Atlantis Plastics, Inc.

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Atlantis Plastics, Inc.

1870 The Exchange, Suite 200
Atlanta, Georgia 30339
U.S.A.
Telephone: (770) 953-4567
Toll Free: (800) 497-7659
Fax: (770) 618-7080
Web site: http://www.atlantisplastics.com

Public Company
Incorporated: 1983 as Atlantis Group, Inc.
Employees: 1,377
Sales: $424.3 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: ATPL
NAIC: 326113 Unlaminated Plastics Film and Sheet (Except Packaging) Manufacturing

Atlantis Plastics, Inc., operates through three business segments. Through its plastic films unit, Atlantis manufactures stretch films for the packaging industry, such as plastic wrap to secure pallets of material, as well as foodservice, party, and institutional products, including foodservice and cleaning gloves, table cloths, aprons, bibs, and bags and liners. Atlantis's injection molding segment manufactures components used in such consumer appliances as washing machines and automotive parts, and also produces Cedarway imitation splitcedar shingles for the building industry. The last Atlantis unit, profile extrusion, uses plastic extrusion technology to produce plastic parts found in appliances, office furniture, residential doors and windows, recreational vehicles, and mobile homes, and other commercial products. Atlantis operates a dozen facilities scattered across the United States. The Atlanta-based company is publicly traded, listed on the NASDAQ.

COFOUNDERS: LEVERAGED BUYOUT ARTISTS

Atlantis grew out of the investments of Trivest, a Miami private investment firm specializing in leveraged buyouts (LBOs) in low-tech industries, focusing on companies generating revenues under $100 million. It was founded in 1980 by a trio of investors: plastic surgeon Dr. Phillip T. George and two accountant friends, J. Bradley Davis and Earl W. Powell. Powell served as chief executive officer of the holding companies Trivest formed to own its acquisitions. A certified public accountant with a 1964 degree from the University of Miami, Powell was a partner at KPMG/Peat Marwick from 1971 until 1985, his tenure including a stint as managing partner of Peat Marwick's Miami office. He was also George's accountant. At Trivest George was primarily responsible for recruiting individual investors—doctors like himself, as well as lawyers and other professionals, 22 in all who contributed $4 million in seed money—while Powell and Davis lined up institutional investors, scouted acquisition targets, and negotiated the deals.

Unlike other LBO firms of the 1980s, Trivest did not break up acquisitions and sell off assets to pay for the deal. Instead, Trivest invested in the company for growth in order to generate cash flow to fund further acquisitions. Within a decade Trivest evolved into an intricate combination of seven private investment firms, backed by such heavyweight institutional investors as New York's Manufacturers Hanover Venture Capital, Pittsburgh's Westinghouse Credit Corp., and Miami's Southeast Bank; and six holding companies, one of which was Atlantis Group, Inc. Atlantis was actually formed in 1983 to acquire Western Pioneer Insurance Company in a deal completed in February 1984. Powell was named chairman and CEO, quit Peat Marwick, and then became chairman of another Trivest holding company, Biscayne Apparel, Inc.

A year after its first acquisition, Atlantis became involved in the furniture business through the acquisition of Loewenstein, Inc. The first purchase of plastics assets came in September 1985 with the addition of Cyanede Plastics, Inc., an injection molding company. This was followed in August 1986 by the acquisitions of Pierce Plastics, Inc., and National Poly Products, Inc., a custom films company, and two months later Plastic Containers, Inc. Atlantis completed an initial public offering (IPO) of stock in 1987 and began trading on the American Stock Exchange.

Atlantis was not completely focused on plastics at this stage, however. It continued to build up its portfolio of furniture assets. Southern Wood Products, Inc., was purchased in July 1988, and in 1988 Gregson Furniture Industries Inc. and Excel Office and Contract Inc. were added. Increasingly, though, the plastics industry became the focus for Atlantis. The most significant acquisition came in June 1988 with the $81.8 million purchase of Linear Films Inc., which moved Atlantis into the plastic stretch wrap field. Other purchases in the late 1980s included Rigal Plastics, Inc., and Engineered Films Corp. As a result of its steady pace of acquisitions, Atlantis's revenues expanded rapidly, growing from $17.2 million in 1985 to $221.6 million in 1989.

