Orchids Paper Products Company Announces Record Twelve-Month Net Sales And Earnings; Declares Dividend Of $0.35 Per Share

Feb 03, 2016, 16:30 ET from Orchids Paper Products Company

PRYOR, Okla., Feb. 3, 2016 /PRNewswire/ -- Orchids Paper Products Company (NYSE MKT: TIS) today reported the following.





Three Months Ended


Twelve Months Ended





December 31, 


December 31,





2015

2014


2015

2014

Net sales:








Converted product


$ 40,175

$ 41,340


$161,052

$138,382


Parent rolls


1,729

-


7,394

4,342


Total net sales


$ 41,904

$ 41,340


$168,446

$142,724

Gross profit


$   8,147

$   6,447


$  30,497

$  26,739

Net income


$   3,701

$   2,446


$  13,557

$    9,465

Adjusted net income


$   3,890

$   2,762


$  13,765

$  12,096

Diluted net income per share


$     0.36

$     0.28


$     1.38

$     1.11

Adjusted diluted net income per share

$     0.38

$     0.31


$     1.40

$     1.42

EBITDA


$   8,698

$   5,985


$  31,357

$  23,819

Adjusted EBITDA


$   8,969

$   6,448


$  32,405

$  27,670










Other Selected Financial Data:








Gross profit margin


19.4%

15.6%


18.1%

18.7%


EBITDA margin


20.8%

14.5%


18.6%

16.7%


Adjusted EBITDA margin


21.4%

15.6%


19.2%

19.4%

Jeff Schoen, President and Chief Executive Officer, stated, "Orchids achieved a record setting year in 2015.  Following our record setting results in the third quarter of 2015, our fourth quarter performance resulted in annual records in Net Sales, Adjusted Net Income and Adjusted EBITDA.  Our results for the quarter were negatively affected by an incident that damaged a section of one of our converting lines, which restricted production in the face of strong open orders, causing a reduction in sales in the quarter.  This is an insured incident which we believe will result in an approximate $1.0 million claim, or $0.06 per share, related to these lost sales under our business interruption insurance, which has not been included in our 2015 results." 

Mr. Schoen continued, "In 2015, we continued to work toward our vision to be recognized as a national supplier of high quality consumer tissue products in the value, premium and ultra-premium tier product segments.  This year, we began to execute our long-term goal to increase Orchids' Adjusted EBITDA and earnings per share by maximizing sales and profitability across our manufacturing sites in Oklahoma and South Carolina and our operations in Mexico.  We successfully implemented a new converting line and a new paper machine in our Oklahoma location, resulting in capacity and cost improvements, and began construction on our greenfield site in South Carolina.  Additionally, our first full-year of sales from our supply agreement with Fabrica provided a significant increase in sales and EBITDA, as expected.  We believe the opportunity for growth in our converted product business is strong, and we will continue to focus on maximizing sales, improving the manufacturing capacity of our current assets while also improving operating costs, and bringing converted product production on-line in South Carolina.  Our South Carolina facility is progressing as planned, with start-up of the first converting line expected in February and start-up of the second line in the second quarter of 2016.  Engineering of the paper machine is underway and it is expected to become operational in early 2017."

Three-month period ended December 31, 2015

Net sales of converted product decreased primarily due to:  

  • lower than planned production from our Oklahoma facility due to an incident on one of our main converting lines, which took the line out of commission for approximately eight weeks during the quarter.  The line went back into operation in December at a reduced rate of production.  At present, the line is operating close to pre-incident run rates.  Estimated lost sales in the quarter due to the production shortfall are approximately 300,000 cases.

Net sales of parent rolls increased due primarily to:

  • demolition of two older paper machines in the fourth quarter of 2014.  The resulting decrease in production capacity resulted in having no excess parent rolls to sell on the open market during the prior year quarter.

Gross profit as a percent of net sales increased primarily due to:

  • higher margins under the supply agreement with Fabrica, resulting from a strong US dollar exchange rate with the Mexican peso, SKU optimization and price increases in the "away from home" business.
  • margins on parent roll sales. The start-up of the new paper machine in Oklahoma lowered operating costs and resulted in increased parent roll tonnage available for sale.
  • lower production costs in our paper making operation.

