Consumables

Orchids Paper Products Company Reports 2012 Third Quarter Results

Thursday 25. October 2012 - Orchids Paper Products Company (NYSE MKT: TIS) today reported third quarter 2012 financial results.

Summary:
— Net sales of converted product in the third quarter of 2012 were $22.8
million, an increase of $1.4 million, or 6%, over the prior year
quarter. Net sales of converted product on a year-to-date basis were
$68.7 million, an increase of $10.6 million, or 18%, over the prior year
period.
— Total net sales in the third quarter of 2012 decreased 1% to $25.8
million, compared with $26.1 million in the same period in 2011. On a
year-to-date basis, total net sales increased $4.6 million, or 6%, to
$76.8 million.
— Third quarter 2012 net income was $2.3 million, an increase of $678,000,
or 41%, compared with $1.6 million of net income in the same period of
2011. Net income for the nine-month period ended September 30, 2012 was
$7.1 million, an increase of $3.6 million, or 105%, compared to the $3.5
million for the nine-month period of 2011.
— Diluted net income per share for the third quarter 2012 was $0.29 per
diluted share compared with $0.21 per diluted share in the same period
in 2011. On a year-to-date basis, diluted net income per share was
$0.90 per share for the 2012 period compared to $0.45 per diluted share
for the 2011 period.
Mr. Robert Snyder, President and Chief Executive Officer, stated, “We are pleased to announce our results for the third quarter, which were in line with our expectations. Our converted product business continues to show strength, as evidenced by our above market improvement in shipments in the third quarter of this year. More importantly, we anticipate that our recently announced new business gains will increase our annual run rate by approximately 1.1 million cases, providing for a strong ending to 2012 and a solid foundation for the beginning of 2013.”
Mr. Snyder added, “The market for business opportunities continues to be strong. We are optimistic about our future growth, as we leverage our new product development and market strategy to further penetrate mid-tier market opportunities with new and existing customers.”
Three-month period ended September 30, 2012
Net sales in the quarter ended September 30, 2012 were $25.8 million, a decrease of $332,000, or 1%, compared to $26.1 million in the same period of 2011. Net sales of converted product were $22.8 million in the 2012 quarter, favorable by $1.4 million, or 6%, compared to the $21.4 million of net sales in the same quarter last year. Net sales of parent rolls were $3.0 million in the third quarter of 2012, a decrease of $1.7 million, or 36%, compared to $4.7 million of parent roll sales in the same quarter last year. The increase in converted product sales resulted from an 8% increase in converted product tonnage shipped partially offset by a 2% decrease in net selling price per ton. The increase in shipments was due to a combination of new product sales which were primarily in the mid-tier market, and increased product distribution with existing customers. Net sales of parent rolls were lower primarily due to the increased requirements of our converting operations.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter ended September 30, 2012 was $5.3 million, an increase of $1.1 million, or 27%, compared to $4.2 million in the same period in the prior year. As a percent of net sales, EBITDA was 20.6% in the 2012 quarter compared with 16.1% in the 2011 quarter.
Gross profit for the third quarter of 2012 was $5.4 million, an increase of $1.5 million, or 37%, when compared with a gross profit of $3.9 million in the prior year quarter. Gross profit as a percent of net sales was 20.9% in the third quarter of 2012 compared to 15.1% for the same period in 2011. As a percent of net sales, gross profit increased primarily due to increased levels of converted product shipments, lower fiber prices, and lower per case converting production costs, which were partially offset by higher maintenance and repair costs in the paper manufacturing operation.
Converted product sales increased as a percentage of overall sales, which had a positive effect on overall gross profit because converted product sales generally provide a higher gross profit margin than parent roll sales. Converting production costs were lower as a percentage of sales due to the increased converted product volumes during the quarter. Cost per ton of fiber in the third quarter of 2012 was 27% lower than the costs incurred in the same quarter of 2011, resulting in a reduction in cost of sales of approximately $1.7 million.
Selling, general and administrative expenses in the third quarter of 2012 totaled $2.0 million, an increase of $521,000, or 35%, compared to $1.5 million incurred in the same quarter of 2011. As a percent of net sales, selling, general and administrative expenses increased to 7.9% for the quarter ended September 30, 2012, compared to 5.8% in the prior year quarter. Selling, general and administrative expense increased primarily due to increased artwork expenses due to new product introductions, increased professional fees, and increased accruals under our incentive bonus plan.
Interest expense for the third quarter of 2012 totaled $99,000 compared to interest expense of $103,000 in the same period in 2011.
As of September 30, 2012, the effective tax rate for the full year is estimated to be 30.0%. This compares to the 30.3% we estimated as of the end of the second quarter of 2012. As a result, the effective rate for the third quarter of 2012 was 28.8%.
Total debt outstanding as of September 30, 2012 was $16.5 million, which when offset by the total of cash and short-term investments of $8.8 million, resulted in net debt of $7.7 million.
On September 21, 2012, the Company paid dividends totaling $1.5 million, or $0.20 per share, to stockholders of record as of September 5, 2012.
Nine-month period ended September 30, 2012
Net sales for the nine-month period ended September 30, 2012 increased $4.6 million, or 6%, to $76.8 million when compared to the $72.2 million reported for the prior year period. Net sales of converted product were $68.7 million for the 2012 period, an increase of $10.6 million, or 18%, when compared to the prior year period. As a result of the increased converted product sales, net sales of parent rolls for 2012 decreased $5.9 million, or 42%, to $8.1 million compared to $14.0 million in the prior year period commensurate with the increase in converted product shipments. Converted product sales increased due to a 21% increase in tonnage shipped being partially offset by a 2% decrease in net selling prices per ton.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the nine-month period ended September 30, 2012 was $16.0 million, an increase of $5.3 million, or 49%, compared to $10.7 million in the same period in the prior year. As a percent of net sales, EBITDA was 20.8% in the 2012 period compared with 14.9% in the 2011 period.
Gross profit for the nine-month period ending September 30, 2012 was $17.1 million, an increase of $6.7 million, or 65%, over the $10.4 million for the 2011 period. The improvement is the result of the same factors cited above for the quarterly results. Our cost of fiber for the current year-to-date period was approximately 24% lower than the costs for the prior year period, which had the effect of reducing our cost of sales by approximately $4.1 million.
Selling, general and administrative expenses for the nine-month period ended September 30, 2012 were $6.4 million, an increase of $1.5 million, or 31%, compared to the prior year period. As a percent of net sales, selling, general and administrative expenses were 8.4% for the 2012 period compared to 6.8% for the 2011 period. The increased expenses were primarily due to the same factors cited in the quarterly discussion as well as increased commission expense due to higher levels of converted product sales.
Interest expense for the nine-month period ended September 30, 2012 was $308,000 compared to the $543,000 reported for the 2011 period. The reduction was due to the refinancing of the Company’s debt facility in April 2011.