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| 8-K - APPVION, INC. | v184237_8k.htm |
Appleton Reports First Quarter 2010
Results
APPLETON,
Wis.,
May 10 /PRNewswire/ --
|
First
Quarter 2010 financial highlights compared to First Quarter 2009
include:
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|
·
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Net
sales of $232.2 million were up
9.2%
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·
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Net
sales of carbonless papers were up 3.4%; shipments up nearly
13%
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·
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Net
sales of thermal papers were up 23.4%; shipments up approximately
36%
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·
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Gross
profits of $43.8 million were up
4.8%
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·
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Voluntary
debt refinancing extends maturities, increases liquidity, eliminates
certain financial covenants and increases financial
flexibility
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Appleton’s
first quarter 2010 net sales of $232.2 million increased 9.2 percent compared to
first quarter 2009 net sales of $212.6 million. Appleton’s first quarter 2010
net loss of $7.4 million compared to net income of $1.2 million in first quarter
2009.
First
quarter 2010 results include an $8.2 million environmental expense recovery as a
result of an insurance settlement, a $5.5 million increase in interest expense
and a $5.5 million debt extinguishment expense resulting from the voluntary
refinancing of the Company’s debt. First quarter 2009 results included $5.4
million of debt extinguishment gain as a result of making market purchases of
senior subordinated notes at a price significantly less than face
value.
“Our
strong sales resulted from improved market demand for our products and increased
market share, especially in the carbonless and thermal paper segments,” said
Mark Richards, Appleton’s chairman, president and chief executive officer. “The
excellent response to the launch of our new Superior carbonless sheet product,
as well as increased international demand, helped drive up carbonless sales over
3 percent. Sales of our thermal paper grew by 23 percent on shipment
volume that increased 36 percent. Those results reflect significant share gains
for both our point-of-sale and high value-added grades.” He added that sales for
the Performance Packaging Division, when adjusted for the December sale of
C&H Packaging, increased $3.6 million compared to first quarter
2009.
Richards
said the Encapsys® business
unit, which is now reported as a separate segment, continues to
grow. Encapsys applies Appleton’s extensive knowledge of the
microencapsulation process in creative and collaborative ways to develop and
deliver better products to customers. “We are excited about the opportunities to
explore new markets and develop relationships beyond the paper industry where we
can leverage this core competency. Our goal is to be the partner of choice for
technology collaborations related to microencapsulation,” Richards
said.
The
positive impact that the Company’s strong sales and shipment volumes had on
earnings was offset by unfavorable product pricing and mix, as well as higher
than expected raw material costs, especially for pulp and energy. Expenses
associated with the Company’s debt refinancing, also reduced earnings for the
quarter. “We are being very aggressive in our efforts to control costs and
spending and improve operating efficiencies to soften the impact of raw material
inflation,” Richards stated.
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Appleton
Reports First Quarter 2010 Results
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page
2
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May
10, 2010
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First
Quarter Business Unit Results (dollars in thousands):
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Net Sales for the
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Operating Income (Loss) for the
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|||||||||||||||
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Three Months Ended
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Three Months Ended
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|||||||||||||||
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April 4, 2010
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April 5, 2009
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April 4, 2010
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April 5, 2009
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Technical
Papers
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$ | 204,850 | $ | 185,548 | $ | 6,230 | $ | 8,045 | ||||||||
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Encapsys
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11,468 | 9,209 | 1,533 | 342 | ||||||||||||
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Performance
Packaging
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22,159 | 23,944 | 1,335 | 344 | ||||||||||||
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Other
(Unallocated)
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— | — | 6,790 | (534 | ) | |||||||||||
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Intersegment
(a)
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(6,309 | ) | (6,151 | ) | (1,148 | ) | (774 | ) | ||||||||
| $ | 232,168 | $ | 212,550 | $ | 14,740 | $ | 7,423 | |||||||||
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(a)
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Represents
the portion of the Encapsys segment relating to encapsulated products
provided internally for the production of carbonless
papers.
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Technical
Papers
Technical
Papers first quarter 2010 net sales of $204.8 million were $19.3 million, or
10.4 percent, higher than first quarter 2009 due to a nearly 20 percent increase
in shipment volumes. Carbonless net sales increased $4.1 million, or 3.4
percent, compared to first quarter 2009, primarily due to the launch of the
Company’s new Superior carbonless sheet product, as well as increased
international demand. Net sales of thermal papers increased $15.2 million, or
23.4 percent, compared to the prior year quarter, due to increased shipment
volumes of approximately 36 percent.
