BRENTWOOD, Tenn., Aug. 9, 2018 /PRNewswire/ -- Orchids Paper
Products Company (NYSE American: TIS), a national supplier of
high-quality consumer tissue products, today reported results for
the quarter ended June 30, 2018. The
following table provides selected financial results for second
quarter 2018 compared to second quarter 2017 and first quarter
2018.
|
|
|
2Q
2018
|
|
2Q
2017
|
|
1Q
2018
|
|
|
|
(Dollars in
thousands, except per share data)
|
|
|
|
(unaudited)
|
Net sales:
|
|
|
|
|
|
|
|
Converted
product
|
|
$ 40,689
|
|
$
34,697
|
|
$ 43,660
|
|
Parent
rolls
|
|
5,169
|
|
3,746
|
|
4,588
|
|
Total net
sales
|
|
$ 45,858
|
|
$
38,443
|
|
$ 48,248
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
$
595
|
|
$
1,514
|
|
$
2,873
|
Net loss
|
|
$ (6,925)
|
|
$
(2,047)
|
|
$ (2,294)
|
Diluted net loss per
share
|
|
$
(0.65)
|
|
$
(0.20)
|
|
$
(0.21)
|
EBITDA
|
|
$
(307)
|
|
$
1,557
|
|
$
3,468
|
Adjusted
EBITDA
|
|
$
3,164
|
|
$
2,261
|
|
$
5,306
|
|
|
|
|
|
|
|
|
Other Selected
Financial Data:
|
|
|
|
|
|
|
|
Gross profit
margin
|
|
1.3%
|
|
3.9%
|
|
6.0%
|
|
EBITDA
margin
|
|
-0.7%
|
|
4.1%
|
|
7.2%
|
|
Adjusted EBITDA
margin
|
|
6.9%
|
|
5.9%
|
|
11.0%
|
Jeff Schoen, President and Chief
Executive Officer, stated, "Orchids' total revenues in the second
quarter were up 19% over the year-ago period driven by the ramp at
the Barnwell facility. Total
revenues were down 5% relative to the first quarter driven by lower
converted product sales, somewhat offset by strong parent roll
sales. Converted products revenues declined 7% sequentially as a
result of competitive bids and a shortage in freight supply that
pushed shipments into the second quarter. Parent rolls sales
in the second quarter were strong with growth of 13% over the first
quarter as we ramped parent roll production at the Barnwell facility."
"We are beginning to see positive signs that the tissue industry
is starting to improve. Just recently, one of the industry
leaders in the branded segment of the market indicated that they
would be raising prices by approximately 5% for their tissue
products. Consistent with these actions, Orchids has also
implemented price increases in its branded and away-from-home
segments, which take effect in the third quarter with further
increases expected to be fully implemented in the fourth
quarter."
"Earlier this month, we implemented modifications to our credit
agreement, which provided us additional liquidity through the
ability to borrow the full commitment under the revolving line of
credit and deferred future principal and interest payments until
October 31, 2018. In addition,
the modifications extend the milestone dates for the Company to
execute a transaction."
"On July 30, we received notice
from one of our major customers that they will transition a major
piece of business to another supplier, effective February 1, 2019. These actions were a result of
this customer's broad initiative to reduce its number of suppliers
and were not related to any other issues such as service, quality,
or cost. We appreciate the fact that this customer has given us the
time to pursue other business. We believe that we will be able to
replace a significant portion of this business over the next
several quarters."
Second Quarter Results
Revenue
The company reported net sales of $45.9
million in the second quarter of 2018, up 19.3% compared to
the year-ago period. Converted product sales were $40.7 million, a year over year increase of
17.3%, and parent roll sales were $5.2
million, up 38.0% over the second quarter of 2017. The
increase in converted product sales was a result of the company
ramping new customer volume at the Barnwell facility. Parent roll growth was
driven by an increase in the volume of excess parent rolls sold
from Barnwell.
