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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 year ended December 31, 2003
OR o
    
    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.  Florida
    
    06-1088270(State or other jurisdiction
of incorporation or organization)
    
    (I.R.S. Employer
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 exchangeTitle of each class
    
    on which registeredClass A Common Stock,
$.10 par value per share
    
    American Stock Exchange
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  Noo Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (§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. o Indicate by check mark whether the registrant is an accelerated filer as
defined in Rule 12b-2 of the Act. Yes o  No x The aggregate market value of shares of Class A Common Stock held by
non-affiliates of the registrant based on a $7.08 average of the high and low
sales prices for the Class A Common Stock on the American Stock Exchange on
June 30, 2003, which was the last business day of the registrants most
recently completed second fiscal quarter, was approximately $21,595,659. 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 February 29,
2004 were 5,298,394 and 2,383,429, 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 (Items 10-14).




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ATLANTIS PLASTICS, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2003
TABLE OF CONTENTS PagePart IItem 1. Business
    
    
    3Item 2. Properties
    
    
    11Item 3. Legal Proceedings
    
    
    11Item 4. Submission of Matters to a Vote of Security Holders
    
    
    11Part IIItem 5. Market for Registrants Common Equity and Related Stockholder Matters
    
    
    12Item 6. Selected Financial Data
    
    
    13Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 8. Financial Statements and Supplementary Data
    
    
    22Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    43Item 9A. Controls and Procedures
    
    
    43Part IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    44Item 11. Executive Compensation
    
    
    44Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    44Item 13. Certain Relationships and Related Transactions
    
    
    44Item 14. Principal Accountant Fees and Services
    
    
    44Part IVItem 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    
    
    44Signatures
    
    
    49EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
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PART I NOTE REGARDING FORWARD-LOOKING STATEMENTS 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 us from time to time, in press
releases, annual or quarterly reports to shareholders, filings with the
Securities and 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 our products or services; assessments of
materiality; predictions of future events; the ability to obtain additional
financing; our 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, our significant debt, dependence on major customers, fluctuating demand for
our products, risks in product and technology development, fluctuating resin
prices, competition, litigation, labor disputes, capital requirements, and
other risk factors detailed in our filings from time to time with the
Securities and Exchange Commission, 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. We
undertake 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 Overview Atlantis Plastics, Inc., headquartered in Atlanta, Georgia, manufactures
specialty and custom plastic products in 14 manufacturing plants located
throughout the United States. We operate through three operating business
segments: Plastic Films, Injection Molding, and Profile Extrusion. Plastic Films, which accounted for approximately 65% of our net sales in
2003, is a leading manufacturer of specialty plastic films. We believe Plastic
Films is one of the largest producers of stretch films, marketed under the
Linear brand, for industrial applications in the United States. The Plastic
Films segment is comprised of three operating divisions: (1) Stretch Films,
(2) Custom Films and (3) Institutional Products. Stretch Films produces
high-quality, multilayer plastic films used to cover, package and protect
products for storage and transportation applications. Custom Films produces
customized monolayer and multilayer specialty plastic films used as a substrate
in multilayer laminates in foam padding for carpet, automotive and medical
applications, and as industrial and protective packaging. Institutional
Products converts custom films into disposable products such as tablecovers,
gloves and aprons, which are used primarily in institutional foodservice. Injection Molding, which accounted for approximately 28% of our net sales
in 2003, is a leading manufacturer of both custom and proprietary injection
molded products. Injection Molding produces a number of custom injection molded
components that are sold primarily to original equipment manufacturers, or
OEMs, in the home appliance, automotive parts, recreational vehicle and
construction industries. Injection Molding also manufactures a line of
proprietary injection molded siding panels for the home building industry and
residential replacement market under the Cedarway® trade name. - 3 -




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Profile Extrusion, which accounted for approximately 7% of our net sales
in 2003, is a manufacturer of custom extruded plastic products, primarily for
use in consumer and commercial products, including recreational vehicles,
mobile homes, residential doors and windows, office furniture and appliances. Strategy The principal elements of our strategy include (1) increasing the Stretch
Film divisions market share, (2) continuing to increase the value added
coextrusion product mix within the Custom Films division, (3) improving the
results of the Injection Molding division through increased volume, production
efficiencies and growth in our line of proprietary building panels and (4)
expanding the range of proprietary products offered by the Profile Extrusion
division. Our business plans and goals for 2004 will emphasize the following
elements. Stretch Film. The division will continue to focus on profitably increasing
its market share through capitalizing on its reputation for quality,
exceptional customer service and low cost national production locations. The
division will also focus on cost reduction initiatives to optimize our market
position as a low cost producer through both productivity enhancing initiatives
and emphasis on application of statistical methods of manufacturing. Custom Films.The division will focus its marketing and technical
resources on the divisions additional capacity and coextrusion manufacturing
capabilities in order to further penetrate the higher margin converter,
lamination and sheet masking film end-use markets. The divisions increased
product offering capabilities are expected to continue to create additional
opportunities for growth and gross margin enhancement. Institutional Products.The division will continue to strive to expand its
penetration into institutional product markets through additions to its line of
institutional product offerings. The division will look to increase efficiency
and profitability through the implementation of further selective automation in
its manufacturing processes. Injection Molding. The division will continue to focus on enhancing the
capabilities and efficiency of its manufacturing facilities through the further
utilization of robotics to reduce waste and streamline material flow. In
addition, the division will continue to focus on increasing its market
penetration and deepen its current customer relationships through the
co-development of new product programs and platforms. Additionally, the
division will strive to aggressively grow its building panel and accessories
business through additional product offerings and continued expansion of its
distribution channels. Profile Extrusion. The division will continue to streamline operations by
improving its processing methods to reduce operating costs and improve
productivity. In addition, the division will continue to develop and expand its
proprietary product offerings, including its line of extruded siding
accessories. - 4 -




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Products Stretch Film. We believe we are one of the largest producers of stretch
film in North America. We manufacture multilayer stretch film used primarily to
wrap pallets of industrial and commercial goods for shipping or storage.
Secondary markets for stretch film products include the bundling of
non-palletized products such as carpet rolls, construction materials, furniture
and paper. Stretch films are typically produced using linear low-density
polyethylene resins and other materials and are manufactured using both blown
and cast extrusion processes to meet rigid customer specifications. We believe
we are the only stretch film producer with all of its facilities ISO
9002-certified. We have over 400 SKUs in the machine wrap and hand wrap
segment. We are one of the two original producers of stretch films and, as a
result, our Linear branded products enjoy considerable brand equity. Our
product offerings include our highly successful Advantage stretch film line,
which incorporates three stretch films types, and is marketed under the Linear
brand product family. The principal attributes driving the continued popularization of stretch
films are as follows:  
    
    Load Containment.Stretch film is puncture resistant and can be
expanded up to 300% of its pre-stretch size, creating a rubber band
effect that applies force evenly to a load, helping to prevent
palletized products from shifting during the distribution and handling
processes. The consistent load containment minimizes product damage and
reduces total costs relative to other, less reliable packaging
alternatives.
    
    Cost Effectiveness.Stretch film provides superior
strength-to-weight ratios, is cheaper to produce, and results in the
creation of less waste than alternative containment media. Materials
such as strapping, banding, corrugated boxes and adhesives continue to
be displaced by stretch films at an increasing rate due to heightened
cost and waste reduction goals. In addition, the average stretch film
requirement for pallet wrapping has decreased from nearly 30 ounces per
load to less than 8 ounces per load as a result of manufacturing and
resin technology improvements, which have enabled down-gauging.
    
    Ease of Use. Stretch film allows for the effective, simple
containment of bulk goods and is less labor and time intensive than
alternative containment media. Machine wrap represents approximately
two-thirds of the market for stretch film and continues to grow in
popularity due to advances in automated wrapping machinery. Custom Films. We produce custom low-density and linear low-density
polyethylene-based laminating, embossed and specialty films that serve the
furniture, carpeting, textile, lamination, medical, beauty aids, manufacturing,
and food packaging industries. Custom Films utilizes over 1,000 different
formulae, resins and color combinations in the manufacturing of monolayer and
multilayer films in a broad range of configurations, sizes and widths. The
following are among the divisions largest volume products:  
    
    Packaging Converter Films. Converter film is primarily used for
flexible packaging, lamination and surface printing, and can be
produced in single wound sheeting, tubing or bag form. Converter film
applications include thin, fractional gauge films used for packaging
applications such as stand-up pouches and sealants used on multilayer
structures to provide oxygen and moisture barriers nearly equivalent to
foil or metal containers.
    
    Masking Films.Masking films are used to protect the surface of
materials such as acrylic sheet, glass and metal during storage and
transportation. These films incorporate a non-abrasive heat-activated
adhesive in order to help bind them to the products surfaces.
    
    Foam and Nonwoven Lamination Films. These films are engineered to
be a carrier web and integral structural component of carpet pad foam
and automotive trim components. In addition, lamination films are used
to adhere to nonwoven substrates for medical product applications,
including dental bibs, surgical draping and other protective medical
related products.
    
    Carpet, Furniture and Textile Packaging Films.This high-strength
packaging films category includes wide sheeting for wrapping textiles
and protective bags for the shipment and storage of furniture and
mattresses. Custom Films also produces film for other market segments, including
embossed films used by producers of personal care and disposable protective
wear products, and smooth and embossed release films used by rubber, prepreg
and molding compound manufacturers as a separation medium. - 5 -




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Institutional Products.Marketed under the Sta-Dri® brand name, we produce
disposable consumer and institutional plastic products for the food service,
party supply and school/collegiate markets. These product offerings are
available in a variety of styles, colors, thickness levels and weights.
Products produced include tablecovers and skirts, aisle runners, aprons, bibs,
gloves, boots, freezer/storage bags, saddle pack bags, locker wrap and custom
imprint designs. Injection Molding. We produce custom thermoplastic components for small
and large appliances, including refrigerators, air conditioners, dehumidifiers
and dishwashers. In addition, the division manufactures products for the
automotive and building products markets. In addition, Injection Molding manufactures a proprietary line of cedar
replica building panels for siding applications in residential and commercial
construction markets. The line includes a cedar shake panel for siding
applications sold under the Cedarway® brand name and proprietary half-round
accent panels. These products provide a maintenance-free, cost-effective,
easy-to-install, long-lasting alternative to wood, vinyl, and aluminum siding
products. Profile Extrusion. We produce and stock over 280 recreational vehicle
components, and have grown our portfolio of building product related offerings
to encompass 20 different products. The following are among the divisions
largest volume products:  
    
    Double-Utility Trim.Double-utility trim is used in the siding
industry and is manufactured under an exclusive licensing agreement.
    
    Flex-Flash and PLY-J. Flex-Flash flexible drip edge flashing and
PLY-J flexible J channel siding trim products were developed to seal
and finish round-top windows. These products offer built-in mildew,
mold and UV inhibitors, are easy to cut and install, and are
manufactured in a variety of colors for convenience. We trademarked the
PLY-J name in 1998 and received a patent on the Flex-Flash design in
1999.
    
    Boat Dock Bumper.We manufacture easy-to-install, heavy duty vinyl
boat dock bumpers for the marine industry. These products are made from
marine grade polyvinyl chloride and contain UV inhibitors to prevent
warping and cracking, as well as fungicide additives to retard mold and
mildew. Sales and Marketing Stretch Film. Under the Linear brand name, we sell stretch film nationally
to approximately 400 distributors of industrial packaging and directly to
several large end-users. More than 90% of our stretch film volume is sold to
distributors through our direct sales organization. Custom Films. We market specialty custom films for direct sale to
end-users, as well as through distributors, with a majority of the divisions
sales completed on an order-by-order basis. Our Custom Films sales force works
closely with our technical group to develop specific solutions for a wide range
of customer applications. The division is marketing its expanded coextrusion
production capabilities in an effort to further penetrate its market segments. Institutional Products.This division sells to numerous customers in the
institutional food service, hospital and janitorial supply and party
supply/retail store markets. Sales to both resellers and end-market retailers
are completed on an order-by-order basis. Injection Molding.This division 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, or SPC, systems enable it to meet these established quality
standards on a cost-efficient basis. We believe that our ability to offer SPC
quality assurance, as well as value-added secondary operations such as hot
stamping, silk screening, and assembly provide us with a competitive advantage
in selling to national accounts. Our personnel generate the majority of our
sales. Independent sales representatives, calling primarily on industrial
customers in the Midwest, account for the balance. Building products sales are
conducted through a nationally recognized distribution and manufacturers
representative organization serving the building construction industry. - 6 -




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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. We supply many industries, including
manufacturers of appliances, recreational vehicles, residential windows and
doors, office furniture, building supplies and marine products. Manufacturing and Raw Materials Stretch Film. We manufacture our stretch film products utilizing both cast
and blown extrusion technology in three facilities located in Sapulpa,
Oklahoma; Nicholasville, Kentucky; and Fontana, California. We purchase several
types of linear low-density resins and other materials to manufacture our
stretch film products. Custom Films. We manufacture our custom film products at two plants
located in Cartersville, Georgia and Mankato, Minnesota. Approximately 20
different types of resin, delivered in pellet form, and approximately 10 types
of additives are used in the manufacturing process. Institutional Products.This division sources film manufactured by Custom
Films and converts the film into disposable poly gloves, bibs, aprons and
tablecovers at its manufacturing facility in Mankato, Minnesota. Institutional
Products is an automated converting facility and enjoys a low cost
manufacturing position among North American suppliers with its vertical
integration-to-raw material film supply. Injection Molding. We operate molding presses ranging from 30 to 1,000
tons and related secondary equipment at six plants located in Henderson,
Kentucky; Ft. Smith, Arkansas; Warren, Ohio; LaVergne, Tennessee; Jackson,
Tennessee; and Alamo, Texas. The variety of equipment configurations and plant
locations enables us to fulfill customer requirements, including multiple
components, various press sizes and secondary operations. Our 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. We believe that the
relatively long production cycles for our 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. We have multiple sources of supply for these materials. Profile Extrusion. We manufacture our extruded plastic parts at our two
facilities located in Elkhart, Indiana. 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. We believe that we have adequate sources available to meet these raw
material needs. The raw materials we use in the manufacture of our products are various
plastic resins, primarily polyethylene. We select our suppliers on the basis of
quality, price, technical support and service. We have contracts with resin
manufacturers, which allow us to achieve what we believe to be the best
combination of price, resin availability and new product development support.
We believe our relationships with our resin suppliers are good. We do not hedge
the purchase of our raw materials. Virtually all of our plastic resin supplies
are manufactured within the United States. Although the plastics industry has
from time to time experienced shortages of plastic resins, to date, we have not
experienced any such shortages. We believe that there are adequate sources
available to meet our raw material needs. We use over 300 million pounds of plastic resins annually. We believe that
our large volume purchases of plastic resin have generally resulted in lower
net raw material costs and enabled us to obtain shipments of raw materials even
in periods of short supply. The primary plastic resins we use are produced from petrochemical
feedstock 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 1999 through 2003. See Item 1,
Business  Factors That May Affect Future Results  Fluctuations in Raw
Material Prices. - 7 -




