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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the year ended December 31, 2006
 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.
  Delaware
    
    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)
 (800) 497-7659
  Name of each exchangeTitle of each class
    
    on which registeredClass A
Common Stock,
$.0001 par value per share
    
    The NASDAQ Stock Market
Pacific Stock Exchange
 None
 o þ
 o þ
 þ o
 o
 o o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



ATLANTIS PLASTICS, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2006
TABLE OF CONTENTS
 PagePart IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    9Item 1B.
    
    Unresolved Staff Comments
    
    
    13Item 2.
    
    Properties
    
    
    14Item 3.
    
    Legal Proceedings
    
    
    14Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    14Part IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchasesof Equity Securities
    
    
    15Item 6.
    
    Selected Financial Data
    
    
    17Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 8.
    
    Financial Statements and Supplementary Data
    
    
    27Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
    
    
    50Item 9A.
    
    Controls and Procedures
    
    
    50Item 9B.
    
    Other Information
    
    
    51Part IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    52Item 11.
    
    Executive Compensation
    
    
    52Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    52Item 13.
    
    Certain Relationships and Related Transactions
    
    
    52Item 14.
    
    Principal Accountant Fees and Services
    
    
    52Part IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    52Signatures
    
    
    
    
    57Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  -2-




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PART I
 NOTE REGARDING FORWARD-LOOKING STATEMENTS
     
 ITEM 1. BUSINESS
 Overview
   â
  -3-




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Industry Overview
 Plastic Films.
  Injection Molding.
 Profile Extrusion.
 Our Business Strategies
 Increase Market Penetration. â
 Expand Product Offerings.
 Maximize Operating Efficiencies.
 -4-




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Pursue Acquisitions at Reasonable Valuations.
 Products
 Stretch Films
  
    
    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 their cost and weight reduction
benefits. 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.
 
    
    Flexible Packaging Converter Films.Films engineered for converted flexible packaging
are marketed under the Proflex tm brand and used in laminated
applications as sealant layers, barrier layers and/or as a print carrier for graphics in
stand-up pouches and similar value added packaging. Proflex tm films
can also be used in an unsupported format, plain or printed, for the manufacture of bags or
wrapping of foods and consumer goods such as bakery or towel and tissue items.
    
    Masking Films.Masking films are used to protect the surface of materials such as
acrylic or polycarbonate sheet, glass and metal during transportation, storage, fabrication
and installation. These films incorporate a scratch, abrasion and gouge resistant layer on
one side and a heat activated adhesive layer on the other, to bind the film to the final
products surface and allow removal to expose a pristine product surface once an item is
finished.
    
    Foam Lamination and Adhesive Films.Foam lamination films are designed to be a carrier
web and become an integral structural component of carpet pad foam and automotive trim
components. Adhesive films act as a heat activated bonding layer between two substrates or
sheets made from diverse materials including applications such as structural panels used in
semi-trailer construction and similar items.
 -5-




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
    
    Non-Woven Lamination Films.These films adhere to non-woven substrates and become a
functional part of the finished product. Applications include dental bibs, surgical
drapings, other medical related products and absorbent tray pads used in meat packaging.
    
    Carpet, Furniture and Textile Packaging Films.This category includes a number of high
strength, wide web films and protective bags used for wrapping textiles and packaging large
format items like mattresses and furniture.
    
    Embossed Films.Embossed films are used in the manufacture of personal care items,
disposable protective clothing and table cloths, and for carrier or release films used in
the production of rubber, composite aerospace materials and molding compounds as a
separation medium.
 Institutional Products. Ò
 Injection Molding â
 Profile Extrusion tm
 Sales and Marketing
 Stretch Films
 Custom Films
 Institutional Products.
 Injection Molding.
 Profile Extrusion.
 -6-




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Manufacturing and Raw Materials
 Stretch Films
 Custom Films
 Institutional Products.
 Injection Molding
   Profile Extrusion
 Raw Materials
   -7-




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Competition
     Backlog
  Information Concerning Atlantis Plastics
    -8-




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Employees
  Patents and Trademarks
  Environmental Regulation
    
 ITEM 1A. RISK FACTORS
 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.
 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.
 Our substantial indebtedness could adversely affect our financial condition and prevent us from
fulfilling future obligations.
   
    
    increases our vulnerability to general adverse economic and industry conditions;
    
    requires us to dedicate all or a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the availability of our
cash flow to fund working capital, capital expenditures, product development efforts
and other general corporate purposes;
 -9-




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
    
    limits our flexibility in planning for, or reacting to, changes in our business
and the industries in which we operate, including our ability to pursue attractive
acquisition opportunities;
    
    places us at a competitive disadvantage compared to our competitors that have less debt;
    
    limits our ability to borrow additional funds; and
    
    limits our ability to obtain favorable credit terms.
     We face intense competition that could result in our losing or failing to gain market share and
adversely affect our results of operations.
      Our financial performance is dependent on raw material prices and our ability to pass on price
increases to customers.
  Sales to one of our customers accounted for 17.4% of our net sales in 2006, and the loss of sales
to that customer
 -10-




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could harm our business, financial condition and results of operations.
  Our acquisitions carry risks.
  Our business may suffer if any of our key senior executives discontinues employment with us or if
we are unable to recruit and retain highly qualified employees.
  Our intellectual property rights may be inadequate to protect our business.
    If third parties claim that we infringe upon their intellectual property rights, our operating
profits could be adversely affected.
  
    
    be expensive and time consuming to defend;
    
    cause us to cease making, licensing or using products that incorporate the challenged intellectual property;
    
    require us to redesign, reengineer, or rebrand our products, if feasible;
    
    divert managements attention and resources; or
    
    require us to enter into royalty or licensing agreements in order to obtain the
right to use a third partys intellectual property.
  -11-




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If our products infringe on the intellectual property rights of others, we may be required to
indemnify our customers for any damages they suffer.
  Environmental, health and safety matters could require material expenditures and changes in our
operations.
     Our major shareholder has significant influence over our business and could delay, deter or prevent
a change of control or other business combination.
  We face significant exposure to difficulties in the housing sector.
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We have identified a material weakness in the financial statement close and reporting process.
  We may be unable to maintain our listing on the NASDAQ Global Market. Failure to maintain our
listing could adversely affect our stock price, and the liquidity of our common stock would be
seriously limited.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  -13-




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ITEM 2. PROPERTIES
   Owned or
    
