BRENTWOOD, Tenn., March 5, 2018 /PRNewswire/ -- Orchids Paper
Products Company (NYSE American: TIS), a national supplier of
high-quality consumer tissue products, today reported results for
the quarter and year ended December 31,
2017. The following table provides selected financial
results for fourth quarter 2017 compared to fourth quarter 2016 and
third quarter 2017, and the full year 2017 compared to the full
year 2016.
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Twelve Months
Ended December 31,
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4Q
2017
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4Q
2016
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3Q
2017
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2017
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2016
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(Dollars in
thousands, except per share data) (unaudited)
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Net sales:
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Converted
product
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$ 40,504
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$
35,226
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$
42,007
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$ 150,106
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$ 158,102
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Parent
rolls
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3,011
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2,483
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3,165
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12,378
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6,392
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Total net
sales
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$ 43,515
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$
37,709
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$
45,172
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$ 162,484
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$ 164,494
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Gross
profit
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$
2,503
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$
5,680
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$
2,740
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$
8,726
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$
30,149
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Net income
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$
8,876
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$
2,621
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$
705
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$
6,674
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$
12,811
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Diluted net income
per share
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$
0.85
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$
0.25
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$
0.07
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$
0.64
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$
1.24
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EBITDA
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$
3,658
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$
5,983
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$
2,873
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$
10,829
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$
31,835
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Adjusted
EBITDA
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$
5,573
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$
6,260
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$
3,917
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$
15,072
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$
33,419
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Other Selected
Financial Data:
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Gross profit
margin
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5.8%
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15.1%
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6.1%
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5.4%
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18.3%
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EBITDA
margin
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8.4%
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15.9%
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6.4%
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6.7%
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19.4%
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Adjusted EBITDA
margin
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12.8%
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16.6%
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8.7%
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9.3%
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20.3%
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Jeff Schoen, President and Chief
Executive Officer, stated, "In the fourth quarter of 2017, Orchids
successfully completed its five-year capital expansion plan with
the full commercialization and start-up of the new Barnwell facility. The completion of
Barnwell expands our geographical
footprint with access to the east coast and increases our exposure
to the ultra-premium tissue market, which currently is experiencing
tight capacity in a growing product segment. As volume at
Barnwell ramps, we expect sales
growth to continue to accelerate and margins to expand, driven by
operating leverage. As a result of completing of our capital
expansion plan, we expect to see a significant decrease in capital
expenditures in 2018. The goal in 2018 is to "harvest" the capital
investments we have made over the past four years to maximize cash
flow, reduce debt, and improve earnings."
"The fourth quarter of 2017 was the first quarter since 2014
that we generated positive free cash-flow (cash flow from
operations less capital expenditures), driven by strong operating
cash flow, up approximately 60% over the prior quarter, and lower
capital expenditures, which declined over 40% from the third
quarter. We expect to see continued improvement in free cash-flow,
throughout 2018 as the ramp in orders from our new customers
improve earnings and as capital expenditures continue to decline.
For 2018, we expect capital expenditures to decrease to
approximately $5 million. In addition
to positive free cash-flow, our adjusted EBITDA in the fourth
quarter increased 42% sequentially to $5.6
million."
"Our lenders continue to support us as our Barnwell facility ramps, providing us covenant
waivers for the fourth quarter of 2017 as well as the first quarter
of 2018. They have also increased the advance rates under our line
of credit to provide financial flexibility for working capital
needs as we ramp our new orders"
Fourth Quarter 2017 Relative to Third Quarter 2017
Net sales of $43.5 million in the
fourth quarter decreased $1.7
million, or 3.7%, from the third quarter driven by
seasonality factors. Converted product sales declined $1.5 million; a decline of $1.9 million due to volume, offset by higher
average-selling prices having a positive impact of $0.4 million. Parent roll sales decreased
$0.2 million, as the effect of lower
sales volume outpaced an increase in the average selling price
compared to third quarter 2017. Average selling prices were, to a
degree, positively impacted in the fourth quarter by the inclusion
of Orchids' new ultra-premium products manufactured at Barnwell.
