking Day of that calendar month; "EURODOLLAR BANKING DAY" means any Banking Day on which banks in the London Interbank Market deal in United States dollar deposits and on which banking institutions are generally open for domestic and international business at the place where Bank's main office is located and in New York City; "LIBOR" means, with respect to a given Contract Period, the rate per annum (rounded upwards, if necessary, to the next higher 1/16 of 1%) determined by Bank to equal the average rate per annum at which deposits (denominated in United States dollars) in an amount similar to the then Principal Balance and with a maturity similar to that Contract Period are offered to Bank at 11:00 A.M. London time (or as soon thereafter as practicable) two (2) Eurodollar Banking Days prior to the first day of that Contract Period by banking institutions in any Eurodollar market selected by Bank; "NOTE" means this promissory note (including, without limitation, each addendum, allonge, or amendment, if any, hereto); "OBLIGOR" means any Person who, or any of whose property, shall at the time in question be obligated in respect of all or any part of the Indebtedness evidenced by this Note of Borrower and in addition to Borrower, includes, without limitation, co-makers, indorsers, guarantors, pledgors, hypothecators, mortgagors, and any other Person who agrees, conditionally or otherwise, to make any loan to, purchase from, or investment in, any other Obligor or otherwise assure such other Obligor's creditors or any of them against loss; "PERSON" means an individual or entity of any kind, including, without limitation, any association, company, cooperative, corporation, partnership, trust, governmental body, or any other form or kind of entity; "PRIME RATE" means the fluctuating rate per annum which is publicly announced from time to time by Bank at its main office as being its so-called "prime rate" or "base rate" thereafter in effect, with each change in the Prime Rate automatically, immediately, and without notice changing the Prime Rate -4- thereafter applicable hereunder, it being acknowledged that the Prime Rate is not necessarily the lowest rate of interest then available from Bank on fluctuating-rate loans; "PRINCIPAL BALANCE" means, at a given time, the entire unpaid principal balance of the this Note; "REINVESTMENT RATE" means, when used with respect to any period, a per annum rate of interest equal to the "bond equivalent yield" for the most actively traded issues of U. S. Treasury Bills, U. S. Treasury Notes, or U. S. Treasury Bonds for a term similar to the period in question; "RELATED WRITING" means this Note and any indenture, note, guaranty, assignment, mortgage, security agreement, subordination agreement, notice, financial statement, legal opinion, certificate, or other writing of any kind pursuant to which all or any part of the Indebtedness evidenced by this Note of Borrower is issued, which evidences or secures all or any part of the Indebtedness evidenced by this Note of Borrower, which governs the relative rights and priorities of Bank and one or more other Persons to payments made by, or the property of, any Obligor, which is delivered to Bank pursuant to another such writing, or which is otherwise delivered to Bank by or on behalf of any Person (or any employee, officer, auditor, counsel, or agent of any Person) in respect of or in connection with all or any part of the Indebtedness evidenced by this Note of Borrower or either of them; and the foregoing definitions shall be applicable to the respective plurals of the foregoing defined terms. 7. EVENTS OF DEFAULT. It shall be an "EVENT OF DEFAULT" if (a) there is a failure of the Borrower to make any payment within ten (10) days of when due hereunder; (b) there is an occurrence of a default or Event of Default under, or as defined in, the Mortgage or any other instrument given as security for this note; (c )there occurs a default or "Event of Default" as defined in the promissory note given by Borrower to Bank of even date herewith in the amount of $1,739,000.00; (d) there occurs a default or "Event of Default" as defined in the revolving credit agreement between Borrower and Bank of even date herewith in the amount of $1,300,000.00; or (e) there is a filing by, or against, Borrower of any complaint or action for relief under any bankruptcy or insolvency laws, or for the appointment of a receiver, which is not dismissed within sixty (60) days of filing. 8. EFFECTS OF DEFAULT. If any Event of Default occurs, Bank may, at its option, accelerate the maturity of this note. If Bank chooses to accelerate, the entire unpaid principal amount, together with interest at the default rate set forth above, shall be immediately due and payable, without demand or notice, both of which are expressly waived by Borrower. 9. LATE CHARGES. In each case in which any principal of or interest on this Note is not paid within ten (10) days after its due date, Bank shall have the right to assess a late charge, payable by Borrower on demand, equal to the greater of twenty dollars ($20.00) or five percent (5%) of the unpaid amount. The payment of a late charge will not cure or constitute a waiver of any default under this Note. 10. INDEMNITY: ADMINISTRATION AND ENFORCEMENT. Borrower will pay to Bank all costs and expenses of collection of this Note, including, without limitation, attorneys' fees. If any amount (other than the principal of any Subject Loan and any interest and late charges) owing under this Note is not paid when due, then, and in each such case, Borrower shall pay, on Bank's demand, -5- interest on that amount from the due date thereof until paid in full at a fluctuating rate equal to four percent (4%) per annum plus the Prime Rate. 11. INDEMNITY: GOVERNMENTAL COSTS. If (a) there shall be enacted any law (including, without limitation, any change in any law or in its interpretation or administration and any request by any governmental authority) relating to any interest rate or any reserve or special deposit requirements against assets held by, deposits in, or loans by Bank or to any tax (other than any tax on Bank's overall net income) and (b) in Bank's sole opinion any such event increases the cost of funding or maintaining any LIBOR Rate Unit or reduces the amount of any payment to be made to Bank in respect thereof, then, and in each such case, upon Bank's demand, Borrower shall pay Bank an amount equal to each such cost increase or reduced payment, as the case may be. In determining any such amount, Bank may use reasonable averaging and attribution methods. Each determination by Bank shall be conclusive absent manifest error. 