Orchids Paper's Q1 net income soars to US$2.5M from profit of US$620,000 in year-ago period, net sales up 13.5% to US$25.7M; company cites increased shipments of converted products, lower fiber costs, lower per case converting production costs
Kendall Sinclair
PRYOR, Oklahoma
,
April 26, 2012
(press release)
–
Orchids Paper Products Company (TIS) today reported first quarter 2012 financial results.
Summary:
Mr. Robert Snyder, President and Chief Executive Officer, stated, "We are pleased to announce very solid results in the first quarter of this year as we continue to build momentum in our converted product business. Increased converted product shipments, continued improvement in our manufacturing operations and lower raw material costs all contributed to a diluted earnings per share improvement of $0.24, or 300%, over the prior year quarter. The establishment of a new quarterly converted product shipment record during a quarter that is traditionally our seasonally slowest is a testament to the continued efforts of our organization to provide high quality, competitively priced products to our customers. This marks the fifth consecutive quarter of increased converted product shipments. Fiber prices increased somewhat during the quarter but were approximately 36% below the peak prices paid during the third quarter of 2011."
Mr. Snyder added, "Our order book remains strong and significant new business opportunities are active. As a result, we are positive about the outlook for the company."
Three-month period ended March 31, 2012
Net sales in the quarter ended March 31, 2012 were $25.7 million, an increase of $3.1 million, or 13%, compared to $22.7 million in the same period of 2011. Net sales of converted product were $23.6 million in the 2012 quarter, favorable by $5.6 million, or 31%, compared to the $18.0 million of net sales in the same quarter last year. Net sales of parent rolls were $2.1 million in the first quarter of 2012, a decrease of $2.6 million, or 55%, compared to $4.7 million of parent roll sales in the same quarter last year. The increase in converted product sales resulted from a 33% increase in converted product tonnage shipped partially offset by a 1% 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 the converting operations, being somewhat offset by higher selling prices.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter ended March 31, 2012 was $5.7 million, an increase of $2.8 million, or 97%, compared to $2.9 million in the same period in the prior year. As a percent of net sales, EBITDA was 22.0% in the 2012 quarter compared with 12.7% in the 2011 quarter.
Gross profit for the first quarter of 2012 was $6.1 million, an increase of $3.4 million, or 126%, when compared with a gross profit of $2.7 million in the prior year quarter. Gross profit as a percent of net sales was 23.8% in the first quarter of 2012 compared to 11.9% 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.
Converted product sales increased as a percent 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 and due to improved efficiencies. Cost per ton of fiber in the first quarter of 2012 was 25% lower than the costs incurred in the same quarter of 2011, resulting in a reduction in cost of sales of approximately $1.3 million.
Selling, general and administrative expenses in the first quarter of 2012 totaled $2.3 million, an increase of $707,000, or 45% compared to $1.6 million incurred in the same quarter of 2011. As a percent of net sales, selling, general and administrative expenses increased to 8.9% for the quarter ended March 31, 2012, compared to 7.0% in the prior year quarter. Selling, general and administrative expense increased primarily due to increased legal and professional fees, higher commission expense due to the higher level of converted product sales, increased bonus accruals under our incentive bonus plan and higher artwork and packaging related expenditures.
Interest expense for the first quarter of 2012 totaled $107,000 compared to interest expense of $249,000 in the same period in 2011. The lower level of interest expense resulted from the effects of the refinancing of the Company's credit facility in April 2011, which lowered borrowing levels and interest rates.
As of March 31, 2012, the effective tax rate for the full year is estimated to be 32.7%.
Total debt outstanding as of March 31, 2012 was $17.1 million and the total of cash and short-term investments stood at $7.8 million. As a result, net debt outstanding as of March 31, 2012 was $9.3 million.
On March 28, 2012, the Company paid dividends totaling $1.5 million, or $0.20 per share, to stockholders of record as of March 19, 2012.
Conference Call/Webcast
The Company will hold a teleconference to discuss its first quarter financial results at 10:00 a.m. (ET) on Thursday, April 26, 2012. All interested parties may participate in the teleconference by calling 800 688 0796 and providing pass code 128 715 57. 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.
About Orchids Paper Products Company
Orchids Paper Products Company is an integrated manufacturer of tissue paper products serving the at home private label consumer market. From its operations in north east Oklahoma, the Company produces a full line of tissue products, including paper towels, bathroom tissue and paper napkins, to serve the value through premium quality market segments. The Company provides these products 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.
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