This Annual Report on Form 10-K contains forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Additional written or oral forward-looking statements may be made by the Company from time to time, in press releases, annual or quarterly reports to shareholders, filings with the Securities Exchange Commission, presentations or otherwise. Statements contained herein that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions referenced above.

Forward-looking statements may include, but are not limited to, projections of net sales, income or losses, or capital expenditures; plans for future operations; financing needs or plans; compliance with financial covenants in loan agreements; plans for liquidation or sale of assets or businesses; plans relating to products or services of the Company; assessments of materiality; predictions of future events; the ability to obtain additional financing; the Company’s ability to meet obligations as they become due; the impact of pending and possible litigation; as well as assumptions relating to the foregoing. In addition, when used in this discussion, the words "anticipates," "believes," "estimates," "expects," "intends," "plans" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, including, but not limited to, the impact of leverage, dependence on major customers, fluctuating demand for the Company’s products, risks in product and technology development, fluctuating resin prices, competition, litigation, labor disputes, capital requirements, and other risk factors detailed in the Company’s Securities and Exchange Commission filings, some of which cannot be predicted or quantified based on current expectations.

Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this Annual Report, including, Item 1, "Business Factors That May Affect Future Results," describe factors, among others, that could contribute to or cause such differences.

Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Atlantis Plastics, Inc. ("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, building supply, and recreational vehicle industries.

Atlantis Plastic Films, which accounted for approximately 70% of the Company's net sales in 2000, produces (i) stretch films, which are multilayer plastic films that are used principally to wrap pallets of materials for shipping or storage; (ii) custom film products, such as 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 that are converted from polyethylene films.

Atlantis Molded Plastics, which accounted for approximately 30% of the Company's net sales in 2000, consists of two principal technologies serving a 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 custom and proprietary extruded plastic parts for both trim and functional applications (profile extrusion) that are incorporated into a broad range of consumer and commercial products such as recreational vehicles, residential windows and doors, office furniture, building supplies, and retail store fixtures.

In November 2000, Atlantis acquired Extrusion Masters, Inc., a custom extruder of thermoplastic parts ("EMI"), for approximately $4.8 million. See Note 2 to the Company's Consolidated Financial Statements.

During 2000, the Company began construction on a new West Coast facility for the manufacture of stretch film in Fontana, California, which the Company believes will widen its geographic coverage and enhance production efficiencies by lowering freight costs and shortening delivery times. The new facility began manufacturing film in March 2001. In addition, the Company installed a new five-layer, 120-inch wide cast coextrusion line at the Company’s stretch film facility in Sapulpa, Oklahoma, which will provide additional capacity. The Company also installed a new seven-layer coextrusion line at the custom film facility in Mankato, Minnesota, which commenced production in March 2001. During the fourth quarter of 2000, the Company introduced a "cedar shake" panel that complements the "half round" accent panel to form the new "Cedarway" siding product line.

The principal elements of the Company's strategy include (1) increasing the Stretch Film division's production capacity and market share in the western United States, (2) continuing to increase the coextrusion mix within the Custom Films division, (3) improving the results of the Injection Molding division through increased volume and production efficiencies, and (4) expanding the range of proprietary products offered by the Profile Extrusion division.

The Company’s business plans and goals for 2001 will emphasize the following elements:

Stretch Film. With the establishment of the new stretch film facility in Fontana, California and the installation of the five-layer cast coextrusion line in Sapulpa, Oklahoma, the effective capacity of the Stretch Films division has increased by approximately 11%. The division will focus on increasing its market share in the western United States through reductions in shipping times and costs and improvements in customer service.

Custom Film and Institutional Products. With the expanded capacity and manufacturing capabilities in coextrusion film, the Custom Film division is focusing its marketing and technical resources on the converter, banner, and masking film markets, which utilize value-added coextrusion film and offer higher gross margin opportunities. The Company expects expanded product offerings in these targeted areas with new film structures to open additional opportunities for growth and gross margin enhancement. The Institutional Products division will focus on increased penetration of the primary institutional product markets through expanded product offerings and reductions in manufacturing costs as a result of continued automation.

Injection Molding. The Company’s Injection Molding division will continue to focus on productivity improvements through increased utilization of robotics, waste reduction efforts, development of new product programs with key customers, and expanding market penetration within the building products segment.