    Building AreaSegment and Location
    
    Leased
    
    (square feet)Plastic Films:Stretch Films, Tulsa, Oklahoma
    
    Owned
    
    
    126,500Stretch Films, Nicholasville, Kentucky
    
    Owned
    
    
    130,000Stretch Films, Fontana, California
    
    Leased
    
    
    95,100Custom Films, Mankato, Minnesota
    
    Owned
    
    
    140,000Institutional Products, Mankato, Minnesota
    
    Leased
    
    
    65,000Custom Films, Cartersville, Georgia
    
    Leased
    
    
    58,500Injection Molding:Injection Molding, Henderson, Kentucky
    
    Owned
    
    
    133,000Injection Molding, Jackson, Tennessee
    
    Owned
    
    
    50,800Injection Molding, Ft. Smith, Arkansas
    
    Owned
    
    
    135,000Injection Molding, Warren, Ohio (60,400 owned, 25,000 leased)
    
    Owned/Leased
    
    
    85,400Injection Molding, LaVergne, Tennessee
    
    Leased
    
    
    38,000Injection Molding, Alamo, Texas
    
    Leased
    
    
    98,000Injection Molding, Elkhart, Indiana
    
    Leased
    
    
    43,800Profile Extrusion:Profile Extrusion, Elkhart, Indiana
    
    Owned
    
    
    88,000Profile Extrusion, Elkhart, Indiana
    
    Leased
    
    
    98,500
 
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  -14-




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PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  High
    
    Low2006First Quarter
    
    $
    10.85
    
    
    $
    7.10Second Quarter
    
    $
    13.78
    
    
    $
    8.66Third Quarter
    
    $
    9.26
    
    
    $
    6.30Fourth Quarter
    
    $
    6.92
    
    
    $
    3.032005First Quarter
    
    $
    26.30
    
    
    $
    16.50Second Quarter
    
    $
    24.20
    
    
    $
    5.36Third Quarter
    
    $
    10.50
    
    
    $
    7.29Fourth Quarter
    
    $
    10.05
    
    
    $
    6.79
    Dividends
  -15-




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Performance Graph
  
    
    the Russell 2000 Index; and
    
    a peer group consisting of us and three other publicly traded plastics companies that we have selected.
  
 -16-




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ITEM 6. SELECTED FINANCIAL DATA
  Years Ended December 31,
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002(in millions, except per share data)Operating DataNet sales
    
    $
    418.7
    
    
    $
    424.3
    
    
    $
    347.8
    
    
    $
    289.1
    
    
    $
    248.6Net (loss) income
    
    
    (4.1
    )
    
    
    6.7
    
    
    
    11.5
    
    
    
    8.2
    
    
    
    2.4Per Share DataNet (loss) income:Basic (loss) earnings per common share
    
    
    ($0.50
    )
    
    $
    0.82
    
    
    $
    1.49
    
    
    $
    1.08
    
    
    $
    0.31Diluted (loss) earnings per common share
    
    
    ($0.50
    )
    
    $
    0.81
    
    
    $
    1.42
    
    
    $
    1.06
    
    
    $
    0.31Cash dividends paid per common share
    
    
    
    
    
    $
    12.50
    
    
    
    
    
    
    
    
    
    
    
    Financial DataTotal assets
    
    $
    226.9
    
    
    $
    242.4
    
    
    $
    213.3
    
    
    $
    185.7
    
    
    $
    175.6Total debt
    
    
    206.8
    
    
    
    199.2
    
    
    
    87.7
    
    
    
    77.2
    
    
    
    88.9
 -17-




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ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
   Ò
  Critical Accounting Policies and Estimates
   Revenue recognition and accounts receivable:
 Inventories:
 -18-




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Goodwill: Goodwill and Other Intangible Assets
  Self-Insurance:
  Years Ended December 31,
    
    2006
    
    
    2005
    
    
    2004Plastic Films (pounds)
    
    
    257,005
    
    
    
    284,019
    
    
    
    273,562
 Net Sales
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net SalesPlastic Films
    
    $
    266,879
    
    
    
    64
    %
    
    $
    273,006
    
    
    
    64
    %
    
    $
    222,221
    
    
    
    64
    %Injection Molding
    
    
    118,893
    
    
    
    28
    %
    
    
    116,050
    
    
    
    28
    %
    
    
    99,899
    
    
    
    29
    %Profile Extrusion
    
    
    32,895
    
    
    
    8
    %
    
    
    35,270
    
    
    
    8
    %
    
    
    25,682
    
    
    
    7
    %Total
    
    $
    418,667
    
    
    
    100
    %
    
    $
    424,326
    
    
    
    100
    %
    
    $
    347,802
    
    
    
    100
    %
 Gross Profit
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net SalesPlastic Films
    
    $
    30,324
    
    
    
    11
    %
    
    $
    40,450
    
    
    
    15
    %
    
    $
    34,891
    
    
    
    16
    %Injection Molding
    
    
    14,899
    
    
    
    13
    %
    
    
    18,117
    
    
    
    16
    %
    
    
    15,592
    
    
    
    16
    %Profile Extrusion
    
    
    2,224
    
    
    
    7
    %
    
    
    6,583
    
    
    
    19
    %
    
    
    5,985
    
    
    
    23
    %Total
    
    $
    47,447
    
    
    
    11
    %
    
    $
    65,150
    
    
    
    15
    %
    
    $
    56,468
    
    
    
    16
    %
 Operating Income (Loss)
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net Sales
    
    Amount
    
    % Net SalesPlastic Films
    
    $
    9,317
    
    
    
    4
    %
    
    $
    16,562
    
    
    
    6
    %
    
    $
    12,995
    
    
    
    6
    %Injection Molding
    
    
    5,819
    
    
    
    5
    %
    
    
    9,715
    
    
    
    8
    %
    
    
    7,406
    
    
    
    7
    %Profile Extrusion
    
    
    (1,402
    )
    
    
    -4
    %
    
    
    2,781
    
    
    
    8
    %
    
    
    3,358
    
    
    
    13
    %Total
    
    $
    13,734
    
    
    
    3
    %
    
    $
    29,058
    
    
    
    7
    %
    
    $
    23,759
    
    
    
    7
    %
 -19-




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Comparison of Years Ended December 31, 2006 and 2005
 Net Sales
  Gross Profit
  Selling, General and Administrative Expense
  Net Interest Expense and Income Taxes
   (Loss) Income
  2006
    
    2005Net (loss) income
    
    ($4.1 million)
    
    $6.7 millionBasic (loss) earnings per share
    
    
    ($0.50
    )
    