Rising resin prices in 1988 resulted in depressed sales of plastic stretch wrap, leading to poor earnings and a stock price that dipped from its 1987 high of $9 to the neighborhood of $3. Part of the decline in net income, which fell from $4.6 million in 1988 to $691,000 a year later was because the company also carried a high debt load, prompting Trivest in 1989 to consider merging Atlantis with Biscayne, which was having problems of its own in the apparel industry but was at least not highly leveraged. By joining Atlantis with Biscayne, the thinking went, the total debt load would be better balanced. The independent committees charged with joining the two holding companies could not agree on the merger terms, however, and the idea was ultimately dropped. Instead of becoming part of an even more diverse conglomerate, Atlantis began to narrow its focus in the 1990s.

In 1991 Atlantis sold a 51 percent stake in its furniture group to Loewenstein Inc., a company formed by management of the subsidiaries and Trivest affiliates. Two years later Loewenstein made an IPO of stock and Atlantis lowered its interest to 20 percent, then to 18 percent in February 1994. After Loewenstein merged with another company to form WinsLoew Furniture, Inc., Atlantis held a 10 percent stake, which it finally sold in December 1996. During this time, Atlantis also divested its insurance assets. In early 1994 a Western Pioneer subsidiary was sold to Data and Staff Service Co, and in August 1995 the rest of the company was sold for $12 million.

KEY DATES

1983:: Company is formed as Atlantis Group to acquire insurance company.
1985:: Atlantis becomes involved in furniture industry; acquires first plastics subsidiary.
1987:: Company is taken public.
1991:: Divestiture of furniture assets begins.
1994:: Name is changed to Atlantis Plastics Inc.
1995:: Insurance assets are sold.
2000:: Extrusion Masters, Inc., is acquired.
2004:: LaVanture Products Company, Inc., is acquired.

While Atlantis engineered its divestitures, it also added to its plastics' holdings. In February 1991 Cyanede Plastics bought the Fort Smith, Arkansas, injection molding plant of Fort Smith Plastics. In 1992 Linear Films and National Poly Products were combined to form a new operating unit called Atlantis Films, which in April 1993 acquired Champaign, Illinois-based United Plastic Products Inc. Further reorganization took place in May 1994 when the company changed its name to Atlantis Plastics, Inc., and moved its state of incorporation from Delaware to Florida. The company was comprised of Atlantis Plastic films, which accounted for two-thirds of all sales, and Atlantis Molded Plastics. In that same month, Atlantis Molded Plastics was supplemented by the acquisition of Advanced Plastics Inc., a Warren, Ohio, plastics injection molder. This unit produced thermoplastic injection molded parts for such markets as major household appliances, automobiles, hardware, and consumer products. Profile extrusion products consisted of plastic seals and trim found in office furniture, residential doors and windows, mobile homes, marine supply, and recreational vehicles. Atlantis Films, on the other hand, produced stretch films used to wrap pallets; custom films used in the food, agricultural packaging, bedding, furniture, industrial, and textile markets; and institutional products such as polyethylene gloves, bibs, aprons, bags, boots, and table covers for institutional foodservice and other markets. In February 1995 Powell turned over day-to-day control of the company to Anthony F. Bova, who became president and CEO. He had joined Atlantis in 1991, possessing experience at office products manufacturer Avery Dennison Corporation and Packaging Corporation of America.

SALES PEAKING: 1995

Revenues for Atlantis Plastics peaked in 1995 at $281.1 million but tailed off to less than $255 million by the end of the decade. The company made a number of overhead reductions in the second half of the 1990s to sustain earnings, however. In 1996 the company began to shift from independent sales representatives to direct sales personnel, a change that resulted in closer relationships with key customers, better overall customer service, and wider market coverage. The company also invested in research and development to add new products to the mix. In March 1998, for example, Atlantis introduced two new proprietary products for use in window seals, garage doors, and entrance doorways. In October 1999 Atlantis formed the Outdoor Building Products unit to produce its outdoor building accessories. Also in that year the unit developed the polypropylene Cedar Way imitation wood siding, which was introduced to the market in 2000. Moreover, Atlantis continued to grow externally during the late 1990s, acquiring Two Eagle Plastics, Inc., for $300,000 in November 1999.