Profile Extrusion. With the acquisition of the EMI in November 2000, the Company’s Extrusion business unit will focus on the integration of the acquired facility, process improvement, and volume growth in both custom and proprietary segments.

Stretch Film. 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.

Custom Film. Atlantis manufactures both low density and linear low-density polyethylene films for a wide variety of packaging applications involving monolayer and coextruded structures. The following are among the division's most significant products:

• Packaging and wrapping films. High clarity packaging films are used by packaging converters in the manufacture of multi-layer flexible packaging for food and non-food applications. Higher-strength packaging and wrapping films are used to wrap and package textiles, carpet, furniture, and mattresses.

• Lamination films. Lamination films are used in a broad array of applications: film laminated to foam for carpet and automotive padding; film laminated to non-wovens for surgical draping and bib applications.

• Carrier / release films. Embossed and smooth films for molding compound, foam, and rubber product in-process release and production applications. Molding compounds are used to produce high strength, lightweight aircraft, automobile, sports gear, and consumer durable components and products.

• Masking films. Masking films are used by polycarbonate, acrylic and other plastic sheet type manufacturers to protect sheet surfaces. Sheet is used to produce a wide range of products including spa / bathware, construction materials and signage / POP displays.

• Stretch hooder films. Hooder films provide complete 5-sided protection for shipment or outdoor storage of high-volume, industrial products.

• Coating films. Coating films are used by adhesive coaters to produce tape, surface protection, label, and other adhesive coated product types.

Significant growth is planned for the packaging converter, plastic sheet manufacturer, foam laminator, nonwoven laminator, adhesive coater, and molding compound markets.

Institutional Products: Under the Sta-DriÒ brand name, Atlantis produces a variety of consumable products for the food service, party supply and school / collegiate markets. Products produced include table covers, gloves, aprons, bibs, food bags, food covers, food liners, and other complimentary accessories.

Injection Molding. Atlantis produces custom thermoplastic parts by using an injection molding process. These parts are used in large and small appliances such as refrigerators, air conditioners, dehumidifiers, dishwashers, and microwave ovens, as well as agricultural and automotive products and hand-held power tools.

Approximately 43% of the molded products segment’s net sales, or 13% of the Company's total net sales, were to Whirlpool in 2000. The Injection Molding division has been a supplier to Whirlpool for over 40 years. See Item 1, "Business – Factors That May Affect Future Results – Dependence on Customers."

In addition, the Injection Molding division designed and manufactures a proprietary "half round" accent panel, which is used as decorative, architectural detail siding for the residential construction market. The Company has also developed a "cedar shake" panel for siding applications, which is a cost-effective, easy-to-install alternative to wood and aluminum siding products.

Profile Extrusion. 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, including products used in the recreational vehicle, mobile home, residential door and window, office furniture, and appliance industries. The profile extrusion unit utilizes approximately 2,000 different dies in fulfilling customer orders, and currently maintains a stock program for approximately 280 recreational vehicle-related components. In 2000, the Profile Extrusion division also manufactured and sold a line of proprietary building products consisting of 20 product offerings, which accounted for 13% of the division’s net sales, or 1% of the Company's total net sales. The Company expects to introduce four additional proprietary products in 2001.

Stretch Film. 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. Because a majority of its products are sold to distributors, Atlantis places particular emphasis on assisting distributors in sales to end-users.

Custom Film. Atlantis has an internal sales staff to market its custom film products. Most custom film customers are in industrial markets and consume the film during their manufacturing and/or delivery processes.

Injection Molding. The injection molding unit maintains an in-house sales and engineering staff that 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. Company personnel generate the majority of sales. Independent sales representatives, calling primarily on industrial customers in the Midwest, account for the balance.

Profile Extrusion. In-house sales personnel who oversee a network of independent sales representatives conduct the Profile Extrusion division’s marketing and sales activities. These representatives 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, building supplies, and marine products.

Stretch Film. Atlantis manufactures its stretch film products at two plants in the Tulsa, Oklahoma region, a plant in Nicholasville, Kentucky, and a plant in Fontana, California. Atlantis purchases several types of linear low-density resins and other materials to manufacture its stretch film products.