Technical
Papers first quarter 2010 operating income of $6.2 million decreased $1.8
million from that of first quarter 2009 due to unfavorable price and mix (-$18.1
million), inflation of raw materials and utilities pricing (-$2.4 million) and
higher distribution costs (-$0.6 million) offset by reduced manufacturing costs
(+$9.1 million), reductions in mill curtailments to match customer
demand (+$3.8 million), overall higher shipment volumes (+$3.5
million) and reduced start-up costs of the thermal coater at the West
Carrollton, Ohio paper mill (+$2.9 million).
Encapsys
Encapsys
first quarter 2010 net sales of $11.5 million were $2.2 million, or 24.5
percent, higher than first quarter 2009. First quarter 2010 volumes were nearly
43 percent higher than the prior year quarter. This increase in sales
contributed an increase in operating income of $1.2 million.
Performance
Packaging
Performance
Packaging first quarter 2010 net sales of $22.2 million were $1.8 million, or
7.5 percent, lower than first quarter 2009. Compared to first quarter 2009,
segment net sales declined due to the December 2009 sale of C&H Packaging
Company, Inc. The remaining Packaging business actually reported a
$3.6 million increase in first quarter 2010 net sales on a volume increase of
nearly 14%. First quarter 2010 operating income, for the remaining business,
increased $1.3 million from first quarter 2009.
Other
(Unallocated)
Other
(unallocated) includes costs associated with new business development activities
and unallocated corporate expenses. Current quarter costs decreased $7.3 million
from first quarter 2009 due to the recording of the $8.2 million Fox River
insurance recovery.
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Appleton
Reports First Quarter 2010 Results
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page
3
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May
10, 2010
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Debt
Refinancing
On
February 8, 2010, Appleton completed a voluntary refinancing of its debt. The
refinancing included the sale of $305.0 million of 10.5% senior secured first
lien notes due June 2015 and a new five-year, asset-backed $100 million
revolving credit facility. Proceeds from the sale of the senior secured notes,
less expenses and discounts, were $292.2 million. Initial borrowing on the new
revolver totaled $20.6 million. A majority of the proceeds from this refinancing
transaction were used to repay, and thus terminate, the senior secured credit
facilities which included senior secured variable rate notes payable of $211.2
million, plus interest, and the old revolving credit facility of $97.1 million,
plus interest. Remaining proceeds were used to pay related expenses totaling
$10.6 million. Debt extinguishment expenses of $5.5 million were charged against
the quarter’s results resulting from the write-off of previously capitalized
deferred debt issuance costs.
Balance
Sheet
At the
end of first quarter 2010, the Company had cash totaling $3.2 million. This
compared to cash of $10.0 million at year-end 2009. During first quarter 2010,
the Company used $25.2 million of cash in operations largely as the result of a
$27.7 million increase in working capital. Higher net sales caused an increase
in accounts receivable and preparation for planned mill outages contributed to
higher inventory levels. Prior to the February 2010 refinancing, Appleton had
borrowed an additional net $8.9 million on the old revolving line of credit.
Subsequent to the February refinancing, a net $17.9 million was borrowed using
the new revolving line of credit. Appleton invested $2.4 million on capital
projects and used $6.8 million of cash for other financing activities, including
mandatory repayments of debt.
Outlook
Richards
said the Company expects that raw material cost inflation will continue to place
pressure on earnings, especially in the second quarter. The Company also plans
to conduct scheduled maintenance work, in the second quarter, which will
interrupt production at some of its facilities.
Richards
said the Company will continue to seek ways to reduce operating costs and drive
continued growth of sales and market share. The Company has successfully
implemented price increases across all its paper products; however, the Company
does not expect to see a significant benefit from these increases until the
second half of the year due to pricing agreements already in place with many of
its customers.
“Demand
for our products is returning and we are encouraged by the signs of a broader
economic recovery. Those improvements may not be as consistent or timely as we
would like, but there are indications that the worst of the recession is behind
us,” Richards said. He added that the strength, breadth and brand value of
Appleton’s paper product lines have the Company well-positioned to serve its
core markets as market demand continues to improve. Appleton is especially
optimistic about continued sales growth of its thermal paper products that
leverage the capabilities of the Company’s new coater.
“Inflation
will pose some near-term challenges for us, but our strategies, discipline and
market leadership positions will serve us well as the year progresses,” said
Richards.
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Appleton
Reports First Quarter 2010 Results
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page
4
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May
10, 2010
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Earnings
release conference call
Appleton
will host a conference call to discuss its first quarter 2010 results on
Tuesday, May 11, 2010, at 10:00 a.m. ET. The call will be broadcast through its
Web site, www.appletonideas.com/investors.
A replay will be available through June 9.