    $
    0.82Diluted (loss) earnings per share
    
    
    ($0.50
    )
    
    $
    0.81
 -20-




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Comparison of Years Ended December 31, 2005 and 2004
 Net Sales
  Gross Profit
  Selling, General and Administrative Expense
  Net Interest Expense and Income Taxes
   Income
  2005
    
    2004Net income
    
    $6.7 million
    
    $11.5 millionBasic earnings per share
    
    $
    0.82
    
    
    $
    1.49Diluted earnings per share
    
    $
    0.81
    
    
    $
    1.42
 -21-




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LIQUIDITY AND CAPITAL RESOURCES
        -22-




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Cash Flows from Operating Activities
  Cash Flows from Investing Activities
   Cash Flows from Financing Activities
   Maturity
    
    MaturityMaturity less 1 yr
    
    1-3 yrs
    
    4-5 yrs
    
    Maturity over 5 yrs
    
    TotalDebt principal
    
    $
    1,741
    
    
    $
    3,570
    
    
    $
    126,440
    
    
    $
    75,000
    
    
    $
    206,751Estimated interest payments (1)
    
    
    22,273
    
    
    
    44,141
    
    
    
    40,857
    
    
    
    2,685
    
    
    
    109,957Operating leases
    
    
    4,375
    
    
    
    5,947
    
    
    
    2,522
    
    
    
    2,456
    
    
    
    15,299Total commitments
    
    $
    28,389
    
    
    $
    53,658
    
    
    $
    169,819
    
    
    $
    80,141
    
    
    $
    332,007
 
 (1)
    
    Estimated interest payments were calculated assuming current interest
rates over the minimum maturity periods specified in our debt agreements. Actual interest rates
may differ from those assumed and debt may be repaid sooner or later than such minimum maturity
periods assumed. -23-




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Subsequent Events
    Recent Accounting Pronouncements
 Accounting
for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 Accounting for
Income Taxes
    The Fair Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115
 -24-




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-25-




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
 Foreign Exchange Rate Risk
 -26-




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageManagements Responsibility for Financial Reporting
    
    
    28Report of Independent Registered Public Accounting Firm
    
    
    29Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005, and 2004
    
    
    30Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    
    31Consolidated Statements of Shareholders (Deficit) Equity for the Years Ended December 31, 2006, 2005, and 2004
    
    
    32Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005, and 2004
    
    
    33Notes to Consolidated Financial Statements
    
    
    34
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MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING
     /s/ V.M. Philbrook
    
    /s/ Paul G. SaariPresident and Chief
    
    Senior Vice President of Finance andOperating Officer
    
    Chief Financial Officer
 - 28 -




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     /s/  Ernst & Young LLP 
 - 29 -




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Consolidated Statements of Operations
 Years Ended December 31,(in thousands, except per share amounts)
    
    2006
    
    
    2005
    
    
    2004Net sales
    
    $
    418,667
    
    
    $
    424,326
    
    
    $
    347,802Cost of goods sold
    
    
    371,220
    
    
    
    359,176
    
    
    
    291,334Gross profit
    
    
    47,447
    
    
    
    65,150
    
    
    
    56,468Selling, general and administrative expenses
    
    
    32,554
    
    
    
    35,537
    
    
    
    32,709Severance expense
    
    
    1,159
    
    
    
    
    
    
    
    Cost of unconsummated financing
    
    
    
    
    
    
    555
    
    
    
    Operating income
    
    
    13,734
    
    
    
    29,058
    
    
    
    23,759Interest expense, net of interest income of $49 in 2006,
$199 in 2005 and $53 in 2004
    
    
    (20,178
    )
    
    
    (15,048
    )
    
    
    (5,643
    )Unamortized deferred financing cost write-off
    
    
    
    
    
    
    (3,794
    )
    
    
    Other income
    
    
    59
    
    
    
    84
    
    
    
    168(Loss) income before provision for income taxes
    
    
    (6,385
    )
    
    
    10,300
    
    
    
    18,284(Benefit) provision for income taxes
    
    
    (2,239
    )
    
    
    3,629
    
    
    
    6,769Net (loss) income
    
    $
    (4,146
    )
    
    $
    6,671
    
    
    $
    11,515Basic (loss) earnings per share
    
    $
    (0.50
    )
    
    $
    0.82
    
    
    $
    1.49Diluted (loss) earnings per share
    
    $
    (0.50
    )
    
    $
    0.81
    
    
    $
    1.42Weighted average number of shares used in
computing (loss) earnings per share:Basic
    
    
    8,256
    
    
    
    8,174
    
    
    
    7,709Diluted
    
    
    8,256
    
    
    
    8,221
    
    
    
    8,131Cash dividends paid per common share
    
    
    
    
    
    $
    12.50
    
    
    
    
 See accompanying notes.
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Consolidated Balance Sheets
 December 31,(in thousands, except share and per share amounts)
    
    2006
    
    2005AssetsCash and cash equivalents
    
    $
    59
    
    
    $
    178Accounts receivable (net of allowances of $1,280 and $1,835)
    
    
    48,999
    
    
    
    57,075Inventories, net
    
    
    36,999
    
    
    
    41,667Other current assets
    
    
    5,479
    
    
    
    6,048Deferred income tax assets
    
    
    3,108
    
    
    
    3,694Total current assets
    
    
    94,644
    
    
    
    108,662Property and equipment, net
    
    
    68,979
    
    
    
    69,695Goodwill, net of accumulated amortization
    
    
    54,592
    
    
    
    54,592Other assets
    
    
    8,673
    
    
    
    9,437Total assets
    
    $
    226,888
    
    
    $
    242,386Liabilities and shareholders deficitAccounts payable and accrued expenses
    
    $
    31,248
    
    
    $
    48,521Current maturities of long-term debt
    
    
    1,741
    
    
    
    1,970Other current liabilities
    
    
    349
    
    
    
    356Total current liabilities
    
    
    33,338
    
    
    
    50,847Long-term debt
    
    
    205,010
    
    
    
    197,195Deferred income tax liabilities
    
    
    12,043
    
    
    
    13,525Other liabilities
    
    
    690
    
    
    
    702Total liabilities
    
    
    251,081
    
    
    
    262,269Commitments and contingencies
    
    
    
    
    
    
    Shareholders deficitClass A Common Stock; $0.0001 par value in 2006 and 2005;
20,000,000 shares authorized, 6,141,009 and 6,113,158 shares issued
and outstanding in 2006 and 2005, respectively
    
    
    1
    
    
    