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Competition Our operating units face intense competition from numerous competitors,
several of which have greater financial resources than we do. In addition, the
markets for certain of our products are characterized by a low cost of entry or
competition based primarily on price. 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. We believe Plastic
Films successfully competes on the basis of its established reputation for
service and quality, as well as its position as an efficient, low-cost
producer. Custom Injection Molding 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, and price. We believe that our custom injection molding
business successfully competes based on its ability to offer extensive customer
service, manufacturing efficiencies, and a wide range of production
capabilities. Our proprietary building products business competes with large
and well-established suppliers to the industry and competes on the basis of
product differentiation and service. Our cedar replica siding is recognized as
having the most authentic appearance and is offered in the broadest array of
colors in the industry. Profile Extrusion competes regionally with a number of smaller extruders
that focus on specialized niche markets. Competition is driven primarily by
cost, quality, and service levels. We believe that Profile Extrusion
successfully competes based on its competitive cost structure, high service
levels, strong production capabilities and efficiencies, and broad geographic
reach. Backlog Our total backlog at December 31, 2003 was approximately $17.7 million,
compared to approximately $10.7 million at December 31, 2002. We do 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 order adjustments. Employees As of December 31, 2003, we employed 1,347 persons, compared with 1,374
persons at December 31, 2002. We believe that relations with our employees are
satisfactory. Patents and Trademarks We have registered various trademarks with the United States Patent and
Trademark Office and certain overseas trademark regulatory agencies. We also
have applications pending for the registration of patents and other trademarks.
We believe that our trademark position is adequately protected in all markets
in which we do business. Plastic Films produces certain stretch film products
under non-exclusive licenses granted by ExxonMobil Corporation, which are
coterminous with the duration of ExxonMobil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 we manufacture or otherwise adversely affect the demand
for our products. At present, environmental laws and regulations do not have a
material adverse effect upon the demand for our products. Certain local
governments have adopted ordinances prohibiting or restricting the use or
disposal of certain plastic products that are among the types we produce. In addition, certain of our 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, we
have not had to make significant capital expenditures for compliance with such
laws and regulations. - 8 -




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While we cannot predict with any certainty our future capital expenditure
requirements for environmental regulatory compliance because of continually
changing compliance standards and technology, we have not currently identified
any of our facilities as requiring major expenditures for environmental
remediation or to achieve compliance with environmental regulations.
Accordingly, we have 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. Factors That May Affect Future Results An investment in our 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 the common
stock. If any of the events described below occurs, our business, financial
condition and results of operations would likely suffer and the trading price
of our common stock could fall. In addition, the following factors could cause our actual results to
differ materially from those projected in forward-looking statements, whether
made in this 10-K, annual or quarterly reports to shareholders, future press
releases, SEC filings or orally, whether in presentations, responses to
questions or otherwise. See Note Regarding Forward-Looking Statements. Leverage At December 31, 2003, we had $77.2 million of outstanding indebtedness, an
approximate $3.0 million in cash and cash equivalents and an additional
approximate $27.3 million of unused availability under our senior credit
facility, net of outstanding letters of credit. Our high debt level presents
substantial risks and could have negative consequences. For example, it could
(1) require us to dedicate a substantial portion of our cash flow from
operations to the repayment of debt, limiting the availability of cash for
other purposes; (2) increase our vulnerability to adverse general economic
conditions by making it more difficult to borrow additional funds to maintain
our operations if we suffer shortfalls in net sales; (3) hinder our flexibility
in planning for, or reacting to, changes in our business and industry by
preventing us from borrowing money to upgrade our equipment or facilities; and
(4) limit or impair our ability to obtain additional financing in the future
for working capital, capital expenditures, acquisitions or general corporate
purposes. Fluctuation in Raw Material Prices The primary raw materials we use in the manufacture of our products are
various plastic resins, primarily polyethylene. Our 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 we attempt to
pass through changes in the cost of our raw materials to our customers in the
form of price increases, there is no assurance that we will be able to do so.
To the extent that increases in the cost of plastic resins cannot be passed on
to our customers, or the duration of time lags associated with a pass through
becomes significant, such increases may have a material adverse effect on our
profitability. Furthermore, during periods when resin prices are falling, gross
profits may suffer, as we will be selling products manufactured with resin
purchased one to two months prior at higher prices. Dependence on Customers Approximately 14% of our net sales were to Whirlpool Corporation in 2003.
Although we have been a supplier to Whirlpool for over 50 years, a significant
reduction in Whirlpools volume, or the loss of Whirlpool as a customer, could
have a material adverse effect on our financial condition and results of
operations. - 9 -




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Competition Our operating units face intense competition from numerous competitors,
several of which have greater financial resources than us. In addition, the
markets for certain of our products are characterized by low cost of entry or
competition based primarily on price. 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 competing on the basis of
quality, price, service (including the manufacturers ability to supply
customers in a timely manner), and product differentiation. Custom Injection Molding 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. Our building
products business competes with large and well-established suppliers to the
industry, competing on the basis of product differentiation and service. Profile Extrusion competes regionally with a number of smaller extruders
that focus on specialized niche markets, competing on the basis of cost,
quality, and service levels. There can be no assurance that we will continue to compete successfully in
the markets for our products or that competition in such markets will not
intensify. Environmental Considerations 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 we manufacture or otherwise adversely affect the demand
for our products. Certain local governments have adopted ordinances prohibiting
or restricting the use or disposal of certain plastic products that are among
the types we produce. If such prohibitions or restrictions were widely adopted,
it could have a material adverse effect on our business, financial condition
and results of operations. In addition, a decline in consumer preference for
plastic products due to environmental considerations could have a material
adverse effect on our business, financial condition and results of operations. In addition, certain of our 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 we cannot predict with any certainty our future capital expenditure
requirements for environmental regulatory compliance because of continually
changing compliance standards and technology, we have not currently identified
any of our facilities as requiring major expenditures for environmental
remediation or to achieve compliance with environmental regulations.
Accordingly, we have not accrued any amounts relating to such expenditures. We
do not currently have any insurance coverage for environmental liabilities and
do not anticipate obtaining such coverage in the future. - 10 -




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ITEM 2. PROPERTIES Our headquarters consists of approximately 11,400 square feet of office
space, with an annual lease payment of approximately $157,000. The following table describes the manufacturing facilities we own or lease
as of December 31, 2003. Substantially all of the owned facilities are pledged
as collateral for debt. We believe that our manufacturing facilities are
adequate to meet current needs and increases in sales volume for the
foreseeable future. Owned or
    
    Building AreaSegment and Location
    
    Leased
    
    (square feet)Plastic Films:Stretch Films, Sapulpa, Oklahoma
    
    Owned
    
    
    126,544Stretch Films, Nicholasville, Kentucky
    
    Owned
    
    
    130,000Stretch Films, Fontana, California
    
    Leased
    
    
    95,080Custom Films, Mankato, Minnesota
    
    Owned
    
    
    140,000Institutional Products, Mankato, Minnesota
    
    Leased
    
    
    65,000Custom Films, Cartersville, Georgia
    
    Leased
    
    
    58,500Injection Molding:Injection Molding, Henderson, Kentucky
    
    Owned
    
    
    118,000Injection Molding, Jackson, Tennessee
    
    Owned
    
    
    50,835Injection Molding, Ft. Smith, Arkansas
    
    Owned
    
    
    135,000Injection Molding, Warren, Ohio
    
    Owned
    
    
    61,000Injection Molding, LaVergne, Tennessee
    
    Leased
    
    
    38,000Injection Molding, Alamo, Texas
    
    Leased
    
    
    98,000Profile Extrusion:Profile Extrusion, Elkhart, Indiana
    
    Owned
    
    
    88,000Profile Extrusion, Elkhart, Indiana
    
    Leased
    
    
    35,200
 
 ITEM 3. LEGAL PROCEEDINGS We are not presently a party to any litigation where the outcome is
expected to have a material adverse effect on our 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, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
2003. - 11 -




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PART II 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Our 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 2003 and 2002: High
    
    Low2003First Quarter
    
    $
    5.25
    
    
    $
    4.65Second Quarter
    
    $
    8.00
    
    
    $
    4.70Third Quarter
    
    $
    7.82
    
    
    $
    6.58Fourth Quarter
    
    $
    13.00
    
    
    $
    7.102002First Quarter
    
    $
    4.13
    
    
    $
    3.18Second Quarter
    
    $
    6.60
    
    
    $
    3.35Third Quarter
    
    $
    4.99
    
    
    $
    3.45Fourth Quarter
    
    $
    5.20
    
    
    $
    3.55
 There is no public market for our 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 February 29, 2004, there were 170 holders of record of Class A
Common Stock and 22 holders of record of Class B Common Stock. Dividends We did not declare or pay any dividends for the year ended December 31,
2003 and do not anticipate paying any cash dividends in the foreseeable future.
Additionally, our outstanding senior credit facility restricts our ability to
pay dividends. We presently intend to retain any future earnings to finance
future operations, to expand our business and to reduce indebtedness. - 12 -




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ITEM 6. SELECTED FINANCIAL DATA The following selected consolidated financial data should be read in
conjunction with our Consolidated Financial Statements and the Notes thereto
and Managements Discussion and Analysis of Financial Condition and Results of
Operations, which are included elsewhere in this report. Years Ended December 31,
    
    2003
    
    2002
    
    2001
    
    2000
    
    1999(in millions, except per share data)Operating DataNet sales
    
    $
    289.1
    
    
    $
    248.6
    
    
    $
    247.8
    
    
    $
    250.3
    
    
    $
    254.1Net income
    
    
    8.2
    
    
    
    2.4
    
    
    
    0.7
    
    
    
    0.2
    
    
    
    9.2Goodwill amortization*
    
    
    
    
    
    
    
    
    
    
    1.8
    
    
    
    1.6
    
    
    
    1.6Per Share DataNet income:Basic earnings per common share
    
    $
    1.08
    
    
    $
    0.31
    
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    1.23Diluted earnings per common share
    
    $
    1.06
    
    
    $
    0.31
    
    
    $
    0.10
    
    
    $
    0.03
    
    
    $
    1.18Financial DataTotal assets
    
    $
    182.9
    
    
    $
    175.6
    
    
    $
    169.6
    
    
    $
    175.5
    
    
    $
    170.7Total debt
    
    
    77.2
    
    
    
    88.9
    
    
    
    88.9
    
    
    
    98.6
    
    
    
    91.7Cash dividends declared per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 * The Company adopted Statement of Financial Accounting Standards No. 142
during 2002, which requires, among other items, the cessation of recording
goodwill amortization. - 13 -




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We are 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. During fiscal 2003, we revised our segment disclosures to report Injection
Molding and Profile Extrusion, the two divisions previously comprising Molded
Products, as separate segments. Previously reported segment information has
been restated to reflect the composition of our three segments. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States. Note 1 to our consolidated financial statements describes
the significant accounting policies and methods used in the preparation of
these financial statements. The preparation of these financial statements also
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities. On an ongoing basis, our management
evaluates these estimates, including those related to revenue recognition,
intangible assets, sales returns and allowances, bad debts and contingencies.
We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ materially from these estimates under different assumptions
or conditions. We believe the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of our consolidated
financial statements. Revenue recognition and accounts receivable:We recognize revenue upon shipment
of our products to customers, giving consideration to product shipping terms.
Receivables are currently due from customers based on negotiated payment terms.
The allowance for doubtful accounts is recorded based on specific review and
analysis of customer account balances. The allowance for sales returns is
recorded based on managements estimate of product returns, primarily based on
historical trends. We perform ongoing credit assessments of our customers and
adjust credit limits based upon payment history, the customers current credit
worthiness and any other relevant customer specific credit information. While
historical credit losses have been within our expectations and the provisions
established, it is possible that future credit losses could be higher or lower
in the future. Inventories:Inventories are stated at the lower of cost (first-in, first-out)
or market. Cost includes materials, labor and overhead. Market, with respect to
all inventories, is replacement cost or net realizable value. Management
periodically reviews inventory to determine the necessity of reserves for
excess, obsolete or unsaleable inventory. These reviews require management to
assess customer and market demand. These estimates may differ from actual
results, in which case we may have overstated or understated the reserve
required for excess, obsolete or unsaleable inventory. Goodwill:In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141, Business Combinations
(SFAS 141), and SFAS No. 142, Goodwill and Other Intangible Assets (SFAS
142). SFAS 141 prospectively prohibits the pooling of interests method of
accounting for business combinations initiated after June 30, 2001. SFAS 142
requires companies to cease amortizing goodwill that existed at December 31,
2001 and establishes a new method for testing goodwill for impairment on an
annual basis, or an interim basis if an event occurs that might reduce the fair
value of a reporting unit below its carrying value. Any goodwill resulting from
acquisitions completed after June 30, 2001 will not be amortized. SFAS 142 also
requires that an identifiable intangible asset which is determined to have an
indefinite useful economic life not be amortized, but be separately tested for
impairment using a fair value based approach. We adopted SFAS 142 effective
January 1, 2002 resulting in a decrease in amortization expense of
approximately $1.8 million during the year ended December 31, 2002, as compared
to the year ended December 31, 2001. - 14 -




