PRYOR, Okla., Feb. 14, 2017 /PRNewswire/ -- Orchids Paper
Products Company (NYSE MKT: TIS) today reported results for the
fourth quarter and year ended December 31,
2016. The following tables provide selected financial
results for fourth quarter 2016 compared to fourth quarter 2015 and
the full year 2016 compared to the full year 2015.
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
2016
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
(Dollars in
thousands, except per share data) (unaudited)
|
Net sales:
|
|
|
|
|
|
|
|
Converted
product
|
$
35,226
|
$
40,175
|
|
$ 158,102
|
|
$ 161,052
|
|
Parent
rolls
|
2,483
|
1,729
|
|
6,392
|
|
7,394
|
|
Total net
sales
|
$
37,709
|
$
41,904
|
|
$ 164,494
|
|
$ 168,446
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
5,680
|
$
8,147
|
|
$
30,149
|
|
$
30,497
|
Net income
|
$
2,621
|
$
3,701
|
|
$
12,811
|
|
$
13,557
|
Diluted net income
per share
|
$
0.25
|
$
0.36
|
|
$
1.24
|
|
$
1.38
|
EBITDA
|
$
5,983
|
$
8,698
|
|
$
31,835
|
|
$
31,357
|
Adjusted
EBITDA
|
$
6,260
|
$
9,017
|
|
$
33,352
|
|
$
32,646
|
|
|
|
|
|
|
|
|
|
|
Other Selected
Financial Data:
|
|
|
|
|
|
|
|
Gross profit
margin
|
15.1%
|
19.4%
|
|
18.3%
|
|
18.1%
|
|
EBITDA
margin
|
15.9%
|
20.8%
|
|
19.4%
|
|
18.6%
|
|
Adjusted EBITDA
margin
|
16.6%
|
21.5%
|
|
20.3%
|
|
19.4%
|
Jeff Schoen, President and Chief
Executive Officer, stated, "Despite intense competitive
pressures, year-over-year adjusted EBITDA increased 2%, the
adjusted EBITDA margin increased from 19.4% to 20.3%, and Cost of
sales, exclusive of depreciation, decreased 4.4% while Sales
declined only 2.3%. In other words, improved cash margins and cost
cutting helped offset the impact of the decline in sales.
On the whole, the fourth quarter of 2016 was characterized by a
continuation of trends previously noted in the second and third
quarters, principally competitive pressures that did not abate. As
discussed in the third quarter earnings calls, Orchids has been
active in several retailers' private label bids as part of our plan
to increase breadth and depth in Orchids customer base. As
previously announced, Orchids recently won private label bids and
branded business that, all things being equal, are expected to
increase sales volumes of converted products by over 35% in the
second half of 2017. These developments lead us to remain
optimistic about our ability to achieve our goal to grow Orchids'
annual earnings per share (EPS) to within the approximate range of
$2.50 to $3.50. We estimate that,
based on current trends, our running rate EPS figure will enter
this range by early 2018 and be toward the higher end of this range
by the end of 2018.
I am also pleased that, as previously announced, our bankers
agreed to relax our covenant restrictions for a temporary period
and increase our debt availability to allow us to bridge the next
few quarters to our greater level of operations, inclusive of the
completion of the capacity expansion in Barnwell, South Carolina. Regarding this
project, the two converting lines are ramping-up to meet the new
demand, and the paper mill is still scheduled for completion around
the end of the first quarter of 2017, with the major ramp-up of the
paper mill occurring in second quarter of 2017. The total projected
expenditure for the facility remains at $150
million of which approximately $119.2
million had been expended as of December 31, 2016."
Fourth Quarter 2016, relative to Fourth Quarter 2015
Net sales decreased $4.2 million,
or 10%, primarily due to heavy promotional activity by
brand-competitors and other competitive pressures. Parent roll
sales increased by $0.7 million while
converted product sales decreased by $4.9
million. Of the $4.9 million
decrease, $3.7 million was
attributable to the decreased number of tons sold, and $1.2 million was due to a decline in the average
price per ton that principally reflects the mix of customers buying
the products.
Cost of sales, exclusive of depreciation, decreased $2.1 million, or 7%. The decrease in sales
volumes, contributed to the relative decrease in Cost of sales, as
did spreading fixed overhead over a lower volume and approximately
$0.6 million in additional costs for
our Mexicali operations, which
reflected increased costs for fiber, electricity, and overhead that
were only partially offset by favorable foreign exchange impacts
upon peso-denominated costs.
Interest expense increased $0.3
million, or 112%, due principally to increased debt levels
and financial leverage.
