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 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number 1-9487 ATLANTIS PLASTICS, INC. (Exact name of registrant as specified in its charter) FLORIDA 06-1088270 ------- ---------- (State or other jurisdiction (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, 2000, was approximately $43,964,456 based on a $12.19 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 greater than 5% beneficial owners of the Class A 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 greater than 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, 2000 were 4,793,716 and 2,676,947, respectively. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the following document have been incorporated by reference into the parts indicated: The registrant's 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. Page 1 of 46 Exhibit index located on page 46 INDEX TO ITEMS PART I PAGE ---- Item 1. Business....................................................... 3 Item 2. Properties..................................................... 8 Item 3. Legal Proceedings.............................................. 8 Item 4. Submission of Matters to a Vote of Security Holders............................................... 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................................... 9 Item 6. Selected Financial Data........................................ 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................... 10 Item 7A. Quantitative and Qualitative Disclosures About Market Risk..... 15 Item 8. Financial Statements and Supplementary Data.................... 16 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................................................. 36 Item 11. Executive Compensation......................................... 36 Item 12. Security Ownership of Certain Beneficial Owners and Management.......................................... 36 Item 13. Certain Relationships and Related Transactions................................................... 36 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................................ 36 Signatures.................................................................. 45 - 2 - PART I 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 filings with the Securities Exchange Commission 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 revenues, income or losses, capital expenditures, plans for future operations, financing needs or plans, compliance with financial covenants in loan agreements, plans for liquidation or sale of assets or businesses, plans relating to products or services of the Company, assessments of materiality, predictions of future events, the ability to obtain additional financing, the Company's ability to meet obligations as they become due, the impact of pending and possible litigation, as well as assumptions relating to the foregoing. In addition, when used in this discussion, the words "anticipates," "believes," "estimates," "expects," "intends," "plans" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, including, but not limited to, the impact of leverage, dependence on major customers, fluctuating demand for the Company's products, risks in product and technology development, fluctuating resin prices, competition, litigation, labor disputes, capital requirements, and other risk factors detailed in the Company's Securities and Exchange Commission filings, some of which cannot be predicted or quantified based on current expectations. 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, particularly in Item 1. Business, Item 2. Properties, Item 3. Legal Proceedings, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 7A. Quantitative and Qualitative Disclosures About Market Risk 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. ITEM 1. BUSINESS THE COMPANY Atlantis Plastics, Inc., a Florida corporation, and its subsidiaries (all of which are wholly owned) ("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 1999, 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, which accounted for approximately 30% of the Company's net sales in 1999, 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 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. 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 office is located at 1870 The Exchange, Suite 200, Atlanta, Georgia 30339, and its telephone number is (800) 497-7659. STRATEGIC OPERATING PLAN During 1999, the Company focused on the following strategies: (1) increasing capacity, while improving geographic delivery capabilities and modernizing production facilities, in the stretch film unit; (2) increasing capacity, particularly with - 3 - coextrusion capability in the custom film unit; (3) improving results of the injection molding unit, through increased volume and production efficiencies; (4) successfully introducing a "half round" accent panel for distribution to the building products industry; (5) improving the labor force in the profile extrusion facility to ensure that expansion can be successfully implemented,; and (6) completing necessary systems changes to convert remaining systems to a Y2K compliant status. Against these plans, the following results were achieved: (1) three existing stretch film lines received major upgrades, a new 120" wide, 5 layer coextrusion line is being delivered to the Company's stretch film facility in Sapulpa, OK and negotiations presently are underway to lease a new facility to manufacture stretch film in the Ontario, CA area; (2) three existing custom film lines have been successfully converted from monolayer to coextrusion and a new coextrusion line has been ordered for delivery to the custom film facility in Mankato, MN in the second half of 2000; (3) the operational turnaround in Atlantis' injection molding business continued in 1999 with gross margins increasing by 8 percentage points compared with 1998; (4) the Company generated approximately $400,000 in net sales with