CHICAGO, Feb. 9 /PRNewswire-FirstCall/ -- Packaging Dynamics
Corporation (NASDAQ:PKDY) (the "Company" or "Packaging Dynamics")
reported results of operations for the fourth quarter and year
ended December 31, 2005. Consolidated Results: The Company reported
net income for the fourth quarter of $2.6 million, or $0.24 per
diluted share, a decline of 1.1% from net income of $2.7 million,
or $0.24 per diluted share, in the fourth quarter of 2004. For the
year ended December 31, 2005, the Company reported net income of
$8.3 million, or $0.76 per diluted share, a decline of 5.2% from
net income of $8.8 million, or $0.85 per diluted share, in the
prior year. Continuing Operations: Net sales were $92.1 million, a
0.3% decrease from net sales of $92.4 million in the fourth quarter
of 2004. Reported income from continuing operations of $2.5
million, or $0.23 per diluted share, includes $0.3 million ($0.2
million after tax) of costs related to the closing of the Company's
Farmers Branch, Texas facility. Excluding these costs, income from
continuing operations was $2.7 million, or $0.25 per diluted share,
a 12.3% decrease from $3.1 million, or $0.28 per diluted share, in
the fourth quarter of 2004. Operating income was $6.1 million ($6.5
million excluding the facility closing costs), compared to $7.2
million ($7.1 million excluding a $0.1 million gain on sale of
property) in the fourth quarter of 2004. Excluding the facility
closing costs and gain on sale of property, operating margin
declined to 7.0% from 7.7% in the fourth quarter of 2004 reflecting
lower margins in the Food Packaging segment and higher margins in
the Specialty Laminations segment. For the year ended December 31,
2005, net sales were $361.0 million, an 18.4% increase over net
sales of $305.0 million in the prior year. Reported income from
continuing operations for the year ended December 31, 2005 of $8.7
million, or $0.80 per diluted share, includes a $1.1 million charge
related to a product quality claim in the Specialty Laminations
segment, $1.2 million of management transition costs related to
organizational integration and restructuring, and $0.3 million of
facility closing costs (collectively $1.6 million after tax).
Reported income from continuing operations for the year ended
December 31, 2004 of $10.1 million, or $0.98 per diluted share,
includes a $0.2 million fair value adjustment to inventory in
connection with purchase accounting for the Papercon acquisition,
$0.1 million gain on sale of property and $0.2 million of term debt
amendment costs to provide for the Papercon acquisition
(collectively $0.2 million after tax). Excluding these items,
income from continuing operations for the year ended December 31,
2005 was $10.4 million, or $0.95 per diluted share compared to
$10.3 million, or $1.00 per diluted share, in the prior year. Food
Packaging Segment Net sales of $70.0 million during the fourth
quarter of 2005 declined 3.6% from $72.7 million in the prior year
primarily due to reduced sales volumes in one product category with
a single customer. Segment operating income was $4.8 million ($5.1
million excluding facility closing costs), compared to $6.2 million
in the prior year. The decrease in segment operating income
reflects the impact of decreased sales as well as increased costs
for certain raw materials and freight. Excluding the impact of
facility closing costs, segment operating margin was 7.3%, compared
to 8.5% in the prior year. For the full year, net sales increased
31.3% to $279.6 million primarily due to the full year effect of
the September 2004 acquisition of Papercon. Segment operating
income increased 26.4% to $18.4 million. Excluding facility closing
costs and management transition costs in the current year and
inventory fair value adjustment in the prior year, segment
operating income increased 33.5% to $19.8 million, reflecting the
impact of the Papercon acquisition, and segment operating margin
increased to 7.1% from 6.9% in the prior year. Specialty
Laminations Segment Net sales of $23.3 million during the fourth
quarter of 2005 increased 11.1% from $21.0 million in the prior
year due to increased sales across most product categories,
including building products. Segment operating income was $1.3
million compared to $0.9 million in the prior year. The increase in
segment operating income reflects the impact of increased sales and
cost control initiatives partially offset by increased costs for
certain raw materials and freight. Segment operating margin
increased to 5.7% from 4.3% in the prior year. For the full year,
net sales decreased 9.6% to $86.3 million primarily due to volume
weakness for products sold into the building products market during
the first three quarters of the 2005 and a $1.1 million charge for
a product quality claim in the second quarter of 2005. Segment
operating income was $4.1 million ($5.4 million excluding the
product quality claim and management transition costs) compared to
$7.9 million in the prior year, reflecting the impact of the sales
decline. Excluding the product quality claim and management
transition costs, segment operating margin declined to 6.1% from
8.3% in the prior year. Discontinued Operations: Discontinued
operations includes the Company's Specialty Paper operation which
was exited during the fourth quarter of 2003. Net income from
discontinued operations in the fourth quarter was $0.1 million, or
$0.01 per diluted share, compared to a net loss of $0.5 million, or
$0.05 per diluted share, in the prior year. On December 29, 2005,
the Company completed the sale of its property located in Detroit,
Michigan, realizing gross proceeds of approximately $1.3 million.