Cost of goods sold, net of depreciation, in the fourth quarter
declined by $2.5 million to 84.6% of
net sales, down from 87.0% in the third quarter, representing our
second consecutive decline as a percentage of sales. Total
cost of sales increased to 94.2% of revenue in the fourth quarter,
up from 93.9% in the third quarter. Total depreciation
increased to 9.6% of net sales in the fourth quarter from 6.9% of
net sales in the third quarter as a result of the addition of the
Barnwell facility.
Selling, general and administrative expenses declined
$0.3 million, or 8.2%, to
$2.8 million in the fourth quarter,
reflecting decreases in charitable contributions, legal and
professional fees and tax penalties, net of an increase in
administrative and sales personnel costs compared to the third
quarter of 2017.
Interest expense was $3.1 million
in the fourth quarter of 2017 compared to $0.8 million in the third quarter of 2017, as
capitalization of interest expense attributable to financing for
the construction of the Company's Barnwell facilities ended in the fourth
quarter with the completion of the project. Capitalized interest
was $0.1 million in the fourth
quarter of 2017 compared to $1.6
million in the third quarter of 2017. Additionally, the
increase in interest expense in the fourth quarter reflected higher
interest rates.
Orchids recognized a tax benefit of $12.7
million in the fourth quarter of 2017, which included the
estimated impact of the new tax laws upon future tax years.
Deferred tax assets and liabilities are measured based on
applicable enacted tax rates and provisions of enacted tax
laws. Accordingly, all deferred tax assets and liabilities as
of December 31, 2017 were restated at
a 21% federal tax rate. Since Orchids has a net deferred tax
liability, this resulted in a net tax benefit of approximately
$11 million. Additionally, net
pre-tax losses for the 2017 period contributed to the tax benefit.
Orchids recognized a benefit from tax credits of $2.0 million in the third quarter of 2017, which
reflected the Company's year-to-date pre-tax net loss position and
the Company's recognition of tax credits.
As a result of the foregoing factors, Orchids recognized net
income of $8.9 million, or
$0.85 per diluted share, in the
fourth quarter of 2017 compared to net income of $0.7 million, or $0.07 per diluted share, in the third quarter of
2017. As mentioned above, net income includes a net one-time
benefit of approximately $11 million
from the change in federal tax rates.
Also as a result of the foregoing factors, principally the lower
level of fixed cost in cost of sales, Adjusted EBITDA improved
$1.7 million to $5.6 million in the fourth quarter of 2017.
Fourth Quarter 2017 Relative to Fourth Quarter 2016
Net sales in the fourth quarter were $43.5 million, up $5.8
million, or 15.4% compared to the year-ago period. Converted
product sales were $40.5 million, up
$5.3 million, reflecting higher
volumes from the rollout of the previously announced new
private-label business. Average selling price per converted ton was
unchanged from the prior-year period. Parent roll sales,
including new ultra-premium parent rolls, increased $0.5 million to $3
million, primarily due to an increase in the average selling
price compared to fourth quarter 2016.
Cost of goods sold, less depreciation, in the fourth quarter was
$36.8 million, or 84.6% of net sales
compared to 76.8% in the fourth quarter of 2016. The increase in
cost of goods sold relative to sales was primarily driven by
increased costs associated with Barnwell's fixed labor, fixed overhead, and
start-up costs. Overall cost of sales, inclusive of depreciation,
in the fourth quarter represented 94.2% of net sales compared to
84.9% in the fourth quarter of 2016. Total depreciation increased
to 9.6% of net sales in the fourth quarter from 8.2% of net
sales in the fourth quarter of 2016 as a result of the
addition of the Barnwell
facility. Other material prices and costs increased by
approximately $2.0 million, inclusive
of the mix impact of adding ultra-premium products. Freight
increased by approximately $0.9
million primarily due to Orchids' bearing the cost of
freight for most of its new business.
Selling, general and administrative expenses of $2.8 million in the fourth quarter of 2017
increased $0.3 million, or 12.8%,
compared to the same period in the prior year, reflecting higher
administrative and sales personnel costs, changes in allowances for
potential bad debt, increased legal and professional fees, and
charitable contributions of excess inventory, net of the favorable
impact of a decrease in tax
penalties.