Gross Profit
Gross profit in the second quarter of 2018 was $0.6 million, a decrease from $1.5 million in the second quarter of
2017. Gross profit margins decreased from 3.9% in the second
quarter of 2017 to 1.3% in the second quarter of 2018. The
compression in gross profit margin was due to the unfavorable
impact of a higher cost structure, which includes increased
overhead costs of the Barnwell, South
Carolina facility that are not fully absorbed by production
and sales. Additionally, costs associated with Barnwell's start-up activities increased
compared to the same period last year. Gross profit margins remain
under pressure from challenging, industry-wide conditions, as input
costs, including fiber and freight costs, continue to
rise. These negative impacts were partially offset by
increased sales volume combined with higher average selling prices,
which reflected a change in the mix of products sold due to the
ramp of the ultra-premium retail business.
Operating Loss
Orchids had a second quarter operating loss of $5.3 million in 2018 compared to an operating
loss of $2.0 million in the second
quarter of 2017. The increase in the operating loss was driven
primarily by SG&A increasing to $5.7
million in the second quarter of 2018, up $2.4 million from $3.3
million in the year-ago period. SG&A
increased due to professional and consulting fees associated with
our previously announced initiatives to review strategic
alternatives and our debt refinancing efforts.
Income Tax
The company reported a tax benefit of $2.8
million in the second quarter of 2018 and a tax benefit of
$0.4 million in the year ago
period.
Net Loss
Net loss in the second quarter of 2018 was $6.9 million and diluted loss per share was
$0.65. Net loss and diluted loss per
share in the second quarter of 2017 were $2.0 million and $0.20, respectively.
Liquidity
|
|
|
2Q
2018
|
|
2Q
2017
|
|
1Q
2018
|
Cash Flow Provided by
(Used in):
|
|
|
|
|
|
|
Operating cash flow
net of changes in working capital
|
|
$
(4,469)
|
|
$
1,188
|
|
$
(293)
|
Changes in working
capital
|
|
(1,381)
|
|
262
|
|
(2,246)
|
Operating
activities
|
|
$
(5,850)
|
|
$
1,450
|
|
$
(2,539)
|
Investing
activities
|
|
$
(1,049)
|
|
$ (17,412)
|
|
$
(1,145)
|
Financing
activities
|
|
$ 12,128
|
|
$
11,418
|
|
$
2,788
|
|
|
|
|
|
|
|
|
Cash, including
restricted cash, beginning
|
|
$
2,930
|
|
$
7,077
|
|
$
3,826
|
Cash, including
restricted cash, ending
|
|
$
8,159
|
|
$
2,533
|
|
$
2,930
|
Cash (used in) provided by operations was ($5.9) million in the second quarter of 2018,
$1.5 million in the second quarter of
2017, and ($2.5) million in the first
quarter of 2018. Changes in working capital (used) provided
operating cash flows of ($1.4)
million in the second quarter of 2018, $0.3 million in the second quarter of 2017, and
($2.2) million in the first quarter
of 2018. Working capital changes in the second quarter of 2018
reflect an increase in inventory that was partially offset by a
reduction in accounts receivable, related to the volume and timing
of sales.
Conference Call/Webcast
The Company will hold a
teleconference to discuss its second quarter results at
10:00 a.m. (ET) on Monday, August 13,
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 excluding
changes in working capital, (4) Changes in working capital, (5)
Adjusted net loss and (6) Adjusted net loss per diluted
share.
EBITDA, Adjusted EBITDA, Operating Cash Flow less changes in
working capital, Changes in working capital, and Adjusted net loss
and Adjusted net loss 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 loss
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 loss and Adjusted net loss 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, consulting and
professional fees, 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 (loss) income and
Adjusted net (loss) 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, 2017, as filed with the
Securities and Exchange Commission on March
16, 2018.
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.
