CHICAGO, April 27 /PRNewswire-FirstCall/ -- Packaging Dynamics
Corporation (NASDAQ:PKDY) (the "Company" or "Packaging Dynamics")
reported results of operations for the first quarter ended March
31, 2006. Consolidated Results: The Company reported net income for
the first quarter of $0.6 million, or $0.05 per diluted share, a
72.3% decrease from net income of $2.0 million, or $0.19 per
diluted share, reported in the first quarter of 2005. As discussed
further below, first quarter results include costs associated with
the closing of the Company's Farmers Branch, Texas facility and
transaction costs incurred in connection with the pending
acquisition of the Company by Thilmany, L.L.C, an affiliate of
Kohlberg & Company, L.L.C. Continuing Operations: Net sales
were $94.7 million, a 9.1% increase over net sales of $86.8 million
in the first quarter of 2005. Reported income from continuing
operations of $0.6 million, or $0.05 per diluted share, includes
$1.2 million of costs related to the closing of the Company's
Farmers Branch, Texas facility, and $2.1 million of transaction
costs incurred in connection with the pending acquisition of the
Company (collectively $2.1 million after tax). Reported income from
continuing operations for the quarter ended March 31, 2005 of $2.2
million, or $0.21 per diluted share, includes $0.3 million of
management transition costs related to organizational integration
and restructuring in the Company's Food Packaging segment ($0.2
million after tax). Excluding these costs, income from continuing
operations was $2.6 million, or $0.24 per diluted share, a 6.9%
increase over $2.4 million, or $0.22 per diluted share, in the
first quarter of 2005. Operating income was $3.0 million ($6.3
million excluding the facility exit costs and transaction costs),
compared to $5.7 million ($6.1 million excluding the management
transition costs) in the first quarter of 2005. Excluding these
costs, operating margin declined to 6.7% from 7.0% in the first
quarter of 2005 reflecting lower margins in the Food Packaging
segment partially offset by higher margins in the Specialty
Laminations segment. Additionally, the Company adopted SFAS No.
123R, "Share-Based Payment," on a prospective basis which required
the Company to record stock based compensation expense of $0.2
million ($0.1 million after tax) or $0.01 per diluted share during
the first quarter of 2006. Food Packaging Segment Net sales of
$70.1 million during the first quarter of 2006 increased 3.9% from
$67.4 million in the first quarter of 2005 due to price increases
and volume growth. Excluding the impact of facility closing costs
and transactions costs, segment operating income was $4.0 million
and segment operating margin was 5.8%. In the first quarter of
2005, excluding the impact of management transition costs, segment
operating income was $4.5 million and segment operating margin was
6.7%. The decrease in segment operating income and margin reflects
the impact of higher raw material and freight costs. Specialty
Laminations Segment Net sales of $26.1 million during the first
quarter of 2006 increased 29.4% from $20.1 million in the first
quarter of 2005 due to price increases and volume growth in key
markets. Excluding the impact of transaction costs, segment
operating income of $2.3 million increased 46.1% from $1.6 million
in the first quarter of 2005 and segment operating margin increased
to 8.8% from 7.8% in the prior year. The increase in segment
operating income and margin reflects the impact of price and volume
increases. Balance Sheet: Total debt was $109.7 million at March
31, 2006, a $1.3 million decrease from $111.0 million at December
31, 2005. Working capital, excluding cash and current maturities of
long-term debt, decreased by $1.9 million during the quarter. The
decrease was primarily due to increased accounts payable partially
offset by increased inventory and other current assets. Summary and