Interest expense increased $2.6
million to $3.1 million in the
fourth quarter of 2017 compared to the same period in the prior
year. Capitalization of interest expense attributable to financing
for the construction of the Company's Barnwell facilities ended with the completion
of the project. Capitalized interest was $0.1 million in the fourth quarter of 2017
compared to $0.5 million for the same
period in 2016. Additionally, the increase in interest expense
reflected higher debt balances and higher interest rates, as the
Company's interest rate is largely variable and dependent upon its
financial leverage. The Company's weighted average interest rate
was 7.3% at the end of the fourth quarter of 2017.
Orchids recognized a tax benefit of $12.7
million in the fourth quarter of 2017, which reflected both
the impact of the newly enacted tax laws and the decline in pre-tax
earnings. This compares to a tax benefit of $0.4 million in the fourth quarter of 2016, which
reflected the Company's recognition of tax credits.
As a result of the foregoing factors, Orchids recognized net
income of $8.9 million, or
$0.85 per diluted share, in the
fourth quarter of 2017 compared to net income of $2.6 million, or $0.25 per diluted share, in the fourth quarter of
2016. As previously discussed, net income includes a net one-time
benefit of approximately $11 million
from the change in federal tax rates. Excluding this tax benefit
and certain other non-core items identified in the attached
Reconciliations of Non-GAAP and GAAP Measurements, fourth quarter
2017 adjusted net loss was $1.1
million, or a net loss of $0.11 per diluted share, compared to fourth
quarter 2016 adjusted net earnings of $3.0
million, or $0.29 per diluted
share.
Principally as a result of the increases in cost of sales
already mentioned, many of which were related to the addition of
fixed infrastructure costs at the Barnwell facility prior to selling-out the
capacity; Adjusted EBITDA declined $0.7
million to $5.6 million in the
fourth quarter of 2017.
Twelve-Month Period Ended December 31,
2017 Relative to Same Period in 2016
Net sales for the year ended December 31,
2017, decreased $2.0 million,
or 1.2%, compared to the year ended December
31, 2016. Converted product sales decreased $8.0 million during 2017, with $5.6 million of the decrease attributable to a
decline in the average selling price and $2.4 million due to lower sales volume. Parent
roll sales increased $6.0 million in
2017, driven by a $6.3 million
increase in volume, partially offset by a $0.3 million decrease in average selling prices.
The increase in volume principally resulted from both the use of
production-capacity not needed for converted products and the
ramp-up of capacity at the new mill in Barnwell, South Carolina.
Cost of sales in 2017 were $153.8
million, an increase of $19.4
million during 2017, or 14.5% over the prior year. As
a percentage of net sales, 2017 cost of sales were 94.6% versus
81.7% in 2016. The addition of the Barnwell facility and its related expenses
prior to selling-out the Company's capacity was the principal
reason for the difference in the relative percentages. Barnwell's fixed labor and overhead costs,
excluding depreciation, increased approximately $8.8 million in the year ended December 31, 2017, and depreciation expense, also
related to the addition of the Barnwell plant, increased $2.0 million. Cost of sales included
approximately $3.5 million of
start-up costs for Barnwell. The
volume of parent rolls sold drove an increase in costs of sales of
over $5.2 million. Decreases in
material costs, resulting from decreased costs per unit, were
largely offset by the cost impact of higher-cost materials required
to make ultra-premium products. The decrease in tons of converted
product sold caused the cost of materials to decline by
approximately $1.3 million. Freight
increased by approximately $1.0
million due to shifts in the mix of shipments for which
Orchids is responsible for the distribution costs. Pryor's overhead
and labor costs, excluding depreciation, decreased approximately
$0.5 million year over year. The net
change in cost per ton attributable to Mexicali year over year was not material.
Selling, general and administrative expenses of $11.7 million in 2017 increased $1.5 million, or 14.3%, reflecting increased
legal and professional fees, charitable contributions of excess
inventory, higher administrative and sales personnel costs, changes
in allowances for potential bad debt, and increased rent expense,
net of the favorable impact of a decrease in tax penalties compared
to 2016.