    1Class B Common Stock; $0.0001 par value in 2006 and 2005;
7,000,000 shares authorized, 2,114,814 and 2,142,665 shares issued
and outstanding in 2006 and 2005, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    390
    
    
    
    Note receivable from employee loan
    
    
    (275
    )
    
    
    Accumulated deficit
    
    
    (25,682
    )
    
    
    (21,536
    )Accumulated other comprehensive income, net of income taxes of $706 and $862
respectively
    
    
    1,373
    
    
    
    1,652Total shareholders deficit
    
    
    (24,193
    )
    
    
    (19,883
    )Total liabilities and shareholders deficit
    
    $
    226,888
    
    
    $
    242,386
 See accompanying notes.
 -31-




---



##### Table of Contents



Consolidated Statements of Shareholders (Deficit) Equity
 Notes
    
    Notes
    
    
    
    
    
    
    
    
    
    TotalReceivable
    
    Receivable
    
    
    
    
    
    
    
    
    
    Share-Class A
    
    Class B
    
    Additional
    
    from Sale of
    
    from
    
    Accumulated
    
    Accumulated Other
    
    holders'Common
    
    Common
    
    Paid-In
    
    Common
    
    Employee
    
    Earnings
    
    Comprehensive
    
    (Deficit)(in thousands)
    
    Stock
    
    Stock
    
    Capital
    
    Stock
    
    Loan
    
    (Deficit)
    
    Income
    
    EquityBalance at January 1,
2004
    
    $
    517
    
    
    $
    246
    
    
    $
    11,119
    
    
    $
    (1,317
    )
    
    $
    
    
    
    $
    47,840
    
    
    $
    
    
    
    $
    58,405Net income and
comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,515
    
    
    
    
    
    
    
    11,515Income tax benefit from
option exercises
    
    
    
    
    
    
    
    
    
    
    483
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    483Exercise of stock options
    
    
    16
    
    
    
    
    
    
    
    993
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,009Conversion of Class B to
Class A
Common Stock
    
    
    23
    
    
    
    (23
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments on notes
received for sale of
Common Stock, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    865
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    865Balance at December 31,
2004
    
    $
    556
    
    
    $
    223
    
    
    $
    12,595
    
    
    $
    (452
    )
    
    $
    
    
    
    $
    59,355
    
    
    $
    
    
    
    $
    72,277Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,671
    
    
    
    
    
    
    
    6,671Net unrealized gain on
derivatives,
net of income taxes
of $862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,652
    
    
    
    1,652Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,323Cancellation of stock
options
    
    
    
    
    
    
    
    
    
    
    (3,977
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,977
    )Exercise of stock options
    
    
    47
    
    
    
    
    
    
    
    2,475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,522Income tax benefit from
option exercises/
cancellations
    
    
    
    
    
    
    
    
    
    
    3,718
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,718Conversion of Class B to
Class A
Common Stock
    
    
    9
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments on notes
received for sale of
Common Stock, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    452
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    452Adjust par value of
common stock
    
    
    (611
    )
    
    
    (214
    )
    
    
    825
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividend paid
    
    
    
    
    
    
    
    
    
    
    (15,636
    )
    
    
    
    
    
    
    
    
    
    
    (87,562
    )
    
    
    
    
    
    
    (103,198
    )Balance at December 31,
2005
    
    $
    1
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (21,536
    )
    
    $
    1,652
    
    
    $
    (19,883
    )Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,146
    )
    
    
    
    
    
    
    (4,146
    )Change in fair value
of derivatives,
net of income tax
benefit of $156
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (279
    )
    
    
    (279
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,425
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    390
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    390Note receivable from
employee loan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (275
    )
    
    
    
    
    
    
    
    
    
    
    (275
    )Balance at December 31,
2006
    
    $
    1
    
    
    $
    
    
    
    $
    390
    
    
    $
    
    
    
    $
    (275
    )
    
    $
    (25,682
    )
    
    $
    1,373
    
    
    $
    (24,193
    )
 See accompanying notes.
 -32-




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##### Table of Contents



Consolidated Statements of Cash Flows
 Years Ended December 31,(in thousands)
    
    2006
    
    2005
    
    2004Operating Activities:Net (loss) income
    
    $
    (4,146
    )
    
    $
    6,671
    
    
    $
    11,515Adjustments to reconcile net (loss) income to cash provided by operating activities:Depreciation and amortization of non-compete agreement
    
    
    12,691
    
    
    
    12,058
    
    
    
    11,340Loan fee and other amortization
    
    
    692
    
    
    
    5,216
    
    
    
    1,029Amortization of gain realized on swap redemption
    
    
    (1,069
    )
    
    
    
    
    
    
    Share-based compensation expense
    
    
    390
    
    
    
    461
    
    
    
    Interest receivable from shareholder loans
    
    
    
    
    
    
    (5
    )
    
    
    31Loss (gain) on disposal of assets
    
    
    37
    
    
    
    38
    
    
    
    (29
    )Deferred income taxes
    
    
    (842
    )
    
    
    (1,336
    )
    
    
    307Change in operating assets and liabilities, net of acquisitions of businesses:Accounts receivable, net
    
    
    8,076
    
    
    
    (11,093
    )
    
    
    (6,381
    )Inventories, net
    
    
    4,668
    
    
    
    (3,509
    )
    
    
    (13,659
    )Other current assets
    
    
    673
    
    
    
    (1,495
    )
    
    
    (1,404
    )Accounts payable, accrued expenses and other current liabilities
    
    
    (17,280
    )
    
    
    3,519
    
    
    
    4,093Other assets and liabilities
    
    
    (1,004
    )
    
    
    (1,190
    )
    
    
    (297
    )Cash provided by operating activities
    
    
    2,886
    
    
    
    9,335
    
    
    
    6,545Investing Activities:Capital expenditures
    
    
    (11,983
    )
    
    
    (17,404
    )
    
    
    (12,943
    )Purchase of business
    
    
    
    
    
    
    
    
    
    
    (9,404
    )Proceeds from asset dispositions
    
    
    
    
    
    
    38
    
    
    
    4Cash used for investing activities
    
    
    (11,983
    )
    
    
    (17,366
    )
    
    
    (22,343
    )Financing Activities:Net borrowings (repayments) under senior credit facilities
    
    
    9,600
    
    
    
    (15,860
    )
    
    
    11,058Repayments under old term loans
    
    
    
    
    
    
    (70,587
    )
    
    
    (513
    )Proceeds from new credit agreement
    
    
    
    
    