During the fourth quarter of 2005, proceeds from the sale of the
Detroit property were mostly offset by costs associated with
maintaining and selling the property and completing the Company's
exit from the Specialty Paper operation. For the full year, net
loss from discontinued operations was $0.4 million, or $0.04 per
diluted share, compared to a net loss of $1.3 million, or $0.13 per
diluted share in the prior year. Balance Sheet: Total debt at
December 31, 2005 was $111.0 million, a $5.5 million decrease from
$116.5 million at December 31, 2004. Working capital, excluding
cash and current maturities of long-term debt, increased by $3.7
million compared to December 31, 2004. The increase was primarily
due to increased inventory levels in the Specialty Laminations
segment. Summary and Outlook: "Although 2005 financial results were
below our original expectations, each of our business segments made
meaningful progress during 2005. In Food Packaging, sales were
strong while adjusted operating income and margins showed
sequential improvement as the year progressed despite significant
upward cost pressures. The closure of the Farmers Branch, Texas
facility, initiated late in the fourth quarter, was executed well
and is essentially complete. The business and organizational
integration which occurred during 2005 following the Papercon
acquisition have positioned the Food Packaging business well for
future sales and profit growth. "Specialty Laminations' 2005
results were negatively impacted by revenue weakness as well as
rising energy, transportation and raw material costs. However,
fourth quarter sales and adjusted operating income showed both
sequential and year-over-year improvement. The Specialty
Laminations business continues to be focused on building positive
sales momentum, offsetting rising costs with price increases,
expanding product capabilities to support sales to new customers in
new markets, and other margin-enhancing initiatives," commented
Frank V. Tannura, Chairman and Chief Executive Officer. Mr. Tannura
added, "Despite the challenges we have faced in 2005, particularly
in the Specialty Laminations segment, we are focused on executing
against growth and cost structure initiatives which will allow
Packaging Dynamics to resume a pattern of meaningful earnings
improvement in 2006." Earnings Call: The Company will hold a
conference call on Friday, February 10, 2006 at 10:00 a.m. (ET) to
discuss the news release. For access to the conference call, please
dial 800-611-1147 (U.S.) by 9:45 a.m. (ET) on February 10th. The
access code is "Packaging Dynamics Earnings Call." A replay of the
call will be available from approximately 5:00 p.m. (ET) on
February 10th through 12:59 a.m. (ET) on February 20th. To access
the replay, please dial 800-475-6701 (U.S.) or 320-365-3844
(International), access code 814976. Packaging Dynamics,
headquartered in Chicago, Illinois, is a flexible packaging company
that laminates and converts paper, film and foil into various
value-added flexible packaging products for the food service, food
processing, bakery, supermarket, deli and concession markets as
well as a limited number of industrial markets. For more
information, visit our website at http://www.pkdy.com/ . The
statements contained in this press release are forward-looking and
are identified by the use of forward looking words and phrases,
such as "estimates," "plans," "expects," "to continue," "subject
to," "target" and such other similar phrases. These forward-looking
statements are based on the current expectations of the company.