About
Appleton
Appleton
creates product solutions through its development and use of coating
formulations, coating applications and encapsulation technology. The Company
produces carbonless papers, thermal papers, Encapsys products and performance
packaging products. Appleton, headquartered in Appleton, Wisconsin, has
manufacturing operations in Wisconsin, Ohio, Pennsylvania, and
Massachusetts, employs approximately 2,100 people and is 100 percent
employee-owned. For more information, visit www.appletonideas.com.
Media
Contact: Bill
Van Den Brandt
Manager,
Corporate Communications
920-991-8613
bvandenbrandt@appletonideas.com
Notice
regarding forward-looking statements
This news
release contains forward-looking statements. The words “will,” “may,” “should,”
“believes,” “anticipates,” “intends,” “estimates,” “expects,” “projects,”
“plans,” “seek” or similar expressions are intended to identify forward-looking
statements. All statements in this news release, other than statements of
historical fact, including statements which address Appleton’s strategy, future
operations, future financial position, estimated revenues, projected costs,
prospects, plans and objectives of management and events or developments that
Appleton expects or anticipates will occur, are forward-looking statements. All
forward-looking statements speak only as of the date on which they are made.
They rely on a number of assumptions concerning future events and are subject to
a number of risks and uncertainties, many of which are outside the Company’s
control that could cause actual results to differ materially from such
statements. These risks and uncertainties include, but are not limited to, the
factors listed under “Item 1A - Risk Factors” in the Annual Report on Form 10-K
for the year ended January 2, 2010. Many of these factors are beyond Appleton’s
ability to control or predict. Given these uncertainties, you should not place
undue reliance on the forward-looking statements. Appleton disclaims any
obligation to update or revise publicly any forward-looking statements, whether
as a result of new information, future events or otherwise.
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Appleton
Reports First Quarter 2010 Results
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page
5
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May
10, 2010
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Table
1
Appleton
Papers Inc.
Consolidated
Statements of Operations
(unaudited)
(dollars
in thousands)
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For the Three
Months Ended
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For the Three
Months Ended
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|||||||
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April 4, 2010
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April 5, 2009
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|||||||
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Net
sales
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$ | 232,168 | $ | 212,550 | ||||
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Cost
of sales
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188,418 | 170,809 | ||||||
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Gross
profit
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43,750 | 41,741 | ||||||
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Selling,
general and administrative expenses
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37,191 | 34,318 | ||||||
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Environmental
expense insurance recovery
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(8,181 | ) | — | |||||
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Operating
income
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14,740 | 7,423 | ||||||
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Other
expense (income)
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||||||||
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Interest
expense
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16,922 | 11,392 | ||||||
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Debt
extinguishment expense (gain), net
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5,532 | (5,380 | ) | |||||
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Interest
income
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(10 | ) | (16 | ) | ||||
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Foreign
exchange (gain) loss
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(263 | ) | 279 | |||||
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(Loss)
income before income taxes
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(7,441 | ) | 1,148 | |||||
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Benefit
for income taxes
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(79 | ) | (15 | ) | ||||
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Net
(loss) income
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$ | (7,362 | ) | $ | 1,163 | |||
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Other
Financial Data:
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||||||||
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Depreciation
and amortization of intangible assets
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$ | 13,168 | $ | 15,389 | ||||
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Appleton
Reports First Quarter 2010 Results
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page
6
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May
10, 2010
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Table
2
Appleton
Papers Inc.
Consolidated
Balance Sheets
(unaudited)
(dollars
in thousands)
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April 4, 2010
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January 2, 2010
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|||||||
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Cash
and cash equivalents
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$ | 3,238 | $ | 9,963 | ||||
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Accounts
receivable
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111,977 | 90,584 | ||||||
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Inventories
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129,635 | 120,942 | ||||||
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Other
current assets
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54,529 | 54,835 | ||||||
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Total
current assets
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299,379 | 276,324 | ||||||
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Property,
plant and equipment, net
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395,602 | 405,598 | ||||||
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Other
long-term assets
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111,422 | 116,058 | ||||||
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Total
assets
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$ | 806,403 | $ | 797,980 | ||||
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Accounts
payable
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$ | 51,933 | $ | 60,020 | ||||
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Other
current liabilities
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104,391 | 103,633 | ||||||
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Total
current liabilities
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156,324 | 163,653 | ||||||
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Long-term
debt
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583,325 | 544,113 | ||||||
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Other
long-term liabilities
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173,079 | 189,608 | ||||||
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Total
equity
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(106,325 | ) | (99,394 | ) | ||||
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Total
liabilities & equity
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$ | 806,403 | $ | 797,980 | ||||