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We review goodwill and identifiable intangible assets for impairment on an
annual basis or on an interim basis if an event occurs that might reduce the
fair value of the goodwill below its carrying value. An impairment loss would
be recognized based on the difference between the carrying value of the asset
and its estimated fair value, which would be determined based on either
discounted future cash flows or other appropriate fair value methods. Specifically, we have net goodwill, which represents the purchase price
over the fair value of identifiable assets and liabilities of acquired
businesses, of $47.2 million and accumulated amortization of $22.5 million at
December 31, 2003 and 2002. Based upon our analysis, we have determined there
has been no impairment of goodwill as of December 31, 2003 in accordance with
SFAS 142. Although we currently believe that the estimates of each reporting units
fair value used in the evaluation of goodwill are reasonable, differences
between actual and expected revenue, operating results, and cash flow could
cause these assets to be deemed impaired. If this were to occur, we would be
required to charge to earnings the write-down in value of such assets, which
could have a material adverse effect on our results of operations and financial
position. Self Insurance:We are self-insured for the majority of our group health
insurance costs, subject to specific retention levels. The reserve for health
insurance claims incurred but not paid is based on historical claims
information. In addition, we are self-insured for the majority of our workers
compensation costs. We establish reserves for workers compensation claims
utilizing insurance industry loss development factors as well as specific
estimates of settlement costs for individual claims. While we believe that our
assumptions are appropriate, significant differences in our actual experience
or significant changes in our assumptions may have a material effect on our
group health insurance and workers compensation costs. Net sales, gross profit, and operating income for the years ended December
31, 2003, 2002, and 2001, were as follows (in thousands): Years Ended December 31,
    
    2003
    
    2002
    
    2001Net Sales
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net SalesPlastic Films
    
    $
    186,431
    
    
    
    65
    %
    
    $
    165,013
    
    
    
    66
    %
    
    $
    170,720
    
    
    
    69
    %Injection Molding
    
    
    81,345
    
    
    
    28
    %
    
    
    61,807
    
    
    
    25
    %
    
    
    59,738
    
    
    
    24
    %Profile Extrusion
    
    
    21,322
    
    
    
    7
    %
    
    
    21,766
    
    
    
    9
    %
    
    
    17,356
    
    
    
    7
    %Total
    
    $
    289,098
    
    
    
    100
    %
    
    $
    248,586
    
    
    
    100
    %
    
    $
    247,814
    
    
    
    100
    %Gross Profit
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net SalesPlastic Films
    
    $
    30,021
    
    
    
    16
    %
    
    $
    24,494
    
    
    
    15
    %
    
    $
    26,416
    
    
    
    15
    %Injection Molding
    
    
    11,893
    
    
    
    15
    %
    
    
    9,584
    
    
    
    16
    %
    
    
    7,789
    
    
    
    13
    %Profile Extrusion
    
    
    5,026
    
    
    
    24
    %
    
    
    5,819
    
    
    
    27
    %
    
    
    4,543
    
    
    
    26
    %Total
    
    $
    46,940
    
    
    
    16
    %
    
    $
    39,897
    
    
    
    16
    %
    
    $
    38,748
    
    
    
    16
    %Operating Income
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net SalesPlastic Films
    
    $
    11,092
    
    
    
    6
    %
    
    $
    5,290
    
    
    
    3
    %
    
    $
    6,914
    
    
    
    4
    %Injection Molding
    
    
    4,765
    
    
    
    6
    %
    
    
    3,001
    
    
    
    5
    %
    
    
    1,926
    
    
    
    3
    %Profile Extrusion
    
    
    2,688
    
    
    
    13
    %
    
    
    3,150
    
    
    
    14
    %
    
    
    2,029
    
    
    
    12
    %Total
    
    $
    18,545
    
    
    
    6
    %
    
    $
    11,441
    
    
    
    5
    %
    
    $
    10,869
    
    
    
    4
    %
 - 15 -




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Comparison of Years Ended December 31, 2003 and 2002 Net Sales Net sales increased to $289.1 million in 2003, compared with $248.6
million in 2002, a 16% increase. Our Plastic Films segment sales increased to
$186.4 million in 2003, compared with $165.0 million in 2002, a 13% increase.
This increase was primarily the result of a 17% increase in average selling
prices in 2003, which was partially offset by a 3% decline in sales volume
(measured in pounds). Injection Molding sales increased to $81.3 million in
2003, compared with $61.8 million in 2002, a 32% increase. This increase was
primarily the result of the acquisition of Rio Grande Plastic Products, Inc. in
October 2002, which contributed approximately $9.8 million in net sales during
the year, as well as growth within the segments building products business.
Sales in our Profile Extrusion segment decreased to $21.3 million in 2003,
compared with $21.8 million in 2002, a 2% decrease. This decrease was primarily
attributable to softer demand in the first half of the year in both the
manufactured housing and office furniture sectors. Gross Profit Gross profit, as a percentage of net sales, remained flat at 16% in 2003,
when compared with 2002. During 2003, our Plastic Films segment experienced
volatility in raw material prices with average raw material prices increasing
23%. Despite the volatility in raw material prices, our Plastic Films
segments gross profit increased to 16% in 2003 compared with 15% in 2002, due
to our ability to pass through raw material cost increases. In our Injection
Molding segment, gross profit decreased to 15% in 2003, compared with 16% in
2002. The decrease was primarily due to start up costs incurred on new
business. Our Profile Extrusion segments gross profit decreased to 24% in 2003
from 27% in 2002. The decrease can be attributed primarily to increases in raw
material costs, which were not fully passed through to customers. Selling, General and Administrative Expense Our selling, general and administrative (SG&A) expense decreased
slightly to $28.4 million in 2003, compared with $28.5 million in 2002. SG&A
expenses as a percentage of net sales decreased in 2003 to 10% from 11% in
2002. Net Interest Expense and Income Taxes Net interest expense decreased 28% to $5.5 million in 2003 from $7.6
million in 2002. The decrease was the result of lower interest rates and lower
average borrowings in 2003. Our 2003 and 2002 effective income tax rate was 37% and 38%, respectively.
The 2003 and 2002 effective income tax rate differed from the applicable
statutory rate due to the effect of state income taxes. Income As a result of the factors described above, operating income increased to
$18.5 million, or 6% of net sales, in 2003, compared with $11.4 million, or 5%
of net sales, in 2002. Net income and earnings per share amounts were as
follows: 2003
    
    2002Net income
    
    $8.2 million
    
    $2.4 millionBasic earnings per share
    
    $
    1.08
    
    
    $
    0.31Diluted earnings per share
    
    $
    1.06
    
    
    $
    0.31
 - 16 -




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Comparison of Years Ended December 31, 2002 and 2001 Net Sales Net sales increased to $248.6 million in 2002, compared with $247.8
million in 2001, a 0.3% increase. Our Plastic Films segment sales decreased to
$165.0 million in 2002, compared with $170.7 million in 2001, a 3% decrease.
This decrease was primarily the result of a 6% decrease in average selling
prices in 2002, which was partially offset by a 2% increase in sales volume
(measured in pounds). Injection Molding sales increased to $61.8 million in
2002, compared with $59.7 million in 2001, or a 4% increase. This increase was
primarily the result of a $2.0 million increase in sales attributed to the
acquisition of Rio Grande Plastic Products, Inc. in October 2002 as well as
growth within the segments building products business. Net sales in our
Profile Extrusion segment increased 25% to $21.8 million in 2002 from $17.4
million in 2001. This increase was primarily due to growth in volumes sold to
a primary appliance customer. Gross Profit Gross profit, as a percentage of net sales, remained flat at 16% in 2002,
when compared with 2001. During 2002, our Plastic Films segment was impacted by
the volatility in raw material prices with average raw material costs
decreasing approximately 7%. Gross profit margin for our Plastic Films segment
remained flat at 15% in 2002, when compared with 2001. In our Injection Molding
segment, gross profit increased to 16% in 2002, compared with 13% in 2001. This
increase was primarily due to a change in product mix resulting in an increase
in higher margin sales. Our Profile Extrusion segments gross profit increased
to 27% in 2002, compared with 26% in 2001. This increase was attributable to
the significant increase in sales resulting in improved fixed cost absorption
and asset utilization. Selling, General and Administrative Expense Our selling, general and administrative expense increased to $28.5 million
in 2002, compared with $26.1 million in 2001, a 9% increase. This increase was
primarily the result of increases in insurance costs (property, general and
health) and increases in incentive compensation costs. Net Interest Expense and Income Taxes Net interest expense decreased to $7.6 million in 2002, compared with $9.4
million in 2001, a 19% decrease. The decrease was primarily the result of lower
interest rates on our borrowings in 2002. Our 2002 and 2001 effective income tax rate was 38% and 66%, respectively.
The 2002 effective income tax rate differed from the applicable statutory rate
due to the effect of state income taxes. In addition, our 2001 effective income
tax rate was higher than the 2002 effective rate and differed from the
applicable statutory rate due to nondeductible goodwill amortization and the
tax effect of the gain on debt extinguishment. Gain on Debt Extinguishment During 2001, we repurchased at a discount approximately $25.5 million of
our 11% Senior Notes on the open market, which resulted in an extraordinary
gain of $639,000. The gain relates to the discount received for the repurchased
Notes, partially offset by the write-off of unamortized loan origination costs
related to such Notes. In accordance with Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 145, this gain was reclassified
and included in income before provision for income taxes in the current year. Income As a result of the factors described above, operating income, excluding
goodwill amortization of $1.8 million in 2001, decreased to $11.4 million, or
5% of net sales, in 2002, compared with $12.6 million, or 5% of net sales, in
2001. Net income and earnings per share amounts were as follows: 2002
    
    2001Net income
    
    $2.4 million
    
    $0.7 millionBasic earnings per share
    
    $
    0.31
    
    
    $
    0.10Diluted earnings per share
    
    $
    0.31
    
    
    $
    0.10
 - 17 -




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LIQUIDITY AND CAPITAL RESOURCES Our working capital, defined as current assets less current liabilities,
at December 31, 2003 totaled $25.9 million (including cash and cash equivalents
of $3.0 million), compared to $28.5 million (including cash and cash
equivalents of $1.2 million) at December 31, 2002. At December 31, 2003,
borrowings on our $110 million senior credit facility were $77.2 million, with
unused availability, net of outstanding letters of credit of approximately $1.6
million, totaling $27.3 million. As of February 29, 2004, borrowings on our
$110 million senior credit facility were $82.2 million, with unused
availability, net of outstanding letters of credit of approximately $1.6
million, totaling $22.3 million. In accordance with the terms of our senior credit facility, we are
required to make mandatory loan pre-payments from excess cash flow as defined
per the credit agreement. Based on our calculation as of December 31, 2003,
this amount is approximately $5.3 million and will be paid during the first
quarter of fiscal 2004. Our 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. We presently do not have any material
commitments for future capital expenditures and expect to meet our short and
long-term liquidity needs with cash on hand, funds generated from operations,
and funds available under our senior credit facility. See Item 1,
Business-Factors That May Affect Future Results  Leverage. Cash Flows from Operating Activities Net cash provided by operating activities was approximately $21.0 million
in 2003, compared with $14.3 million in 2002. The difference between our net
income in 2003 of $8.2 million and our $21.0 million operating cash flow was
primarily attributable to approximately $11.8 million of depreciation, an $8.0
million increase in accounts payable and accrued expenses and a $1.6 million
increase in net deferred income tax liabilities, partially offset by an $11.0
million increase in accounts receivable and an approximately $1.3 million
increase in inventories. Cash Flows from Investing Activities Net cash used for investing activities in 2003 totaled $7.0 million,
compared with $9.8 million in 2002, and consists primarily of capital
expenditures in both years. The majority of the capital expenditures incurred
in 2003 related to capacity expansion within our building products and custom
injection molding businesses. The cash used for investing activities in 2002
also includes approximately $1.9 million for the purchase of a business,
partially offset by approximately $1.6 million in proceeds from asset
dispositions. Cash Flows from Financing Activities Net cash used for financing activities was $12.2 million in 2003, compared
with $4.3 million in 2002. The cash used for financing activities in 2003
reflects net debt repayments of $11.7 million and $1.1 million of refinancing
costs associated with the senior credit facility, primarily offset by $0.3
million in repayments on shareholder notes and $0.3 million of proceeds from
the exercise of stock options. The following table summarizes our contractual obligations at December 31,
2003, and the effect such obligations are expected to have on our liquidity and
cash flows in future periods (in thousands): Maturity
    
    Maturity
    
    Maturity
    
    Maturityless 1 yr
    
    1-3 yrs
    
    4-5 yrs
    
    over 5 yrsDebt principal
    
    $
    10,487
    
    
    $
    15,327
    
    
    $
    51,386
    
    
    $
    Operating leases
    
    
    3,453
    
    
    
    6,125
    
    
    
    3,661
    
    
    
