DEERFIELD, Ill., Nov. 12, 2010 /PRNewswire/ -- 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.
A summary of Adjusted EBITDA, a significant measure required by the Company's indentures and used by the Company to measure its operating performance and liquidity, is presented in the supplemental information at the end of this release.
Conference Call:
The Company will conduct an investor conference call to review its 2010 third quarter results on Monday, November 15, 2010 at 11:00 a.m. ET (10:00 a.m. CT). The call can be accessed through the following dial-in numbers: Domestic: 800-638-5495; International: 617-614-3946; Participant Passcode: 21454238. A replay of the conference call will be available through November 26, 2010. The replay may be accessed using the following dial-in information: Domestic: 888-286-8010; International: 617-801-6888; Passcode: 10943663.
About Pregis:
Pregis Corporation is a leading global provider of innovative protective, flexible, and foodservice packaging and hospital supply products. The specialty-packaging leader currently operates 47 facilities in 18 countries around the world. Pregis Corporation is a wholly owned subsidiary of Pregis Holding II Corporation. For more information about Pregis, visit the Company's web site at www.pregis.com.
Safe Harbor Statement:
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. You can generally identify forward-looking statements by the Company's use of forward-looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "seek," "should," or "will," or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company's control. For a discussion of key risk factors, please see the risk factors disclosed in the Company's annual report, which is available on its website, www.pregis.com. These risks may cause actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these risk and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. The Company undertakes no duty to update its forward-looking statements.
Pregis Holding II Corporation Consolidated Balance Sheets Unaudited (dollars in thousands) |
|||||
September 30, 2010 |
December 31, 2009 |
||||
Assets |
|||||
Current assets |
|||||
Cash and cash equivalents |
$ 44,587 |
$ 80,435 |
|||
Accounts receivable |
|||||
Trade, net of allowances of $5,275 and $6,015 respectively |
136,785 |
120,812 |
|||
Other |
16,168 |
12,035 |
|||
Inventories, net |
91,551 |
81,024 |
|||
Deferred income taxes |
5,494 |
5,079 |
|||
Due from Pactiv |
1,178 |
1,169 |
|||
Prepayments and other current assets |
7,861 |
7,929 |
|||
Total current assets |
303,624 |
308,483 |
|||
Property, plant and equipment, net |
204,037 |
226,882 |
|||
Other assets |
|||||
Goodwill |
142,431 |
126,250 |
|||
Intangible assets, net |
54,313 |
38,054 |
|||
Deferred financing costs, net |
5,674 |
8,092 |
|||
Due from Pactiv, long-term |
8,305 |
8,429 |
|||
Pension and related assets |
14,411 |
13,953 |
|||
Restricted cash |
3,501 |
- |
|||
Other |
533 |
404 |
|||
Total other assets |
229,168 |
195,182 |
|||
Total assets |
$ 736,829 |
$ 730,547 |
|||
Liabilities and stockholder's equity |
|||||
Current liabilities |
|||||
Short-term debt |
$ 3,798 |
$ - |
|||
Current portion of long-term debt |
340 |
300 |
|||
Accounts payable |
97,900 |
78,708 |
|||
Accrued income taxes |
6,310 |
5,236 |
|||
Accrued payroll and benefits |
14,946 |
14,242 |
|||
Accrued interest |
12,238 |
7,722 |
|||
Other |
19,023 |
18,011 |
|||
Total current liabilities |
154,555 |
124,219 |
|||
Long-term debt |
490,453 |
502,534 |
|||
Deferred income taxes |
20,736 |
19,721 |
|||
Long-term income tax liabilities |
5,556 |
5,463 |
|||
Pension and related liabilities |
3,692 |
4,451 |
|||
Other |
22,337 |
15,367 |
|||
Stockholder's equity: |
|||||