Gross profit was negatively affected by:

  • lower production due to the converting line incident. Due to the lower production and strong open orders, we estimate lost sales and the resultant margins on approximately 300,000 cases. This incident is covered by a business interruption insurance policy, under which we expect to recover approximately $1.0 million when settled. Additionally, we recorded the $100,000 deductible on the property and casualty insurance claim to repair and maintenance costs during the quarter.
  • higher fiber costs. The combination of price changes and mix of fiber consumed in the fourth quarter of 2015 resulted in an approximate $152,000 decrease in gross profit.
  • higher converted product production costs, due primarily to higher repairs and maintenance expense and higher labor costs.
  • higher depreciation.

Twelve-month period ended December 31, 2015

Net sales of converted product increased primarily due to:

  • the full-year effect of shipments under the supply agreement with Fabrica.
  • an 8% increase in shipments from our Oklahoma site.

Net sales of converted product were negatively affected by:

  • a 5% decrease in net selling price per ton due to a change in mix of converted products sold, including "away from home" sales associated with the Fabrica transaction, which typically have a lower selling price than "at home" sales. 

Net sales of parent rolls increased primarily due to:

  • a 51% increase in tons shipped due to the increased production in 2015 from our new paper machine project, as discussed above.
  • a 13% increase in selling price per ton.

Gross profit as a percent of net sales decreased primarily due to:

  • the effects of the Oklahoma paper machine project on our first quarter results.
  • higher fiber costs. Average fiber prices across our fiber basket increased by 4% in 2015, resulting in an approximate $2.4 million decrease in gross profit. Additionally, we consumed approximately 3,000 tons of purchased parent rolls at a cost of approximately $3.4 million in 2015.
  • higher converted product production costs, primarily due to higher labor and repairs and maintenance expense.
  • The effects of the converting line incident, as discussed above.

Income Taxes

As of December 31, 2015, our effective tax rate is 30.9%, as compared to the 33.9% effective tax rate estimated at the end of the third quarter of 2015.  The lower estimated effective tax rate is the result of the December 2015 ratification of the Indian Employment Tax Credits for 2015 and 2016 and state investment tax credits that were higher than previously estimated.  A change in our estimated state tax liabilities had a positive effect of $0.05 on net income per diluted share for the twelve-months ended December 31, 2015.

Liquidity





Twelve Months Ended





December 31, 





2015

2014

Cash Flow Provided by (Used in):




   Operating Activities  


$ 18,791

$ 20,152

   Investing Activities 


$(75,189)

$(37,434)

   Financing Activities


$ 59,738

$ 11,098

Cash provided by operations was primarily impacted by:

  • higher cash earnings, including increased deferred taxes from capital projects placed into service in 2015, offset by increased inventory levels, primarily due to an increase in parent roll inventory as we prepared for the start-up of our Barnwell site, and higher income taxes receivable.

Cash used in investing activities in 2015 includes:

  • $63.2 million on capital expenditures.
  • restriction of $12.0 million of cash in connection with a New Markets Tax Credit transaction. This cash will be used to fund a portion of the Barnwell greenfield project.

Cash provided by financing activities in 2015 was primarily impacted by:

  • $32.1 million of net proceeds from a follow on stock offering.
  • $31.1 million of borrowings under our term loans and $10.8 million under our revolving credit lines.
  • $5.1 million of proceeds received under our New Market Tax Credit transaction.
  • $2.7 million of debt repayments.
  • $13.8 million of dividends paid to stockholders.

Total long-term debt outstanding as of December 31, 2015 was $75.6 million and cash totaled $4.4 million. As a result, Net Debt outstanding as of December 31, 2015 was $71.2 million.

Dividend Declared

On February 3, 2016, the Orchids Board of Directors declared a quarterly dividend of $0.35 per share to be paid on March 1, 2016 to stockholders of record at the close of business on February 16, 2016.

Conference Call/Webcast

The Company will hold a teleconference to discuss its third quarter results at 10:00 a.m. (ET) on Thursday, February 4, 2016.  All interested parties may participate in the teleconference by calling 888 346 7791 and requesting the Orchids Paper Products teleconference.  A question and answer session will be part of the teleconference's agenda.  Those intending to access the teleconference should dial in fifteen minutes prior to the start.  The call may also be accessed live via webcast through the Company's website at www.orchidspaper.com under "Investors."  A replay of the teleconference will be available for 30 days on the Company's website.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures.  A non-GAAP financial measure is a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States in the statement of income, balance sheet or statement of cash flows of a company.  The five non-GAAP financial measures used within this press release are: (1) EBITDA, (2) Adjusted EBITDA, (3) Adjusted Net Income, (4) Adjusted Diluted Net Income Per Share and (5) Net Debt.    

EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Net Income Per Share are not measurements of financial performance under GAAP and should not be considered as an alternative to net income, operating income, diluted net income per share or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or a measure of our liquidity.  EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization.  Adjusted EBITDA excludes stock-based compensation expense, expenses related to business acquisitions and costs to demolish property, plant and equipment.  Adjusted Net Income excludes after-tax stock-based compensation expense, expenses related to business acquisitions, costs to demolish property, plant and equipment and the effects of a change in our estimated state tax liabilities.  Adjusted Diluted Net Income Per Share is calculated by dividing Adjusted Net Income by the number of diluted weighted average shares outstanding. Management believes EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Net Income Per Share facilitate operating performance comparisons from period to period and company to company by eliminating potential differences caused by variations in capital structures (affecting relative interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), the age and book depreciation of facilities and equipment (affecting relative depreciation expense) non-cash compensation (affecting stock-based compensation expense) and sporadic expenses (including costs of business acquisitions, demolition costs and changes in estimated state tax liabilities). 

Net Debt is not a measurement of financial performance under GAAP and should not be considered as an alternative to total debt outstanding, total liabilities or any other performance measure derived in accordance with GAAP.  Net Debt represents total debt outstanding reduced by cash and short-term investments on hand.  Management believes the presentation of Net Debt provides the reader with additional information regarding the Company's liquidity and debt leverage positions.

Forward-Looking Statements

This release contains forward-looking statements that involve certain contingencies and uncertainties.  The Company intends these forward-looking statements to be covered by the safe harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  These statements relate to future events or future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause its actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  In some cases, forward-looking statements can be identified by terminology such as "may," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "potential," "will" or "continue" or the negative of such terms or other comparable terminology.  Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements.  These statements are only predictions.

Factors that could materially affect the Company's actual results, levels of activity, performance or achievements include, without limitation, those detailed under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on March 9, 2015 and the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30,  and September 30, 2015, as filed with the Securities and Exchange Commission on May 8, August 5,  and November 9, 2015, respectively.

The Company's actual results may be materially different from what it expects.  The Company does not undertake any duty to update these forward-looking statements after the date hereof, even though the Company's situation may change in the future.  All of the forward-looking statements herein are qualified by these cautionary statements. 

About Orchids Paper Products Company

Orchids Paper Products Company is a customer-focused, national supplier of high quality consumer tissue products primarily serving the at home private label consumer market.  The Company produces a full line of tissue products, including paper towels, bathroom tissue and paper napkins, to serve the value through ultra-premium quality market segments from its operations in northeast Oklahoma and Mexicali, Mexico and beginning in 2016 from its Barnwell, South Carolina greenfield site.  The Company provides these products primarily to retail chains throughout the United States.  For more information on the Company and its products, visit the Company's website at http://www.orchidspaper.com.

Orchids Paper Products Company and Subsidiaries

Selected Financial Data

(in thousands, except tonnage and per share data)










Three Months Ended December 31,


Twelve Months Ended December 31,


2015


2014


2015


2014


(unaudited)


(unaudited)


(unaudited)


(unaudited)

Converted Product Net Sales

$         40,175


$         41,340


$   161,052


$   138,382

Parent Roll Net Sales

1,729


-


7,394


4,342

Net Sales

41,904


41,340


168,446


142,724

Cost of Sales

33,757


34,893


137,949


115,985

Gross Profit

8,147


6,447


30,497


26,739

Selling, General and Administrative Expenses

2,366


2,548


9,540


11,675

Intangibles Amortization

377


323


1,507


753

Operating Income 

5,404


3,576


19,450


14,311

Interest Expense

232


56


521


271

Other (Income) Expense, net

(176)


40


(683)


181

Income Before Income Taxes

5,348


3,480


19,612


13,859

Provision for Income Taxes

1,647


1,034


6,055


4,394

Net Income 

$          3,701


$          2,446


$     13,557


$      9,465









Average number of shares outstanding, basic

10,266,891


8,753,308


9,778,167


8,462,875

Average number of shares outstanding, diluted

10,349,113


8,822,732


9,844,221


8,538,752









Net income per share:








   Basic

$            0.36


$            0.28


$        1.39


$        1.12

   Diluted

$            0.36


$            0.28


$        1.38


$        1.11









Cash dividends paid

$          3,594


$          3,065


$     13,848


$     11,781

Cash dividends per share

$            0.35


$            0.35


$        1.40


$        1.40









Operating Data:








   Converted Product Tons Shipped

20,800


20,864


82,972


67,870

   Parent Roll Tons Shipped

1,754


-


7,436


4,922

   Total Tons Shipped

22,554


20,864


90,408


72,792









Cash Flow Data:








   Cash Flow Provided by (Used in):








   Operating Activities  

$          5,608


$          4,281


$     18,791


$     20,152

   Investing Activities 

$        (39,704)


$        (12,423)


$    (75,189)


$    (37,434)

   Financing Activities

$         29,907


$          5,672


$     59,738


$     11,098










As of 






December 31,


December 31,





Balance Sheet Data:

2015


2014






(unaudited)







Cash & Restricted Cash

$         16,366


$          1,021





Accounts Receivable, net

11,834


10,195





Inventory, net

13,501


9,650





Other Current Assets

9,917


3,432





Property Plant and Equipment

232,925


169,551





Accumulated Depreciation

(59,547)


(49,831)





Net Property Plant and Equipment

173,378


119,720





Intangibles and Goodwill, net

23,290


24,797





Other Long Term Assets

3,093


1,924





Total Assets

$       251,379


$       170,739













Accounts Payable and Bank Overdrafts

$         11,098


$         13,097





Accrued Liabilities

3,880


3,747





Total Debt

75,581


36,362





Other Long-Term Liabilities

5,098


-





Deferred Income Taxes

21,939


17,020





Total Stockholders' Equity

133,783


100,513





Total Liabilities and Stockholders' Equity

$       251,379


$       170,739





 

Orchids Paper Products Company and Subsidiaries

Selected Financial Data

(in thousands, except tonnage and per share data)









Non-GAAP Measurements (unaudited)










Three Months Ended December 31,


Twelve Months Ended December 31,

EBITDA Reconciliation:

2015


2014


2015


2014

   Net Income

$          3,701


$          2,446


$     13,557


$      9,465

     Plus: Interest Expense

232


56


521


271

     Plus: Income Tax Expense 

1,647


1,034


6,055


4,394

     Plus: Depreciation

2,741


2,126


9,717


8,936

     Plus: Intangibles Amortization

377


323


1,507


753

  Earnings Before Interest, Income Tax and Depreciation 

$          8,698


$          5,985


$     31,357


$     23,819

     and Amortization (EBITDA)

















Three Months Ended December 31,


Twelve Months Ended December 31,

Adjusted EBITDA Reconciliation:

2015


2014


2015


2014

   EBITDA

$          8,698


$          5,985


$     31,357


$     23,819

     Plus: Stock Compensation Expense

271


270


1,048


1,879

     Plus: Acquisition Costs

-


-


-


1,572

     Plus: Demolition Costs

-


193


-


400

  Adjusted Earnings Before Interest, Income Tax and 

$          8,969


$          6,448


$     32,405


$     27,670

     Depreciation and Amortization (Adjusted EBITDA)

















Three Months Ended December 31,


Twelve Months Ended December 31,

Adjusted Net Income Reconciliation:

2015


2014


2015


2014

   Net income

$          3,701


$          2,446


$     13,557


$      9,465

     Plus: Stock Compensation Expense, net of tax

189


184


724


1,284

     Plus: Acquisition Costs, net of tax

-


-


-


1,074

     Plus: Demolition Costs, net of tax

-


132


-


273

     Less: Change in Estimated State Tax Liabilities

-


-


(516)


-

  Adjusted Net income

$          3,890


$          2,762


$     13,765


$     12,096









Adjusted Diluted Net Income Per Share

$            0.38


$            0.31


$        1.40


$        1.42










As of 






December 31,


December 31,





Net Debt Reconciliation:  

2015


2014





   Current Portion Long-Term Debt

$          3,882


$          2,700





   Long-Term Debt

71,699


33,662





   Total Debt

75,581


36,362





   Less: Cash, net of Bank Overdrafts

(4,361)


685





   Net Debt

$         71,220


$         37,047













 

SOURCE Orchids Paper Products Company



RELATED LINKS

http://www.orchidspaper.com