Interest expense increased $3.3
million to $5.0 million,
reflecting higher debt balances incurred in conjunction with the
construction of the Barnwell, South
Carolina facility and higher interest rates. Capitalized
interest was $3.6 million in 2017
compared to $1.7 million in 2016.
Orchids recognized a tax benefit of $15.5
million in 2017 compared to tax expense of $4.4 million in 2016, reflecting both the impact
of the newly enacted tax laws and the decline in pre-tax
earnings.
Net income in 2017 was $6.7
million or $0.64 per diluted
share compared to net income of $12.8
million, or $1.24 per diluted
share in 2016. Adjusted net loss for 2017 was $1.8 million, or a net loss of $0.18 per diluted share, compared to 2016
adjusted net earnings of $14.9
million, or $1.44 per diluted
share.
Also as a result of the foregoing factors, principally the
increased fixed cost structure principally related to the addition
of Barnwell prior to selling-out
the Company's capacity, Adjusted EBITDA declined $18.3 million to $15.1
million in 2017.
Liquidity
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Twelve Months
Ended December 31,
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4Q
2017
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4Q
2016
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3Q
2017
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2017
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2016
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(Dollars in
thousands) (unaudited)
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Cash Flow Provided by
(Used in):
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Operating cash flow net of changes in working capital
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$
1,044
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$
6,803
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$
2,309
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$
6,939
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$
34,068
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Changes in working capital
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4,106
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765
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924
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6,507
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(6,241)
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Operating
activities
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$
5,150
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$
7,568
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$
3,233
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$
13,446
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$
27,827
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Investing
activities
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$ (5,078)
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$ (14,255)
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$ (7,417)
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$ (47,864)
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$ (77,679)
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Financing
activities
|
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$
1,672
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$
6,876
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$
4,936
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$
29,491
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$
54,241
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Cash balance,
beginning
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$
2,079
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$
8,561
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$
1,327
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$
8,750
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$
4,361
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Cash balance,
ending
|
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$
3,823
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$
8,750
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$
2,079
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$
3,823
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$
8,750
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At December 31, 2017, debt, before
unamortized deferred debt issuance costs, was $179.8 million. Orchid's debt was primarily
due to financing the construction of the Company's integrated
converting facility in Barnwell, South
Carolina at a cost of approximately $165 million. The Barnwell converting plant was completed in
2016 and the mill and recycled-fiber processing plant were
completed in the second half of 2017.
At December 31, 2017, the Company
was not in compliance with certain financial covenants under its
Second Amended and Restated Credit Agreement (the "Credit
Agreement") or its Loan Agreement for New Markets Tax Credit
financing (the "NMTC Loan Agreement"), and obtained a waiver from
its lenders. On February 28, 2018,
the Company entered into Amendment No. 7 to the Credit Agreement
and on March 1, 2018 the Company
entered into Amendment No. 4 to the NMTC Loan Agreement, each of
which, in addition to providing waivers for covenant defaults until
the measurement date of June 30,
2018, provide for a minimum EBITDA covenant, amend the
pricing schedule, and amend certain reporting requirements.
Including the amendments incorporated into these waivers, the
Company's credit facilities have been amended for each of the last
five quarters. The financial covenant requirements remaining in
effect at this time are as follows: fixed charge coverage ratios of
1.2 to 1.0 at December 31, 2017 and
quarter-ends thereafter, leverage ratios of 4.5 at December 31, 2017, 3.5 at March 31, 2018, 5.5 at June 30, 2018, and 3.5 at quarter-ends
thereafter; minimum EBITDA for the most recent three-month period
of $5.0 million at December 31, 2017, $4.6
million at January 31, 2018,
and February 28, 2018, and at
increasing levels as of the last day of each month thereafter.
