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Management Side
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Orchids Paper Products Company
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Pryor, Oklahoma, USA, 13 August 2007 -- /PRNewswire/ -- Orchids Paper Products Company (AMEX:TIS) today reported net sales and EBITDA levels for the second quarter of 2007 of USD 18.5 million and USD 2.3 million, respectively, each a new quarterly record.

Net sales of USD 18.5 million in the second quarter of 2007 represented an increase of 35% over the USD 13.7 million reported in the prior year quarter. The increase in net sales in the 2007 quarter was due to a 46% increase in total tons shipped, to approximately 12,800 tons, partially offset by a 7% decrease in average selling price. Increased shipments of parent rolls and converted products accounted for the volume increase, while the average price decrease was a function of the increase in parent roll sales.

For the first six months of 2007, the company reported net sales of USD 35.2 million, an increase of 27% compared to USD 27.8 million reported for the first six months of 2006. Shipments rose 33% to approximately 24,000 tons in the six-month period of 2007, compared to approximately 18,000 tons in the same period of 2006. The net selling price per ton declined 5% in the first six months of 2007 compared to 2006 primarily due to the effect of increased sales of parent rolls to third parties.

In the second quarter of 2007, earnings before interest, taxes, depreciation and amortization (EBITDA) increased USD 2.2 million to USD 2.3 million, compared to USD 169,000 in the same period of 2006. EBITDA as a percent of net sales increased to 13% in the current year quarter compared to 1% in the prior year quarter. EBITDA increased USD 2.9 million to USD 3.8 million in the six months ended 30 June 2007, from USD 0.9 million in the same period of 2006. EBITDA as a percent of net sales increased to 11% in the current year six-month period compared to 3% in the comparable prior year period. For both the quarter and year-to-date periods, the largest causes for the increase in EBITDA as a percentage of net sales were lower paper costs due to the elimination of purchases of recycled parent rolls and lower internal costs of producing parent rolls.

The company reported net income of USD 743,000, or USD 0.12 per diluted share, in the second quarter of 2007, an increase of USD 1.0 million compared with a net loss of USD 293,000, or (USD 0.05) per diluted share, in the same period of 2006. Net income was USD 612,000, or USD 0.10 per diluted share, for the first six months of 2007, an increase of USD 723,000 compared to the USD 111,000 loss reported for the first half of 2006.

Gross profit for the second quarter of 2007 was USD 2.9 million compared to USD 1.0 million in the prior year quarter. Gross profit as a percentage of net sales more than doubled from 7% in the second quarter of 2006 to 16% in the second quarter of 2007. Gross profit in the first six months of 2007 increased USD 2.2 million, or 88%, to USD 4.8 million compared to USD 2.6 million in the same period in 2006. Gross profit as a percentage of net sales increased from 9% to 14% from the first six months of 2006 to the same period in 2007.

The company benefited in both the quarter and six-month period of 2007 from lower overall cost of paper. As a result of the production of the company's new paper machine, which started up in June 2006, recycled parent roll purchases were not required in the first six months of 2007, thereby reducing the company's overall paper cost. Internal paper production cost was lower due to the added production and efficiencies from the production of the new paper machine which started operating in June 2006. These cost savings were partly offset by higher raw material prices, electricity rates, converting labor costs, and depreciation expense. Prices paid for waste paper increased approximately 37% and 33%, in the second quarter and six-month period of 2007 compared to the same periods in 2006, respectively.

Selling, general, and administrative expenses in the second quarter of 2007 totaled USD 1.4 million, an increase of 7% compared to USD 1.3 million in the second quarter of 2006. Higher commission expense, due to greater finished converted product sales, and executive search costs accounted for most of the increase. Selling, general and administrative expenses increased USD 33,000, or 1%, to USD 2.6 million in the six months ended 30 June 2007 mainly as a result of higher commission expense due to higher sales levels. As a percent of net sales, selling, general and administrative expenses decreased to 7% in the second quarter and first six months of 2007 compared to 9% in the same periods of 2006.