Custom Film. Atlantis manufactures its custom film products at a plant located in Cartersville, Georgia and a plant in Mankato, Minnesota. Approximately 20 different types of resin, delivered in pellet form, and approximately 10 types of additives are used in the manufacturing process. Atlantis also converts film into institutional products such as plastic gloves, aprons, and tablecloths at its manufacturing facility located in Mankato. 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 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; LaVergne, Tennessee; and Jackson, Tennessee. This variety of equipment configurations and plant locations enables the Company to fulfill customer requirements, including multiple components, various press sizes, and secondary operations.

The Company's injection molding customers generally place orders for products based on their production requirements for the following three to four months, with a non-binding estimate of requirements over six to 12 months. Management believes that the relatively long production cycles for its customers make these estimates reliable. See Item 1, "Business - Backlog."

A wide variety of materials, such as acrylonitrile butabiene styrene, polystyrene, polyethylene, polycarbonate, and nylon are used in the manufacturing process. The Company has multiple sources of supply for these materials.

Profile Extrusion. Atlantis manufactures its extruded plastic parts at its two facilities located in Elkhart, Indiana. One of the facilities was acquired in connection with the EMI acquisition. Five basic types of compound materials are used in the manufacturing process. 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 these raw material needs.

The raw materials used by the Company in the manufacture of its products are various plastic resins, primarily polyethylene. The Company selects its suppliers on the basis of quality, price, technical support, and service. 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 good. The Company does not hedge the purchase of its raw materials. 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 over 300 million pounds of plastic resins annually. Management believes that the Company's large volume purchases of plastic resin have generally resulted in lower net raw material costs and enabled it to obtain shipments of raw materials even in periods of short supply.

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 Films units successfully compete on the basis of their established reputation for service and quality, as well as their positions as efficient, low-cost producers.

Atlantis Molded Plastics competes in a highly fragmented segment of the plastics industry, with a large number of regional manufacturers competing on the basis of customer service (including timely delivery and engineering/design capabilities), quality, product differentiation, and price. Management believes that the Atlantis Molded Plastics 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, 2000 was approximately $14.1 million, compared to approximately $18.2 million at December 31, 1999. 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.

As of December 31, 2000 the Company employed approximately 1,260 persons, compared with approximately 1,200 persons at December 31, 1999. The Company believes that relations with its employees are satisfactory.

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. See Item 1, "Business - Factors That May Affect Future Results - Environmental Considerations."

An investment in the Company’s common stock involves a high degree of risk. You should carefully consider the factors described below, in addition to those discussed elsewhere in this report, in analyzing an investment in common stock. If any of the events described below occurs, business, financial condition, and results of operations would likely suffer and the trading price of the Company’s common stock could fall.

At December 31, 2000, the Company had approximately $98.6 million of outstanding indebtedness, approximately $2.4 million in cash and cash equivalents, and an additional approximately $12.2 million unused availability under its revolving credit facility, net of outstanding letters of credit. The Company's high debt level presents substantial risks and could have negative consequences. For example, it could (1) require the Company to dedicate a substantial portion of its cash flow from operations to repayment of debt, limiting the availability of cash for other purposes; (2) increase the Company's vulnerability to adverse general economic conditions by making it more difficult to borrow additional funds to maintain its operations if the Company suffers shortfalls in net sales; (3) hinder the Company's flexibility in planning for, or reacting to, changes in its business and industry by preventing the Company from borrowing money to upgrade its equipment or facilities; and (4) limit or impair the Company's ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, or general corporate purposes.

The revolving credit facility expires November 12, 2001, and there can be no assurance that the commitment will be renewed or extended, or that another source of financing will be available to the Company on satisfactory terms. In addition, Atlantis is exploring alternatives to refinance its long-term debt, including its 11% Senior Notes due February 2003 and the principal payment of $24.8 million due February 2002. In the event that the Company's cash flow from existing working capital are not sufficient to fund the Company's expenditures or to service its indebtedness, the Company would be required to raise additional funds through the sale of assets or subsidiaries. There can be no assurance that any of these sources of funds would be available in amounts sufficient for the Company to meet its obligations. Moreover, even if the Company were able to meet its obligations, its highly leveraged capital structure could significantly limit its ability to finance its expansion program and other capital expenditures, to compete effectively, or to operate successfully under adverse economic conditions.