Outlook: "We are pleased to report year-over-year earnings
improvement in the first quarter, excluding the anticipated
facility closure costs and costs related to the pending acquisition
of the Company. Specialty Laminations again experienced strong
sequential and year-over-year sales and earnings growth, continuing
a trend which began in the fourth quarter of last year following
several disappointing quarters. In Food Packaging, where first
quarter results are typically the weakest of the year, price
increases and volume growth failed to offset the impact of rising
raw material and freight costs. We are aggressively pursuing
initiatives to improve results in Food Packaging including
achieving the expected benefits of pricing actions, the closure of
the Farmers Branch facility, pending capital projects, and other
growth and cost reduction activities," commented Frank V. Tannura,
Chairman and Chief Executive Officer. Mr. Tannura added, "We
continue to make progress towards completion of the pending
acquisition of the Company by Thilmany, an affiliate of Kohlberg
& Company, and expect the transaction to be completed during
the second quarter of 2006. Required antitrust approvals have been
received and we expect to mail the merger proxy statement to our
stockholders shortly." Earnings Call: The Company will hold a
conference call on Friday, April 28, 2006 at 10:00 a.m. (ET) to
discuss the news release. For access to the conference call, please
dial 800-553-0358 (U.S.) by 9:45 a.m. (ET) on April 28th. The
access code is "Packaging Dynamics Earnings Call." A replay of the
call will be available from approximately 5:00 p.m. (ET) on April
28th through 11:59 p.m. (ET) on May 12th. To access the replay,
please dial 800-475-6701 (U.S.) or 320-365-3844 (International),
access code 825992. 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; (ix) the ability of our pending acquisition by Thilmany
L.L.C. to be consummated in a timely manner if at all, (x) the risk
that the merger agreement with Thilmany may be terminated under
circumstances that would require the Company to pay Thilmany a
termination fee of $5 million and (xi) 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 months ended March 31, 2006. PACKAGING DYNAMICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in
thousands, except per share data) (unaudited) For the Three Months
Ended For the Three Months Ended March 31, 2006 March 31, 2005
Reported Adjustments Adjusted Reported Adjustments Adjusted Net
sales $ 94,657 $- $ 94,657 $ 86,784 $ - $86,784 Cost of goods sold
81,843 81,843 74,110 74,110 Gross profit 12,814 - 12,814 12,674 -
12,674 Operating expenses 9,789 (3,307)(1) 6,482 6,935 (320)(2)
6,615 Operating income 3,025 3,307 6,332 5,739 320 6,059 Interest
expense 2,120 2,120 2,088 2,088 Income before income taxes 905
3,307 4,212 3,651 320 3,971 Income tax provision 345 1,257 1,602
1,406 123 1,529 Income from continuing operations 560 $2,050 2,610
2,245 $197 2,442 Loss from discontinued operations, net of tax - -
(223) (223) Net income $560 $2,610 $2,022 $ 2,219 Income (loss) per
share: Basic: Continuing operations $0.05 $0.24 $0.21 $0.23
Discontinued operations - - (0.02) (0.02) Net Income $0.05 $0.24
$0.19 $0.21 Diluted: Continuing operations $0.05 $0.24 $0.21 $0.22
Discontinued operations - - (0.02) (0.02) Net Income $0.05 $0.24
$0.19 $0.20 Cash dividend declared per share: $- $ - $0.065 $ 0.065
Weighted average shares outstanding: Basic 10,752,786 10,752,786
10,525,653 10,525,653 Diluted 11,073,120 11,073,120 10,924,037
10,924,037 Reconciliation of Operating income to EBITDA Operating
income $3,025 $3,307 $6,332 $5,739 $320 $ 6,059 Depreciation and
amorti- zation 2,041 2,041 2,043 2,043 Stock-based compensation 196
196 - - EBITDA $5,262 $3,307 $8,569 $7,782 $320 $ 8,102 Segment Net
Sales: Food Pack- aging $70,061 $- $70,061 $67,409 $67,409
Specialty Lamin- ations 26,056 26,056 20,143 20,143 Elimination of