Common stock - $0.01 par value; 1,000 shares authorized, |
|||||
149.0035 shares issued and outstanding at |
|||||
September 30, 2010 and December 31, 2009 |
- |
- |
|||
Additional paid-in capital |
153,352 |
151,963 |
|||
Accumulated deficit |
(106,035) |
(82,328) |
|||
Accumulated other comprehensive loss |
(7,817) |
(10,843) |
|||
Total stockholder's equity |
39,500 |
58,792 |
|||
Total liabilities and stockholder's equity |
$ 736,829 |
$ 730,547 |
|||
Pregis Holding II Corporation Consolidated Statements of Operations Unaudited (dollars in thousands) |
|||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||
2010 |
2009 |
2010 |
2009 |
||||||
Net Sales |
$ 223,681 |
$ 207,047 |
$ 651,518 |
$ 588,594 |
|||||
Operating costs and expenses: |
|||||||||
Cost of sales, excluding depreciation |
|||||||||
and amortization |
176,301 |
156,088 |
510,139 |
444,144 |
|||||
Selling, general and administrative |
29,716 |
28,660 |
96,157 |
83,059 |
|||||
Depreciation and amortization |
11,646 |
12,607 |
34,305 |
35,383 |
|||||
Other operating expense, net |
3,953 |
2,267 |
5,519 |
13,602 |
|||||
Total operating costs and expenses |
221,616 |
199,622 |
646,120 |
576,188 |
|||||
Operating income |
2,065 |
7,425 |
5,398 |
12,406 |
|||||
Interest expense |
11,724 |
9,192 |
35,320 |
28,072 |
|||||
Interest income |
- |
(54) |
- |
(176) |
|||||
Foreign exchange (gain) loss, net |
(526) |
(886) |
382 |
(5,817) |
|||||
Loss before income taxes |
(9,133) |
(827) |
(30,304) |
(9,673) |
|||||
Income tax expense (benefit) |
(1,216) |
2,514 |
(6,597) |
1,013 |
|||||
Net loss |
$ (7,917) |
$ (3,341) |
$ (23,707) |
$ (10,686) |
|||||
Pregis Holding II Corporation Consolidated Statements of Cash Flows Unaudited (dollars in thousands) |
||||||
Nine Months Ended September 30, |
||||||
2010 |
2009 |
|||||
Operating activities |
||||||
Net loss |
$ (23,707) |
$ (10,686) |
||||
Adjustments to reconcile net loss to |
||||||
cash provided by operating activities: |
||||||
Depreciation and amortization |
34,305 |
35,383 |
||||
Amortization of inventory step-up |
406 |
- |
||||
Deferred income taxes |
(8,303) |
(1,483) |
||||
Unrealized foreign exchange loss (gain) |
692 |
(5,552) |
||||
Amortization of deferred financing costs |
2,615 |
1,781 |
||||
Amortization of debt discount |
2,174 |
238 |
||||
Gain on disposal of property, plant and equipment |
1,778 |
(249) |
||||
Stock compensation expense |
1,389 |
1,061 |
||||
Changes in operating assets and liabilities |
||||||
Accounts and other receivables, net |
(21,635) |
9,874 |
||||
Due from Pactiv |
(169) |
3,792 |
||||
Inventories, net |
(12,005) |
5,364 |
||||
Prepayments and other current assets |
65 |
1,961 |
||||
Accounts payable |
19,909 |
6,771 |
||||
Accrued taxes |
817 |
(5,637) |
||||
Accrued interest |
4,469 |
3,547 |
||||
Other current liabilities |
611 |
856 |
||||
Pension and related assets and liabilities, net |
(1,428) |
(2,931) |
||||
Other, net |
(1,716) |
(2,633) |
||||
Cash provided by operating activities |
267 |
41,457 |
||||
Investing activities |
||||||
Capital expenditures |
(21,783) |
(17,644) |
||||
Proceeds from sale of assets |
499 |
692 |
||||
Proceeds from sale leaseback, net of costs |
17,875 |
- |
||||
Acquisition of business, net of cash acquired |
(31,655) |
- |
||||
Change in restricted cash |
(3,501) |
- |
||||
Cash used in investing activities |
(38,565) |
(16,952) |
||||
Financing activities |
||||||
Proceeds from revolving credit facility |
500 |
38,700 |
||||
Financing Fees |
- |
(1,284) |
||||
Repayment of debt |
- |
(4,312) |
||||
Proceeds from foreign lines of credit |
3,670 |
- |
||||
Other, net |
71 |
(125) |
||||
Cash provided by financing activities |
4,241 |
32,979 |
||||
Effect of exchange rate changes on cash |