    995Total commitments
    
    $
    13,940
    
    
    $
    21,452
    
    
    $
    55,047
    
    
    $
    995
 - 18 -




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Recent Accounting Pronouncements In May 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 150, Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity (SFAS 150). This statement changes the classification of certain
financial instruments from equity to a liability. The three types of financial
instruments requiring the change in classification are: (1) mandatorily
redeemable shares, which the issuing company is obligated to buy back in
exchange for cash or other assets; (2) put options and forward purchase
contracts; and (3) obligations that can be settled with shares, the monetary
value of which is fixed, tied solely or predominantly to a variable such as a
market index, or varies inversely with the value of the issuers shares. This
statement is effective for all financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after September 15, 2003. We have adopted the
provisions of SFAS 150 as of October 1, 2003. Since we do not currently
maintain any of the above-mentioned financial instruments, the adoption of this
statement did not have any effect on our consolidated financial statements. In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities (SFAS 149). This statement
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities
under FASB Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities. This Statement is generally effective for contracts
entered into or modified after September 30, 2003 and hedging relationships
designated after September 30, 2003. We will apply the provisions of SFAS 149
for any derivative instruments or hedging activities entered into after
September 30, 2003. As we do not currently enter into derivative instruments
or hedging activities, the adoption of this statement will not have any effect
on our consolidated financial statements. In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities, an Interpretation of ARB 51
(FIN 46). The primary objectives of FIN 46 are to provide guidance on the
identification of entities for which control is achieved through means other
than through voting rights (variable interest entities or VIEs) and how to
determine when and which business enterprise should consolidate the VIE (the
primary beneficiary). This interpretation is required to be adopted for all
periods after December 15, 2003 for any VIEs in which we hold a variable
interest that we acquired before February 1, 2003. We adopted the provisions of
FIN 46 on January 1, 2004; however, as we do not currently hold any VIEs, the
adoption of this pronouncement did not have any effect on our consolidated
financial statements. In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure (SFAS 148), amending SFAS
No. 123, Accounting for Stock-Based Compensation (SFAS 123), to provide
alternative methods of transition to the fair value method of accounting for
stock-based employee compensation. The three methods provided in SFAS 148
include (1) the prospective method which is the method currently provided for
in SFAS 123, (2) the retroactive method which would allow companies to restate
all periods presented and (3) the modified prospective method which would allow
companies to present the recognition provisions to all outstanding stock-based
employee compensation instruments as of the beginning of the fiscal year of
adoption. In addition, SFAS 148 amends the disclosure provisions of SFAS 123 to
require disclosure in the summary of significant accounting policies of the
effects of an entitys accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and
interim financial statements. SFAS 148 does not amend SFAS 123 to require
companies to account for their employee stock-based awards using the fair value
method. However, the disclosure provisions are required for all companies with
stock-based employee compensation, regardless of whether they utilize the fair
value method of accounting described in SFAS 123 or the intrinsic value method
described in Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB Opinion No. 25). We will continue to account for
our stock-based compensation awards to employees and directors under the
accounting prescribed by APB Opinion No. 25 and related interpretations;
however, we have adopted the disclosure provisions of SFAS 148 in the current
year. (See Notes 1 and 4). In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued.
FIN 45 also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and initial
measurement provisions of FIN - 19 -




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45 are applicable on a prospective basis to guarantees issued or modified
after December 31, 2002, and the disclosure provisions are effective as of
December 31, 2002. We adopted the disclosure provisions of FIN 45 as of
December 31, 2002, and the remaining provisions of FIN 45 as of January 1, 2003
and, as we have not entered into significant guarantees, the interpretation did
not have any effect on the consolidated financial statements. In July 2002, the FASB issued SFAS No. 146, Accounting for the Cost
Associated with Exit or Disposal Activities. This statement applies to all
exit or disposal activities initiated after December 31, 2002 and requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or
disposal plan. Examples of costs covered by this statement include lease
termination costs and certain employee severance costs that are associated with
a restructuring, discontinued operation, plant closing, or other exit or
disposal activity. We have adopted this accounting standard as of January 1,
2003 and it did not have any effect on our consolidated financial statements. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections (SFAS 145). SFAS 145 rescinds SFAS 4, Reporting Gains and
Losses from Extinguishment of Debt, and an amendment of SFAS 4, SFAS 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. SFAS 145
also rescinds SFAS 44, Accounting for Intangible Assets of Motor Carriers,
and amends SFAS 13, Accounting for Leases, to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic effects
that are similar to sale-leaseback transactions. SFAS 145 also amends other
existing authoritative pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under changed conditions.
SFAS 145 is effective for fiscal years beginning after May 15, 2002. Any gain
or loss on extinguishment of debt that was classified as an extraordinary item
in prior periods presented that does not meet the criteria in Accounting
Principles Board Opinion No. 30, Reporting the Results of Operations 
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual, and Infrequently Occurring Events and Transactions,
for classification as an extraordinary item shall be reclassified. The
provisions of SFAS 145 related to SFAS 13 were effective for transactions
occurring after May 15, 2002. All other provisions of SFAS 145 were effective
for financial statements issued on or after May 15, 2002. We adopted SFAS 145
as of January 1, 2003, and the pronouncement did not have a material impact on
the consolidated financial statements, other than the reclassification of the
extraordinary gain from the extinguishment of debt to income before provision
for income taxes in our statement of income for the year ended December 31,
2001. - 20 -




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks that may impact our financial condition and
financial results due to changing interest rates and foreign exchange rates. We
do not participate in any significant hedging activities, nor do we currently
utilize any significant derivative financial instruments. The following
discussion provides additional information regarding our market risks. Interest Rate Risk: We have entered into variable-rate debt that, at
December 31, 2003, had an outstanding balance of $77.2 million. As of December
31, 2002, we had $88.3 million of outstanding variable-rate debt. Based on our
variable-rate obligations outstanding at December 31, 2003, and December 31,
2002, each 25 basis point increase or decrease in the level of interest rates
would, respectively, increase or decrease our annual interest expense and
related cash payments by approximately $0.2 million, and $0.2 million,
respectively. Such potential increases or decreases are based on certain
simplifying assumptions, including a constant level of variable-rate debt for
all maturities and an immediate, across-the-board increase or decrease in the
level of interest rates with no other subsequent changes for the remainder of
the period. Foreign Exchange Rate Risk: We have a Canadian dollar bank account and
therefore are exposed to foreign exchange currency market risk. We have
determined this risk to be immaterial at both December 31, 2003 and December
31, 2002 based on the balance maintained in that account and the overall level
of our Canadian operations. - 21 -




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageManagements Responsibility for Financial Reporting
    
    
    23Report of Independent Auditors
    
    
    24Consolidated Statements of Income For the Years Ended December 31, 2003, 2002, and 2001
    
    
    25Consolidated Balance Sheets as of December 31, 2003 and 2002
    
    
    26Consolidated Statements of Shareholders Equity For the Years Ended December 31, 2003, 2002, and 2001
    
    
    27Consolidated Statements of Cash Flows For the Years Ended December 31, 2003, 2002, and 2001
    
    
    28Notes to Consolidated Financial Statements
    
    
    29
 - 22 -




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MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING The Companys management is responsible for the preparation of the
accompanying consolidated financial statements in accordance with accounting
principles generally accepted in the United States 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. /s/ Anthony F. Bova
    
    /s/ Paul G. SaariPresident and Chief
    
    Senior Vice President of Finance andExecutive Officer
    
    Chief Financial Officer
 - 23 -




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REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders of Atlantis Plastics, Inc. We have audited the accompanying consolidated balance sheets of Atlantis
Plastics, Inc. as of December 31, 2003 and 2002, and the related consolidated
statements of income, shareholders equity, and cash flows for each of the
three years in the period ended December 31, 2003. Our audits also included the
financial statement schedule listed in the Index at Item 15(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. at December 31, 2003 and 2002, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2003, 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. As discussed in Note 1 to the consolidated financial statements, in 2002 the
Company ceased amortization of goodwill in accordance with Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. /s/ Ernst & Young LLP Atlanta, Georgia
February 13, 2004 - 24 -




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##### Table of Contents



Consolidated Statements of Income Years Ended December 31,(in thousands, except per share amounts)
    
    2003
    
    2002
    
    2001Net sales
    
    $
    289,098
    
    
    $
    248,586
    
    
    $
    247,814Cost of goods sold
    
    
    242,158
    
    
    
    208,689
    
    
    
    209,066Gross profit
    
    
    46,940
    
    
    
    39,897
    
    
    
    38,748Selling, general and administrative expenses
    
    
    28,395
    
    
    
    28,456
    
    
    
    26,101Goodwill amortization
    
    
    
    
    
    
    
    
    
    
    1,778Operating income
    
    
    18,545
    
    
    
    11,441
    
    
    
    10,869Interest expense, net of interest income of $153 in 2003,
$132 in 2002 and $252 in 2001
    
    
    (5,466
    )
    
    
    (7,607
    )
    
    
    (9,410
    )Gain on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    639Income before provision for income taxes
    
    
    13,079
    
    
    
    3,834
    
    
    
    2,098Provision for income taxes
    
    
    4,839
    
    
    
    1,456
    
    
    
    1,375Net income
    
    $
    8,240
    
    
    $
    2,378
    
    
    $
    723Basic earnings per share
    
    $
    1.08
    
    
    $
    0.31
    
    
    $
    0.10Diluted earnings per share
    
    $
    1.06
    
    
    $
    0.31
    
    
    $
    0.10Weighted average number of shares used in
computing earnings per share:Basic
    
    
    7,606
    
    
    
    7,569
    
    
    
    7,532Diluted
    
    
    7,750
    
    
    
    7,578
    
    
    
    7,535
 See accompanying notes. - 25 -




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##### Table of Contents



Consolidated Balance Sheets December 31,(in thousands, except share and per share amounts)
    
    2003
    
    2002AssetsCash and cash equivalents
    
    $
    3,001
    
    
    $
    1,225Accounts receivable (net of allowances of $1,281 and $915)
    
    
    37,661
    
    
    
    26,733Inventories
    
    
    23,305
    
    
    
    21,958Other current assets
    
    
    3,583
    
    
    
    6,155Deferred income tax assets
    
    
    3,003
    
    
    
    2,766Total current assets
    
    
    70,553
    
    
    
    58,837Property and equipment, net
    
    
    60,347
    
    
    
    65,140Goodwill, net of accumulated amortization
    
    
    47,212
    
    
    
    47,212Other assets
    
    
    4,748
    
    
    
    4,411Total assets
    
    $
    182,860
    
    
    $
    175,600Liabilities and shareholders equityAccounts payable and accrued expenses
    
    $
    34,209
    
    
    $
    26,279Current maturities of long-term debt
    
    
    10,487
    
    
    
    4,013Total current liabilities
    
    
    44,696
    
    
    
    30,292Long-term debt
    
    
    66,713
    
    
    
    84,891Deferred income tax liabilities
    
    
    12,731
    
    
    
    10,889Other liabilities
    
    
    315
    
    
    
    Total liabilities
    
    
    124,455
    
    
    
    126,072Commitments and contingencies
    
    
    
    
    
    
    Shareholders equityClass A Common Stock; $0.10 par value; 20,000,000 shares authorized,
5,170,842 and 5,121,752 shares issued and outstanding in 2003 and 2002
    
    
    517
    
    
    
    512Class B Common Stock; $0.10 par value; 7,000,000 shares authorized,
2,456,981 shares issued and outstanding in 2003 and 2002
    
    
    246
    
    
    
    246Additional paid-in capital
    
    
    11,119
    
    
    
    10,852Notes receivable from sale of common stock
    
    
    (1,317
    )
    
    
    (1,682
    )Retained earnings
    
    
    47,840
    
    
    
    39,600Total shareholders equity
    
    
    58,405
    
    
    
    49,528Total liabilities and shareholders equity
    
    $
    182,860
    
    
    $
    175,600
 See accompanying notes. - 26 -




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##### Table of Contents



Consolidated Statements of Shareholders Equity Notes
    
    
    
    
    
    
    
    
    
    TotalClass A
    
    Class B
    
    Additional
    
    Receivable
    
    
    
    
    
    
    
    
    
    Share-Common
    
    Common
    
    Paid-In
    
    from Sale of
    
    Retained
    
    Treasury
    
    holders( in thousands)
    
    Stock
    
    Stock
    
    Capital
    
    Common Stock
    
    Earnings
    
    Stock
    
    EquityBalance at January 1, 2001
    
    $
    486
    
    
    $
    268
    
    
    $
    10,679
    
    
    $
    (1,625
    )
    
    $
    36,505
    
    
    $
    
    
    
    $
    46,313Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    723
    
    
    
    
    
    
    
    723Purchases of Class A Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Cancellation of Class A Common Stock
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (6
    )
    
    
    9
    
    
    
    Conversion of Class B to Class A
Common Stock
    
    
    11
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments on notes received for sale of
Common Stock , net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    36Balance at December 31, 2001
    
    
    496
    
    
    
    257
    
    
    
    10,677
    
    
    
    (1,589
    )
    
    
    37,222
    
    
    
    
    
    
    
    47,063Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,378
    
    
    
    
    
    
    
    2,378Exercise of stock options
    
    
    5
    
    
    
    
    
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180Conversion of Class B to Class A
Common Stock
    
    
    11
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Notes received for sale of Common
Stock , net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (93
    )
    
    
    
    
    
    
    
    
    
    
    (93
    )Balance at December 31, 2002
    
    
    512
    
    
    
    246
    
    
    
    10,852
    
    
    
    (1,682
    )
    
    
    39,600
    
    
    
    
    
    
    
    49,528Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,240
    
    
    
    
    
    
    
    8,240Exercise of stock options
    
    
    5
    
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    272Payments on notes received for sale of
Common Stock , net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    365
    
    
    
    
    
    
    
    
    
    
    
    365Balance at December 31, 2003
    
    $
    517
    
    
    $
    246
    
    
    $
    11,119
    
    
    $
    (1,317
    )
    
    $
    47,840
    
    
    $
    
    
    
    $
    58,405
 See accompanying notes. - 27 -




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Consolidated Statements of Cash Flows Years Ended December 31,(in thousands)
    
    2003
    
    2002
    
    2001Operating Activities:Net income
    
    $
    8,240
    
    
    $
    2,378
    
    
    $
    723Adjustments to reconcile net income to cash provided by operating activities:Depreciation
    
    
    11,760
    
    
    
    11,678
    
    
    
    10,519Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    1,778Loan fee and other amortization
    
    
    1,012
    
    
    
    220
    
    
    
    303Interest receivable from shareholder loans
    
    
    33
    
    
    
    (75
    )
    
    
    (104
    )Gain on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (639
    )Loss on disposal of assets
    
    
    
    
    
    
    153
    
    
    
    66Deferred income taxes
    
    
    1,605
    
    
    
    (824
    )
    
    
    449Change in operating assets and liabilities, net of acquisitions of businesses:Accounts receivable
    
    
    (11,035
    )
    
    
    2,853
    
    
    
    (4,879
    )Inventories
    
    
    (1,347
    )
    
    
    (5,406
    )
    
    
    2,234Other current assets
    
    
    1,566
    
    
    
    (82
    )
    
    
    1,197Accounts payable and accrued expenses
    
    
    8,037
    
    
    
    3,182
    
    
    
    3,441Other assets and liabilities
    
    
    1,159
    
    
    
    251
    
    
    
    70Cash provided by operating activities
    
    
    21,030
    
    
    
    14,328
    
    
    
    15,158Investing Activities:Capital expenditures
    
    
    (7,033
    )
    