Other expenses increased $0.5
million principally due to the recognition of a $0.4 million foreign exchange loss on the
valuation of VAT and income tax receivables. As the balances of
these receivables have been diminished, this economic loss is not
expected to be reoccurring to this extent.
As discussed further below, the Company's recognition of tax
credits lessened tax expense by $2.1
million, contributing this greater amount to net income. As
a consequence, principally of these factors, net income declined
from $3.7 million to $2.6 million, or
29%.
Twelve-month period ended December 31,
2016 compared to same period in 2015
Net sales decreased $4.0 million
or 2%. Parent roll sales decreased by $1.0
million, and converted product sales decreased by
$3.0 million. Of the $3.0 million decrease, all $3.0 million was attributable to the decreased
number of tons sold, as the average selling price did not change
year-over-year.
Cost of sales, exclusive of depreciation, decreased $5.6 million, or 4%. Overall, lower fiber
costs in the United States are
estimated to have saved the Company $2.5
million during 2016. We estimate that the devaluation of the
peso reduced year-over-year costs by roughly $1.4 million. The Company received $1.1 million of business interruption insurance
proceeds in the second quarter of 2016, which was applied to Cost
of sales. Cost reductions in our Oklahoma converting operation, product-mix
impacts, and lower sales volumes also contributed to the lower Cost
of sales. Offsetting these favorable cost changes to a degree,
Barnwell's (fixed) overhead
expense (before being allocated to the inventory produced) in 2016
was $4.8 million, relative to
$0.3 million in 2015, following from
the start-up and ramp-up of those operations.
Depreciation expense increased $2.0
million, or 21%, due to the improvement and expansion
projects placed into service.
Selling, general and administrative expenses increased
$0.7 million, or 7%. Administrative
compensation expenses decreased $0.4
million while sales compensation increased $0.3 million. Recruiting and relocation expenses
increased $0.3 million. A variety of
increases in professional and consulting expenses largely led to
the balance of the change.
Interest expense increased $1.2
million, or 222%, due principally to increased debt levels
and financial leverage.
Other income decreased $0.5
million principally, as noted above, due to a $0.4 million foreign exchange loss on the
valuation of VAT and income tax receivables that was recognized. As
the balances of these receivables have been diminished, this
economic loss is not expected to be reoccurring to this extent.
Tax expense decreased by $1.6
million or 27%. As of December 31,
2016, our effective tax rate was 25.6% as compared to 30.9%
for 2015. The effective rate was less than statutory rates
due principally to Oklahoma,
South Carolina, Indian Employment,
and Foreign tax credits. Current income taxes in fiscal year 2016
provided a benefit of $3.2 million
whereas current income taxes for the 2015 period were $1.8 million. The change was driven by
accelerated tax depreciation and other timing differences
recognized in 2016. The Company ended 2016 with a tax receivable
balance of $8.7 million. The Company
expects its effective tax rate for 2017 to return to the range of
30% to 34%.
Liquidity
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
|
|
|
2016
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
(Dollars in
thousands) (unaudited)
|
Cash Flow Provided by
(Used in):
|
|
|
|
|
|
Operating
cash flow net of changes in working capital
|
$
5,928
|
$
12,195
|
|
$
33,193
|
|
$
30,260
|
Changes
in working capital
|
1,640
|
(6,587)
|
|
(5,366)
|
|
(11,469)
|
Operating
activities
|
$
7,568
|
$
5,608
|
|
$
27,827
|
|
$
18,791
|
Investing
activities
|
$ (14,255)
|
$ (39,704)
|
|
$
(77,679)
|
|
$
(75,189)
|
Financing
activities
|
$
6,876
|
$
29,907
|
|
$
54,241
|
|
$
59,738
|
|
|
|
|
|
|
|
|
|
|
Cash balance,
beginning
|
$
8,561
|
$
8,550
|
|
$
4,361
|
|
$
1,021
|
Cash balance,
ending
|
$
8,750
|
$
4,361
|
|
$
8,750
|
|
$
4,361
|
At December 31, 2016, Debt, not
having been netted with unamortized deferred debt issuance costs,
was $142.0 million and the Adjusted
EBITDA leverage ratio reportable to our bankers was 4.3.