||||||
and cash equivalents |
(1,791) |
1,539 |
||||
Increase (decrease) in cash and cash equivalents |
(35,848) |
59,023 |
||||
Cash and cash equivalents, beginning of period |
80,435 |
41,179 |
||||
Cash and cash equivalents, end of period |
$ 44,587 |
$ 100,202 |
||||
Pregis Holding II Corporation Supplemental Information (Unaudited) Calculation of Adjusted EBITDA ("Consolidated Cash Flow") |
||||
(unaudited) |
Three Months Ended September 30, |
|||
(dollars in thousands) |
2010 |
2009 |
||
Net loss of Pregis Holding II Corporation |
$ (7,917) |
$ (3,341) |
||
Interest expense, net of interest income |
11,724 |
9,138 |
||
Income tax (benefit) expense |
(1,216) |
2,514 |
||
Depreciation and amortization |
11,646 |
12,607 |
||
EBITDA |
14,237 |
20,918 |
||
Other non-cash charges (income): |
||||
Unrealized foreign currency transaction losses (gains), net |
(431) |
(859) |
||
Non-cash stock based compensation expense |
330 |
327 |
||
Non-cash loss on sales leaseback and other |
1,837 |
- |
||
Net unusual or nonrecurring gains or losses: |
||||
Restructuring, severance and related expenses |
2,218 |
2,769 |
||
Other unusual or nonrecurring gains or losses |
538 |
1,609 |
||
Other adjustments: |
||||
Amounts paid pursuant to management agreement with Sponsor |
1,511 |
472 |
||
Adjusted EBITDA (“Consolidated Cash Flow”) |
$ 20,240 |
$ 25,236 |
||
Note to above:
EBITDA is calculated internally as net income before interest, taxes, depreciation, amortization, restructuring expense and adjusted for other non-cash charges and benefits. Adjusted EBITDA, referred to as Consolidated Cash Flow within the context of the Company's indentures, is presented herein because it is a material element of the fixed charge coverage ratio and secured indebtedness leverage ratio included in the Company's indentures and is a significant operating measure used by the Company to measure its operating performance and liquidity.
Pregis Holding II Corporation Supplemental Information (Unaudited) Calculation of Adjusted EBITDA ("Consolidated Cash Flow") |
|||||
(unaudited) |
Twelve Months Ended September 30, |
||||
(dollars in thousands) |
2010 |
2009 |
|||
Net loss of Pregis Holding II Corporation |
$ (31,031) |
$ (37,613) |
|||
Interest expense, net of interest income |
49,634 |
39,315 |
|||
Income tax (benefit) expense |
(10,609) |
(3,881) |
|||
Depreciation and amortization |
43,705 |
46,992 |
|||
EBITDA |
51,699 |
44,813 |
|||
Other non-cash charges (income): |
|||||
Unrealized foreign currency transaction losses (gains), net |
118 |
2,370 |
|||
Non-cash stock based compensation expense |
1,681 |
1,344 |
|||
Non-cash asset impairment charge |
194 |
20,101 |
|||
Non-cash loss on sales leaseback and other |
1,837 |
- |
|||
Net unusual or nonrecurring gains or losses: |
|||||
Restructuring, severance and related expenses |
5,751 |
13,251 |
|||
Other unusual or nonrecurring gains or losses |
11,418 |
2,524 |
|||
Other adjustments: |
|||||
Amounts paid pursuant to management agreement with Sponsor |
2,508 |
2,040 |
|||
Pro forma adjusted EBITDA of acquired business |
1,410 |
- |
|||
Adjusted EBITDA (“Consolidated Cash Flow”) |
$ 76,616 |
$ 86,443 |
|||
Note to above:
EBITDA is calculated internally as net income before interest, taxes, depreciation, amortization, restructuring expense and adjusted for other non-cash charges and benefits. Adjusted EBITDA, referred to as Consolidated Cash Flow within the context of the Company's indentures, is presented herein because it is a material element of the fixed charge coverage ratio and secured indebtedness leverage ratio included in the Company's indentures and is a significant operating measure used by the Company to measure its operating performance and liquidity.