Because forward looking statements involve risks and uncertainties,
the company's plans, actions and actual results could differ
materially. Among the factors that could cause plans, actions and
results to differ materially from current expectations are: (i)
changes in consumer demand and prices resulting in a negative
impact on revenues and margins; (ii) raw material substitutions and
increases in the costs of raw materials, utilities, labor and other
supplies; (iii) increased competition in the company's product
lines; (iv) changes in capital availability or costs; (v) workforce
factors such as strikes or labor interruptions; (vi) the ability of
the company and its subsidiaries to develop new products, identify
and execute capital programs and efficiently integrate acquired
businesses; (vii) the cost of compliance with applicable
governmental regulations and changes in such regulations, including
environmental regulations; (viii) the general political, economic
and competitive conditions in markets and countries where the
company and its subsidiaries operate, including currency
fluctuations and other risks associated with operating in foreign
countries; and (ix) the timing and occurrence (or non-occurrence)
of transactions and events which may be subject to circumstances
beyond the control of the company and its subsidiaries. Following
are more detailed financial results for the three and twelve months
ended December 31, 2005. PACKAGING DYNAMICS CORPORATION CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except
per share data) For the Three Months For the Three Months Ended
December 31, 2005 Ended December 31, 2004 Adjust- Adjust- Reported
ments Adjusted Reported ments Adjusted Net sales $92,106 $92,106
$92,383 $92,383 Cost of goods sold 79,708 79,708 79,005 79,005
Gross profit 12,398 - 12,398 13,378 - 13,378 Operating expenses
6,270 (341)(1) 5,929 6,228 54 (2) 6,282 Operating income 6,128 341
6,469 7,150 (54) 7,096 Interest expense 2,080 2,080 2,009 2,009
Income before income taxes 4,048 341 4,389 5,141 (54) 5,087 Income
tax provision 1,559 131 1,690 2,031 (22) 2,009 Income from
continuing operations 2,489 210 2,699 3,110 (32) 3,078 Income
(loss) from discontinued operations, net of tax 135 135 (457) (457)
Net income $2,624 $2,834 $2,653 $2,621 Income (loss) per share:
Basic: Continuing operations $0.23 $0.25 $0.30 $0.29 Discontinued
operations 0.02 0.02 (0.05) (0.04) Net Income $0.25 $0.27 $0.25
$0.25 Diluted: Continuing operations $0.23 $0.25 $0.29 $0.28
Discontinued operations 0.01 0.01 (0.05) (0.04) Net Income $0.24
$0.26 $0.24 $0.24 Cash dividend declared per share: $0.065 $0.065
$0.065 $0.065 Weighted average shares outstanding: Basic 10,665,377
10,665,377 10,514,837 10,514,837 Diluted 10,959,886 10,959,886
10,886,362 10,886,362 Reconciliation of Operating income to EBITDA
Operating income $6,128 $341 $6,469 $7,150 $(54) $7,096
Depreciation and amortization 2,035 2,035 1,897 1,897 EBITDA $8,163
$341 $8,504 $9,047 $(54) $8,993 Segment Net Sales: Food Packaging
$70,038 $- $70,038 $72,657 $- $72,657 Specialty Laminations 23,286
23,286 20,962 20,962 Elimination of Specialty Laminations
Intercompany Sales (1,218) (1,218) (1,236) (1,236) Total $92,106 $-
$92,106 $92,383 $- $92,383 Segment Operating Income: Food Packaging
$4,804 $341 $5,145 $6,205 $- $6,205 Specialty Laminations 1,324 -
1,324 891 - 891 Total 6,128 341 6,469 7,096 - 7,096 Gain on sale of
assets - - - 54 (54) - Operating Income $6,128 $341 $6,469 $7,150