The Company sought to refinance its existing long-term debt in
2017, but did not procure an alternative acceptable to all parties
involved. The Company intends to continue to seek to refinance its
existing long-term debt obligations as required by its existing
lender and as earnings and cash flow improve and more opportunities
become available. The Company may also need to seek another
amendment of its Credit Agreement with its existing lenders. If the
Company is unable to obtain another suitable amendment and/or a
refinancing is not completed, the bank syndicate could declare a
default. There can be no assurance that the Company's lenders will
agree to further waivers or amendments to the existing debt
covenants. While management intends to amend or refinance the debt,
there can be no assurance that the Company will be able to obtain
additional financing on terms that are satisfactory to it or at
all. As of December 31, 2017, the
borrowings under the Credit Agreement and the term loan otherwise
due in 2022 were classified as current on the balance sheet due to
these uncertainties regarding the Company's ability to meet the
existing debt covenants over the next twelve-month period. The
Company's cash requirements have historically been satisfied
through a combination of cash flows from operations, equity
financings and debt financings. This trend is expected to
continue.
Fourth quarter 2017 relative to fourth quarter 2016: Operating
cash flows, excluding changes in working capital, decreased
$5.8 million, reflecting a decrease
in pre-tax cash earnings. Changes in working capital provided
$4.1 million of operating cash flows
in the fourth quarter of 2017, principally due to decreases in
accounts receivable and income taxes receivable, partially offset
by pay-downs of accounts payable. This compares to $0.8 million of cash provided by changes in
working capital in the fourth quarter of 2016, principally from
decreases in accounts receivable, inventory and prepaid expenses,
largely offset by pay-downs of accounts payable and a decrease in
income taxes receivable. Increased borrowings in both periods were
used to finance investments in the Barnwell facility. The Company realized
$3.2 million in net proceeds from the
issuance of 241,257 shares of its common stock under an "at the
market" (ATM) stock offering program in the fourth quarter of 2017,
which is included in Financing activities. Such shares were issued
at a weighted average price of $13.63, and the Company incurred $0.2 million in sales agent commissions and other
stock issuance costs in connection with such issuance. The net
proceeds were used for general corporate purposes. The Company paid
dividends of $3.6 million in the
fourth quarter of 2016, which are included in Financing
activities.
Fourth quarter 2017 relative to third quarter 2017: Operating
cash flows, excluding changes in working capital, decreased
$1.3 million, between consecutive
quarters, reflecting a decrease in pre-tax cash earnings. Changes
in working capital provided $3.2
million of operating cash flows in the fourth quarter of
2017.
Twelve months ended December 31,
2017 relative to the same period in 2016: Operating cash
flows excluding changes in working capital decreased $27.1 million year over year, reflecting a
decrease in pre-tax cash earnings. Working capital changes provided
$6.5 million of operating cash flows
in 2017 as a decrease in income tax receivables and an increase in
accounts payable exceeded the effect of increases in accounts
receivable and inventory. In 2016 working capital changes used
$6.2 million of operating cash flows
as increases in inventory and income tax receivables and a decrease
in accrued liabilities more than offset decreases in accounts
receivable and other assets. Increased borrowings in both periods
were used to finance investments in the Barnwell facility, while $1.3 million and $10.7
million of restricted cash set aside for the Barnwell project was used and applied against
capital spending in 2017 and 2016, respectively.
The Company realized $5.2 million
in net proceeds from the issuance of 359,957 shares of its common
stock under an ATM stock offering program in 2017, which is
included in Financing activities. Such shares were issued at a
weighted average price of $14.71, and
the Company incurred $0.5 million in
sales agent commissions and other stock issuance costs in
connection with such issuance. The net proceeds were used for
general corporate purposes. As of December
31, 2017, $34.7 million of
common stock remained available for issuance under the ATM program.
The Company paid dividends of $3.6
million and $14.4 million in
2017 and 2016, respectively, which are included in Financing
activities.
Chief Financial Officer Transition
On March 2, 2018, Rodney D. Gloss, Chief Financial Officer of
Orchids, advised the Board of Directors of the Company of his
intention to resign, effective March
16, 2018. Mr. Gloss will remain with the Company
through March 16, 2018 to facilitate
an orderly transition of his duties. Mr. Gloss's decision to
leave the Company was not the result of any dispute or
disagreements with the Company on any matter relating to the
Company's operations, policies or practices.
Conference Call/Webcast
The Company will hold a teleconference to discuss its fourth
quarter results at 10:00 a.m. (ET) on
Tuesday, March 6, 2018. 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, (4) Changes in working capital, and (5) Adjusted net
income and Adjusted net income per diluted
share.
