PKDY Packaging Dynamics - When-Issued Common Stock (MM)

Packaging Dynamics Corporation Reports Results for the First Quarter Ended March 31, 2005 CHICAGO, April 28 /PRNewswire-FirstCall/ -- Packaging Dynamics Corporation (NASDAQ:PKDY)(the "Company" or "Packaging Dynamics") reported results of operations for the first quarter ended March 31, 2005. Consolidated Results: The Company reported net income for the first quarter of $2.0 million, or $0.19 per diluted share, a 36.4% increase over net income of $1.5 million, or $0.15 per diluted share, reported in the first quarter of 2004. Continuing Operations: Net sales were $86.8 million, a 26.6% increase over net sales of $68.5 million in the first quarter of 2004. Income from operations was $5.7 million, a 33.7% increase over income from operations of $4.3 million in the first quarter of 2004. Operating margin for the first quarter was 6.6% compared to 6.3% in the prior year. Income from continuing operations was $2.2 million, or $0.21 per diluted share, a 20.0% increase over income from continuing operations of $1.9 million, or $0.19 per diluted share, in the first quarter of 2004. Food Packaging Segment Net sales of $67.4 million increased 51.0% from $44.7 million in the prior year primarily due to the contribution of Papercon which was acquired in the third quarter of 2004. Segment operating income of $4.2 million increased 96.1% from $2.1 million in the prior year and segment operating margin improved to 6.2% from 4.8% in the prior year, reflecting the acquisition of Papercon and positive results from the integration of Papercon and other cost and productivity initiatives. Specialty Laminations Segment Net sales of $20.1 million declined 18.1% from $24.6 million in the prior year primarily due to volume weakness for products sold into the building products market as well as for other products. Segment operating income was $1.6 million, a 27.6% decline from $2.2 million in the prior year and operating margin declined to 7.8% from 8.8% in the prior year, reflecting the sales decline. Discontinued Operations: Discontinued operations includes the Company's Specialty Paper operation which was exited during the fourth quarter of 2003. Net loss from discontinued operations was $0.2 million, or $0.02 per diluted share, compared to a net loss of $0.4 million, or $0.04 per diluted share, in the first quarter of 2004. The net loss for both periods represents costs associated with the ongoing program to maintain and dispose of the Detroit property. Balance Sheet: Total debt was $116.2 at March 31, 2005, a $0.3 million decrease from $116.5 million at December 31, 2004. Working capital, excluding cash and current maturities of long-term debt, increased by $4.2 million during the quarter. The increase was primarily due to increased inventory levels as a result of sales declines in the Specialty Laminations segment as well as efforts to address lead time and pricing pressures in certain raw material categories. Summary and Outlook: "Our first quarter results were consistent with our full-year 2005 earnings outlook and we continue to target diluted earnings per share from continuing operations of $1.20 to $1.30. Our Food Packaging segment benefited from the ongoing integration of the Papercon acquisition. We expect the integration efforts to produce additional benefits as the year unfolds. Our Specialty Laminations segment continued to experience revenue challenges. We expect these challenges to continue in the second quarter but diminish during the second half of the year," commented Frank V. Tannura, Chairman and Chief Executive Officer. Earnings Call: The Company will hold a conference call on Friday, April 29, 2005 at 10:00 a.m. (ET) to discuss the news release. For access to the conference call, please dial 877-209-0397 (U.S.) by 9:45 a.m. (ET) on April 29th. 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 29th through 12:59 a.m. (ET) on May 14th. To access the replay, please dial 800-475-6701 (U.S.) or 320-365-3844 (International), access code 776423. 