    
    (9,546
    )
    
    
    (7,818
    )Purchase of business
    
    
    
    
    
    
    (1,885
    )
    
    
    (47
    )Proceeds from asset dispositions
    
    
    
    
    
    
    1,642
    
    
    
    12Cash used for investing activities
    
    
    (7,033
    )
    
    
    (9,789
    )
    
    
    (7,853
    )Financing Activities:(Repayments) borrowings under new revolving credit facility
    
    
    (7,200
    )
    
    
    13,300
    
    
    
    (Repayments) borrowings under term loans
    
    
    (3,900
    )
    
    
    75,000
    
    
    
    Retirement of Senior Notes
    
    
    
    
    
    
    (49,325
    )
    
    
    (25,500
    )(Repayments) borrowings under old credit agreement
    
    
    
    
    
    
    (21,500
    )
    
    
    5,000(Repayments) borrowings on long-term debt
    
    
    (604
    )
    
    
    (17,461
    )
    
    
    11,556Financing costs associated with new credit facility
    
    
    (1,121
    )
    
    
    (4,381
    )
    
    
    Repayments on notes receivable from shareholders
    
    
    332
    
    
    
    96
    
    
    
    140Purchases of common stock and options
    
    
    
    
    
    
    
    
    
    
    (9
    )Proceeds from exercise of stock options
    
    
    272
    
    
    
    20
    
    
    
    Cash used for financing activities
    
    
    (12,221
    )
    
    
    (4,251
    )
    
    
    (8,813
    )Increase (decrease) in cash and cash equivalents
    
    
    1,776
    
    
    
    288
    
    
    
    (1,508
    )Cash and cash equivalents at beginning of year
    
    
    1,225
    
    
    
    937
    
    
    
    2,445Cash and cash equivalents at end of year
    
    $
    3,001
    
    
    $
    1,225
    
    
    $
    937Supplemental disclosure of cash flow information:Cash paid during the year for:Interest
    
    $
    4,003
    
    
    $
    7,364
    
    
    $
    9,203Income taxes, net of refunds
    
    $
    1,119
    
    
    $
    2,107
    
    
    $
    (556
    )Supplemental schedule of non-cash investing and financing activities:Leases obtained in acquisition
    
    $
    
    
    
    $
    1,978
    
    
    $
    Non-cash reduction of accounts receivable and accounts payable
    
    $
    107
    
    
    $
    344
    
    
    $
    1,181
 See accompanying notes. - 28 -




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Nature of Business and Summary of Significant Accounting Policies Atlantis Plastics, Inc. (Atlantis or the Company) through its wholly
owned subsidiaries 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
building supply industries. During 2003, the Company revised the composition of
its segments by separating into two segments the businesses previously
comprising the Molded Products segment. The Companys operations are now
reported as three segments, Plastic Films, Injection Molding, and Profile
Extrusion. Plastic Films manufactures stretch films, which are multilayer plastic
films used principally to wrap pallets of industrial and commercial goods for
shipping or storage and custom film products that include high-grade laminating
films, embossed films and specialty films which serve the furniture, carpeting,
textile, lamination, medical, beauty aids, manufacturing, and food packaging
industries. Plastic Films also produces disposable consumer and institutional
plastic products to the food service, party supply, and school and collegiate
markets. Injection Molding manufactures a number of custom injection molded
thermoplastic components that are sold primarily to original equipment
manufacturers in the home appliance, automotive parts, recreational vehicle and
construction industries. Injection Molding also manufactures a line of
proprietary injection molded siding panels for the home building industry and
the residential replacement market. Profile Extrusion manufactures custom extruded plastic products, primarily
for use in consumer and commercial products including recreational vehicles,
mobile homes, residential doors and windows, office furniture, and appliances. 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 material intercompany balances
and transactions have been eliminated. Cash and cash equivalents:The Company classifies as cash and cash equivalents
all highly liquid investments that 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 that, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts. Revenue recognition and accounts receivable:The Company recognizes revenue
upon shipment of its products to customers, giving consideration to product
shipping terms. Receivables are currently due from customers based on
negotiated payment terms. The allowance for doubtful accounts is recorded based
on specific review and analysis of customer account balances. The allowance for
sales returns is recorded based on managements estimate of product returns,
primarily based on historical trends. The Company performs ongoing credit
assessments of its customers and adjusts credit limits based upon payment
history, the customers current credit worthiness and any other relevant
customer specific credit information. Historical credit losses have been within
our expectations and the provisions established. Inventories:Inventories are stated at the lower of cost (first-in, first-out)
or market. Cost includes materials, labor and overhead. Market, with respect to
all inventories, is replacement cost or net realizable value. Management
periodically reviews inventory to determine the necessity of reserves for
excess, obsolete or unsaleable inventory. Goodwill:In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 141, Business Combinations
(SFAS 141), and Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 prospectively
prohibits the pooling of interests method of accounting for business
combinations initiated after December 31, 2001. SFAS 142 requires companies to
cease amortizing goodwill that existed at June 30, 2001 and establishes a new
method for testing goodwill for impairment on an annual basis, or an interim
basis if an event occurs that might reduce the fair value of a reporting unit
below its carrying value. Any goodwill resulting from acquisitions completed
after June 30, 2001 will not be amortized. SFAS 142 also requires that an
identifiable intangible - 29 -




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asset which is determined to have an indefinite useful economic life not be
amortized, but be separately tested for impairment using a fair value based
approach. The Company adopted SFAS 142 effective January 1, 2002 resulting in a
decrease in amortization expense of approximately $1.8 million during the year
ended December 31, 2002 when compared to the year ended December 31, 2001. At December 31, 2003, the Company had other intangibles in the form of
non-compete agreements of $0.4 million and accumulated amortization on these
agreements of approximately $0.1 million. At December 31, 2002, the Company had
other intangibles in the form of non-compete agreements of $0.5 million and
accumulated amortization on these agreements of approximately $0.2 million. The changes in the carrying amount of goodwill as recorded at each of the
Companys segments for the years ended December 31, 2003 and 2002 are
summarized as follows: Plastic
    
    Injection
    
    ProfileFilms
    
    Molding
    
    Extrusion
    
    TotalBalance as of December 31, 2001
    
    $
    31.1
    
    
    $
    8.9
    
    
    $
    6.1
    
    
    $
    46.1Goodwill acquired during the year
    
    
    
    
    
    
    1.1
    
    
    
    
    
    
    
    1.1Balance as of December 31, 2002
    
    $
    31.1
    
    
    $
    10.0
    
    
    $
    6.1
    
    
    $
    47.2Balance as of December 31, 2003
    
    $
    31.1
    
    
    $
    10.0
    
    
    $
    6.1
    
    
    $
    47.2
 Prior to the adoption of SFAS 142, $46.1 million of goodwill associated
with prior acquisitions was amortizable. Had the Company accounted for goodwill
consistent with the provisions of SFAS 142 in 2001, the Companys net income
and basic and diluted earnings per share would have been as follows: 2001Reported net income
    
    $
    723Add back: goodwill amortization
    
    
    1,778Adjusted net income
    
    $
    2,501Basic earnings per shareReported net income
    
    $
    0.10Add back: goodwill amortization
    
    
    0.24Adjusted net income
    
    $
    0.34Diluted earnings per shareReported net income
    
    $
    0.10Add back: goodwill amortization
    
    
    0.24Adjusted net income
    
    $
    0.34
 The Company reviews goodwill for impairment on an annual basis as of
October 1, or on an interim basis if an event occurs that might reduce the fair
value of the goodwill below its carrying value. An impairment loss would be
recognized based on the difference between the carrying value of the asset and
its estimated fair value, which would be determined based on either discounted
future cash flows or other appropriate fair value methods. Specifically, the Company has goodwill in excess of the purchase price
over the fair value of identifiable assets and liabilities of acquired
businesses of $47.2 million as of December 31, 2003, and December 31, 2002 and
accumulated - 30 -




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amortization of $22.5 million at December 31, 2003 and 2002. Based upon its
analysis, management has determined there has been no impairment of goodwill as
of December 31, 2003 in accordance with SFAS 142. Self Insurance: We are self-insured for the majority of our group health
insurance costs, subject to specific retention levels. The reserve for health
insurance claims incurred but not paid is based on historical claims
information. In addition, we are self-insured for the majority of our workers
compensation costs. We establish reserves for workers compensation claims
utilizing insurance industry loss development factors as well as specific
estimates of settlement costs for individual claims. Property and equipment:Property and equipment are carried at cost less
accumulated depreciation. Depreciation has been computed, using both
straight-line and accelerated methods, based on 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 11 years; vehicles 
3 to 8 years; and computer hardware and software  3 to 5 years. Property and equipment are evaluated for impairment whenever events or
changes in circumstances indicate that the carrying amounts of such assets may
not be recoverable. Recoverability estimates are based on the projected future
cash flows expected to result from the use of the assets. An impairment loss is
measured as the amount by which the carrying amount of the assets exceeds the
fair value. When assets are retired or otherwise disposed of, the costs and
accumulated depreciation are removed from the respective accounts and any
related gain or loss is recognized. Maintenance and repair costs are charged to
expense as incurred. Additions and improvements are capitalized when incurred. Earnings per share:Earnings per share has been computed in accordance with
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(SFAS 128), which requires disclosure of basic and diluted earnings per
share. Basic earnings per share excludes any dilutive effects of options,
shares subject to repurchase, warrants, and convertible securities. Diluted
earnings per share includes the impact of potentially dilutive securities. See
Note 10  Earnings Per Share. Stock-based compensation: The Company measures compensation expense for its
stock-based employee compensation plans using the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees and related interpretations. Compensation expense is based
on the difference, if any, between the fair value of Atlantis common stock and
the exercise price of the option on the measurement date, which is typically
the date of grant. In accordance with Statement of Financial Accounting
Standards No. 123 Accounting for Stock-Based Compensation, (SFAS 123), as
amended by Statement of Financial Accounting Standards No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure, (SFAS 148), the
Company has provided the pro forma disclosures of the effect on net income and
earnings per share as if the Company had accounted for its employee stock
options granted under the fair value method of SFAS 123 and had been applied in
measuring compensation expense for all periods presented. The fair value of the options granted was estimated at the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for 2003, 2002, and 2001, respectively:
dividend yield of 0% for all years; volatility of 60%, 54% and 51%; risk-free
interest rates of 3.53%, 3.34% and 4.33%, and an expected life of six years for
all grants. The Black-Scholes option valuation model was developed for use in
estimating the fair value of options that have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price volatility.
Because the Companys employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options. - 31 -




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For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. The Companys
pro forma information for the years ended December 31, 2003, 2002, and 2001 is
as follows (in thousands, except per share data): (in thousands, except per share data)
    
    2003
    
    2002
    
    2001Net income:As reported
    
    $
    8,240
    
    
    $
    2,378
    
    
    $
    723Add:Stock-based employee compensation
expense included in reported net
income, net of related tax effects
    
    
    
    
    
    
    
    
    
    
    Less:Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects
    
    
    132
    
    
    
    167
    
    
    
    147Pro forma
    
    $
    8,108
    
    
    $
    2,211
    
    
    $
    576Basic net income per share:As reported
    
    $
    1.08
    
    
    $
    0.31
    
    
    $
    0.10Pro forma
    
    $
    1.07
    
    
    $
    0.29
    
    
    $
    0.08Diluted net income per share:As reported
    
    $
    1.06
    
    
    $
    0.31
    
    
    $
    0.10Pro forma
    
    $
    1.05
    
    
    $
    0.29
    
    
    $
    0.08
 Shipping and handling costs:The Company records costs incurred for shipping
and handling in cost of sales. 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. The Company currently
utilizes the straight-line method for all capitalized acquisition costs. Income taxes:The Company and its subsidiaries file a consolidated federal
income tax return. The Company provides for income taxes in accordance with the
liability method, which requires the recognition of deferred income tax assets
and liabilities associated with the expected future tax consequences of events
that have been included in the financial statements. Under this method,
deferred income tax assets and liabilities are determined based on the
difference between the financial statements and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Use of estimates:The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect: (i) the
reported amounts of assets and liabilities; (ii) disclosure of contingent
assets and liabilities at the dates of the consolidated financial statements;
and (iii) 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. - 32 -




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Financial instruments:The fair value of current assets and current
liabilities, including cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximates their carrying values due to the
short maturity of the instruments. The carrying amounts of the Companys total
indebtedness at December 31, 2003 and 2002 approximate their fair values as
they bear interest at variable market rates. The
Companys financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company places its cash and cash equivalents with high quality
institutions. The Companys three largest trade receivable balances as of
December 31, 2003 represented 34% of the Companys net accounts receivable,
compared with 32% as of December 31, 2002. At December 31, 2003, Whirlpool
Corporations accounts receivable balance was approximately $8.5 million, or
23% of the Companys total net trade accounts receivable balance. At December
31, 2002, Whirlpool Corporations accounts receivable balance was $5.8 million,
or 22% of the Companys total net accounts receivable. Approximately 14%, 12%
and 13% of the Companys net sales in the years ended December 31, 2003, 2002,
and 2001, respectively, were to Whirlpool Corporation. The Company generally
does not require collateral from its customers for trade accounts receivable. Recent Accounting Pronouncements In May 2003, the
Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 150, Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity (SFAS 150). This statement changes the classification of certain
financial instruments from equity to a liability. The three types of financial
instruments requiring the change in classification are: (1) mandatorily
redeemable shares, which the issuing company is obligated to buy back in
exchange for cash or other assets; (2) put options and forward purchase
contracts; and (3) obligations that can be settled with shares, the monetary
value of which is fixed, tied solely or predominantly to a variable such as a
market index, or varies inversely with the value of the issuers shares. This
statement is effective for all financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after September 15, 2003. The Company has adopted the
provisions of SFAS 150 as of October 1, 2003. Since the Company does not
currently maintain any of the above-mentioned financial instruments, the
adoption of this statement did not have any effect on its consolidated
financial statements. In April 2003,
the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities (SFAS 149). This statement
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities
under FASB Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities. This Statement is generally effective for contracts
entered into or modified after September 30, 2003 and hedging relationships
designated after September 30, 2003. The Company will apply the provisions of
SFAS 149 for any derivative instruments or hedging activities entered into
after September 30, 2003. As the Company does not currently enter into
derivative instruments or hedging activities, adoption of this statement will
not have any effect on the Companys consolidated financial statements. In January 2003, the FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an Interpretation of ARB 51
(FIN 46). The primary objectives of FIN 46 are to provide guidance on the
identification of entities for which control is achieved through means other
than through voting rights (variable interest entities or VIEs) and how to
determine when and which business enterprise should consolidate the VIE (the
primary beneficiary). This interpretation is required to be adopted for all
periods after December 15, 2003 for any VIEs in which a company holds a
variable interest that it acquired before February 1, 2003. The Company adopted
the provisions of FIN 46 on January 1, 2004; however, as it does not currently
hold any VIEs, the adoption of this pronouncement did not have any effect on
the Companys consolidated financial statements. In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure (SFAS 148), amending SFAS
No. 123, Accounting for Stock-Based Compensation (SFAS 123), to provide
alternative methods of transition to the fair value method of accounting for
stock-based employee compensation. The three methods provided in SFAS 148
include (1) the prospective method which is the method currently provided for
in SFAS 123, (2) the retroactive method which would allow companies to restate
all periods presented and (3) the modified prospective method which would allow
companies to present the recognition provisions to all outstanding stock-based
employee compensation instruments as of the beginning of the fiscal year of
adoption. In addition, SFAS 148 amends the disclosure provisions of SFAS 123 to
require disclosure in the summary of significant accounting policies of the
effects of an entitys - 33 -




