PRYOR, Okla., Feb. 25 /PRNewswire-FirstCall/ -- Orchids Paper
Products Company (NYSE Alternext US: TIS) today reported net income
for the three months ended December 31, 2008 of $2.3 million, or
$0.34 per diluted share, a new quarterly record, compared with
$850,000, or $0.13 per diluted share, in the same period in 2007.
For the twelve months ended December 31, 2008, net income was $5.2
million, or $0.79 per diluted share, a new annual record,
representing an increase of $2.6 million compared to net income of
$2.6 million, or $0.40 per diluted share, reported for the twelve
months ended December 31, 2007. Three-month period ended December
31, 2008 Net sales for the 2008 quarter were a new quarterly record
of $24.3 million, an increase of 20% over the $20.3 million
reported for the same quarter of 2007. Net sales of converted
product in the fourth quarter of 2008 were $21.1 million, an
increase of 22% compared to the $17.3 million of net sales in the
same period in 2007, while net sales of parent rolls increased 7%
to $3.2 million compared to $3.0 million in the same quarter over
quarter comparison. The increase in converted product net sales was
primarily the result of a 23% increase in the net selling price per
ton which was slightly offset by lower tonnage shipped. Parent roll
sales increased primarily due to a 9% increase in selling prices
which was slightly offset by lower tonnage shipped. Earnings before
interest, taxes, depreciation and amortization (EBITDA) was $4.4
million for the quarter ended December 31, 2008, a new quarterly
record, and an increase of $2.1 million, or 91%, compared to the
$2.3 million in the quarter ended December 31, 2007. As a percent
of net sales, EBITDA was 18% in the 2008 quarter compared with 11%
in the 2007 quarter. Gross profit for the fourth quarter of 2008
was $5.4 million, an increase of $2.2 million, or 69%, when
compared with a gross profit of $3.2 million in the comparable
prior year quarter. Gross profit as a percent of net sales
increased to 22% in the fourth quarter of 2008 compared to 16% for
the same period in 2007. The increase in gross profit was primarily
due to higher selling prices being partially offset by higher
converting costs, and as a percent of net sales, gross profit
increased primarily due to such higher selling prices. Converting
costs increased in the 2008 quarter compared to the 2007 quarter
primarily due to the cost of outside warehousing of $316,000 and
higher maintenance and repair costs of approximately $270,000. The
higher maintenance and repair costs, which expenditure includes
parts, service technicians and consultants, are part of the
Company's ongoing efforts to improve productivity in its converting
operation. The Company expects the level of maintenance
expenditures experienced in the fourth quarter of 2008 to represent
a normalized level of future expenditures. Partially offsetting
these higher overhead costs were lower converting labor costs in
the 2008 quarter compared to the 2007 quarter of approximately
$140,000, primarily due to the effects of the previously disclosed
$4.7 million converting automation project. This project was
completed in February 2009 and the Company expects to realize
further labor cost reductions in the first quarter of 2009. The
Company's overall cost of paper was basically flat in the 2008
quarter compared to the 2007 quarter primarily due to the
elimination of the purchase of external parent rolls. Selling,
general and administrative expenses in the fourth quarter of 2008
totaled $1.8 million, an increase of $123,000, or 7%, when compared
with selling, general and administrative expenses of $1.7 million
in the fourth quarter of 2007. Higher commission expense due to
higher sales levels accounted for most of the increase. As a
percent of net sales, selling, general and administrative expenses
decreased to 7% for the quarter ended December 31, 2008, compared
to 8% for the prior year quarter. Interest expense for the fourth
quarter of 2008 totaled $321,000 compared to interest expense of
$612,000 in the same period in 2007. Lower LIBOR interest rates,
lower LIBOR margins and the elimination of $66,000 of interest
expense as a result of redeeming the Company's 12% subordinated
debentures, which were retired in December 2007, accounted for most
of the decrease. Twelve-month period ended December 31, 2008 For
the twelve months ended December 31, 2008, the Company reported net
sales of $90.2 million, a new annual record, representing an
increase of 21% compared to $74.6 million reported for the
twelve-month period of 2007. Net sales of converted product in the
twelve-month period of 2008 increased $9.6 million, or 15%, to
$74.9 million compared to the same period in 2007, while net sales
of parent rolls increased $6.0 million or 65% in the 2008
twelve-month period to $15.2 million compared to the 2007 period.