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 months ended March 31, 2005. PACKAGING DYNAMICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share data) (unaudited) For the Three Months Ended March 31, 2005 2004 Net sales $86,784 $68,534 Cost of goods sold 74,108 59,474 Gross profit 12,676 9,060 Operating expenses 6,937 4,768 Income from operations 5,739 4,292 Interest expense 2,088 1,200 Income before income taxes 3,651 3,092 Income tax provision 1,406 1,221 Income from continuing operations 2,245 1,871 Loss from discontinued operations (223) (389) Net income $2,022 $1,482 Income (loss) per share: Basic: Continuing operations $0.21 $0.19 Discontinued operations (0.02) (0.04) Net income $0.19 $0.15 Fully diluted: Continuing operations $0.21 $0.19 Discontinued operations (0.02) (0.04) Net income $0.19 $0.15 Weighted average shares outstanding: Basic 10,525,653 9,681,504 Fully diluted 10,924,037 9,970,277 Reconciliation of Income from Operations to EBITDA Income from operations $5,739 $4,292 Depreciation and amortization 2,043 1,484 EBITDA $7,782 $5,776 Segment Net Sales: Food Packaging $67,409 $44,656 Specialty Laminations 20,143 24,590 Elimination of Specialty Laminations intercompany sale (768) (712) Total $86,784 $68,534 Segment Operating Income: Food Packaging $4,172 $2,128 Specialty Laminations 1,567 2,164 Total $5,739 $4,292 PACKAGING DYNAMICS CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share data) (unaudited) March 31, December 31, 2005 2004 ASSETS (unaudited) Current Assets: Cash and cash equivalents $380 $1,175 Accounts receivable trade (net of allowance for doubtful accounts of $828 and $825) 31,014 31,174 Inventories 40,591 36,506 Prepaid expenses and other 6,259 5,962 Total current assets 78,244 74,817 Property, Plant and Equipment: Property, plant and equipment 81,733 80,978 Less -- accumulated depreciation (31,077) (29,284) Total property, plant and equipment 50,656 51,694 Other Assets: Goodwill 81,263 81,263 Other 20,513 20,893 Total other assets 101,776 102,156 Total Assets $230,676 $228,667 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $6,343 $6,093 Cash overdraft 3,706 6,339 Accounts payable 24,643 20,793 Accrued salary and wages 3,087 3,420 Other accrued liabilities 7,310 8,207 Total current liabilities 45,089 44,852 Long-term Debt 109,876 110,386 Other Liabilities 6,937 7,592 Deferred Income Taxes 16,960 15,975 Total Liabilities 178,862 178,805 Commitments and Contingencies Stockholders' Equity: Common stock, $.01 par value - 40,000,000 shares authorized; 10,542,505 and 10,514,837 shares issued and outstanding at March 31, 2005 and December 31, 2004 106 105 Preferred stock, $.01 par value - 5,000,000 shares authorized; no shares issued and outstanding - - Paid in capital in excess of par value 57,826 57,570 Other comprehensive income 844 486 Accumulated deficit (6,962) (8,299) Total stockholders' equity 51,814 49,862 Total Liabilities and Stockholders' Equity $230,676 $228,667 PACKAGING DYNAMICS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited) For the Three Months Ended March 31, 2005 2004 Cash flows from operating activities: Net income $2,022 $1,482 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 2,043 1,484 Amortization of deferred finance costs 154 86 Provision for doubtful accounts 3 94 Deferred income taxes 924 114 Changes in assets and liabilities: Accounts receivable 157 (1,445) Inventories (4,085) (663) Other assets 158 (648) Accounts payable and accrued liabilities 2,093 1,226 Net cash from continuing operating activities 3,469 1,730 Net cash used by discontinued operating activities (90) (1,232) Net cash from operating activities 3,379 498 Cash flows used by investing activities: Additions to property, plant and equipment (755) (1,544) Net cash used by continuing investing activities (755) (1,544) Net cash from discontinued investing activities - 152 Net cash used by investing activities (755) (1,392) Cash flows from (used by) financing activities: Principal payments for loan obligations (1,460) (1,250) Proceeds under revolving line of credit 19,700 14,600 Repayments under revolving line of credit (18,500) (14,700) Payment of dividends (685) (484) Change in cash overdrafts (2,633) 2,703 Other, net 159 (4) Net cash from (used by) financing activities (3,419) 865 Net decrease in cash and cash equivalents (795) (29) Cash and cash equivalents at beginning of period 1,175 453 Cash and cash equivalents at end of period $380 $424 DATASOURCE: Packaging Dynamics Corporation CONTACT: Ms. Sharon Thompson of Packaging Dynamics Corporation, +1-773-843-8013 Web site: http://www.pkdy.com/

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