Fourth quarter 2016 relative to fourth quarter 2015: Operating
cash flows excluding changes in working capital decreased
$6.3 million compared to the fourth
quarter of 2015, primarily reflecting a decrease in tax payments
and to a lesser extent, the decrease in net income. Changes in
working capital contributed $1.6
million to operating cash flows in the fourth quarter of
2016 versus having used $6.6 million
in the fourth quarter of 2015. This largely reflects the collection
of accounts receivable, decreased inventory levels, and the
draw-down of prepaid expenses, partially offset by pay-downs of
accounts payable. Increased borrowings in both periods were used to
finance investments in the Barnwell facility and to upgrade line 6 at the
Pryor facility. In the fourth
quarter of 2015, the Company received $12.0
million of restricted cash from financings, which was set
aside for the Barnwell project and
was, accordingly, included in Investing activities. The Company
paid dividends of $3.6 million in
both quarters, which are included in Financing activities.
Twelve months ended December 31,
2016 relative to the same period in 2015: Operating cash
flows excluding changes in working capital increased $2.9 million year over year, reflecting increases
in cash-earnings and the deferral of tax payments. Additionally, a
net decrease in the change in working capital accounts of
$6.1 million as compared to 2015 was
principally due to the timing of receivable collections. Increased
borrowings in both periods were used to finance investments in the
Barnwell facility. In 2015,
$12.0 million of restricted cash was
set aside for the Barnwell project
within Investing activities, whereas $10.7
million of this restricted cash was used and applied against
capital spending in 2016. The Company paid dividends of
$14.4 million and $13.8 million in 2016 and 2015, respectively,
which are included in Financing activities.
Dividend Declared
On February 14, 2017, the Orchids
Board of Directors declared a quarterly dividend of $0.35 per share to be paid on April 3, 2017 to stockholders of record at the
close of business on February 27,
2017.
Conference Call/Webcast
The Company will hold a teleconference to discuss its fourth
quarter results at 10:00 a.m. (ET) on
Wednesday, February 15, 2017.
All interested parties may participate in the teleconference by
calling 888-346-7791 and requesting the Orchids Paper Products
teleconference. A question and answer session will be part of the
teleconference's agenda. Those intending to access the
teleconference should dial in fifteen minutes prior to the start.
The call may also be accessed live via webcast through the
Company's website at www.orchidspaper.com under "Investors." A
replay of the teleconference will be available for 30 days on the
Company's website.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures. A
non-GAAP financial measure is a numerical measure of a company's
financial performance that excludes or includes amounts so as to be
different than the most directly comparable measure calculated and
presented in accordance with Generally Accepted Accounting
Principles ("GAAP") in the United
States in the statement of income, balance sheet or
statement of cash flows of a company. The non-GAAP financial
measures used within this press release are: (1) EBITDA, (2)
Adjusted EBITDA, (3) Operating Cash Flow, less changes in working
capital, and (4) Changes in working
capital.
EBITDA, Adjusted EBITDA, Operating Cash Flow less changes in
working capital, and Changes in working capital are not
measurements of financial performance under GAAP and should not be
considered as an alternative to net income, operating income,
diluted net income per share or any other performance measure
derived in accordance with GAAP, or as an alternative to cash flow
from operating activities or a measure of our liquidity. EBITDA
represents net income before net interest expense, income tax
expense, depreciation and amortization. Adjusted EBITDA is
EBITDA less stock-based compensation expense. Changes in working
capital is the subtotal of changes in operating assets and
liabilities shown on the Consolidated Statements of Cash Flows.
Operating Cash Flow less changes in working capital is Net Cash
provided by operating activities less Changes in working capital.
Management believes EBITDA and Adjusted EBITDA facilitate operating
performance comparisons between periods and between companies by
eliminating potential differences caused by variations in capital
structures (affecting relative interest expense), tax positions
(such as the impact on periods or companies of changes in effective
tax rates or net operating losses), the age and book depreciation
of facilities and equipment (affecting relative depreciation
expense), and non-cash compensation (affecting stock-based
compensation expense). These measures are also commonly used in the
industry and are used by our lenders in monitoring adherence to
covenants. Management believes that Changes in working capital
provides an indication of the cash invested in or provided by
changes in operating assets and liabilities and therefore may
indicate trends in operating performance and may call out a
significant source or use of cash during any period. Operating Cash
Flow less changes in working capital is believed to provide an
estimate of the cash generated from all operating activities, prior
to investments in or liquidations of operating assets and
liabilities and therefore may indicate trends in operating
performance and may call out significant changes in the generation
of cash through operating activities.
Forward-Looking Statements
This release contains forward-looking statements that involve
certain contingencies and uncertainties. The Company intends
these forward-looking statements to be covered by the safe harbor
provision for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. These statements
relate to future events or future financial performance, and
involve known and unknown risks, uncertainties and other factors
that may cause its actual results, levels of activity, performance
or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases,
forward-looking statements can be identified by terminology such as
"may," "should," "could," "expects," "plans," "intends,"
"anticipates," "believes," "estimates," "predicts," "potential,"
"will" or "continue" or the negative of such terms or other
comparable terminology. Although the Company believes that
the expectations reflected in the forward-looking statements are
reasonable, it cannot guarantee future results, levels of activity,
performance or achievements. These statements are only
predictions.