In the twelve months ended December 31, 2008, the net selling price
per ton of converted product increased 15% compared to the same
period of 2007 while tonnage shipped decreased slightly. Net sales
of parent rolls in the twelve months ended December 31, 2008
increased due to a 43% increase in tonnage shipped and a 15%
increase in selling prices compared to the 2007 period. EBITDA
increased $3.2 million to $11.9 million, a new annual record, in
the twelve months ended December 31, 2008, compared to $8.7 million
in the same period of 2007. As a percent of net sales, EBITDA was
13% in the 2008 period compared with 12% in the 2007 period. Gross
profit for the twelve months ended December 31, 2008 was $15.0
million, an increase of $4.1 million, or 37%, when compared with a
gross profit of $10.9 million in the comparable prior year period.
Gross profit as a percent of net sales increased to 17% in the 2008
period compared to 15% for the same period in 2007. The primary
reasons for the increase in gross profit and gross profit as a
percentage of net sales were higher net selling prices and volumes
being partially offset by higher paper costs and converting costs.
Paper production costs increased in the twelve-month period of 2008
compared to the same period in 2007 due to higher wastepaper prices
of approximately 20% and higher natural gas prices of approximately
17% during the same period. The higher wastepaper prices increased
the Company's cost of wastepaper by approximately $3.0 million in
the twelve-month period ended December 31, 2008, compared to the
same period in 2007. The increased natural gas prices resulted in a
$740,000 increase in the cost of natural gas consumed. Converting
costs increased in the twelve months ended December 31, 2008
compared to the same period in 2007 primarily for the same reasons
discussed in the three-month results. For the twelve-months ended
December 31, 2008 compared to the same period in 2007, maintenance
and repairs costs and outside warehousing increased approximately
$1.0 million and $600,000, respectively. As a percent of net sales,
gross profit increased primarily due to the higher selling prices
and sales volumes being only partially offset by higher paper and
converting costs. As previously reported, the Company's production
costs were negatively affected during 2008 by rising wastepaper and
energy costs. Those costs began to abate somewhat during the fourth
quarter. Wastepaper prices decreased slightly in November and to a
greater extent in December. By the end of December, wastepaper
prices had decreased approximately 20% from their highest point in
2008, which was the month of October. Wastepaper prices have
continued to drop through the month of February 2009 and are now
approximately 40% off the October 2008 high. The Company's cost of
natural gas decreased approximately 25% in the fourth quarter of
2008 compared to the average cost for the third quarter of 2008.
Selling, general and administrative expenses in the twelve months
ended December 31, 2008 totaled $6.3 million, an increase of $1.1
million, or 20%, when compared with selling, general and
administrative expenses of $5.2 million in the same period of 2007.
Higher costs associated with additions to the Company's senior
management team in late 2007 and during 2008, increased accruals
under the Company's incentive bonus plan, higher commission expense
and increased packaging-related selling costs accounted for most of
the increase. As a percent of net sales, selling, general and
administrative expenses were flat in the year to year comparison at
approximately 7%. Interest expense for the twelve-month period
ended December 31, 2008 totaled $1.4 million compared to interest
expense of $2.8 million in the same period in 2007. Lower LIBOR
rates and margins over LIBOR and the redemption of the Company's
subordinated debentures as discussed above all contributed to the
decrease. The Company generated $8.5 million in cash from
operations in the twelve-month period ended December 31, 2008,
primarily from cash earnings being somewhat offset by higher trade
receivables and inventory levels. Cash used in investing activities
was $6.9 million, of which $4.3 million was related to expenditures
on the Company's previously announced automation project in the
converting operation. The $4.7 million project was completed in
February 2009. Cash flows used in financing was $1.6 million in
2008 primarily as a result of scheduled principal payments on the
Company's bank term loans. Cash on hand was essentially flat from
year to year. Commenting on the quarter, Mr. Robert Snyder,
President and Chief Executive Officer, stated, "Our fourth quarter
results, which included record sales and earnings, are very
encouraging, especially in this current economic environment. These
achievements, combined with our efforts throughout the year, have
resulted in record sales and earnings for the full year period as
well. Additionally, the investment we made during the second and
third quarters in the converting operations, namely the hiring of a
productivity consultant firm and the implementation of resultant
equipment maintenance programs, continued to pay-off in the fourth
quarter, and the efficiency of our converting operations continues
to improve through the current quarter. Moreover, the at-home
tissue market remains strong and our customer base continues to
provide us with a strong backlog for our product even in these
difficult economic conditions. Our additional converting production
has allowed us to take advantage of opportunities in the market
place to increase market share. There are additional opportunities
available to us and we believe that we are well positioned to take
advantage of these opportunities." Additionally, Mr. Snyder
commented, "We have seen softening in the parent roll market, both
in price and demand, primarily due to a weakened away-from-home
market. In order to balance our inventories, we expect to take some
downtime on our older machines during the first quarter of 2009.
