Business News

Orchids Paper Products Company Reports a 22% Increase in First Quarter Sales

Thursday 01. May 2008 - Orchids Paper Products Company (AMEX:TIS) today reported net income for the three months ended March 31, 2008 of $611,000, or $.09 per diluted share, compared with a net loss of $131,000, or $0.02 per diluted share, in the same period in 2007.

Net sales for the 2008 quarter were $20.3 million, an increase of 22% over the $16.6 million reported for the same quarter of 2007. The increase in net sales was primarily the result of a more than two-fold increase in parent roll shipments, a 9% increase in the selling price per ton of converted products, and, to a lesser extent, a 20% increase in the selling price of parent rolls.

Financial results for the first quarter of 2008 were negatively affected by increased waste paper prices, an unplanned shutdown in January of the company’s newest paper machine and higher selling, general and administrative expenses. Waste paper prices increased approximately 22% in the first quarter of 2008 compared to the same period in 2007, resulting in approximately $1 million of increased costs. In January 2008, we experienced down time on the new paper machine that totaled approximately 3 days of lost production time in order to effect repairs. The unplanned shutdown was required to correct certain issues with the surface of the yankee dryer and resulted in $330,000 of lost production and certain related out of pocket expenses. The surface issues causing the shutdown were corrected during the month of January.

In the first quarter of 2008, earnings before interest, taxes, depreciation and amortization (EBITDA) increased $617,000 to $2.1 million, a 43% increase compared to $1.4 million in the same period of 2007. As a percent of net sales, EBITDA was 10.2% in the first quarter of 2008 compared with 8.7% in the same period in 2007.

Gross profit for the first quarter of 2008 was $2.7 million, an increase of $957,000, or 55%, when compared with a gross profit of $1.7 million in the comparable prior year quarter. Gross profit as a percent of net sales increased to 13.3% in the first quarter of 2008 compared to 10.4% for the same period in 2007.

Selling, general and administrative expenses in the first quarter of 2008 totaled $1.4 million, an increase of $326,000, or 31%, when compared with selling, general and administrative expenses of $1.1 million in the first quarter of 2007. Increased accruals under the company’s incentive bonus plan, higher costs associated with additions to the Company’s senior management team and increased legal and other professional costs accounted for most of the increase.

Interest expense for the first quarter of 2008 totaled $411,000 compared to interest expense of $873,000 in the same period in 2007. Lower overall borrowing levels and lower interest rates accounted for the improvement.

Commenting on the results, Mr. Robert Snyder, President and Chief Executive Officer, stated, “The tissue industry continues to face cost pressures as evidenced by the increase in waste paper pricing during the first quarter of 2008, which had a significant negative effect on our operating results. We have begun taking action in our product pricing and product content to counteract waste paper and other cost increases. Our management is continuing its efforts to reduce operating costs by focusing on continuous improvement efforts in productivity and the cost effectiveness of our production facilities.”