$(54) $7,096 FOOTNOTES: (1) The Company incurred $341 of costs
related to the closing of the Farmers Branch facility. (2) The
Company recorded a gain of $54 on sale of property within our
Specialty Laminations operating segment. PACKAGING DYNAMICS
CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data) For the Year Ended
For the Year Ended December 31, 2005 December 31, 2004 Adjust-
Adjust- Reported ments Adjusted Reported ments Adjusted Net sales
$360,960 $1,100(1) $362,060 $304,973 $304,973 Cost of goods sold
312,414 312,414 261,910 (234)(3) 261,676 Gross profit 48,546 1,100
49,646 43,063 234 43,297 Operating expenses 26,055 (1,552)(2)
24,503 20,541 55 (4) 20,596 Operating income 22,491 2,652 25,143
22,522 179 22,701 Interest expense 8,306 8,306 5,900 (150)(5) 5,750
Income before income taxes 14,185 2,652 16,837 16,622 329 16,951
Income tax provision 5,461 1,021 6,482 6,566 129 6,695 Income from
continuing operations 8,724 1,631 10,355 10,056 200 10,256 Loss
from discontinued operations, net of tax (399) (399) (1,278)
(1,278) Net income $8,325 $9,956 $8,778 $8,978 Income (loss) per
share: Basic: Continuing operations $0.83 $0.98 $1.01 $1.03
Discontinued operations (0.04) (0.04) (0.13) (0.13) Net Income
$0.79 $0.94 $0.88 $0.90 Diluted: Continuing operations $0.80 $0.95
$0.98 $1.00 Discontinued operations (0.04) (0.04) (0.13) (0.13) Net
Income $0.76 $0.91 $0.85 $0.87 Cash dividend declared per share:
$0.260 $0.260 $0.215 $0.215 Weighted average shares outstanding:
Basic 10,573,137 10,573,137 9,927,406 9,927,406 Diluted 10,941,000
10,941,000 10,268,678 10,268,678 Reconciliation of Operating income
to EBITDA Operating income $22,491 $2,652 $25,143 $22,522 $179
$22,701 Depreciation and amortization 8,104 8,104 6,244 6,244
EBITDA $30,595 $2,652 $33,247 $28,766 $179 $28,945 Segment Net
Sales: Food Packaging $279,643 $- $279,643 $213,053 $- $213,053
Specialty Laminations 86,255 1,100 87,355 95,454 95,454 Elimination
of Specialty Laminations Intercompany Sales (4,938) (4,938) (3,534)
(3,534) Total $360,960 $1,100 $362,060 $304,973 $- $304,973 Segment
Operating Income: Food Packaging $18,412 $1,360 $19,772 $14,572
$234 $14,806 Specialty Laminations 4,079 1,292 5,371 7,895 - 7,895
Total 22,491 2,652 25,143 22,467 234 22,701 Gain on sale of assets
- - - 55 (55) - Operating Income $22,491 $2,652 $25,143 $22,522
$179 $22,701 FOOTNOTES: (1) The Company incurred a $1,100 charge
related to a product quality claim in the Specialty Laminations
segment. (2) The Company incurred management transition costs of
$1,211 related to organizational integration and restructuring and
$341 of costs related to the closing of the Farmers Branch
facility. (3) The Company recorded $234 of inventory fair value
adjustment in connection with purchase accounting for the Papercon
acquisition. (4) The Company recorded a gain of $55 on sale of
property within our Specialty Laminations operating segment. (5)
The Company expensed $150 of costs incurred in connection with
amending the terms of its term debt to provide for the Papercon
acquisition. PACKAGING DYNAMICS CORPORATION CONDENSED CONSOLIDATED
BALANCE SHEETS (dollars in thousands) December 31, December 31,
2005 2004 ASSETS Current Assets: Cash and cash equivalents $3
$1,175 Accounts receivable trade (net of allowance for doubtful
accounts of $776 and $825) 31,263 31,174 Inventories, net 42,036
36,506 Prepaid expenses and other asset 6,502 5,962 Total current
assets 79,804 74,817 Property, Plant and Equipment Buildings and