The primary raw materials used by the Company in the manufacture of its products are various plastic resins, primarily polyethylene. The Company's financial performance therefore is dependent to a substantial extent on the polyethylene resin market. The capacity, supply, and demand for plastic resins and the petrochemical intermediates from which they are produced are subject to substantial cyclical price fluctuations and other market disturbances, including supply shortages. Consequently, plastic resin prices may fluctuate as a result of changes in natural gas and crude oil prices. While the Company attempts to pass through changes in the cost of its raw materials to its customers in the form of price increases, there is no assurance that the Company will be able to do so. 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 a pass through becomes significant, such increases may have a material adverse effect on the profitability of the Company. Furthermore, during periods when resin prices are falling, gross profits may suffer, as the Company will be selling products manufactured with resin purchased one to two months prior at higher prices.

Approximately 43% of the molded products segment’s net sales, or 13% of the Company's net sales, were to Whirlpool in 2000. Although the Injection Molding division has been a supplier to Whirlpool for over 40 years, a significant reduction in Whirlpool’s volume, or the loss of Whirlpool as a customer, would have a material adverse effect on the Company's financial condition and results of operations.

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.

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.

There can be no assurance that the Company will continue to compete successfully in the markets for its products or that competition in such markets will not intensify.

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. 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.

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.

The Atlanta headquarters consists of approximately 9,250 square feet of office space, with an annual lease payment of approximately $120,000. The lease expires in May 2002.

The following table describes the manufacturing facilities owned or leased by the Company as of December 31, 2000. Substantially all of the owned facilities are pledged as collateral 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.

The Company is not presently a party to any litigation where the outcome is expected to have a material adverse effect on its consolidated financial condition or results of operations.

There is no public market for the Company’s Class B Common Stock. Each share of Class B Common Stock is convertible, at the option of the holder, into one share of Class A Common Stock.

As of January 31, 2001, there were 179 holders of record of Class A Common Stock and 9 holders of record of the Class B Common Stock.

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 shares of Class A and Class B Common Stock then outstanding. During 2000, the Company repurchased 43,870 shares for total consideration of $0.4 million. Through December 31, 2000, the Company had repurchased 749,298 shares and options for 55,125 shares of its common stock for total consideration of $7.7 million. In March 2001, the Board of Directors approved the termination of the stock repurchase program.

The Company did not declare or pay any dividends for the year ended December 31, 2000, and does not anticipate paying any cash dividends in the foreseeable future. Additionally, the Company’s outstanding 11% Senior Notes due February 2003 and senior credit facility restrict the Company’s ability to pay dividends. The Company presently intends to retain any future earnings to finance future operations and expansion of its business and to reduce indebtedness.

The selected consolidated financial data should be read in conjunction with the Company’s Consolidated Financial Statements and the Notes thereto included in Item 8, and Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations".

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

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, building supply, and residential window industries.

Net sales, gross profit, and operating income for the years ended December 31, 2000, 1999, and 1998, were as follows:

(in thousands)

Net interest expense increased to $10.2 million in 2000, compared with $9.2 million in 1999, an 11% increase. This increase in net interest expense is attributable to the increase in net debt resulting from the increased capital expenditures associated with the Company’s expansion plans and the purchase of Extrusion Masters, Inc. ("EMI").

The Company’s 2000 and 1999 effective income tax rate differed from the applicable statutory rate primarily due to nondeductible goodwill amortization and the effect of state income taxes.

Net Sales

Net interest expense decreased to $9.2 million in 1999, compared with $10.5 million in 1998, a 12% decrease. This decrease in net interest expense is attributed primarily to the third quarter 1998 repurchase of $14.7 million of the Company’s 11% Senior Notes.

The Company’s 1999 effective income tax rate differed from the applicable statutory rate primarily due to nondeductible goodwill amortization and the effect of state income taxes. The Company’s 1998 effective income tax rate differed from the applicable statutory rate primarily due to (1) nondeductible goodwill amortization, (2) the effect of state income taxes, and (3) a reduction of $690,000 in the Company’s reserve for deferred taxes for amounts that were no longer considered necessary for contingencies for income taxes.

During August and September 1998, the Company repurchased, at a premium, $14.7 million of its 11% Senior Notes in the open market, which resulted in an after-tax extraordinary loss of $390,000. This loss related to the premium paid for the repurchased Notes and the write-off of unamortized loan origination costs related to such Notes.