EBITDA, Adjusted EBITDA, Operating Cash Flow less changes in
working capital, Changes in working capital, and Adjusted net
income and Adjusted net income per diluted share 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 the Company's liquidity.
EBITDA represents net income before net interest expense, income
tax expense, depreciation and amortization. Adjusted
represents EBITDA before specified items. 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.
Adjusted net income and Adjusted net income per diluted share
exclude the impact of certain items that management does not
believe are indicative of the Company's core operating performance.
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), sporadic expenses (including start-up costs, foreign
exchange adjustments, failed refinancing costs, and relocation),
and non-cash compensation (affecting stock-based compensation
expense). These measures are also commonly used in the industry and
are used by the Company's 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. Management provides Adjusted
net income and Adjusted net income per diluted share because it
believes these measures assist investors and analysts in comparing
the Company's performance across reporting periods on a consistent
basis by excluding items that the company does not believe are
indicative of its core operating performance.
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. Such forward-looking statements include, without
limitation, the Company's beliefs, expectations, focus and/or plans
about future events, including those regarding any potential
refinancing, and the terms, conditions, timing and costs of any
such refinancing. 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, 2016, as filed with the
Securities and Exchange Commission on March
15, 2017 and the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2017,
as filed with the Securities and Exchange Commission on
November 9, 2017.
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended December 31,
|
|
4Q
2017
|
4Q
2016
|
3Q
2017
|
|
2017
|
|
2016
|
|
(unaudited)
|
|
(unaudited)
|
|
|
Converted product net
sales
|
$
40,504
|
$
35,226
|
$
42,007
|
|
$
150,106
|
|
$
158,102
|
Parent roll net
sales
|
3,011
|
2,483
|
3,165
|
|
12,378
|
|
6,392
|
Total net
sales
|
43,515
|
37,709
|
45,172
|
|
162,484
|
|
164,494
|
Cost of sales less
depreciation
|
36,826
|
28,952
|
39,315
|
|
140,014
|
|
122,629
|
Depreciation in cost
of sales
|
4,186
|
3,077
|
3,117
|
|
13,744
|
|
11,716
|
Total cost of
sales
|
41,012
|
32,029
|
42,432
|
|
153,758
|
|
134,345
|
Gross
profit
|
2,503
|
5,680
|
2,740
|
|
8,726
|
|
30,149
|
Selling, general
& administrative expenses
|
2,777
|
2,461
|
3,026
|
|
11,711
|
|
10,244
|
Intangible
amortization
|
232
|
233
|
233
|
|
931
|
|
1,219
|
Operating income
(loss)
|
(506)
|
2,986
|
(519)
|
|
(3,916)
|
|
18,686
|
Interest
expense
|
3,076
|
491
|
827
|
|
4,980
|
|
1,678
|
Other (income)
expense, net
|
254
|
313
|
(42)
|
|
(70)
|
|
(214)
|
Income (loss) before
income taxes
|
(3,836)
|
2,182
|
(1,304)
|
|
(8,826)
|
|
17,222
|
(Benefits from)
provision for income taxes
|
(12,712)
|
(439)
|
(2,009)
|
|
(15,500)
|
|
4,411
|
Net income