    
    195,000
    
    
    
    Repayments of term loans under new credit agreement
    
    
    (1,500
    )
    
    
    (600
    )
    
    
    Payment of special dividend
    
    
    
    
    
    
    (103,198
    )
    
    
    Proceeds from issuance of long-term bonds
    
    
    
    
    
    
    3,503
    
    
    
    Payments of long-term bonds
    
    
    (514
    )
    
    
    (35
    )
    
    
    Proceeds from swap redemption
    
    
    3,417
    
    
    
    
    
    
    
    Financing costs associated with credit agreements and unconsummated financing
    
    
    (1,750
    )
    
    
    (6,762
    )
    
    
    (23
    )Repayments on notes receivable from shareholders
    
    
    
    
    
    
    457
    
    
    
    834Income tax benefit from stock option exercises/cancellations
    
    
    
    
    
    
    3,718
    
    
    
    483Notes receivable from employee loan
    
    
    (275
    )
    
    
    
    
    
    
    Proceeds from exercise of stock options
    
    
    
    
    
    
    2,522
    
    
    
    1,0091,009Cash provided by financing activities
    
    
    8,978
    
    
    
    8,158
    
    
    
    12,848(Decrease) increase in cash and cash equivalents
    
    
    (119
    )
    
    
    127
    
    
    
    (2,950
    )Cash and cash equivalents at beginning of year
    
    
    178
    
    
    
    51
    
    
    
    3,001Cash and cash equivalents at end of year
    
    $
    59
    
    
    $
    178
    
    
    $
    51Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    20,922
    
    
    $
    13,754
    
    
    $
    4,689Net cash (refunded) paid for income taxes
    
    $
    (518
    )
    
    $
    2,969
    
    
    $
    7,854Supplemental schedule of non-cash investing and financing activities:Non-cash reduction of accounts receivable and accounts payable in connection
with supplier agreements
    
    $
    23
    
    
    $
    914
    
    
    $
    851
 See accompanying notes.
 -33-




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Nature of Business and Summary of Significant Accounting Policies
      Basis of presentation:
 Cash and cash equivalents:
 Revenue recognition and accounts receivable:
 Inventories:
 Goodwill: Goodwill and Other Intangible Assets
 See accompanying notes. -34-




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##### Table of Contents



Plastic
    
    Injection
    
    ProfileFilms
    
    Molding
    
    Extrusion
    
    TotalGoodwill, net
    
    $
    31.1
    
    
    $
    10.9
    
    
    $
    12.6
    
    
    $
    54.6
 Self-insurance
 Property and equipment:
   Earnings per share:
 Share-based compensation Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation Share-Based
Payment
 -35-




---



##### Table of Contents



2004Net income:As reported
    
    $
    11,515Add: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
    
    
    150Pro forma net income
    
    $
    11,365Basic net income per share:As reported
    
    $
    1.49Pro forma
    
    $
    1.47Diluted net income per share:As reported
    
    $
    1.42Pro forma
    
    $
    1.39
 -36-




---



##### Table of Contents



Repair and maintenance expenses:
 Advertising costs:
 Shipping and handling costs:
 Amortization:
 Income taxes:
 Use of estimates:
 Reclassifications:
 Financial instruments:
  Derivative instruments and hedging activities
 -37-




---



##### Table of Contents



Going Concern Consideration
  -38-




---



##### Table of Contents



Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 Accounting for Income Taxes
    The Fair Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115
 -39-




---



##### Table of Contents



Note 2. Acquisitions of Businesses and Assets
 Business Combinations
  Current assets
    
    $
    1,222Long-term assets
    
    
    2,213Goodwill
    
    
    6,775Liabilities
    
    
    (806
    )$
    9,404
 Note 3. Inventories
  2006
    
    
    2005Raw materials
    
    $
    20,250
    
    
    $
    25,081Work in progress
    
    
    560
    
    
    
    438Finished goods
    
    
    17,321
    
    
    
    18,150Inventory
reserve
    
    
    (1,132
    )
    
    
    (2,002
    )Total
    
    $
    36,999
    
    
    $
    41,667
 Note 4. Property and Equipment
  2006
    
    
    2005Land
    
    $
    2,604
    
    
    $
    2,606Building and improvements
    
    
    28,433
    
    
    
    27,523Office furniture and equipment
    
    
    15,904
    
    
    
    15,231Manufacturing equipment
    
    
    149,912
    
    
    
    144,683Vehicles
    
    
    328
    
    
    
    320Total
    
    
    197,181
    
    
    
    190,363Accumulated depreciation
and amortization
    
    
    (128,202
    )
    
    
    (120,668
    )Net
    
    $
    68,979
    
    
    $
    69,695
  -40-




---



##### Table of Contents



Note 5. Accounts Payable and Accrued Expenses
  2006
    
    
    2005Accounts payable
    
    $
    19,595
    
    
    $
    27,399Accrued interest
    
    
    983
    
    
    
    1,005Accrued compensation, vacation and profit sharing
    
    
    4,077
    
    
    
    8,732Accrued health and workers compensation insurance
    
    
    1,339
    
    
    
    1,177Customer deposits and commissions
    
    
    2,583
    
    
    
    5,187Other
    
    
    2,671
    
    
    
    5,021Total
    
    $
    31,248
    
    
    $
    48,521
 Note 6. Long-Term Debt
  2006
    
    
    2005Senior secured term loan
    
    $
    117,900
    
    
    $
    119,400Junior secured term loan
    
    
    75,000
    
    
    
    75,000Revolving line of credit
    
    
    10,900
    
    
    
    1,300Bonds
    
    
    2,951
    
    
    
    3,465Total debt
    
    
    206,751
    
    
    
    199,165Current portion of long-term
debt
    
    
    (1,741
    )
    
    
    (1,970
    )Long-term debt
    
    $
    205,010
    
    
    $
    197,195
     -41-




---



##### Table of Contents



-42-




---



##### Table of Contents



Year
    
    Amount2007
    
    $
    1,7412008
    
    
    1,7702009
    
    
    1,8002010
    
    
    1,8322011
    
    
    124,6082012
    
    
    75,000Total
    
    $
    206,751
 Note 7. Capital Stock
  -43-




---



##### Table of Contents



Note 8. Income Taxes
  2006
    
    
    2005
    
    
    2004Current Federal income tax (benefit)
provision
    
    $
    (1,241
    )
    
    $
    4,223
    
    
    $
    5,690Current State income tax (benefit) provision
    
    
    (156
    )
    
    
    742
    
    
    