Specialty Laminations Inter- company Sales (1,460) (1,460) (768)
(768) Total $94,657 $- $ 94,657 $ 86,784 $- $86,784 Segment
Operating Income: Food Pack- aging $1,306 $2,736 $4,042 $4,172 $320
$ 4,492 Specialty Lamin- ations 1,719 571 2,290 1,567 - 1,567
Operating Income $3,025 $3,307 $6,332 $5,739 $320 $ 6,059
FOOTNOTES: (1) The Company incurred $1,201 of costs related to the
closing of the Farmers Branch facility and $2,106 of transaction
costs in connection with the pending sale of the Company. (2) The
Company incurred management transition costs of $320 related to
organizational integration and restructuring in the Company's Food
Packaging segment. PACKAGING DYNAMICS CORPORATION CONDENSED
CONSOLIDATED BALANCE SHEETS (dollars in thousands) March 31,
December 31, 2006 2005 ASSETS (unaudited) Current Assets: Cash and
cash equivalents $- $3 Accounts receivable trade (net of allowance
for doubtful accounts of $530 and $776) 31,271 31,263 Inventories,
net 44,705 42,036 Other 7,107 6,502 Total current assets 83,083
79,804 Property, Plant and Equipment Property, plant and equipment
91,657 87,970 Less-Accumulated depreciation (38,205) (36,456) Total
property, plant and equipment 53,452 51,514 Other Assets: Goodwill
81,263 81,263 Other assets, net 19,280 19,632 Total other assets
100,543 100,895 Total Assets $237,078 $232,213 LIABILITIES AND
STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of
long-term debt $14,095 $14,093 Cash overdraft 4,376 6,573 Accounts
payable 30,948 25,038 Accrued salary and wages 2,791 2,628 Other
accrued liabilities 8,332 6,989 Total current liabilities 60,542
55,321 Long-term Debt 95,558 96,894 Other Liabilities 2,695 3,041
Deferred Income Taxes 19,249 18,877 Total Liabilities 178,044
174,133 Commitments and Contingencies Stockholders' Equity: Common
stock, $.01 par value - 40,000,000 shares authorized; 10,759,583
and 10,751,249 shares issued and outstanding at March 31, 2006 and
December 31, 2005, respectively 107 107 Preferred stock, $.01 par
value - 5,000,000 shares authorized; no shares issued and
outstanding - - Paid in capital in excess of par value 60,544
60,260 Accumulated other comprehensive income 551 441 Accumulated
deficit (2,168) (2,728) Total stockholders' equity 59,034 58,080
Total Liabilities and Stockholders' Equity $237,078 $232,213
PACKAGING DYNAMICS CORPORATION CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS (dollars in thousands) (unaudited) Three Months Ended
March 31 2006 2005 Cash flows from operating activities: Net income
$560 $2,022 Loss from discontinued operations - 223 Adjustments to
reconcile net income to net cash from operating activities:
Depreciation and amortization 2,041 2,043 Amortization and
write-off of deferred finance costs 158 154 Stock-based
compensation expense 196 - Provision for doubtful accounts (246) 3
Deferred income taxes 85 924 Changes in operating assets and
liabilities: Accounts receivable 238 157 Inventories (2,669)
(4,085) Other assets (240) 158 Accounts payable and accrued
liabilities 7,894 2,093 Net cash from continuing operating
activities 8,017 3,692 Net cash used by discontinued operating
activities (35) (313) Net cash from operating activities 7,982
3,379 Cash flows used by investing activities: Additions to
property, plant and equipment (3,844) (755) Net cash used by
investing activities (3,844) (755) Cash flows used by financing
activities: Principal payments for loan obligations (5,109) (1,460)
Proceeds under revolving line of credit 23,050 19,700 Repayments
under revolving line of credit (19,275) (18,500) Change in cash
overdraft (2,197) (2,633) Payment of dividends (698) (685) Other,
net 88 159 Net cash used by financing activities (4,141) (3,419)
Net decrease in cash and cash equivalents (3) (795) Cash and cash
equivalents at beginning of period 3 1,175 Cash and cash
equivalents at end of period $- $380 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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