Investor Relations Contact:
Water's Edge Investor
Relations Consulting Group
Louie Toma
774-291-6000
louie.toma@watersedgeir.com
Orchids Paper
Products Company and Subsidiaries
|
Selected Income
Statement Data
|
(Dollars in
thousands, except per share data) (unaudited)
|
|
|
|
|
|
|
|
2Q
2018
|
|
2Q
2017
|
|
1Q
2018
|
Converted product net
sales
|
$
40,689
|
|
$
34,697
|
|
$
43,660
|
Parent roll net
sales
|
5,169
|
|
3,746
|
|
4,588
|
Total net
sales
|
45,858
|
|
38,443
|
|
48,248
|
Cost of sales less
depreciation
|
40,642
|
|
33,712
|
|
41,302
|
Depreciation in cost
of sales
|
4,621
|
|
3,217
|
|
4,073
|
Total cost of
sales
|
45,263
|
|
36,929
|
|
45,375
|
Gross
profit
|
595
|
|
1,514
|
|
2,873
|
Selling, general
& administrative expenses
|
5,700
|
|
3,289
|
|
3,633
|
Intangibles
amortization
|
233
|
|
233
|
|
233
|
Operating
loss
|
(5,338)
|
|
(2,008)
|
|
(993)
|
Interest
expense
|
4,530
|
|
560
|
|
3,389
|
Other income,
net
|
(177)
|
|
(115)
|
|
(155)
|
Loss before income
taxes
|
(9,691)
|
|
(2,453)
|
|
(4,227)
|
Benefits from income
taxes
|
(2,766)
|
|
(406)
|
|
(1,933)
|
Net loss
|
$
(6,925)
|
|
$
(2,047)
|
|
$
(2,294)
|
|
|
|
|
|
|
Average number of
shares outstanding, basic
|
10,670,348
|
|
10,367,315
|
|
10,670,348
|
Average number of
shares outstanding, diluted
|
10,670,348
|
|
10,367,315
|
|
10,670,348
|
|
|
|
|
|
|
Net loss per
share:
|
|
|
|
|
|
Basic
|
$
(0.65)
|
|
$
(0.20)
|
|
$
(0.21)
|
Diluted
|
$
(0.65)
|
|
$
(0.20)
|
|
$
(0.21)
|
|
|
|
|
|
|
Cash dividends paid
per share
|
$
-
|
|
$
0.35
|
|
$
-
|
Orchids Paper
Products Company and Subsidiaries
|
Selected Balance
Sheet Data
|
(Dollars in
thousands)
|
|
|
|
|
|
|
|
Jun. 30,
2018
|
|
Dec. 31,
2017
|
|
|
(unaudited)
|
|
|
Cash
|
|
$
8,004
|
|
$
3,823
|
Accounts receivable,
net
|
|
12,712
|
|
11,825
|
Inventory,
net
|
|
23,055
|
|
20,563
|
Other current
assets
|
|
3,404
|
|
3,182
|
Property plant and
equipment
|
|
372,398
|
|
370,761
|
Accumulated
depreciation
|
|
(93,697)
|
|
(85,003)
|
Net property plant
and equipment
|
|
278,701
|
|
285,758
|
Intangibles and
goodwill, net
|
|
20,673
|
|
21,139
|
Other long-term
assets
|
|
155
|
|
245
|
Total
assets
|
|
$
346,704
|
|
$
346,535
|
|
|
|
|
|
Accounts payable,
inclusive of amounts due to related parties
|
|
$
14,135
|
|
$
15,458
|
Other current
liabilities
|
|
4,336
|
|
3,519
|
Current portion of
long-term debt
|
|
183,754
|
|
168,903
|
Deferred income
taxes
|
|
6,434
|
|
11,595
|
Long-term
liabilities
|
|
5,308
|
|
5,273
|
Total stockholders'
equity
|
|
132,737
|
|
141,787
|
Total liabilities and
stockholders' equity
|
|
$
346,704
|
|
$
346,535
|
|
|
|
|
|
Debt, current and
long term
|
|
$
183,786
|
|
$
168,936
|
Orchids Paper
Products Company and Subsidiaries
|
Reconciliations of
Non-GAAP and GAAP Measurements
|
(Dollars in
thousands) (unaudited)
|
|
|
|
|
|
2Q
2018
|
|
2Q
2017
|
|
1Q
2018
|
Net loss
|
$
(6,925)
|
|
$
(2,047)
|
|
$
(2,294)
|
Adjustments, after
tax (1):
|
|
|
|
|
|
Barnwell start-up
costs
|
523
|
|
276
|
|
434
|
Foreign exchange
(gain) loss
|
-
|
|
(11)
|
|
3
|
Relocation
costs
|
13
|
|
(34)
|
|
9
|
Stock compensation
expense
|
94
|
|
82
|
|
25
|
Failed debt
refinancing costs
|
(32)
|
|
4
|
|
193
|
Default
Fees
|
139
|
|
-
|
|
-
|
Consulting and other
professional fees
|
1,562
|
|
-
|
|
334
|
Severance from
reduction in force
|
-
|
|
29
|
|
-
|
Amortization of
intangible assets
|
154
|
|
114
|
|
126
|
Adjusted net loss
(2)
|
$
(4,472)
|
|
$
(1,587)
|
|
$
(1,170)
|
|
|
|
|
|
|
Net loss per diluted
share
|
$
(0.65)
|
|
$
(0.20)
|
|
$
(0.21)
|
Adjusted net loss per
diluted share (2)
|
$
(0.42)
|
|
$
(0.15)
|
|
$
(0.11)
|
Weighted average
diluted shares
|
10,670,348
|
|
10,367,315
|
|
10,670,348
|
|
(1)
|
Tax effect was
calculated using the estimated annual effective tax rate for the
period presented.