Interest expense increased USD 465,000 to USD 708,000 in the second quarter of 2007, compared to USD 243,000, net of capitalized interest of USD 511,000 related to the company's new paper machine project. Excluding the interest capitalization, interest expenditures decreased USD 46,000 in the second quarter of 2007 compared to the same period in 2006. Lower interest rate margins under the company's new credit facility dated 09 April 2007, accounted for the lower interest expenditures in the 2007 quarter. Interest expense increased to USD 1,581,000 in the first six months of 2007, compared to USD 290,000, net of capitalized interest of USD 992,000 related to the company's new paper machine project. Excluding the interest capitalization, interest expenditures increased USD 299,000 in the first six months of 2007 compared to the same period in 2006. For the six-month period, interest expenditures were higher mainly due to increased average debt levels for the 2007 period resulting from borrowings during 2006 to fund construction of the new paper machine, which was partially offset by lower interest rate margins beginning in April 2007.

Commenting on the second quarter results, Keith Schroeder, chief financial officer, stated, "We began to realize the expected benefits from our investment in the new paper machine in the second quarter and expect to continue improved performance in the coming quarters. We will continue to seek improvements in the productivity and cost effectiveness of our production facilities as well as to expand our customer base and business with our existing customers." Jay Shuster, chairman of the board of directors, commented, "The company is developing a continuous improvement plan that will provide us the opportunity to take full advantage of our production assets, allow us to improve our cost performance and maximize our sales potential."

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 waste paper to produce finished tissue products which it provides to retail chains throughout the central United States. For more information on the company and its products, visit the company's Web site at http://www.orchidspaper.com/.


Orchids Paper Products Company
Selected Financial Data
(in thousands, except net selling price per ton, tonnage, cost per ton and
per share data; $ = U.S. dollars [USD])

Three Months Ended Six Months Ended
30 June 30 June
2007 2006 2007 2006
Net Sales $18,515 $13,675 $35,152 $27,774
Cost of Sales 15,567 12,669 30,334 25,205
Gross Profit 2,948 1,006 4,818 2,569
Selling, General and
Administrative Expenses 1,365 1,281 2,562 2,529
Operating Income (Loss) 1,583 (275) 2,256 40
Interest Expense 708 243 1,581 290
Other (Income) Expense, net (7) (51) (27) (63)
Income (Loss) Before
Income Taxes 882 (467) 702 (187)
Provision (Benefit) for
Income Taxes 139 (174) 90 (76)
Net Income (Loss) $743 $(293) $612 $(111)

Net income (loss) per share:
Basic $0.12 $(0.05) $0.10 $(0.02)
Diluted $0.12 $(0.05)(1) $0.10 $(0.02)(1)

Other Income Statement Data:
Depreciation $749 $393 $1,498 $786
Commission Expense $256 $193 $478 $391
Earnings Before Interest,
Income Taxes, Depreciation
and Amortization (EBITDA) $2,339 $169 $3,781 $889

Operating Data:
Total Tons Shipped 12,816 8,756 23,977 17,974
Net Selling Price per Ton $1,445 $1,562 $1,466 $1,545
Total Paper Cost per Ton
Consumed $735 $862 $756 $865
Total Paper Cost $9,418 $7,549 $18,115 $15,540

Cash Flow Data:
Cash Flow Provided by (Used in):
Operating Activities $979 $1,260 $1,909 $1,297
Investing Activities $1,357 $(6,329) $1,280 $(15,105)
Financing Activities $(2,335) $5,070 $(3,188) $13,435



Balance Sheet Data:
As of
30 June 31 December
2007 2006
Working Capital $4,142 $5,025
Net Property, Plant and Equipment $56,761 $58,039
Total Assets $69,341 $71,028
Long-Term Debt, net of current portion $28,559 $31,575
Total Stockholders' Equity $25,485 $24,704

(1) Due to net loss, warrant and option shares are anti-dilutive, thus
not considered.

Source: Orchids Paper Products Company



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