the "half round" accent panel, representing the largest first year sales for a proprietary product in the Molded Products Segment's history; (5) Atlantis stabilized and improved the labor force in profile extrusion; and (6) the Company successfully completed changes to systems to prepare for Y2K. In September 1999, Atlantis announced that it had retained Bowles Hollowell Conner, a division of First Union Capital Markets Corp., as its exclusive financial advisor to assist the Company in exploring various strategic alternatives to enhance shareholder value, including but not limited to a sale, merger, or recapitalization of the Company. Although the Company has engaged in discussions regarding possible transactions and is continuing to explore strategic alternatives, there presently is no agreement, understanding, or arrangement with respect to any significant transaction. In March 2000, Atlantis announced that it had resumed its share repurchase program authorized by its Board of directors in November 1996. Additionally, the Company announced that it is exploring alternatives which would allow it to refinance its long term debt including its 11% Senior Notes due February 2003. BUSINESS GROWTH AND PROFIT IMPROVEMENT STRATEGIES For 2000, the Company's strategies are: (1) successfully implement stretch's new West Coast facility and new coextrusion line and increase the stretch unit's market share in the western part of the U. S.; (2) successfully implement the new and converted coextrusion lines in custom films and expand coextrusion based product offerings; (3) continue to improve operating results in the injection molding unit by increasing sales to existing customers, generating new customers, and continuing the automation of the unit's facilities; (4) successfully introduce a "cedar shake" panel to complement the "half round" accent panel. Sales volume in films (measured in pounds) declined approximately 9% in the first two months of 2000 compared with the same period of 1999. High energy prices are causing resin prices to increase and are negatively affecting gross margins. If continued, these trends would adversely impact gross margins, gross profits, and operating income in the films segment and for the Company in 2000. The Company's business plans and goals for 2000 will emphasize the following elements: STRETCH FILM - A new five-layer cast coextrusion line is being assembled in the Sapulpa, OK facility. A new facility is expected be opened on the West Coast during the summer of 2000. Other lines are being converted from three to five layers to allow the production of metallocene based films and another new five-layer line is planned for late 2000. Additionally, major upgrades have been completed that will enable production of industrial rollwrap, a significant new market opportunity. As a result of these actions, overall capacity in this unit should increase by about 20% during 2000. The opening of the West Coast facility is expected to result in increased market share in the western part of the U.S. as the Company will be able to reduce shipping times and costs and substantially improve customer service to this region. CUSTOM FILM AND INSTITUTIONAL PRODUCTS -With the new cast and blown coextrusion film capabilities cited above, custom films is focussing its marketing and technical resources on the converter, banner, and masking film markets which are requiring value added coextrusion film and offer higher margin opportunities. Expanded product offerings in these targeted areas with new film structures are expected to open additional opportunities for growth and margin enhancement. ISO 9002 certification was achieved in the Mankato, MN facility and is expected in the Cartersville, GA facility in the second quarter of 2000. Institutional Products increased its capacity to support the retail convenience market in 1999, and is anticipating further growth and reduced variable costs associated with servicing this market. INJECTION MOLDING -Having implemented significant productivity improvements through reduction of scrap and rework as well as installation of robotics equipment primarily in the Henderson, KY facility in 1999, the injection molding unit will focus on implementing production of new products previously approved by key customers, developing new product programs with key customers, rolling out the automation effort to its other facilities, and expanding its proprietary product - 4 - offerings with the introduction of the cedar shake panel. Continued training and development of associates on the work floor is expected to further improve productivity. PROFILE EXTRUSION -During 2000, the Company's profile extrusion unit is planning to accelerate sales growth by adding to its customer base, and developing new programs with existing customers. Further growth is also anticipated in the unit's proprietary product sales through increased distribution of recent product introductions as well as development of new products. Expanded associate training activities are expected to result in reduced scrap and improved throughput. MARKET CAPABILITIES STRETCH FILM. Utilizing two plants in the Tulsa, OK region and one plant in Nicholasville, KY, (as well as the planned West Coast facility) 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 good. 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 FILM. Utilizing two plants located in Cartersville, GA and Mankato, MN, Atlantis manufactures both low density and linear low-density polyethylene films for a wide variety of packaging applications involving monolayer and coextruded structures. Approximately 20 different types of resin, delivered in pellet form, and approximately 10 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. Management believes its relationships with its resin suppliers are 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 the converter, masking and banner film markets utilizing expanded coextrusion capabilities together with a solid base of value