    772Deferred Federal and State income tax
(benefit) provision
    
    
    (842
    )
    
    
    (1,336
    )
    
    
    307Total (benefit) provision for income taxes
    
    $
    (2,239
    )
    
    $
    3,629
    
    
    $
    6,769
  2006
    
    
    2005
    
    
    2004Statutory federal income tax rate
    
    
    34
    %
    
    
    34
    %
    
    
    34
    %State income taxes
    
    
    3
    
    
    
    3
    
    
    
    3Domestic production deduction and
other
    
    
    (2
    )
    
    
    (2
    )
    
    
    Effective income tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    37
    %
  2006
    
    
    2005Non-current deferred income tax liabilities:Excess of book over tax basis of
property and equipment
    
    $
    9,601
    
    
    $
    10,525Goodwill
    
    
    2,870
    
    
    
    2,139Interest rate swap
    
    
    
    
    
    
    861Total deferred income tax liabilities
    
    $
    12,471
    
    
    $
    13,525Non-current deferred income tax assets:Interest rate swap
    
    
    100
    
    
    
    Stock options
    
    
    328
    
    
    
    Total net long-term deferred income tax
liabilities
    
    $
    12,043
    
    
    $
    13,525Current deferred income tax assets:Reserves and accrued expenses not yet
deductible for income tax purposes
    
    $
    2,681
    
    
    $
    3,038Capitalized inventory costs
    
    
    427
    
    
    
    656Total current deferred income tax assets
    
    $
    3,108
    
    
    $
    3,694Deferred income taxes, net
    
    $
    8,935
    
    
    $
    9,831
  Note 9. Stock Option Plans
  -44-




---



##### Table of Contents



2006
    
    
    2005
    
    
    2004Options outstanding at January 1
    
    
    
    
    
    
    1,051
    
    
    
    1,244Granted
    
    
    530
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    (472
    )
    
    
    (156
    )Cancelled
    
    
    (85
    )
    
    
    (579
    )
    
    
    (37
    )Options outstanding at December 31
    
    
    445
    
    
    
    
    
    
    
    1,051Weighted-average option prices per common share:Options outstanding at January 1
    
    $
    
    
    
    $
    6.47
    
    
    $
    6.45Granted
    
    
    8.47
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    5.34
    
    
    
    6.48Cancelled
    
    
    8.93
    
    
    
    7.40
    
    
    
    5.81Outstanding at December 31
    
    $
    8.38
    
    
    $
    
    
    
    $
    6.47Weighted-average fair value of options
granted during the year
    
    $
    4.30
    
    
    $
    
    
    
    $
    Options exercisable at December 31
    
    
    
    
    
    
    
    
    
    
    827Options available for grant at December 31
    
    
    420
    
    
    
    865
    
    
    
    195
   Weighted-Shares
    
    
    Average Grant(000s)
    
    
    Date Fair ValueNonvested at January 1, 2006
    
    
    Granted
    
    
    530
    
    
    $
    4.30Vested
    
    
    (25
    )
    
    
    1.59Forfeited or expired
    
    
    (85
    )
    
    
    4.54Nonvested at December 31, 2006
    
    
    420
    
    
    $
    4.41
 -45-




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##### Table of Contents



Note 10. (Loss) Earnings Per Share
  2006
    
    
    2005
    
    
    2004Basic
(loss) earnings per common share:Net (loss) income
    
    $
    (4,146
    )
    
    $
    6,671
    
    
    $
    11,515Weighted-average common shares outstanding
    
    
    8,256
    
    
    
    8,174
    
    
    
    7,709Basic (loss) earnings per common share
    
    $
    (0.50
    )
    
    $
    0.82
    
    
    $
    1.49Diluted (loss) earnings per common share:(Loss) earnings applicable to common shares
    
    $
    (4,146
    )
    
    $
    6,671
    
    
    $
    11,515Weighted-average common shares outstanding
    
    
    8,256
    
    
    
    8,174
    
    
    
    7,709Add  Dilutive options
    
    
    
    
    
    
    47
    
    
    
    422Weighted-average common shares outstanding plus
potential dilutive common shares
    
    
    8,256
    
    
    
    8,221
    
    
    
    8,131Diluted (loss) earnings per common share
    
    $
    (0.50
    )
    
    $
    0.81
    
    
    $
    1.42
 -46-




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##### Table of Contents



Note 11. Business Segments
    Plastic
    
    
    Injection
    
    
    ProfileFilms
    
    
    Molding
    
    
    Extrusion
    
    
    Corporate
    
    
    Consolidated2006Net sales
    
    $
    266,879
    
    
    $
    118,893
    
    
    $
    32,895
    
    
    $
    
    
    
    $
    418,667Operating income
    
    
    9,317
    
    
    
    5,819
    
    
    
    (1,402
    )
    
    
    
    
    
    
    13,734Identifiable assets
    
    
    140,318
    
    
    
    107,676
    
    
    
    45,918
    
    
    
    (67,024
    )
    
    
    226,888Capital expenditures
    
    
    7,425
    
    
    
    2,643
    
    
    
    1,522
    
    
    
    393
    
    
    
    11,983Depreciation
    
    
    5,397
    
    
    
    4,629
    
    
    
    1,259
    
    
    
    1,366
    
    
    
    12,6512005Net sales
    
    $
    273,006
    
    
    $
    116,050
    
    
    $
    35,270
    
    
    $
    
    
    
    $
    424,326Operating income
    
    
    16,562
    
    
    
    9,715
    
    
    
    2,781
    
    
    
    
    
    
    
    29,058Identifiable assets
    
    
    150,079
    
    
    
    110,287
    
    
    
    49,235
    
    
    
    (67,215
    )
    
    
    242,386Capital expenditures
    
    
    10,165
    
    
    
    4,234
    
    
    
    2,063
    
    
    
    942
    
    
    
    17,404Depreciation
    
    
    4,964
    
    
    
    4,561
    
    
    
    1,258
    
    
    
    1,028
    
    
    
    11,8112004Net sales
    
    $
    222,221
    
    
    $
    99,899
    
    
    $
    25,682
    
    
    $
    
    
    
    $
    347,802Operating income
    
    
    12,995
    
    
    
    7,406
    
    
    
    3,358
    
    
    
    
    
    
    
    23,759Identifiable assets
    
    
    95,923
    
    
    
    57,389
    
    
    
    26,560
    
    
    
    33,422
    
    
    
    213,294Capital expenditures
    
    
    4,601
    
    
    
    4,843
    
    
    