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##### Table of Contents



accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
SFAS 148 does not amend SFAS 123 to require companies to account for their
employee stock-based awards using the fair value method. However, the
disclosure provisions are required for all companies with stock-based employee
compensation, regardless of whether they utilize the fair value method of
accounting described in SFAS 123 or the intrinsic value method described in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB Opinion No. 25). The Company will continue to account for its
stock-based compensation awards to employees and directors under the accounting
prescribed by APB Opinion No. 25 and related interpretations; however, the
Company has adopted the disclosure provisions of SFAS 148 in the current year. In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45). FIN 45 elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued.
FIN 45 also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and initial
measurement provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, and the disclosure
provisions are effective as of December 31, 2002. The Company has adopted the
disclosure provisions of FIN 45 as of December 31, 2002, and the remaining
provisions of FIN 45 as of January 1, 2003 and, as the Company has not entered
into any significant guarantees, the interpretation did not have any effect on
the consolidated financial statements. In July 2002, the FASB issued SFAS No. 146, Accounting for the Cost
Associated with Exit or Disposal Activities. This statement applies to all
exit or disposal activities initiated after December 31, 2002 and requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or
disposal plan. Examples of costs covered by this statement include lease
termination costs and certain employee severance costs that are associated with
a restructuring, discontinued operation, plant closing, or other exit or
disposal activity. The Company has adopted this accounting standard as of
January 1, 2003 and it did not have any effect on the consolidated financial
statements. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections (SFAS 145). SFAS 145 rescinds SFAS 4, Reporting Gains and
Losses from Extinguishment of Debt, and an amendment of SFAS 4, SFAS 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. SFAS 145
also rescinds SFAS 44, Accounting for Intangible Assets of Motor Carriers,
and amends SFAS 13, Accounting for Leases, to eliminate an inconsistency
between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic effects
that are similar to sale-leaseback transactions. SFAS 145 also amends other
existing authoritative pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under changed conditions.
SFAS 145 is effective for fiscal years beginning after May 15, 2002. Any gain
or loss on extinguishment of debt that was classified as an extraordinary item
in prior periods presented that does not meet the criteria in Accounting
Principles Board Opinion No. 30, Reporting the Results of Operations 
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual, and Infrequently Occurring Events and Transactions,
for classification as an extraordinary item shall be reclassified. The
provisions of SFAS 145 related to SFAS 13 were effective for transactions
occurring after May 15, 2002. All other provisions of SFAS 145 were effective
for financial statements issued on or after May 15, 2002. The Company adopted
SFAS 145 as of January 1, 2003, and the pronouncement did not have a material
impact on its consolidated financial statements, other than the
reclassification of the extraordinary gain from the extinguishment of debt to
income before provision for income taxes in the statement of income for the
year ended December 31, 2001. Note 2. Acquisitions of Businesses and Assets On October 8, 2002, Atlantis acquired the business and certain assets and
assumed certain specified liabilities of Rio Grande Plastic Products, Inc.
(Rio Grande), an injection molder located in Alamo, Texas for $3.9 million.
Rio Grande primarily manufactures safety restraints, door trim reflectors and
vehicle lamps for the automotive industry. Of the total purchase price,
approximately $2.0 million was funded through a master equipment lease
agreement with a financial institution, with the remainder funded by borrowings
under the Companys then existing revolving line of credit. The Company
accounted for this acquisition as a purchase in accordance with the provisions
of SFAS 141. The activities of Rio Grande are included in the results of
operations of the Companys Injection Molding segment since the date of
acquisition. - 34 -




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##### Table of Contents



The allocation of the purchase price resulted in goodwill of approximately $1.1
million, which represents the excess of the purchase price over the fair value
of the net assets acquired. The allocation of the purchase price was as follows (in thousands): Current assets
    
    $
    1,808Long-term assets
    
    
    686Goodwill
    
    
    1,086Liabilities
    
    
    (1,695
    )$
    1,885
 Note 3. Inventories Inventories at December 31, 2003 and 2002 consisted of the following: (in thousands)2003
    
    2002Raw materials
    
    $
    12,187
    
    
    $
    11,559Work in
progress
    
    
    246
    
    
    
    190Finished goods
    
    
    10,872
    
    
    
    10,209Total
    
    $
    23,305
    
    
    $
    21,958
 Note 4. Property and Equipment Property and equipment at December 31, 2003 and 2002 consisted of the
following: (in thousands)2003
    
    2002Land
    
    $
    2,612
    
    
    $
    2,523Building and improvements
    
    
    21,863
    
    
    
    19,912Office furniture and equipment
    
    
    12,279
    
    
    
    11,488Manufacturing equipment
    
    
    123,518
    
    
    
    122,338Vehicles
    
    
    235
    
    
    
    262Total
    
    
    160,507
    
    
    
    156,523Accumulated depreciation
and amortization
    
    
    (100,160
    )
    
    
    (91,383
    )Net
    
    $
    60,347
    
    
    $
    65,140
 Depreciation expense for fiscal 2003, 2002, and 2001 was approximately
$11.8 million, $11.7 million, and $10.5 million, respectively. - 35 -




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Note 5. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following at
December 31, 2003 and 2002: (in thousands)2003
    
    2002Accounts payable
    
    $
    14,354
    
    
    $
    13,053Accrued interest
    
    
    416
    
    
    
    32Accrued compensation, vacation and profit sharing
    
    
    5,555
    
    
    
    4,472Accrued health and workers compensation insurance
    
    
    1,526
    
    
    
    1,632Customer deposits and commissions
    
    
    3,394
    
    
    
    1,915Income taxes payable
    
    
    2,325
    
    
    
    459Other
    
    
    6,639
    
    
    
    4,716Total
    
    $
    34,209
    
    
    $
    26,279
 Note 6. Long-term Debt Long-term debt consisted of the following at December 31, 2003 and 2002: (in thousands)2003
    
    2002Senior Credit FacilityTerm Loan A, due December 31, 2007
    
    $
    31,500
    
    
    $
    35,000Term Loan B, due December 31, 2008
    
    
    39,600
    
    
    
    40,000Revolver, due December 31, 2007
    
    
    6,100
    
    
    
    13,300Other indebtedness
    
    
    
    
    
    
    604Total debt
    
    
    77,200
    
    
    
    88,904Current portion of long-term debt
    
    
    (10,487
    )
    
    
    (4,013
    )Long-term debt
    
    $
    66,713
    
    
    $
    84,891
 The Company maintains its existing indebtedness through a $110 million
senior secured credit facility provided by a syndicate of financial
institutions. This facility is secured by all of the Companys assets,
including property, inventory and receivables. The components of this facility
include two term loans and a revolving line of credit. Term Loan A and Term
Loan B require scheduled quarterly principal payments through the respective
maturity dates. Borrowings under the revolver portion of the facility are
subject to a borrowing base formula based on eligible collateral in the form of
accounts receivable and inventories. Borrowings outstanding under the facility
bear interest based upon LIBOR or prime rate plus an applicable margin. The
applicable margin applied to LIBOR and prime based loans range from 3.25% to
4.50% and 1.75% to 3.00%, respectively, based on the Companys funded debt to
EBITDA (Earnings before interest, taxes, depreciation and amortization) ratio.
Annual fees for the unused portion of this facility are 0.5%. Under the
agreements covering this facility, certain restrictions and covenants exist
relating, but not limited to, the maintenance of financial ratios, dividend
payments, asset disposals, acquisitions and capital expenditures. The Company
is currently in compliance with such restrictions and covenants. In addition,
on an annual basis, the Company is required to make mandatory loan pre-payments
from excess cash flow as defined per the credit agreement. Based on a
calculation as of December 31, 2003, this amount is approximately $5.3 million
and will be paid during the first quarter of fiscal 2004. As of December 31,
2003, the interest rate on the Term Loan A, Term Loan B and the Revolver were
5.12%, 5.62% and 5.12%, respectively, based on LIBOR of 1.12%. A small portion - 36 -




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of the interest on the Revolver is indexed to the prime
rate. As of December 31, 2003, the interest rate on this portion of the Revolver was 6.50%
based on a prime rate of 4.00%. The Company
has approximately $1.6 million in outstanding letters of
credit provided by a financial institution. Scheduled maturities of indebtedness in each of the next five years are as follows (in thousands): Year
    
    Amount2004
    
    $
    10,4872005
    
    
    6,8532006
    
    
    8,4742007
    
    
    16,1942008
    
    
    35,192Total
    
    $
    77,200
 Note 7. Capital Stock Generally, the Class A Common Stock has one vote per share and the Class B
Common Stock has 10 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. Note 8. Income Taxes The provision for income taxes for the years ended December 31, 2003,
2002, and 2001, consisted of the following: (in thousands)
    
    2003
    
    2002
    
    2001Current Federal income tax provision
    
    $
    4,096
    
    
    $
    1,499
    
    
    $
    722Current State income tax provision
    
    
    437
    
    
    
    299
    
    
    
    204Deferred Federal and State income
tax provision (benefit)
    
    
    306
    
    
    
    (342
    )
    
    
    449Total provision for income taxes
    
    $
    4,839
    
    
    $
    1,456
    
    
    $
    1,375
 The following table provides a reconciliation between the statutory
federal income tax rate and the Companys effective income tax rate for the
years ended December 31, 2003, 2002, and 2001: 2003
    
    2002
    
    2001Statutory federal income tax
rate
    
    
    34
    %
    
    
    34
    %
    
    
    34
    %State income taxes
    
    
    3
    
    
    
    4
    
    
    
    14Amortization of goodwill
    
    
    
    
    
    
    
    
    
    
    40Other, net
    
    
    
    
    
    
    
    
    
    
    (22
    )Effective income tax rate
    
    
    37
    %
    
    
    38
    %
    
    
    66
    %
 - 37 -




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At December 31, 2003 and 2002, deferred income tax assets and liabilities
consisted of the following: (in thousands)
    
    2003
    
    2002Long-term deferred income tax liabilities:Excess of book over tax basis of
property and equipment
    
    $
    11,813
    
    
    $
    10,238Goodwill
    
    
    1,447
    
    
    
    1,293Other, net
    
    
    79
    
    
    
    13Total deferred income tax liabilities
    
    $
    13,339
    
    
    $
    11,544Long-term deferred income tax assets:Acquired goodwill
    
    
    608
    
    
    
    655Total net long-term deferred income tax liabilities
    
    $
    12,731
    
    
    $
    10,889Current deferred income tax assets:Reserves and accrued expenses not yet
deductible for income tax purposes
    
    $
    2,683
    
    
    $
    2,461Net operating loss carryforwards
    
    
    565
    
    
    
    847Capitalized inventory costs
    
    
    320
    
    
    
    305$
    3,568
    
    
    $
    3,613Valuation allowance
    
    
    (565
    )
    
    
    (847
    )Total current deferred income tax assets
    
    $
    3,003
    
    
    $
    2,766Deferred income taxes, net
    
    $
    9,728
    
    
    $
    8,123
 The Company has evaluated its deferred income tax assets for which a
valuation allowance has not been provided and believes such assets will be
realized based upon future projected taxable income. 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 10 years from the date of grant. Options granted vest ratably
over a five-year period 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 and to fund related tax exposures; however,
pursuant to the regulations of the Sarbanes-Oxley Act of 2002, the Company will
no longer authorize any loans to directors or officers of the Company. - 38 -




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##### Table of Contents



Information with respect to the Option Plans is as follows for the years
ended December 31, (in thousands of shares, except prices per share): 2003
    
    2002
    
    2001Options outstanding at January 1
    
    
    1,250
    
    
    
    1,274
    
    
    
    1,045Granted
    
    
    75
    
    
    
    30
    
    
    
    398Exercised
    
    
    (49
    )
    
    
    (47
    )
    
    
    Canceled
    
    
    (32
    )
    
    
    (7
    )
    
    
    (169
    )Options outstanding at December 31
    
    
    1,244
    
    
    
    1,250
    
    
    
    1,274Weighted-average option prices per common share:Options outstanding at January 1
    
    $
    6.23
    
    
    $
    6.14
    
    
    $
    6.81Granted
    
    
    9.29
    
    
    
    4.64
    
    
    
    4.71Exercised
    
    
    5.53
    
    
    
    2.88
    
    
    
    Canceled
    
    
    5.63
    
    
    
    4.74
    
    
    
    6.91Outstanding at December 31
    
    $
    6.45
    
    
    $
    6.23
    
    
    $
    6.14Weighted-average fair value of options
granted during the year
    
    $
    5.34
    
    
    $
    2.50
    
    
    $
    1.27Options exercisable at December 31
    
    
    863
    
    
    
    815
    
    
    
    736Options available for grant at December 31
    
    
    163
    
    
    