Factors that could materially affect the Company's actual
results, levels of activity, performance or achievements include,
without limitation, those detailed under the caption "Risk Factors"
in the Company's Annual Report on Form 10-K for the year ended
December 31, 2015, as filed with the
Securities and Exchange Commission on March
7, 2016 and the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2016,
as filed with the Securities and Exchange Commission on
November 3, 2016.
The Company's actual results may be materially different from
what it expects. The Company does not undertake any duty to
update these forward-looking statements after the date hereof, even
though the Company's situation may change in the future. All
of the forward-looking statements herein are qualified by these
cautionary statements.
About Orchids Paper Products Company
Orchids Paper Products Company is a customer-focused, national
supplier of high quality consumer tissue products primarily serving
the at home private label consumer market. The Company
produces a full line of tissue products, including paper towels,
bathroom tissue and paper napkins, to serve the value through
ultra-premium quality market segments from its operations in
northeast Oklahoma, Barnwell, South Carolina and Mexicali, Mexico. The Company provides these
products primarily to retail chains throughout the United
States. For more information on the Company and its products,
visit the Company's website at http://www.orchidspaper.com.
Orchids Paper
Products Company and Subsidiaries
|
Selected Income
Statement Data
|
(Dollars in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
2016
|
2015
|
|
2016
|
|
2015
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Converted product net
sales
|
$
35,226
|
$
40,175
|
|
$
158,102
|
|
$
161,052
|
Parent roll net
sales
|
2,483
|
1,729
|
|
6,392
|
|
7,394
|
Total net
sales
|
37,709
|
41,904
|
|
164,494
|
|
168,446
|
Cost of sales less
depreciation
|
28,952
|
31,016
|
|
122,629
|
|
128,232
|
Depreciation in cost
of sales
|
3,077
|
2,741
|
|
11,716
|
|
9,717
|
Total cost of
sales
|
32,029
|
33,757
|
|
134,345
|
|
137,949
|
Gross
profit
|
5,680
|
8,147
|
|
30,149
|
|
30,497
|
Selling, general
& administrative expenses
|
2,461
|
2,366
|
|
10,244
|
|
9,540
|
Intangible
amortization
|
233
|
377
|
|
1,219
|
|
1,507
|
Operating
income
|
2,986
|
5,404
|
|
18,686
|
|
19,450
|
Interest
expense
|
491
|
232
|
|
1,678
|
|
521
|
Other (income)
expense, net
|
313
|
(176)
|
|
(214)
|
|
(683)
|
Income before income
taxes
|
2,182
|
5,348
|
|
17,222
|
|
19,612
|
(Benefits from)
provision for income taxes
|
(439)
|
1,647
|
|
4,411
|
|
6,055
|
Net income
|
$
2,621
|
$
3,701
|
|
$
12,811
|
|
$
13,557
|
|
|
|
|
|
|
|
Average number of
shares outstanding, basic
|
10,296,891
|
10,266,891
|
|
10,286,373
|
|
9,778,167
|
Average number of
shares outstanding, diluted
|
10,343,587
|
10,349,113
|
|
10,349,274
|
|
9,844,221
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
Basic
|
$
0.25
|
$
0.36
|
|
$
1.25
|
|
$
1.39
|
Diluted
|
$
0.25
|
$
0.36
|
|
$
1.24
|
|
$
1.38
|
|
|
|
|
|
|
|
Cash dividends
paid
|
$
3,603
|
$
3,594
|
|
$
14,400
|
|
$
13,848
|
Cash dividends per
share
|
$
0.35
|
$
0.35
|
|
$
1.40
|
|
$
1.40
|
Orchids Paper
Products Company and Subsidiaries
|
Selected Balance
Sheet Data
|
(Dollars in
thousands)
|
|
|
|
|
|
Dec. 31,
2016
|
|
Dec. 31,
2015
|
|
(unaudited)
|
|
|
Cash
|
$
8,750
|
|
$