Pregis Holding II Corporation Third Quarter 2010 Supplemental Information (Unaudited) (Amounts and percentage changes are approximations due to rounding.) Gross Margin Calculations |
|||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||
(dollars in thousands) |
2010 |
2009 |
Change |
2010 |
2009 |
Change |
|||||||
Net sales |
$ 223,681 |
$ 207,047 |
$ 16,634 |
$ 651,518 |
$ 588,594 |
$ 62,924 |
|||||||
Cost of sales, excluding |
|||||||||||||
depreciation and amortization |
(176,301) |
(156,088) |
(20,213) |
(510,139) |
(444,144) |
(65,995) |
|||||||
Gross margin |
$ 47,380 |
$ 50,959 |
$ (3,579) |
$ 141,379 |
$ 144,450 |
$ (3,071) |
|||||||
Gross margin, as a percent of net sales |
21.2% |
24.6% |
(3.4)% |
21.7% |
24.5% |
(2.8)% |
|||||||
Net Sales by Segment |
|||||||||||||||||||||
Change Attributable to the |
|||||||||||||||||||||
Following Factors |
|||||||||||||||||||||
Three Months Ended September 30, |
Price / |
Currency |
|||||||||||||||||||
2010 |
2009 |
$ Change |
% Change |
Mix |
Volume |
Acquisition |
Translation |
||||||||||||||
(dollars in thousands) |
|||||||||||||||||||||
Segment: |
|||||||||||||||||||||
Protective Packaging |
$ 141,814 |
$ 128,930 |
$ 12,884 |
10.0 % |
$ 1,592 |
1.2 % |
$ 11,401 |
8.9 % |
$ 5,631 |
4.4 % |
$ (5,740) |
(4.5)% |
|||||||||
Specialty Packaging |
81,867 |
78,117 |
3,750 |
4.8 % |
932 |
1.2 % |
10,189 |
13.0 % |
- |
- % |
(7,371) |
(9.4)% |
|||||||||
Total |
$ 223,681 |
$ 207,047 |
$ 16,634 |
8.0 % |
$ 2,524 |
1.2 % |
$ 21,590 |
10.4 % |
$ 5,631 |
2.7 % |
$ (13,111) |
(6.3)% |
|||||||||
Change Attributable to the |
|||||||||||||||||||||
Following Factors |
|||||||||||||||||||||
Nine Months Ended September 30, |
Price / |
Currency |
|||||||||||||||||||
2010 |
2009 |
$ Change |
% Change |
Mix |
Volume |
Acquisition |
Translation |
||||||||||||||
(dollars in thousands) |
|||||||||||||||||||||
Segment: |
|||||||||||||||||||||
Protective Packaging |
$ 414,925 |
$ 363,107 |
$ 51,818 |
14.3 % |
$ (3,111) |
(0.9)% |
$ 47,773 |
13.2 % |
$ 12,569 |
3.5 % |
$ (5,413) |
(1.5)% |
|||||||||
Specialty Packaging |
236,593 |
225,487 |
11,106 |
4.9 % |
1,236 |
0.5 % |
17,630 |
7.8 % |
- |
- % |
(7,760) |
(3.4)% |
|||||||||
Total |
$ 651,518 |
$ 588,594 |
$ 62,924 |
10.7 % |
$ (1,875) |
(0.3)% |
$ 65,403 |
11.1 % |
$ 12,569 |
2.1 % |
$ (13,173) |
(2.2)% |
|||||||||
EBITDA by Segment |
|||||||||
Three Months Ended September 30, |
|||||||||
2010 |
2009 |
$ Change |
% Change |
||||||
(dollars in thousands) |
|||||||||
Segment: |
|||||||||
Protective Packaging |
$ 13,725 |
$ 15,462 |
$ (1,737) |
(11.2)% |
|||||
Specialty Packaging |
7,674 |
11,363 |
(3,689) |
(32.5)% |
|||||
Total segment EBITDA |
$ 21,399 |
$ 26,825 |
$ (5,426) |
(20.2)% |
|||||
Nine Months Ended September 30, |
|||||||||
2010 |
2009 |
$ Change |
% Change |
||||||
(dollars in thousands) |
|||||||||
Segment: |
|||||||||
Protective Packaging |
$ 35,164 |
$ 42,201 |
$ (7,037) |
(16.7)% |
|||||
Specialty Packaging |
27,075 |
30,792 |
(3,717) |
(12.1)% |
|||||
Total segment EBITDA |
$ 62,239 |
$ 72,993 |
$ (10,754) |
(14.7)% |
|||||
SOURCE Pregis Corporation
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