improvements 21,134 20,919 Machinery and equipment 61,474 58,287
Construction in progress 4,514 924 87,122 80,130 Less-Accumulated
depreciation (36,456) (29,284) 50,666 50,846 Land 848 848 Total
property, plant and equipment 51,514 51,694 Other Assets: Goodwill
81,263 81,263 Intangibles and other assets, net 19,632 20,893 Total
other assets 100,895 102,156 Total Assets $232,213 $228,667
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current
maturities of long-term debt $14,093 $6,093 Cash overdraft 6,573
6,339 Accounts payable 25,038 20,793 Accrued salary and wages 2,628
3,420 Other accrued liabilities 6,989 8,207 Total current
liabilities 55,321 44,852 Long-term Debt 96,894 110,386 Other
Liabilities 3,041 7,592 Deferred Income Taxes 18,877 15,975 Total
Liabilities 174,133 178,805 Commitments and Contingencies
Stockholders' Equity: Common stock, $.01 par value -40,000,000
shares authorized; 10,751,249 and 10,514,837 shares issued and
outstanding at December 31, 2005 and December 31, 2004,
respectively 107 105 Preferred stock, $.01 par value - 5,000,000
shares authorized; no shares issued and outstanding - - Paid in
capital in excess of par value 60,260 57,995 Accumulated other
comprehensive income 441 61 Accumulated deficit (2,728) (8,299)
Total stockholders' equity 58,080 49,862 Total Liabilities and
Stockholders' Equity $232,213 $228,667 PACKAGING DYNAMICS
CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands) For the Year Ended December 31, 2005 2004
Cash flows from operating activities: Net income $8,325 $8,778 Loss
from discontinued operations 399 1,278 Adjustments to reconcile net
income to net cash from operating activities: Depreciation and
amortization 8,104 6,244 Amortization and write-off of deferred
finance costs 635 393 (Gain)/Loss on disposal of assets - (55)
Provision for doubtful accounts (49) 126 Deferred income taxes
2,900 4,728 Changes in operating assets and liabilities: Accounts
receivable (44) 128 Inventories (5,530) (4,429) Other assets 194
(1,674) Accounts payable and accrued liabilities (608) 5,040 Net
cash from continuing operating activities 14,326 20,557 Net cash
used by discontinued operating activities (2,485) (3,230) Net cash
from operating activities 11,841 17,327 Cash flows used by
investing activities: Proceeds from sale of assets - 225
Acquisitions, net of cash acquired - (45,124) Additions to
property, plant and equipment (6,990) (6,081) Net cash used by
continuing investing activities (6,990) (50,980) Net cash from
discontinued investing activities 1,132 602 Net cash used by
investing activities (5,858) (50,378) Cash flows from (used by)
financing activities: Principal payments for loan obligations
(6,092) (5,871) Proceeds from loan obligations - 45,000 Proceeds
under revolving line of credit 74,900 89,600 Repayments under
revolving line of credit (74,300) (91,900) Payment of dividends to
stockholders (2,741) (1,978) Payment of financing costs (159) (670)
Other, net 1,237 (408) Net cash from (used by) financing activities
(7,155) 33,773 Net increase (decrease) in cash and cash equivalents
(1,172) 722 Cash and cash equivalents at beginning of period 1,175
453 Cash and cash equivalents at end of period $3 $1,175 First Call
Analyst: FCMN Contact: knarcissi@pkdy.com DATASOURCE: Packaging
Dynamics Corporation CONTACT: Mr. Patrick Chambliss of Packaging
Dynamics Corporation, +1-773-843-8113 Web site:
http://www.pkdy.com/
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