Business News
Pregis Announces Third Quarter 2010 Financial Results
Monday 15. November 2010 - Pregis Corporation, a leading international manufacturer, marketer, and supplier of protective packaging products and specialty packaging solutions, today announced its 2010 third quarter financial results.
For the third quarter of 2010, the Company generated net sales of $223.7 million, an increase of 8.0% versus net sales of $207.0 million in same quarter of 2009. Excluding the impact of unfavorable foreign currency translation, resulting from the U.S. dollar strengthening against the euro and pound sterling on a year-over-year basis, and the sales associated with our recently completed acquisition of IntelliPack, the quarter’s net sales were higher by 11.6% compared to the prior year quarter. The sales increase was driven by increased volumes, which resulted from the impact of economic recovery as well as the Company’s growth initiatives, along with the impact of selling price increases implemented in 2010.
Gross profit margin, as a percent of net sales, was 21.2% in the third quarter of 2010, compared to 24.6% in same quarter of 2009. The year-over-year decline in gross margin as a percent of net sales was driven by increased key raw material costs partially offset by increased volumes, year-over-year selling price increases, and the impact from the Company’s cost reduction programs. Average resin costs in North America and Europe for the third quarter 2010, as measured by their respective indices, were 20% and 30% higher, respectively, compared to the same quarter in 2009.
The Company generated operating income of $2.1 million in the third quarter of 2010 compared with operating income of $7.4 million for the same quarter 2009. The decrease in operating income was driven primarily by increased key raw materials costs as well as a non-cash loss related to a sales leaseback transaction completed on July 19, 2010.
Adjusted EBITDA, or “Consolidated Cash Flow” as defined by our indentures, is a significant operating measure used by the Company to measure its operating performance and liquidity. Adjusted EBITDA was $20.2 million in the third quarter of 2010 compared to $25.2 million for the same period in 2009. The year-over-year decrease in adjusted EBITDA was driven by the same drivers impacting operating income as described above.
Commenting on the Company’s results, Mike McDonnell, President and Chief Executive Officer, stated, “In the third quarter, we drove volume growth, both year-over-year and sequentially, as a result of our organic growth initiatives including new offerings in inflatable and foam-in-place systems, sustainable product designs, and fresh and processed food packaging, as well as strong performance in emerging markets. However, the positive impact of this growth was more than offset by significant year-over-year increases in our key raw material costs, which were higher compared with the third quarter 2009 by over 20% in North America and nearly 30% in Europe based on their respective indices.”
Mr. McDonnell continued, “As discussed last quarter, we implemented selling price increases in the second quarter of 2010 in North America and in the second and third quarters of 2010 in Europe, but we were disappointed that we were not able to achieve the full value of these increases in order to offset the increases in raw material costs this year. Resin costs have continued to increase in the third quarter in both North America and Europe. Consequently, we launched an additional price increase in North America in October, and we are currently evaluating additional increases in Europe. We remain committed to fully pass through the increases in raw materials, as we have done successfully in previous years, in order to recover our margins.”
Segment Performance
Comments on segment net sales and EBITDA performance for the third quarter of 2010 is as follows:
— Third quarter 2010 net sales for the protective packaging segment
increased by $12.9 million, or 10.0% compared to the same quarter of
2009. This increase was driven primarily by increased volumes resulting
from improved economic conditions, the impact of the Company’s growth
initiatives, and the IntelliPack acquisition, partially offset by
unfavorable foreign currency translation. Excluding the unfavorable
foreign currency translation and the IntelliPack acquisition, net sales
for the third quarter 2010 increased 10.1%.
— Third quarter 2010 EBITDA of the protective packaging segment decreased
$1.7 million compared to the same quarter of 2009. This decrease was
primarily due to significantly higher key raw material costs which were
partially offset by increased sales.
— Third quarter 2010 net sales of the specialty packaging segment
increased $3.8 million, or 4.8% compared to the same quarter 2009. This
increase was primarily driven by increased volumes in our fresh food
packaging markets, which more than offset the impact of unfavorable
foreign currency translation. Excluding the unfavorable foreign
currency translation, net sales for the third quarter 2010 increased
14.2% year-over-year.
— Third quarter 2010 EBITDA of the specialty packaging segment decreased
$3.7 million compared to the same quarter 2009. This decrease was due
to increased key raw material costs, higher energy costs, and
unfavorable foreign currency translation, partially offset by increased
volumes.