|
$
8,876
|
$
2,621
|
$
705
|
|
$
6,674
|
|
$
12,811
|
|
|
|
|
|
|
|
|
Average number of
shares outstanding, basic
|
10,496,113
|
10,296,891
|
10,429,091
|
|
10,399,074
|
|
10,286,373
|
Average number of
shares outstanding, diluted
|
10,502,148
|
10,343,587
|
10,429,091
|
|
10,414,871
|
|
10,349,274
|
|
|
|
|
|
|
|
|
Net income per
share:
|
|
|
|
|
|
|
|
Basic
|
$
0.85
|
$
0.25
|
$
0.07
|
|
$
0.64
|
|
$
1.25
|
Diluted
|
$
0.85
|
$
0.25
|
$
0.07
|
|
$
0.64
|
|
$
1.24
|
|
|
|
|
|
|
|
|
Cash dividends
paid
|
$
-
|
$
3,603
|
$
-
|
|
$
3,607
|
|
$
14,400
|
Cash dividends per
share
|
$
-
|
$
0.35
|
$
-
|
|
$
0.35
|
|
$
1.40
|
Orchids Paper
Products Company and Subsidiaries
|
Selected Balance
Sheet Data
|
(Dollars in
thousands)
|
|
|
|
|
|
|
|
Dec. 31,
2017
|
|
Dec. 31,
2016
|
|
|
(unaudited)
|
|
|
Cash
|
|
$
3,823
|
|
$
8,750
|
Accounts receivable,
net
|
|
11,825
|
|
8,954
|
Inventory,
net
|
|
20,563
|
|
18,414
|
Other current
assets
|
|
3,182
|
|
11,019
|
Property plant and
equipment
|
|
370,761
|
|
320,442
|
Accumulated
depreciation
|
|
(85,003)
|
|
(71,258)
|
Net property plant
and equipment
|
|
285,758
|
|
249,184
|
Intangibles and
goodwill, net
|
|
21,139
|
|
22,071
|
Other long-term
assets
|
|
245
|
|
1,488
|
Total
assets
|
|
$
346,535
|
|
$
319,880
|
|
|
|
|
|
Accounts payable,
inclusive of amounts due to related parties
|
|
$
15,458
|
|
$
10,869
|
Other current
liabilities
|
|
3,519
|
|
2,545
|
Current portion of
long-term debt
|
|
168,903
|
|
6,728
|
Deferred income
taxes
|
|
11,595
|
|
27,334
|
Long-term
liabilities
|
|
5,273
|
|
139,159
|
Total stockholders'
equity
|
|
141,787
|
|
133,245
|
Total liabilities and
stockholders' equity
|
|
$
346,535
|
|
$
319,880
|
|
|
|
|
|
Debt, current and
long term
|
|
$
168,936
|
|
$
140,717
|
Orchids Paper
Products Company and Subsidiaries
|
Reconciliations of
Non-GAAP and GAAP Measurements
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
2017
|
2016
|
|
2017
|
|
2016
|
|
(Dollars in
thousands) (unaudited)
|
Net income
|
$
8,876
|
$
2,621
|
|
$
6,674
|
|
$
12,811
|
Federal tax rate
change
|
(11,037)
|
-
|
|
(11,037)
|
|
-
|
Adjustments, after
tax (1):
|
|
|
|
|
|
|
Barnwell start-up
costs
|
696
|
-
|
|
1,699
|
|
50
|
Foreign exchange
(gain) loss
|
(4)
|
298
|
|
(26)
|
|
298
|
Relocation
costs
|
42
|
(65)
|
|
(20)
|
|
409
|
Stock compensation
expense
|
22
|
(28)
|
|
200
|
|
421
|
Failed debt
refinancing costs
|
184
|
-
|
|
197
|
|
-
|
Severance from
reduction in force
|
-
|
-
|
|
29
|
|
-
|
Amortization of
intangible assets
|
114
|
173
|
|
456
|
|
907
|
Adjusted net (loss)
income (2)
|
$
(1,107)
|
$
2,999
|
|
$
(1,828)
|
|
$
14,896
|
|
|
|
|
|
|
|
Net income per
diluted share
|
$
0.85
|
$
0.25
|
|
$
0.64
|
|
$
1.24
|
Adjusted net (loss)
income per diluted share (2)
|
$
(0.11)
|
$
0.29
|
|
$
(0.18)
|
|
$
1.44
|
Weighted average
diluted shares
|
10,496,113
|
10,343,587
|
|
10,399,074
|
|
10,349,274
|
|
|
|
|
|
|
|
(1) Tax effect was
calculated using the estimated annual effective tax rate for the
period presented.
|
(2) Adjusted net
income and adjusted net income per diluted share exclude the impact
of the listed items that we do not believe are indicative of
our core operating performance.