|
(2)
|
Adjusted net loss and
adjusted net loss 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)
|
(Dollars in
thousands) (unaudited)
|
|
|
|
|
|
2Q
2018
|
|
2Q
2017
|
|
1Q
2018
|
EBITDA
Reconciliation:
|
|
|
|
|
|
Net loss
|
$
(6,925)
|
|
$
(2,047)
|
|
$
(2,294)
|
Plus: Interest
expense
|
4,530
|
|
560
|
|
3,389
|
Plus: Income tax
benefit
|
(2,766)
|
|
(406)
|
|
(1,933)
|
Plus:
Depreciation
|
4,621
|
|
3,217
|
|
4,073
|
Plus: Intangible
amortization
|
233
|
|
233
|
|
233
|
Earnings Before
Interest, Income Taxes, Depreciation, and Amortization
(EBITDA)
|
$
(307)
|
|
$
1,557
|
|
$
3,468
|
|
|
|
|
|
|
Adjusted EBITDA
Reconciliation:
|
|
|
|
|
|
EBITDA
|
$
(307)
|
|
$
1,557
|
|
$
3,468
|
Plus: Barnwell start-up costs
|
789
|
|
563
|
|
800
|
Plus: Foreign exchange (gain) loss
|
-
|
|
(23)
|
|
5
|
Plus: Relocation costs
|
20
|
|
(70)
|
|
16
|
Plus: Stock compensation expense
|
142
|
|
167
|
|
46
|
Plus: Failed debt refinancing costs
|
(48)
|
|
8
|
|
355
|
Plus: Default fees
|
210
|
|
-
|
|
-
|
Plus: Consulting and other professional fees
|
2,358
|
|
-
|
|
616
|
Plus: Severance from reduction in force
|
-
|
|
59
|
|
-
|
Adjusted
EBITDA
|
$
3,164
|
|
$
2,261
|
|
$
5,306
|
|
|
|
|
|
|
Operating Cash
Flow Reconciliation:
|
|
|
|
|
|
Cash Flows From
Operating Activities
|
|
|
|
|
|
Net loss
|
$
(6,925)
|
|
$
(2,047)
|
|
$
(2,294)
|
Adjustments to
reconcile net loss to net cash (used in) provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
5,220
|
|
3,577
|
|
4,483
|
Provision for
doubtful accounts
|
-
|
|
(20)
|
|
(273)
|
Deferred income
taxes
|
(2,906)
|
|
(490)
|
|
(2,255)
|
Stock compensation
expense
|
142
|
|
168
|
|
46
|
Operating
cash flow excluding changes in working capital
|
(4,469)
|
|
1,188
|
|
(293)
|
Changes in cash due
to changes in operating assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
2,654
|
|
(2,647)
|
|
(2,841)
|
Inventories
|
(3,126)
|
|
(2,674)
|
|
634
|
Income taxes
receivable
|
-
|
|
3,477
|
|
41
|
Prepaid
expenses
|
(950)
|
|
340
|
|
374
|
Other
assets
|
(328)
|
|
(180)
|
|
456
|
Accounts
payable
|
(764)
|
|
1,134
|
|
(2)
|
Accrued
liabilities
|
1,133
|
|
812
|
|
(908)
|
Changes in working capital
|
(1,381)
|
|
262
|
|
(2,246)
|
Net cash (used in)
provided by operating activities
|
$
(5,850)
|
|
$
1,450
|
|
$
(2,539)
|
View original content with
multimedia:http://www.prnewswire.com/news-releases/orchids-paper-products-company-announces-second-quarter-2018-results-300695129.html
SOURCE Orchids Paper Products Company