Consumables

Orchids Paper Products Company Reports Record Earnings And Net Sales

Thursday 24. October 2013 - Orchids Paper Products Company (NYSE MKT: TIS) today reported third quarter 2013 financial results.

Executive Summary:
— Established a new quarterly record for EBITDA of $6.9 million.
— Established a new quarterly record for both total net sales and
converted product net sales of $29.8 million and $28.2 million,
respectively.
— Converted product shipments were 2,096,000 cases, exceeding the record
set in the second quarter of 2013 of 2,080,000.
— Third quarter 2013 net income was $3.7 million, an increase of $1.4
million, or 60%, compared with $2.3 million of net income in the same
period of 2012.
— Diluted net income per share for the third quarter 2013 was $0.47 per
diluted share compared with $0.29 per diluted share in the same period
in 2012.
Mr. Robert Snyder, President and Chief Executive Officer, stated, “In the third quarter of 2013, we delivered another strong quarter and established new quarterly records for total net sales, converted product net sales and EBITDA. The strong sales performance coupled with good cost controls and lower fiber prices helped drive our record profits. Our converted product business momentum has continued to build with shipments achieving a record level during the third quarter.”
Mr. Snyder added, “We anticipate growth in our converted product business due to our ability to manufacture a full spectrum of quality grades from opening price point to premium tier, which enhances our ability to grow our sales beyond market growth rates. Shipment volumes in the fourth quarter of this year are expected to slightly exceed those achieved in the third quarter. As a result, our full year shipments are expected to exceed 2012 levels by approximately 17%. We have established a strong base of business for the coming year and continue to work on new business for 2014.”
Three-month period ended September 30, 2013
Net sales in the quarter ended September 30, 2013 were $29.8 million, an increase of $4.0 million, or 15%, compared to $25.8 million in the same period of 2012. Net sales of converted product were $28.2 million in the 2013 quarter, favorable by $5.4 million, or 24%, compared to the $22.8 million of net sales in the same quarter last year. Net sales of parent rolls decreased to $1.6 million in the third quarter of 2013 compared with $3.0 million in the same quarter last year. The increase in converted product sales resulted from a 24% increase in converted product tonnage shipped. The increase in shipments was primarily due to new product sales in the mid- and premium tier markets.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter ended September 30, 2013 was $6.9 million, an increase of $1.6 million, or 30%, compared to $5.3 million in the same period in the prior year. As a percent of net sales, EBITDA was 23.3% in the 2013 quarter compared with 20.6% in the 2012 quarter.
Gross profit for the third quarter of 2013 was $7.1 million, an increase of $1.7 million, or 32%, when compared with a gross profit of $5.4 million in the prior year quarter. Gross profit as a percent of net sales was 24.0% in the third quarter of 2013 compared to 20.9% for the same period in 2012. As a percent of net sales, gross profit increased primarily due to a higher percentage of converted product sales, lower fiber prices and lower paper manufacturing costs being partially offset by external warehousing costs and the costs associated with the purchase of external parent rolls, which exceeds the cost of parent rolls produced internally, for consumption in the converting operation.
Fiber costs in the third quarter of 2013 were lower than the costs incurred in the same quarter of 2012, resulting in a reduction in cost of sales of approximately $570,000. Overhead costs in the paper manufacturing area in the third quarter of 2013 were approximately $530,000 lower than the prior year costs primarily due to lower maintenance and repair costs.
Selling, general and administrative expenses in the third quarter of 2013 totaled $2.1 million, an increase of $93,000 or 5%, compared to the same period in the prior year. The increase was primarily due to higher sales commissions due to higher converted product sales. Selling, general and administrative expenses as a percent of net sales in the 2013 quarter were 7.1% compared to 7.9% for the prior year quarter.
Interest expense for the third quarter of 2013 totaled $92,000 compared to interest expense of $99,000 in the same period in 2012. The lower level of interest expense resulted from lower amounts outstanding under the Company’s credit facility.
As of September 30, 2013, the effective tax rate for the full year is estimated to be 26.2%, which includes the 1.3% favorable effect of an Indian employment tax credit (“IEC”) for 2012 that was recognized in the first quarter of 2013. This estimate compares favorably to the 28.4% effective tax rate (including the IEC) estimated as the end of the second quarter of 2013. The decrease in the estimated annual effective tax rate had the effect of increasing earnings per share by approximately $0.01 in the third quarter.
Nine-month period ended September 30, 2013
Net sales in the nine-month period ended September 30, 2013 were $85.6 million, an increase of $8.8 million, or 11%, compared to $76.8 million in the same period of 2012. Net sales of converted product were $80.6 million in the 2013 period, favorable by $11.9 million, or 17%, compared to the $68.7 million of net sales in the same period last year. Net sales of parent rolls decreased to $5.0 million in the first nine months of 2013 compared with $8.1 million in the same period last year. The increase in converted product sales resulted from a 17% increase in converted product tonnage shipped, while net selling price per ton remained flat when compared to 2012. The increase in shipments was primarily due to new product sales which were primarily in the mid and premium-tier markets. The decrease in parent roll sales was primarily due to the higher converting requirements due to the increased shipments.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the nine-month period ended September 30, 2013 was $19.5 million, an increase of $3.5 million, or 22%, compared to $16.0 million in the same period in the prior year. As a percent of net sales, EBITDA was 22.7% in the 2013 period compared with 20.8% in 2012.
Gross profit for the first nine months of 2013 was $20.7 million, an increase of $3.5 million, or 21%, when compared with a gross profit of $17.1 million in the prior year period. Gross profit as a percent of net sales was 24.1% in the nine-month period of 2013 compared to 22.3% for the same period in 2012. As a percent of net sales, gross profit increased primarily due to a higher percentage of converted product sales, lower fiber prices and lower paper manufacturing costs being partially offset by external warehousing costs.
Fiber costs in the nine-month period ended September 30, 2013 were approximately $1.2 million lower than the costs incurred in the same period of 2012. Overhead costs in the paper manufacturing area in the first nine months of 2013 were approximately $1.2 million lower than the prior year costs primarily due to lower maintenance and repair costs and lower utility costs and the increased costs associated with the purchase of external parent rolls for consumption in the converting operation.
Selling, general and administrative expenses in the first nine months of 2013 totaled $6.9 million, an increase of $484,000 or 8%, compared to the same period in the prior year. The increase was primarily due to higher sales commissions due to higher converted product sales and, to a lesser extent, higher director related fees and expenses, including stock option expense, being partially offset by lower professional fees. Selling, general and administrative expenses as a percent of net sales was 8.1% in the current year period as compared to 8.4% in the prior year period.
Interest expense for the nine-month period ended September 30, 2013 totaled $280,000 compared to interest expense of $308,000 in the same period in 2012. The lower level of interest expense resulted from lower amounts outstanding under the Company’s credit facility.
Cash provided by operations for the nine-month period ended September 30, 2013 was basically flat compared to the prior year period at $11.7 million. Cash earnings were somewhat offset by increases in accounts receivable and inventories to support the increased sales. Capital expenditures for the nine-month periods were $7.6 million in 2013 and $4.3 million in 2012. The Company expects capital expenditures for the full-year 2013 to be approximately $10.6 million. The Company maintained its quarterly dividend rate of $0.35 per share in the quarter, resulting in a dividend payment of approximately $2.8 million during the quarter. For the year-to-date period, dividend payments totaled $7.9 million.
Total debt outstanding as of September 30, 2013 was $15.4 million and the total of cash and short-term investments stood at $10.1 million. As a result, Net Debt outstanding as of September 30, 2013 was $5.3 million.