4,361
|
Accounts receivable,
net
|
8,954
|
|
10,509
|
Inventory,
net
|
18,414
|
|
13,501
|
Other current
assets
|
11,019
|
|
9,942
|
Property plant and
equipment
|
320,442
|
|
232,925
|
Accumulated
depreciation
|
(71,258)
|
|
(59,547)
|
Net property plant
and equipment
|
249,184
|
|
173,378
|
Intangibles and
goodwill, net
|
22,071
|
|
23,290
|
Other long-term
assets
|
1,488
|
|
13,756
|
Total
assets
|
$
319,880
|
|
$
248,737
|
|
|
|
|
Accounts payable,
inclusive of amounts due to related parties
|
$
10,869
|
|
$
11,098
|
Other current
liabilities
|
9,273
|
|
7,762
|
Deferred income
taxes
|
27,334
|
|
20,639
|
Long-term
liabilities
|
139,159
|
|
75,455
|
Total stockholders'
equity
|
133,245
|
|
133,783
|
Total liabilities and
stockholders' equity
|
$
319,880
|
|
$
248,737
|
|
|
|
|
Debt, current and
long term
|
$
140,717
|
|
$
74,239
|
Orchids Paper
Products Company and Subsidiaries
|
Reconciliations of
Non-GAAP and GAAP Measurements
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
2016
|
2015
|
|
2016
|
|
2015
|
|
(Dollars in
thousands) (unaudited)
|
EBITDA
Reconciliation:
|
|
|
|
|
|
|
Net income
|
$
2,621
|
$
3,701
|
|
$ 12,811
|
|
$
13,557
|
Plus: Interest
expense
|
491
|
232
|
|
1,678
|
|
521
|
Plus: Income tax
(benefit) expense
|
(439)
|
1,647
|
|
4,411
|
|
6,055
|
Plus:
Depreciation
|
3,077
|
2,741
|
|
11,716
|
|
9,717
|
Plus: Intangible
amortization
|
233
|
377
|
|
1,219
|
|
1,507
|
Earnings Before
Interest, Income Tax and Depreciation and Amortization
(EBITDA)
|
$
5,983
|
$
8,698
|
|
$ 31,835
|
|
$
31,357
|
|
|
|
|
|
|
|
Adjusted EBITDA
Reconciliation:
|
|
|
|
|
|
|
EBITDA
|
$
5,983
|
$
8,698
|
|
$ 31,835
|
|
$
31,357
|
Plus: Foreign exchange loss
|
401
|
-
|
|
401
|
|
-
|
Plus: Relocation costs
|
(87)
|
48
|
|
549
|
|
241
|
Plus: Stock compensation expense
|
(37)
|
271
|
|
567
|
|
1,048
|
Adjusted
EBITDA
|
$
6,260
|
$
9,017
|
|
$ 33,352
|
|
$
32,646
|
|
|
|
|
|
|
|
Separation of
Operating Cash Flow measures:
|
|
|
|
|
|
Cash Flows From
Operating Activities
|
|
|
|
|
|
Net
income
|
$
2,621
|
$
3,701
|
|
$ 12,811
|
|
$
13,557
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
3,364
|
3,165
|
|
13,229
|
|
11,420
|
Provision for
doubtful accounts
|
(125)
|
-
|
|
(125)
|
|
-
|
Deferred income
taxes
|
71
|
5,058
|
|
6,695
|
|
4,235
|
Stock compensation
expense
|
(38)
|
271
|
|
566
|
|
1,048
|
Loss on disposal of
property, plant and equipment
|
35
|
-
|
|
17
|
|
-
|
Subtotal,
"Operating cash flow less changes in working
capital"
|
$
5,928
|
$ 12,195
|
|
$ 33,193
|
|
$
30,260
|
Changes in cash due
to changes in operating assets and liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
4,055
|
1,960
|
|
2,514
|
|
(1,640)
|
Inventories
|
2,035
|
(1,455)
|
|
(4,913)
|
|
(3,852)
|
Income taxes
receivable
|
(5,735)
|
(5,628)
|
|
(3,107)
|
|
(4,994)
|
Prepaid
expenses
|
2,964
|
490
|
|
211
|
|
149
|
Other
assets
|
747
|
(1,713)
|
|
2,237
|
|
(972)
|
Accounts
payable
|
(2,816)
|
1,547
|
|
(973)
|
|
(293)
|
Accrued
liabilities
|
390
|
(1,788)
|
|
(1,335)
|
|
133
|
Subtotal, "Changes
in working capital"
|
$
1,640
|
$ (6,587)
|
|
$ (5,366)
|
|
$ (11,469)
|
Net cash provided by
operating activities
|
$
7,568
|
$
5,608
|
|
$ 27,827
|
|
$
18,791
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/orchids-paper-products-company-announces-2016-fourth-quarter-and-year-to-date-results-declares-dividend-of-035-per-share-300407659.html
SOURCE Orchids Paper Products Company