    238
    
    
    
    264
 The following table summarizes information about stock options outstanding
at December 31, 2003: Options Outstanding
    
    
    
    
    
    Options ExercisableNumber
    
    
    
    
    
    
    
    
    
    NumberOutstanding
    
    Weighted-Average
    
    Weighted-
    
    Exercisable
    
    Weighted-Range of
    
    At 12/31/03
    
    Remaining
    
    Average
    
    At 12/31/03
    
    AverageExercise Prices
    
    (in 000s)
    
    Contractual Life
    
    Exercise Price
    
    (in 000s)
    
    Exercise Price$  3.00
- $  4.50
    
    
    444
    
    
    
    7.6
    
    
    $
    4.30
    
    
    
    193
    
    
    $
    4.25$  4.51 - $  6.80
    
    
    417
    
    
    
    2.6
    
    
    $
    5.72
    
    
    
    384
    
    
    $
    5.76$  6.81 - $  9.75
    
    
    283
    
    
    
    4.7
    
    
    $
    8.99
    
    
    
    186
    
    
    $
    8.87$  9.76
- $11.88
    
    
    100
    
    
    
    1.1
    
    
    $
    11.88
    
    
    
    100
    
    
    $
    11.881,244
    
    
    
    4.7
    
    
    $
    6.45
    
    
    
    863
    
    
    $
    6.80
 - 39 -




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##### Table of Contents



Note 10. Earnings Per Share The following table calculates basic and diluted earnings per share for
the years ended December 31, 2003, 2002 and 2001: (thousands, except per share amounts)
    
    2003
    
    2002
    
    2001Basic earnings per common share:Net income
    
    $
    8,240
    
    
    $
    2,378
    
    
    $
    723Weighted-average common shares outstanding
    
    
    7,606
    
    
    
    7,569
    
    
    
    7,532Basic earnings per common share
    
    $
    1.08
    
    
    $
    0.31
    
    
    $
    0.10Diluted earnings per common share:Earnings applicable to common shares
    
    $
    8,240
    
    
    $
    2,378
    
    
    $
    723Weighted-average common shares outstanding
    
    
    7,606
    
    
    
    7,569
    
    
    
    7,532Add  Options
    
    
    144
    
    
    
    9
    
    
    
    3Weighted-average common shares outstanding plus
potential dilutive common shares
    
    
    7,750
    
    
    
    7,578
    
    
    
    7,535Diluted earnings per common share
    
    $
    1.06
    
    
    $
    0.31
    
    
    $
    0.10
 Excluded from the above calculation of diluted earnings per share are
antidilutive options, which could potentially dilute earnings per share in the
future. Antidilutive options for 2003, 2002 and 2001 are 383,500, 1,165,454,
and 1,213,654 shares, respectively. - 40 -




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##### Table of Contents



Note 11. Business Segments During 2003, the Company revised its segment disclosures to report
Injection Molding and Profile Extrusion, the two divisions previously
comprising Molded Products, as separate segments. Previously reported segment
information has been restated to reflect the composition of the Companys three
operating segments: Plastic Films, Injection Molding, and Profile Extrusion. During the years ended December 31, 2003, 2002, and 2001, a customer
accounted for approximately 14%, 12%, and 13%, respectively, of the Companys
net sales and 23%, 22%, and 19% respectively, of the Companys net accounts
receivable. Summary data for the years ended December 31, 2003, 2002, and 2001 are as
follows (in thousands): Plastic
    
    Injection
    
    ProfileFilms
    
    Molding
    
    Extrusion
    
    Corporate
    
    Consolidated2003Net sales
    
    $
    186,431
    
    
    $
    81,345
    
    
    $
    21,322
    
    
    $
    
    
    
    $
    289,098Operating income
    
    
    11,092
    
    
    
    4,765
    
    
    
    2,688
    
    
    
    
    
    
    
    18,545Identifiable assets
    
    
    92,089
    
    
    
    51,612
    
    
    
    26,631
    
    
    
    12,528
    
    
    
    182,860Capital expenditures
    
    
    1,653
    
    
    
    4,161
    
    
    
    729
    
    
    
    490
    
    
    
    7,033Depreciation and
deferred loan fee
amortization
    
    
    6,022
    
    
    
    3,629
    
    
    
    988
    
    
    
    2,133
    
    
    
    12,7722002Net sales
    
    $
    165,013
    
    
    $
    61,807
    
    
    $
    21,766
    
    
    $
    
    
    
    $
    248,586Operating income
    
    
    5,290
    
    
    
    3,001
    
    
    
    3,150
    
    
    
    
    
    
    
    11,441Identifiable assets
    
    
    101,832
    
    
    
    46,207
    
    
    
    21,932
    
    
    
    5,629
    
    
    
    175,600Capital expenditures
    
    
    2,944
    
    
    
    4,355
    
    
    
    988
    
    
    
    1,259
    
    
    
    9,546Depreciation and
deferred loan fee
amortization
    
    
    6,107
    
    
    
    3,372
    
    
    
    939
    
    
    
    1,480
    
    
    
    11,8982001Net sales
    
    $
    170,720
    
    
    $
    59,738
    
    
    $
    17,356
    
    
    $
    
    
    
    $
    247,814Operating income
    
    
    6,914
    
    
    
    1,926
    
    
    
    2,029
    
    
    
    
    
    
    
    10,869Identifiable assets
    
    
    100,396
    
    
    
    42,929
    
    
    
    19,460
    
    
    
    6,573
    
    
    
    169,358Capital expenditures
    
    
    3,976
    
    
    
    2,244
    
    
    
    1,103
    
    
    
    495
    
    
    
    7,818Depreciation and
deferred loan fee
amortization
    
    
    5,472
    
    
    
    3,045
    
    
    
    892
    
    
    
    1,413
    
    
    
    10,822Goodwill amortization
    
    
    1,181
    
    
    
    295
    
    
    
    302
    
    
    
    
    
    
    
    1,778
 - 41 -




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##### Table of Contents



Note 12. Profit Sharing and Retirement Plans Atlantis has a 401(k) defined contribution retirement plan. Generally,
such plan covers all employees who have attained the age of 21 and have at
least one year of service. The Company matches 50% of contributions up to a
maximum of 6% of compensation as defined by the plan and as limited by federal
regulations. Related expenses were approximately $468,000, $509,000 and
$460,000 for the years ended December 31, 2003, 2002, and 2001, respectively. Effective January 1, 2000, the Company established the Atlantis Plastics,
Inc. Deferred Compensation Plan (the Plan) for certain selected employees.
Under the Plan, eligible employees may elect to make pre-tax contributions to a
trust fund up to a maximum of 15% of annual earnings. The Companys
contribution to the Plan is based upon the employees contribution to the Plan
but could not exceed $3,000 per participant for 2003. Normally, the full amount
of each participants interest in the trust fund is paid upon termination of
employment; however, the Plan allows participants to make early withdrawals of
contributions, subject to certain restrictions. Company assets earmarked to pay
benefits under the Plan are held by a rabbi trust. Under current accounting
rules, assets of a rabbi trust must be accounted for as if they are assets of
the Company; therefore, all earnings and expenses will be recorded in the
Companys financial statements. The Company may terminate the Plan at any time.
Total Company contributions to the Plan were approximately $55,000, $56,000 and
$45,000 for the years ended December 31, 2003, 2002, and 2001, respectively. Note 13. Related Parties Trivest and Trivest II, affiliates of two major shareholders, and the
Company have certain common officers, directors, and shareholders. Management
fees and expense allocations are paid to Trivest and Trivest II. During the
years ended December 31, 2003, 2002 and 2001, the Company incurred costs
related to these payments of approximately $2.4 million, $2.2 million and $1.2
million, respectively. The increase from 2002 to 2003 is primarily due to
certain costs associated with the Companys debt refinancing in December 2002.
The increase from 2001 to 2002 relates predominately to the acquisition of Rio
Grande and certain additional consulting charges. During 2002 and 2001 certain members of the Companys Board of Directors
exercised stock options and issued notes payable to the Company, secured by the
underlying stock, which bear interest at prime and are due February 13, 2004,
March 16, 2005 and March 18, 2005. Such notes are full recourse in nature. Note 14. Commitments and Contingencies The Company is, from time to time, involved in routine litigation. No such
litigation in which the Company is presently involved is believed to be
material to its financial condition or results of operations. The Company leases various office space, buildings, transportation, and
production equipment with terms in excess of one year. Total rent expense under
these agreements for the years ended December 31, 2003, 2002 and 2001 was
approximately $3.2 million, $1.9 million and $1.8 million, respectively. The total minimum rental commitments under long-term, noncancelable
operating leases at December 31, 2003 consisted of the following (in
thousands): Year
    
    Amount2004
    
    $
    3,4532005
    
    
    3,2362006
    
    
    2,8892007
    
    
    2,3122008
    
    
    1,349Thereafter
    
    
    995Total
    
    $
    14,234
 - 42 -




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##### Table of Contents



Note 15. Quarterly Financial Data (Unaudited) Unaudited consolidated quarterly financial data for the years ended
December 31, 2003 and 2002 are as follows: (in thousands, except per share data)Quarter Ended
    
    Quarter Ended
    
    Quarter Ended
    
    Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 312003
    
    2002
    
    2003
    
    2002
    
    2003
    
    2002
    
    2003
    
    2002Net sales
    
    $
    67,669
    
    
    $
    58,263
    
    
    $
    67,207
    
    
    $
    67,118
    
    
    $
    76,640
    
    
    $
    63,173
    
    
    $
    77,582
    
    
    $
    60,032Gross profit
    
    
    10,905
    
    
    
    10,949
    
    
    
    10,096
    
    
    
    11,562
    
    
    
    12,207
    
    
    
    9,495
    
    
    
    13,732
    
    
    
    7,891Net income (loss)
    
    
    1,662
    
    
    
    1,157
    
    
    
    955
    
    
    
    1,346
    
    
    
    2,475
    
    
    
    433
    
    
    
    3,148
    
    
    
    (558
    )Net income (loss)
per common share:Basic
    
    $
    0.22
    
    
    $
    0.15
    
    
    $
    0.13
    
    
    $
    0.18
    
    
    $
    0.32
    
    
    $
    0.06
    
    
    $
    0.41
    
    
    
    ($0.07
    )Diluted
    
    $
    0.22
    
    
    $
    0.15
    
    
    $
    0.12
    
    
    $
    0.18
    
    
    $
    0.32
    
    
    $
    0.06
    
    
    $
    0.40
    
    
    
    ($0.07
    )
 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES The Company has had no changes in or disagreements with its independent
auditors on accounting or financial disclosures. 
 ITEM 9A. CONTROLS AND PROCEDURES As required by Rule 13a-15 under the Exchange Act, within the 90 days
prior to the filing date of this report, the Company carried out an evaluation
of the effectiveness of the design and operation of the Companys disclosure
controls and procedures. This evaluation was carried out under the supervision
and with the participation of the Companys management, including the Companys
Chief Executive Officer and Chief Financial Officer. Based upon that
evaluation, the Companys Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective.
There have been no significant changes in the Companys internal controls or in
other factors that could significantly affect these internal controls
subsequent to the date the Company carried out its evaluation. Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in Company
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms. Disclosure controls and procedures
include controls and procedures designed to ensure that information required to
be disclosed in Company reports filed under the Exchange Act is accumulated and
communicated to management, including the Companys Chief Executive Officer and
Chief Financial Officer as appropriate, to allow timely decisions regarding
required disclosure. - 43 -




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##### Table of Contents



PART III 
 ITEMS 10, 11, 12, 13, AND 14 The information required by Items 10, 11, 12, 13, and 14 is incorporated
by reference from the registrants Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A no later than 120
days after the end of the fiscal year covered by this report. 
 PART IV 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K (a) Documents filed as a part of this report: Page(1)
    
    Financial Statements:Report of Independent Auditors
    
    
    24Consolidated Statements of Income
    
    
    25Consolidated Balance Sheets
    
    
    26Consolidated Statements of Shareholders Equity
    
    
    27Consolidated Statements of Cash Flows
    
    
    28Notes to Consolidated Financial Statements
    
    
    29(2)
    
    Financial Statement Schedules:The following Financial Statement Schedule for the years
ended December 31, 2003, 2002, and 2001
is submitted herewith:Schedule II  Valuation and Qualifying Accounts
    
    
    48
 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. The information called for by Item 15(a) 3. Exhibit Listing, can be
obtained free of charge by any Company Stockholder by writing to Paul G. Saari,
Senior Vice President of Finance and Chief Financial Officer, at the corporate
headquarters office. (b) Reports onForm 8-K: Press Release for Atlantis Plastics, Inc. dated October 24, 2004,
reporting the Companys financial results for the third quarter of 2003. - 44 -




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##### Table of Contents



(c)
    
    Exhibits (An asterisk to the right of an exhibit number denotes a
management contract or compensatory plan or arrangement required to be
filed as an exhibit to thisForm 10-K.)  3.1
    
    Registrants Articles of Incorporation (1)3.2
    
    Registrants Bylaws (February 1988) (1)4.1
    
    Form of Stock Certificate evidencing ownership of Registrants Class A Common Stock(5)10.1
    
    * Registrants 1997 Stock Option Plan.(7)10.2
    
    * Registrants 1998 Stock Option Plan. (9)10.3
    
    * Registrants 2001 Stock Option Plan. (15)10.4
    
    * Form of Indemnification Agreement. (4)10.5
    
    *Management Agreement by and between Atlantis Plastics, Inc. and
Trivest Partners, L.P. dated January 1, 2003.(16)10.6
    
    * Agreement dated as of January 1, 1998 by and among Registrant,
Trivest II, Inc., Earl W. Powell and Phillip T. George, M.D. (10)10.7
    
    Assignment and Assumption of Lease between Registrant and Trivest
II, Inc.(11)10.8
    
    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. (2)10.9
    
    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. (2)10.10
    
    Loan Agreement between Arkansas Development Finance Authority and
Atlantis Plastics Injection Molding, Inc. (formerly known as Cyanede
Plastics, Inc.), dated March 18, 1992. (3)10.11
    