12. APPLICATION OF PAYMENTS. Payments other than prepayments will be applied first to instalments in the order of their respective due dates; provided, however, that if a payment so applied would pay the principal amount of the note in full, but would leave late charges outstanding, the payment will instead be applied to late charges prior to being applied to the principal amount of the final instalment. 13. OTHER PROVISIONS. All fees, interest, and premiums for any given period shall be computed on the basis of a 360-day year and the actual number of days in the period. Any term used in this Note shall have the meaning ascribed thereto by the Uniform Commercial Code as in effect on the date hereof in the jurisdiction in which Bank's main office is located, subject, however, to such modification, if any, as may be provided in this Note. This Note shall be governed by the laws of the State of Ohio. 14. WARRANT OF ATTORNEY. Borrower authorizes any attorney at law at any time or times to appear in any state or federal court of record in the United States of America after all or any part of the obligations created by this Note shall have become due, whether by lapse of time, by acceleration of the due date thereof, or otherwise, and in each case to waive the issuance and service of process, to present to the court this Note and any other writing (if any) evidencing the obligation or obligations in question, to admit the due date thereof and the nonpayment thereof when due, to confess judgment against Borrower in favor of Bank for the full amount then appearing due, together with interest and costs of suit, and thereupon to release all errors and waive all rights of appeal and any stay of execution. The foregoing warrant of attorney shall survive any judgment, it being understood that should any judgment against Borrower be vacated for any reason, Bank may nevertheless utilize the foregoing warrant of attorney in thereafter obtaining one or more additional judgments against Borrower. -6- ------------------------------------------------------------------------- "WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND ------------------------------------------------------------------------- COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN ------------------------------------------------------------------------- AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN ------------------------------------------------------------------------- BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE ------------------------------------------------------------------------- AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ------------------------------------------------------------------------- ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE." ------------------------------------------------------------------------- BORROWERS: ATLANTIS PLASTICS INJECTION MOLDING, INC. (a Kentucky corporation) By:____________________________ Title:_________________________ ATLANTIS PLASTICS, INC. (a Florida corporation) By:____________________________ Title:_________________________ Accepted by Bank: NATIONAL CITY BANK, NORTHEAST By: _________________________ BRIAN V. KOCHUNAS Title: Vice President -7- EX-11.1 6 EXHIBIT 11.1 ATLANTIS PLASTICS, INC. AND SUBSIDIARIES CALCULATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
PRIMARY 1996 1995 1994 ---- ---- ---- Shares outstanding: Weighted average outstanding 7,133,067 7,089,467 7,066,511 Share equivalents 391,225 118,706 443,468 --------- --------- --------- Adjusted outstanding 7,524,292 7,208,173 7,509,979 ========= ========= ========= Net income (loss) available to common shareholders: Net income (loss) $8,096,895 $(13,072,150) $6,366,130 Less - preferred stock dividend (108,748) (145,000) (145,000) ---------- ------------ ---------- Net income (loss) available to common shareh $7,988,147 $(13,217,150) $6,221,130 ========== ============ ========== Income (loss) per common share $1.06 $ (1.83) $ 0.83 ========== ============ ========== FULLY DILUTED 1996 1995 1994 ---- ---- ---- Shares outstanding: Weighted average outstanding 7,133,067 Share equivalents 1,068,850 --------- Adjusted outstanding 8,201,917 ========= Net income (loss) available to common shareholders: Net income (loss) $8,096,895 Income (loss) per common share $0.99 (1), (2) (1), (2) ==========
(1) The difference between primary and fully dilutive earnings per share is not material. (2) The Company's convertible preferred stock was determined not to be a common stock equivalent in computing primary earnings per share. In computing fully diluted income per share, the dilutive effect was not material. EX-21.1 7 EXHIBIT 21.1 REGISTRANTS'S SUBSIDIARIES -- ALL 100% OWNED ATLANTIS PLASTIC FILMS, INC., a Delaware corporation ATLANTIS MOLDED PLASTICS, INC., a Florida corporation ATLANTIS PLASTIC INJECTION MOLDING, INC., a Kentucky corporation PIERCE PLASTICS, INC., a Delaware corporation PLASTIC CONTAINERS, INC., an Alabama corporation RIGAL PLASTICS, INC., a Florida corporation WP ACQUISITION CORP., a California corporation ATLANTIS PLASTICS FOREIGN SALES INC., a Barbados corporation LINEAR FILMS, INC., a Canadian corporation EX-23.1 8 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Atlantis Plastics, Inc. and subsidiaries on Form S-8 (Registration Nos. 33-25983 and 33-41012) of our reports dated February 7, 1997, except for Note 7, as to which the date is March 28, 1997, on our audits of the consolidated financial statements of Atlantis Plastics, Inc. as of December 31, 1996 and 1995 and for each of the three years in the period ended Decemebr 31, 1996 which reports are included in this Form 10-K. COOPERS & LYBRAND L.L.P. Atlanta, Georgia March 28, 1997 EX-27.1 9
5 1,000 DOLLARS 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 1 15,905 0 28,997 633 16,984 66,078 110,082 51,559 177,901 29,648 105,365 0 2,000 713 32,196 177,901 267,119 267,119 221,377 221,377 20,634 0 12,638 12,470 4,396 8,074 96 (73) 0 8,097 1.06 0.99
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