    1,424
    
    
    
    2,075
    
    
    
    12,943Depreciation
    
    
    5,333
    
    
    
    4,091
    
    
    
    1,032
    
    
    
    884
    
    
    
    11,340
 Note 12. Profit Sharing and Retirement Plans
   - 47 -




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##### Table of Contents



Note 13. Related Parties
  2006
    
    
    2005
    
    
    2004Management fees
    
    $
    1,121
    
    
    $
    1,045
    
    
    $
    1,275Expense allocations and reimbursements
    
    
    269
    
    
    
    371
    
    
    
    193Total fees paid to Trivest Partners, LP
    
    $
    1,390
    
    
    $
    1,416
    
    
    $
    1,468
   Note 14. Commitments and Contingencies
    Year
    
    Amount2007
    
    $
    4,3742008
    
    
    3,3572009
    
    
    2,5902010
    
    
    1,5112011
    
    
    1,010Thereafter
    
    
    2,456Total
    
    $
    15,298
 - 48 -




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##### Table of Contents



Note 15. Quarterly Financial Data (Unaudited)
  Quarter Ended
    
    
    Quarter Ended
    
    
    Quarter Ended
    
    
    Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31
    
    
    Year2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    109,785
    
    
    $
    100,421
    
    
    $
    110,602
    
    
    $
    101,585
    
    
    $
    108,261
    
    
    $
    106,585
    
    
    $
    90,019
    
    
    $
    115,735
    
    
    $
    418,667
    
    
    $
    424,326Gross profit
    
    
    14,727
    
    
    
    14,308
    
    
    
    13,134
    
    
    
    16,322
    
    
    
    11,141
    
    
    
    16,326
    
    
    
    8,445
    
    
    
    18,194
    
    
    
    47,447
    
    
    
    65,150Net income (loss)
    
    
    764
    
    
    
    (332
    )
    
    
    26
    
    
    
    2,445
    
    
    
    (1,754
    )
    
    
    1,946
    
    
    
    (3,182
    )
    
    
    2,612
    
    
    
    (4,146
    )
    
    
    6,671Net income (loss)
per common share:Basic
    
    $
    0.09
    
    
    
    ($0.04
    )
    
    $
    0.00
    
    
    $
    0.30
    
    
    
    ($0.21
    )
    
    $
    0.24
    
    
    
    ($0.39
    )
    
    $
    0.32
    
    
    
    ($0.50
    )
    
    $
    0.82Diluted
    
    $
    0.09
    
    
    
    ($0.04
    )
    
    $
    0.00
    
    
    $
    0.30
    
    
    
    ($0.21
    )
    
    $
    0.24
    
    
    
    ($0.39
    )
    
    $
    0.32
    
    
    
    ($0.50
    )
    
    $
    0.81
 Note 16. Severance Expense
  Note 17. Subsequent Events
    - 49 -




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##### Table of Contents



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
     Material Weakness Over Financial Statement Close and Reporting Process
   
    
    the lack of comprehensive documentation of accounting policies and procedures,
    
    the inaccurate preparation and review of reconciliations of certain significant account
balances on a timely basis, and
 - 50 -




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##### Table of Contents




    
    the lack of segregation of duties.
   Plan for Remediation of Material Weakness
  
    
    prepare detailed accounting policies and procedures in connection with the
implementation of Section 404 of the Sarbanes-Oxley Act, which would outline the policies
and procedures to be followed and would assist in mitigating the risk related to employee
turnover and the lack of segregation of duties,
    
    increase training and supervision of policies and procedures, particularly with respect
to matters noted above regarding the inaccurate preparation and timely review of
reconciliations of accounts, and
    
    review, at a senior management level, significant income statement items on a timely
basis. In addition, appropriate supervisory personnel will review significant balance
sheet reconciliations. This will help to ensure that reconciling items have been
addressed, and that appropriate classification of assets, liabilities, income and expense
accounts has been achieved.
 
 ITEM 9B.
    
    OTHER INFORMATION
  - 51 -




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##### Table of Contents



PART III
 
 ITEMS 10, 11, 12, 13, AND 14
  
 PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    Documents filed as a part of this report:
 Page(1)
    
    Financial Statements:Report of Independent Registered Public Accounting Firm
    
    
    29Consolidated Statements of Operations
    
    
    30Consolidated Balance Sheets
    
    
    31Consolidated Statements of Shareholders' (Deficit) Equity
    
    
    32Consolidated Statements of Cash Flows
    
    
    33Notes to Consolidated Financial Statements
    
    
    34(2)
    
    Financial Statement Schedules:
The following Financial Statement Schedule for the years ended
December 31, 2006, 2005, and 2004 is submitted herewith:Schedule II - Valuation and Qualifying Accounts
    
    
    56All 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.
  - 52 -




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##### Table of Contents



(b)
    
    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 Certificate of Incorporation(15)3.2
    
    Registrants Bylaws(15)4.1
    
    Form of Stock Certificate evidencing ownership of Registrants Class A Common Stock(4)10.1
    
    * Registrants 2001 Stock Award Plan, amended and restated as of January 27, 2005.(15)10.2
    
    * Form of Indemnification Agreement. (3)10.3
    
    * Management Agreement by and between Atlantis Plastics, Inc. and Trivest Partners,
L.P. dated January 1, 2003. (14)10.4
    
    * Agreement dated as of January 1, 1998 by and among Registrant, Trivest II, Inc.,
Earl W. Powell and Phillip T. George, M.D. (8)10.5
    
    Assignment and Assumption of Lease between Registrant and Trivest II, Inc.(9)10.6
    
    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. (1)10.7
    
    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. (1)10.8
    
    Office Lease, dated as of April 1, 1992, between Euram/1870 Exchange Associates and
National Poly Products, Inc. (2)10.9
    
    First Extension of lease agreement between Euram/1870 Exchange Associates and
Atlantis Plastic Films, Inc., dated May 14, 1997. (6)10.10
    
    First Amendment of lease agreement between 1870 Exchange Associates and Atlantis
Plastic Films, Inc., dated February 27, 2002. (13)10.11
    
    Lease with option to purchase Real Estate between Atlantis Plastic Films, Inc. and
the City of Mankato, Minnesota, dated as of March 2, 1995. (4)10.12
    
    * Registrants Deferred Compensation Plan, incorporated by reference and filed with
the Registrants Form S-8 filed April 5, 2000 (no. 333-34050). (10)10.13
    
    Lease between Principal Life Insurance Company and Atlantis Plastic Films, Inc.,
dated as of March 8, 2000. (11)10.14
    