As the 1990s came to a close, Atlantis looked to add a polyethylene film plant on the West Coast to supplement its stretch film plants in Tulsa, Oklahoma, and Nicholasville, Kentucky. The new operation would be able to sell to new western markets by lowering freight costs and trimming delivery times. In addition, Atlantis planned to add a new cast extrusion line in a Kentucky facility. However, the company faced stiff competition in the stretch-film market, where rivals were also investing in new equipment to increase productivity. In September 1999 Atlantis announced it was considering selling the company or other ways to enhance shareholders value and had hired a financial adviser, Bowles Hollowell Conner, to help in the deliberations. The company did not think that selling the company in parts made any sense, expressing a belief that Atlantis was worth more money together than broken up. No enticing offers were forthcoming, however, as rivals were more interested in seeing Atlantis and its excess production capacity disappear into the sea than in buying it. Hence, Atlantis entered the new century pursuing its own growth agenda.

Construction of the West Coast stretch film facility, located in Fontana, California, was begun in 2000 and began operations in March 2001. Atlantis also encountered difficulties in starting a new film line in 2000, the delay of which along with poor market conditions led to a dip of revenues in 2000 to $250.3 million, and a fall in net income to just $200,000 after totaling $9.2 million in 1999. Nevertheless, Atlantis had the wherewithal to complete an acquisition in December 2000, paying $4.8 million for Extrusion Masters, Inc., an Elkhart, Indiana-based customer profile extruder of thermoplastic parts.

POOR ECONOMIC CONDITIONS IN NEW CENTURY

As the U.S. economy lapsed into recession in 2001, and the plastics industry suffered from its own set of difficulties, Atlantis experienced another difficult year, with sales declining to $247.8 million in 2001. Net income, on the other hand, improved to $700,000 and Atlantis was able to pare its debt from $96.1 million at the start of the year to $48.8 million. A significant reason for improved profitability in the molded products unit was the company's commitment to productivity improvements, including greater use of robotics and measures to reduce waste.

Problematic conditions continued in 2002, when not only did Atlantis have to contend with a weak economy but escalating resin prices as well. Nevertheless, both business units were able to achieve sales gains, resulting in overall revenues of $248.6 million. Atlantis was able to record net income of $2.4 million. Increased business from Whirlpool for refrigerator parts also boded well for the future, and in 2002 Atlantis began expanding its Henderson, Kentucky, plant. In addition, Atlantis added to its markets in 2000 by acquiring Rio Grand Plastic Products Inc., an injection molder located in Alamo, Texas, close to the Mexican border. As a result, Atlantis could better serve customers with assembly plants in Mexico.

Resin prices remained volatile in 2003, yet Atlantis was able to increase revenues to $289.1 million and net income continued to increase sharply, totaling $8.2 million. Similar economic conditions persisted in 2004, when resin prices continued to climb, but as was the case the year before, Atlantis continued to grow. Sales jumped to $347.8 million, while net income reached $11.5 million. Atlantis also completed the acquisition of LaVanture Products Company, Inc. in November 2004. LaVanture was composed of two units: LaVanture Plastic Extrusion Technologies, Inc., and Molded Designs Technology, Inc., makers of profile extruded and injection molded plastic products, especially parts used in recreational vehicles. What made LaVanture especially attractive was that it was located in Elkhart, Indiana, only a few miles from two other Atlantis plants.

Atlantis switched to the NASDAQ in 2005 in an effort to improve the visibility of its stock. What was beginning to catch the attention of investors was the company's continued strong performance. Sales improved to $424.3 million in 2005. Net income slipped to $6.7 million, due in part to the reduction of debt and the launch of a $13 million expansion and modernization program, which would likely position Atlantis to enjoy further long-term growth.

Ed Dinger