    Promissory Note from Atlantis Plastics Injection Molding, Inc.
(formerly known as Cyanede Plastics, Inc.), to the Arkansas
Development Finance Authority, in the amount of $1,600,000, dated
June 1, 1992. (3)10.12
    
    Office Lease, dated as of April 1, 1992, between Euram/1870
Exchange Associates and National Poly Products, Inc. (3)10.13
    
    First Extension of lease agreement between Euram/1870 Exchange
Associates and Atlantis Plastic Films, Inc., dated May 14, 1997. (8)10.14
    
    First Amendment of lease agreement between 1870 Exchange
Associates and Atlantis Plastic Films, Inc., dated February 27, 2002.
(15)10.15
    
    Lease with option to purchase Real Estate between Atlantis Plastic
Films, Inc. and the City of Mankato, Minnesota, dated as of March 2,
1995. (5)10.16
    
    *Registrants Deferred Compensation Plan, incorporated by
reference and filed with the Registrants Form S-8 filed April 5,
2000 (no. 333-34050). (12)10.17
    
    Lease between Principal Life Insurance Company and Atlantis
Plastic Films, Inc., dated as of March 8, 2000. (13) - 45 -




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##### Table of Contents



10.18
    
    Guaranty of Lease by Registrant of the obligations of Atlantis
Plastic Films, dated as of March 8, 2000. (13)10.19
    
    Master Security Agreement between Atlantis Plastics Inc. and
Atlantis Plastic Films Inc., as debtor and General Electric Capital
Corporation, as secured party, dated as of November 7, 2001. (14)10.20
    
    Amendment to Master Security Agreement between Atlantis Plastics
Inc. and Atlantis Plastic Films Inc., as debtor and General Electric
Capital Corporation, as secured party, dated as of November 7, 2001.
(14)10.21
    
    Lease Extension between Extrusion Masters, Inc. and E.E.E.
Properties, dated as of October 30, 2001. (15)10.22
    
    Executive Employment Agreement by and between Atlantis Plastics,
Inc. and Anthony F. Bova, dated December 31, 2002.(16)10.23
    
    Change in Control Agreement by and between Atlantis Plastics, Inc.
and Anthony F. Bova, dated December 31, 2002.(16)10.24
    
    Credit Agreement dated as of December 27, 2002 by and among
Atlantis Plastic Films, Inc., Atlantis Molded Plastics, Inc.,
Atlantis Films, Inc., Rigal Plastics, Inc., Atlantis Plastics
Injection Molding, Inc., Pierce Plastics, Inc. and Extrusion Masters,
Inc. and General Electric Capital Corporation and CIBC World Markets
Corp. and other financial institutions as a party thereto.(16)10.25
    
    Amendment No. 1 to Credit Agreement dated July 18, 2003 by and
among Atlantis Plastic Films, Inc., Atlantis Molded Plastics, Inc.,
Atlantis Films, Inc., Rigal Plastics, Inc., Atlantis Plastics
Injection Molding, Inc., Pierce Plastics, Inc. and Extrusion Masters,
Inc. and General Electric Capital Corporation and CIBC World Markets
Corp. and other financial institutions as a party thereto. (17)21.1
    
    Registrants Subsidiaries. (15)23.1
    
    Consent of Ernst & Young LLP relating to the Companys Registration
Statements on Form S-8 (No. 333-85866, No. 333-63855, No. 333-34197,
and No. 333-34050)31.1
    
    CEO Certification Pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    CFO Certification Pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    CEO Certification Pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    CFO Certification Pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - 46 -




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##### Table of Contents



(1)
    
    Incorporated by reference to the exhibits filed with the
Registrants Form 8-B filed June 7, 1994.(2)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 1991.(3)
    
    Incorporated by reference to the exhibits filed with the
Registrants registration statement on Form S-2 (33-53152).(4)
    
    Incorporated by reference to the exhibits filed with the
Registrants Report on Form 8-K filed June 3, 1994.(5)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 1994.(6)
    
    Incorporated by reference to the exhibits and filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.(7)
    
    Incorporated by reference to Exhibit A filed with the Registrants
Schedule 14A filed on April 29, 1997.(8)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 1997.(9)
    
    Incorporated by reference to Exhibit A filed with the
Registrants Schedule 14A filed on April 17, 1998.(10)
    
    Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.(11)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 1998.(12)
    
    Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000.(13)
    
    Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.(14)
    
    Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001.(15)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 2001.(16)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 2002.(17)
    
    Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended June
30, 2003. - 47 -




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##### Table of Contents



(d)
    
    Financial Statement Schedules required by Regulation S-X. Atlantis Plastics, Inc.
Schedule II  Valuation and Qualifying Accounts
for the years ended December 31,
(in thousands) Balance at
    
    Charged to
    
    Charged
    
    
    
    
    
    BalanceBeginning
    
    Costs and
    
    to Other
    
    
    
    
    
    at EndClassification
    
    of Year
    
    Expenses
    
    Accounts
    
    Deductions (a)
    
    of Year2003Allowances reducing the assets in the balance sheet:Allowance for doubtful accounts
    
    $
    499
    
    
    $
    159
    
    
    $
    
    
    
    $
    108
    
    
    $
    550Reserve for sales allowances
    
    
    416
    
    
    
    268
    
    
    
    183
    
    
    
    136
    
    
    
    731Reserve for inventory obsolescence
    
    
    667
    
    
    
    448
    
    
    
    
    
    
    
    114
    
    
    
    1,001Deferred income tax valuation allowance
    
    
    847
    
    
    
    
    
    
    
    
    
    
    
    282
    
    
    
    565Total
    
    $
    2,429
    
    
    $
    875
    
    
    $
    183
    
    
    $
    640
    
    
    $
    2,8472002Allowances reducing the assets in the balance sheet:Allowance for doubtful accounts
    
    $
    572
    
    
    $
    269
    
    
    $
    16
    
    
    $
    358
    
    
    $
    499Reserve for sales allowances
    
    
    500
    
    
    
    35
    
    
    
    
    
    
    
    119
    
    
    
    416Reserve for inventory obsolescence
    
    
    676
    
    
    
    166
    
    
    
    
    
    
    
    175
    
    
    
    667Deferred income tax valuation allowance
    
    
    634
    
    
    
    213
    
    
    
    
    
    
    
    
    
    
    
    847Total
    
    $
    2,382
    
    
    $
    683
    
    
    $
    16
    
    
    $
    652
    
    
    $
    2,4292001Allowances reducing the assets in the balance sheet:Allowance for doubtful accounts
    
    $
    648
    
    
    $
    (112
    )
    
    $
    
    
    
    $
    (36
    )
    
    $
    572Reserve for sales allowances
    
    
    824
    
    
    
    
    
    
    
    
    
    
    
    324
    
    
    
    500Reserve for inventory obsolescence
    
    
    712
    
    
    
    (7
    )
    
    
    
    
    
    
    29
    
    
    
    676Deferred income tax valuation allowance
    
    
    683
    
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    634Total
    
    $
    2,867
    
    
    $
    (119
    )
    
    $
    
    
    
    $
    366
    
    
    $
    2,382
 (a) Includes amounts written-off as uncollectible, allowances granted, obsolete
inventory, and net decreases in deferred income tax valuation allowance. - 48 -




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##### Table of Contents



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 26, 2004
    By:
    /S/ PAUL G. SAARIPaul G. SaariSenior Vice President, Finance and
Chief 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
Earl W. Powell
    
    Chairman of the Board
    
    March 26, 2004/s/ PHILLIP T. GEORGE, M.D.
Phillip T. George, M.D.
    
    Director, Vice Chairman, and
Chairman of the Executive Committee
    
    March 26, 2004/s/ ANTHONY F. BOVA
Anthony F. Bova
    
    President and Chief
Executive Officer
(Principal Executive Officer)
    
    March 26, 2004/s/ PAUL G. SAARI
Paul G. Saari
    
    Senior Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
    
    March 26, 2004/s/ CHARLES D. MURPHY, III
Charles D. Murphy, III
    
    Director
    
    March 26, 2004/s/ CHESTER B. VANATTA
Chester B. Vanatta
    
    Director
    
    March 26, 2004/s/ LARRY D. HORNER
Larry D. Horner
    
    Director
    
    March 26, 2004/s/ CESAR ALVAREZ
Cesar Alvarez
    
    Director
    
    March 26, 2004/s/ JAY SHUSTER
Jay Shuster
    
    Director
    
    March 26, 2004
 - 49 -




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##### Table of Contents



Exhibit Index  (An asterisk to the right of an exhibit number denotes a
management contract or compensatory plan or arrangement required to be
filed as an exhibit to thisForm 10-K.)  3.1
    
    Registrants Articles of Incorporation (1)3.2
    
    Registrants Bylaws (February 1988) (1)4.1
    
    Form of Stock Certificate evidencing ownership of Registrants Class A Common Stock(5)10.1
    
    * Registrants 1997 Stock Option Plan.(7)10.2
    
    * Registrants 1998 Stock Option Plan. (9)10.3
    
    * Registrants 2001 Stock Option Plan. (15)10.4
    
    * Form of Indemnification Agreement. (4)10.5
    
    *Management Agreement by and between Atlantis Plastics, Inc. and
Trivest Partners, L.P. dated January 1, 2003.(16)10.6
    
    * Agreement dated as of January 1, 1998 by and among Registrant,
Trivest II, Inc., Earl W. Powell and Phillip T. George, M.D. (10)10.7
    
    Assignment and Assumption of Lease between Registrant and Trivest
II, Inc.(11)10.8
    
    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. (2)10.9
    
    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. (2)10.10
    
    Loan Agreement between Arkansas Development Finance Authority and
Atlantis Plastics Injection Molding, Inc. (formerly known as Cyanede
Plastics, Inc.), dated March 18, 1992. (3)10.11
    
    Promissory Note from Atlantis Plastics Injection Molding, Inc.
(formerly known as Cyanede Plastics, Inc.), to the Arkansas
Development Finance Authority, in the amount of $1,600,000, dated
June 1, 1992. (3)10.12
    
    Office Lease, dated as of April 1, 1992, between Euram/1870
Exchange Associates and National Poly Products, Inc. (3)10.13
    
    First Extension of lease agreement between Euram/1870 Exchange
Associates and Atlantis Plastic Films, Inc., dated May 14, 1997. (8)10.14
    
    First Amendment of lease agreement between 1870 Exchange
Associates and Atlantis Plastic Films, Inc., dated February 27, 2002.
(15)10.15
    
    Lease with option to purchase Real Estate between Atlantis Plastic
Films, Inc. and the City of Mankato, Minnesota, dated as of March 2,
1995. (5)10.16
    
    *Registrants Deferred Compensation Plan, incorporated by
reference and filed with the Registrants Form S-8 filed April 5,
2000 (no. 333-34050). (12)10.17
    
    Lease between Principal Life Insurance Company and Atlantis
Plastic Films, Inc., dated as of March 8, 2000. (13) -50-




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##### Table of Contents



10.18
    
    Guaranty of Lease by Registrant of the obligations of Atlantis
Plastic Films, dated as of March 8, 2000. (13)10.19
    
    Master Security Agreement between Atlantis Plastics Inc. and
Atlantis Plastic Films Inc., as debtor and General Electric Capital
Corporation, as secured party, dated as of November 7, 2001. (14)10.20
    
    Amendment to Master Security Agreement between Atlantis Plastics
Inc. and Atlantis Plastic Films Inc., as debtor and General Electric
Capital Corporation, as secured party, dated as of November 7, 2001.
(14)10.21
    
    Lease Extension between Extrusion Masters, Inc. and E.E.E.
Properties, dated as of October 30, 2001. (15)10.22
    
    Executive Employment Agreement by and between Atlantis Plastics,
Inc. and Anthony F. Bova, dated December 31, 2002.(16)10.23
    
    Change in Control Agreement by and between Atlantis Plastics, Inc.
and Anthony F. Bova, dated December 31, 2002.(16)10.24
    
    Credit Agreement dated as of December 27, 2002 by and among
Atlantis Plastic Films, Inc., Atlantis Molded Plastics, Inc.,
Atlantis Films, Inc., Rigal Plastics, Inc., Atlantis Plastics
Injection Molding, Inc., Pierce Plastics, Inc. and Extrusion Masters,
Inc. and General Electric Capital Corporation and CIBC World Markets
Corp. and other financial institutions as a party thereto.(16)10.25
    
    Amendment No. 1 to Credit Agreement dated July 18, 2003 by and
among Atlantis Plastic Films, Inc., Atlantis Molded Plastics, Inc.,
Atlantis Films, Inc., Rigal Plastics, Inc., Atlantis Plastics
Injection Molding, Inc., Pierce Plastics, Inc. and Extrusion Masters,
Inc. and General Electric Capital Corporation and CIBC World Markets
Corp. and other financial institutions as a party thereto. (17)21.1
    
    Registrants Subsidiaries. (15)23.1
    
    Consent of Ernst & Young LLP relating to the Companys Registration
Statements on Form S-8 (No. 333-85866, No. 333-63855, No. 333-34197,
and No. 333-34050)31.1
    
    CEO Certification Pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    CFO Certification Pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    CEO Certification Pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    CFO Certification Pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. -51-




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##### Table of Contents



(1)
    
    Incorporated by reference to the exhibits filed with the
Registrants Form 8-B filed June 7, 1994.(2)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 1991.(3)
    
    Incorporated by reference to the exhibits filed with the
Registrants registration statement on Form S-2 (33-53152).(4)
    
    Incorporated by reference to the exhibits filed with the
Registrants Report on Form 8-K filed June 3, 1994.(5)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 1994.(6)
    
    Incorporated by reference to the exhibits and filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.(7)
    
    Incorporated by reference to Exhibit A filed with the Registrants
Schedule 14A filed on April 29, 1997.(8)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 1997.(9)
    
    Incorporated by reference to Exhibit A filed with the
Registrants Schedule 14A filed on April 17, 1998.(10)
    
    Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.(11)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 1998.(12)
    
    Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000.(13)
    
    Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.(14)
    
    Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001.(15)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 2001.(16)
    
    Incorporated by reference to the exhibits filed with the
Registrants Annual Report on Form 10-K for the year ended December
31, 2002.(17)
    
    Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report on Form 10-Q for the quarter ended June
30, 2003. -52-