|
Orchids Paper
Products Company and Subsidiaries
|
Reconciliations of
Non-GAAP and GAAP Measurements (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended December 31,
|
|
4Q
2017
|
4Q
2016
|
3Q
2017
|
|
2017
|
|
2016
|
|
(Dollars in
thousands) (unaudited)
|
EBITDA
Reconciliation:
|
|
|
|
|
|
|
|
Net income
|
$
8,876
|
$
2,621
|
$
705
|
|
$
6,674
|
|
$ 12,811
|
Plus: Interest
expense
|
3,076
|
491
|
827
|
|
4,980
|
|
1,678
|
Plus: Income tax
(benefit) expense
|
(12,712)
|
(439)
|
(2,009)
|
|
(15,500)
|
|
4,411
|
Plus:
Depreciation
|
4,186
|
3,077
|
3,117
|
|
13,744
|
|
11,716
|
Plus: Intangible
amortization
|
232
|
233
|
233
|
|
931
|
|
1,219
|
Earnings Before
Interest, Income Tax and Depreciation and Amortization
(EBITDA)
|
$
3,658
|
$
5,983
|
$
2,873
|
|
$ 10,829
|
|
$ 31,835
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
Reconciliation:
|
|
|
|
|
|
|
|
EBITDA
|
$
3,658
|
$
5,983
|
$
2,873
|
|
$ 10,829
|
|
$ 31,835
|
Plus: Barnwell start-up costs
|
1,420
|
-
|
975
|
|
3,467
|
|
67
|
Plus: Foreign exchange (gain) loss
|
(9)
|
401
|
1
|
|
(53)
|
|
401
|
Plus: Relocation costs
|
85
|
(87)
|
(50)
|
|
(41)
|
|
550
|
Plus: Stock compensation expense
|
44
|
(37)
|
99
|
|
409
|
|
566
|
Plus: Failed debt refinancing costs
|
375
|
-
|
19
|
|
402
|
|
-
|
Plus: Severance from reduction in force
|
-
|
-
|
-
|
|
59
|
|
-
|
Adjusted
EBITDA
|
$
5,573
|
$
6,260
|
$
3,917
|
|
$ 15,072
|
|
$ 33,419
|
|
|
|
|
|
|
|
|
Separation of
Operating Cash Flow measures:
|
|
|
|
|
|
|
|
Cash Flows From
Operating Activities
|
|
|
|
|
|
|
|
Net
income
|
$
8,876
|
$
2,621
|
$
705
|
|
$
6,674
|
|
$ 12,811
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
4,569
|
3,364
|
3,523
|
|
15,219
|
|
13,229
|
Provision for
doubtful accounts
|
323
|
(125)
|
-
|
|
323
|
|
(125)
|
Deferred income
taxes
|
(12,769)
|
946
|
(2,070)
|
|
(15,739)
|
|
7,570
|
Stock compensation
expense
|
45
|
(38)
|
99
|
|
410
|
|
566
|
Loss on disposal of
property, plant and equipment
|
-
|
35
|
52
|
|
52
|
|
17
|
Subtotal,
"Operating cash flow less changes in working
capital"
|
$
1,044
|
$
6,803
|
$
2,309
|
|
$
6,939
|
|
$ 34,068
|
Changes in cash due
to changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
3,822
|
4,055
|
(2,508)
|
|
(3,745)
|
|
2,514
|
Inventories
|
321
|
2,035
|
52
|
|
(2,149)
|
|
(4,913)
|
Income taxes
receivable
|
2,886
|
(5,735)
|
-
|
|
8,236
|
|
(3,107)
|
Prepaid
expenses
|
265
|
2,964
|
(903)
|
|
(32)
|
|
211
|
Other
assets
|
(496)
|
747
|
883
|
|
153
|
|
2,237
|
Accounts
payable
|
(2,225)
|
(2,816)
|
3,373
|
|
3,911
|
|
(973)
|
Accrued
liabilities
|
(467)
|
(485)
|
27
|
|
133
|
|
(2,210)
|
Subtotal, "Changes
in working capital"
|
$
4,106
|
$
765
|
$
924
|
|
$
6,507
|
|
$ (6,241)
|
Net cash provided by
operating activities
|
$
5,150
|
$
7,568
|
$
3,233
|
|
$ 13,446
|
|
$ 27,827
|
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SOURCE Orchids Paper Products Company