As a result of the factors described above, operating income increased to $25.0 million (10% of net sales in 1999), compared with $21.1 million (8% of net sales in 1998). Income before extraordinary items and net income were as follows:

The Company's working capital at December 31, 2000 totaled approximately $16.8 million (including cash and cash equivalents of $2.4 million), compared to $24.7 million (including cash and cash equivalents of $2.3 million) at December 31, 1999. At December 31, 2000, borrowings on the Company’s $30.0 million revolving credit facility were $16.5 million and unused availability, net of outstanding letters of credit of approximately $1.3 million, equaled $12.2 million. The revolving credit facility expires November 12, 2001, and there can be no assurance that the commitment will be renewed or extended, or that another source of financing will be available to the Company on satisfactory terms. As of February 28, 2001 borrowings on this facility totaled $16.3 million and unused availability, net of outstanding letters of credit of approximately $1.3 million, equaled $12.4 million. 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. In addition, in March 2000, Atlantis announced that it is exploring alternatives that would allow it to refinance its long-term debt including its 11% Senior Notes due February 2003 and the principal payment of $24.8 million due February 2002. See Item 1, "Business-Factors That May Affect Future Results – Leverage".

Net cash provided by operating activities was approximately $13.4 million in 2000, compared with $12.8 million in 1999. The difference between the Company’s net income in 2000 of $192,000 and its $13.4 million operating cash flow was primarily attributable to approximately $11.5 million of depreciation and amortization expense, an approximately $6.1 million decrease in accounts receivables, and approximately $1.1 million in deferred income taxes, partially offset by an approximately $3.2 million decrease in payables and accrued expenses, an approximately $1.7 million increase in other current assets, and an approximately $476,000 increase in inventory.

Net cash provided by financing activities in 2000 was $6.9 million in 2000, compared with $2.5 million in 1999. The Company’s 2000 financing cash flow reflects net borrowings under the revolving credit facilities of $9.4 million and approximately $260,000 in proceeds from the exercise of stock options, partially offset by approximately $2.6 million used to reduce long-term debt and approximately $388,000 used to repurchase common stock.

In June 1998, the Financial Accounting Standards Board issued SFAS 133, "Accounting for Derivative Investments and Hedging Activities". SFAS 133 establishes a new model for accounting for derivatives and hedging activities and supersedes several existing standards. SFAS 133, as amended by SFAS 137 and SFAS 138, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company does not expect that the adoption of SFAS 133 will have a material impact on its financial statements.

In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements". SAB 101 explains how the SEC staff applies by analogy the existing rules on revenue recognition to other transactions not covered by such rules. In March 2000, the SEC issued SAB 101A that delayed the original effective date of SAB 101 until the second quarter of 2000 for calendar year companies. In June 2000, the SEC issued SAB 101B that further delayed the effective date of SAB 101 until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. The adoption of SAB 101 has not had a material impact on the Company’s financial statements.

The Company is exposed to market risk from changes in interest rates, primarily as a result of its floating interest rate debt.

The following table summarizes information on debt instruments. The table presents expected maturity of debt instruments and projected annual average interest rates. For variable rate debt instruments, average interest rates are based on London Inter-Bank Offered (LIBOR), prime, and commercial paper rates as of December 31, 2000. The fair market value of the Senior Notes is based on quoted market price as of December 31, 2000. The carrying value of the Company’s other long-term debt approximates its fair market value.

Page

Management’s Responsibility for Financial Reporting ..................................................................18

Report of Independent Auditors.........................................................................................................19

Consolidated Statements of Income For the Years Ended December 31, 2000,
1999, and 1998........................................................................................................................................ 20

Consolidated Balance Sheets as of December 31, 2000 and 1999...................................................21

Consolidated Statements of Shareholders’ Equity For the Years Ended December 31,
2000, 1999, and 1998...............................................................................................................................22

Consolidated Statements of Cash Flows For the Years Ended December 31, 2000, 1999,
and 1998...................................................................................................................................................23

Notes to Consolidated Financial Statements.....................................................................................24

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 that require adherence to ethical business standards and compliance with all laws to which the Company is subject. The internal control 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 (1) all have significant accounting or financial expertise, and (2) are not officers or employees of the Company, meets periodically with representatives of management and the Company’s independent auditors 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 auditors have full and free access to the Audit Committee.

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, 2000 and 1999, and the related consolidated statements of income, shareholders’ equity, and cash flows for the three years in the period ended December 31, 2000. Our audits included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlantis Plastics, Inc. and subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Atlanta, Georgia
January 31, 2001

CONSOLIDATED STATEMENTS OF INCOME