    Guaranty of Lease by Registrant of the obligations of Atlantis Plastic Films, dated
as of March 8, 2000. (11)10.15
    
    Lease Extension between Extrusion Masters, Inc. and E.E.E. Properties, dated as of
October 30, 2001.(13)10.16
    
    Credit Agreement dated as of March 22, 2005 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. as Borrowers and the other persons party hereto that are designated as Credit
Parties and Merrill Lynch Capital, a Division of Merrill Lynch Business Financial
Services, Inc. and other financial institutions as a party thereto. (15)
 - 53 -




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##### Table of Contents



10.17
    
    Second Lien Credit Agreement dated as of March 22, 2005 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. as Borrowers and the other persons party hereto that are designated as Credit
Parties.(15)21.1
    
    Registrants Subsidiaries. (13)23.1
    
    Consent of Independent Registered Public Accounting Firm, 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.
 - 54 -




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##### Table of Contents



(1)
    
    Incorporated by reference to the exhibits filed with the Registrants Annual
Report on Form 10-K for the year ended December 31, 1991.(2)
    
    Incorporated by reference to the exhibits filed with the Registrants
registration statement on Form S-2 (33-53152).(3)
    
    Incorporated by reference to the exhibits filed with the Registrants Report
on Form 8-K filed June 3, 1994.(4)
    
    Incorporated by reference to the exhibits filed with the Registrants Annual
Report on Form 10-K for the year ended December 31, 1994.(5)
    
    Incorporated by reference to Exhibit A filed with the Registrants Schedule
14A filed on April 29, 1997.(6)
    
    Incorporated by reference to the exhibits filed with the Registrants Annual
Report on Form 10-K for the year ended December 31, 1997.(7)
    
    Incorporated by reference to Exhibit A filed with the Registrants Schedule
14A filed on April 17, 1998.(8)
    
    Incorporated by reference to the exhibits filed with the Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.(9)
    
    Incorporated by reference to the exhibits filed with the Registrants Annual
Report on Form 10-K for the year ended December 31, 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, 2000.(11)
    
    Incorporated by reference to the exhibits filed with the Registrants
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.(12)
    
    Incorporated by reference to the exhibits filed with the Registrants
Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.(13)
    
    Incorporated by reference to the exhibits filed with the Registrants Annual
Report on Form 10-K for the year ended December 31, 2001.(14)
    
    Incorporated by reference to the exhibits filed with the Registrants Report
on Form 8-K filed February 27, 2006.(15)
    
    Incorporated by reference to the exhibits filed with the Registrants Annual
Report on Form 10-K for the year ended December 31, 2004. - 55 -




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##### Table of Contents



(c) Financial Statement Schedule required by Regulation S-X.
 Atlantis Plastics, Inc.
Schedule II  Valuation and Qualifying Accounts
for the years ended December 31,
 Balance at
    
    
    Charged to
    
    
    
    
    
    
    BalanceBeginning
    
    
    Costs and
    
    
    
    
    
    
    at EndClassification
    
    of Year
    
    
    Expenses
    
    
    Deductions (a)
    
    
    of Year2006Allowances reducing the assets in the consolidated balance sheet:Allowance for doubtful accounts
    
    $
    806
    
    
    
    ($191
    )
    
    
    ($35
    )
    
    $
    580Reserve for sales allowances
    
    
    1,029
    
    
    
    21
    
    
    
    ($350
    )
    
    
    700Reserve for inventories
    
    
    2,002
    
    
    
    (870
    )
    
    
    
    
    
    
    1,132Total
    
    $
    3,837
    
    
    
    ($1,040
    )
    
    
    ($385
    )
    
    $
    2,4122005Allowances reducing the assets in the consolidated balance sheet:Allowance for doubtful accounts
    
    $
    539
    
    
    $
    255
    
    
    
    ($12
    )
    
    $
    806Reserve for sales allowances
    
    
    689
    
    
    
    340
    
    
    
    
    
    
    
    1,029Reserve for inventories
    
    
    1,409
    
    
    
    607
    
    
    
    14
    
    
    
    2,002Deferred income tax valuation allowance
    
    
    377
    
    
    
    
    
    
    
    377
    
    
    
    Total
    
    $
    3,014
    
    
    $
    1,202
    
    
    $
    379
    
    
    $
    3,8372004Allowances reducing the assets in the consolidated balance sheet:Allowance for doubtful accounts
    
    $
    550
    
    
    $
    216
    
    
    $
    227
    
    
    $
    539Reserve for sales allowances
    
    
    731
    
    
    
    173
    
    
    
    215
    
    
    
    689Reserve for inventories
    
    
    1,001
    
    
    
    843
    
    
    
    435
    
    
    
    1,409Deferred income tax valuation allowance
    
    
    565
    
    
    
    
    
    
    
    188
    
    
    
    377Total
    
    $
    2,847
    
    
    $
    1,232
    
    
    $
    1,065
    
    
    $
    3,014
  -56-




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##### Table of Contents



SIGNATURES
  ATLANTIS PLASTICS, INC.Date: April 5, 2007
    By:
    /s/          PAUL G. SAARIPaul G. SaariSenior Vice President, Finance and
Chief Financial Officer  Signature
    
    Title
    
    Date/s/     EARL W. POWELL

          Earl W. Powell
    
    Chairman of the Board and
Interim Chief Executive Officer
(Principal Executive Officer)
    
    April 5, 2007/s/     V.M. PHILBROOK

          V.M. Philbrook
    
    President and Chief
Operating Officer
    
    April 5, 2007/s/     PAUL G. SAARI

          Paul G. Saari
    
    Senior Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
    
    April 5, 2007/s/     CHARLES D. MURPHY, III

          Charles D. Murphy, III
    
    Director
    
    April 5, 2007/s/     CHESTER B. VANATTA

          Chester B. Vanatta
    
    Director
    
    April 5, 2007/s/     LARRY D. HORNER

          Larry D. Horner
    
    Director
    
    April 5, 2007/s/     CESAR ALVAREZ

          Cesar Alvarez
    
    Director
    
    April 5, 2007/s/     JAY SHUSTER

          Jay Shuster
    
    Director
    
    April 5, 2007/s/     PETER VANDENBERG, JR.

          Peter Vandenberg, Jr.
    
    Director
    
    April 5, 2007
 -57-




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##### Table of Contents



EXHIBIT INDEX
 23.1
    
    Consent of Independent Registered Public Accounting Firm, 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.