The amount of downtime we expect to take is not completely clear at
this time due to the uncertainty of the timing of the recovery of
the away-from-home market; however we do not expect it to be
significant." As announced, the Company will hold a teleconference
to discuss its fourth quarter earnings at 11:00 a.m. (ET) on
Thursday, February 26. All interested parties may participate in
the teleconference by calling (866) 800-8648 and providing passcode
249 744 50. A question and answer session will be part of the
teleconference's agenda. Those intending to access the
teleconference should dial in 15 minutes prior to the start. The
call may also be accessed live via webcast through the Company's
website at http://www.orchidspaper.com/ under "Investors." A replay
of the teleconference will be available for 30 days on the
Company's website. About Orchids Paper Products Company Orchids
Paper Products Company is an integrated manufacturer of tissue
paper products serving the private label consumer market. The
Company produces a full line of tissue products, including paper
towels, bathroom tissue and paper napkins. From its operations in
Pryor, Oklahoma, Orchids Paper Products Company uses recycled
wastepaper to produce finished tissue products that it provides to
retail chains throughout the central United States. For more
information on the Company and its products, visit the Company's
website at http://www.orchidspaper.com/. This release contains
forward-looking statements. 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" or "continue" or
the negative of such terms or other comparable terminology.
Although the Company believes that the expectations reflected in
the forward-looking statements are reasonable, it cannot guarantee
future results, levels of activity, performance or achievements.
These statements are only predictions. Factors that could
materially affect the Company's actual results, levels of activity,
performance or achievements include, without limitation, those
detailed under the caption "Risk Factors" in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2007 as
filed with the Securities and Exchange Commission on March 18,
2008. 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. Orchids Paper Products Company Selected Financial Data
(in thousands, except net selling price per ton, tonnage, cost per
ton and per share data) Three Months Twelve Months Ended Ended
December 31, December 31, ------------ ------------ 2008 2007 2008
2007 ---- ---- ---- ---- Converted Product Net Sales $21,130
$17,315 $74,927 $65,383 Parent Roll Net Sales 3,170 2,963 15,275
9,265 ----- ----- ------ ----- Net Sales $24,300 $20,278 $90,202
$74,648 Cost of Sales 18,899 17,053 75,196 63,717 ------ ------
------ ------ Gross Profit 5,401 3,225 15,006 10,931 Commission
Expense 336 257 1,089 959 Other Selling, General and Administrative
Expenses 1,497 1,452 5,170 4,275 ----- ----- ----- ----- Operating
Income 3,568 1,516 8,747 5,697 Interest Expense 321 612 1,361 2,828
Other (Income) Expense, net (1) (7) (10) (36) --- --- --- ---
Income Before Income Taxes 3,248 911 7,396 2,905 Provision
(Benefit) for Income Taxes 978 61 2,205 307 --- -- ----- --- Net
Income $2,270 $850 $5,191 $2,598 ====== ==== ====== ====== Net
income per share: Basic $0.36 $0.14 $0.82 $0.42 Diluted $0.34 $0.13
$0.79 $0.40 EBITDA Reconciliation: Net Income $2,270 $850 $5,191
$2,598 Plus: Interest Expense 321 612 1,361 2,828 Plus: Income Tax
Expense 978 61 2,205 307 Plus: Depreciation 812 753 3,122 3,001 ---
--- ----- ----- Earnings Before Interest, Income Tax and
Depreciation and Amortization (EBITDA) $4,381 $2,276 $11,879 $8,734
Operating Data: Total Tons Shipped 13,184 13,339 54,207 50,706 Net
Selling Price per Ton $1,843 $1,520 $1,664 $1,472 Total Paper Cost
per Ton Consumed $768 $769 $795 $753 Total Paper Cost $10,944
$10,231 $44,184 $38,181 Cash Flow Data: Cash Flow Provided by (Used
in): Operating Activities $4,807 $3,272 $8,508 $8,382 Investing
Activities $(2,767) $(1,341) $(6,926) $(318) Financing Activities
$(2,041) $(1,931) $(1,574) $(8,064) As of ----- December 31,
December 31, Balance Sheet Data: 2008 2007 ---- ---- Working
Capital $3,453 $1,714 Net Property, Plant and Equipment $60,659
$56,856 Total Assets $74,482 $68,303 Long-Term Debt, net of current
portion $21,067 $23,264 Total Stockholders' Equity $33,562 $28,042
DATASOURCE: Orchids Paper Products Company CONTACT: Keith
Schroeder, Chief Financial Officer of Orchids Paper Products
Company, +1-918-824-4605 Web Site: http://www.orchidspaper.com/
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