Business News

Orchids Paper Products Company Reports Increased Sales and Earnings in Second Quarter Results

Thursday 31. July 2008 - Orchids Paper Products Company (AMEX:TIS) today reported net income for the three months ended June 30, 2008 of $887,000, or $.14 per diluted share, compared with $743,000, or $0.12 per diluted share, in the same period in 2007.

Net income was $1,498,000, or $0.23 per diluted share, for the first six months of 2008, an increase of $886,000 compared to net income of $612,000, or $.10 per diluted share, reported for the first half of 2007.
Three-month period ended June 30, 2008
Net sales for the 2008 quarter were $22.3 million, an increase of 21% over the $18.5 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 14% increase in the selling price per ton of converted products, and, to a lesser extent, an increase in the selling price of parent rolls.
Earnings before interest, taxes, depreciation and amortization (EBITDA) increased $69,000 to $2.4 million in the quarter ended June 30, 2008, compared to $2.3 million in the prior year quarter. As a percent of net sales, EBITDA was 10.8% in the 2008 quarter compared with 12.6% in the 2007 quarter.
Gross profit for the second quarter of 2008 was $3.1 million, an increase of $369,000, or 13%, when compared with a gross profit of $2.8 million in the comparable prior year quarter. Gross profit as a percent of net sales decreased to 14.0% in the second quarter of 2008 compared to 14.9% for the same period in 2007. As a percent of net sales, gross profit decreased primarily due to higher paper and converting production costs and, to a lesser extent, the effect of the lower gross profit margin percentage realized on parent roll sales as compared to converted product sales. These factors were partially offset by the increased overall shipment volumes and higher converted product selling prices.
Selling, general and administrative expenses in the second quarter of 2008 totaled $1.5 million, an increase of $321,000, or 27%, when compared with selling, general and administrative expenses of $1.2 million in the second quarter of 2007. Higher costs associated with additions to the Company’s senior management team and increased legal expenses accounted for most of the increase. As a percent of net sales, selling, general and administrative expenses increased to 6.7% for the quarter ended June 30, 2008 compared to 6.3% in the prior year quarter.
Interest expense for the second quarter of 2008 totaled $320,000 compared to interest expense of $708,000 in the same period in 2007. Lower LIBOR interest rates and the absence of interest on our 12% subordinated debentures totaling $2.15 million, which were retired in December, 2007, accounted for most of the decrease.
Six-month period ended June 30, 2008
For the first six months of 2008, the Company reported net sales of $42.6 million, an increase of 21% compared to $35.2 million reported for the first six months of 2007. Higher parent roll sales and higher prices for converted finished products were the main reasons for the increase.
EBITDA increased $686,000 to $4.5 million in the six months ended June 30, 2008, compared to $3.8 million in the first six months of 2007. As a percent of net sales, EBITDA was 10.5% in the 2008 year-to-date period compared with 10.8% in the 2007 period.
Gross profit for the six months ended June 30, 2008 was $5.8 million, an increase of $1.3 million, or 30%, when compared with a gross profit of $4.5 million in the comparable prior year period. Gross profit as a percent of net sales increased to 13.6% in the 2008 period compared to 12.8% for the same period in 2007. As a percent of net sales, gross profit increased primarily due to the higher sales volumes and higher selling prices being partially offset by higher paper and converting production costs and, to a lesser extent, the lower gross profit margins realized on the increased parent roll sales when compared to margins realized on converted product sales.
Selling, general and administrative expenses in the six months ended June 30, 2008 totaled $2.9 million, an increase of $647,000, or 29%, when compared with selling, general and administrative expenses of $2.2 million in the same period of 2007. Higher costs associated with additions to the Company’s senior management team, increased accruals under the Company’s incentive bonus plan and increased legal expenses accounted for most of the increase. As a percent of net sales, selling, general and administrative expenses increased to 6.8% for the six-month period ended June 30, 2008 compared to 6.3% in the prior year period.
Interest expense for the six-month period ended June 30, 2008 totaled $731,000 compared to interest expense of $1.6 million in the same period in 2007. Lower average bank borrowings, lower LIBOR rates and margins over LIBOR on our new credit facility entered into in April, 2007 and the absence of interest on our subordinated debentures as discussed above all contributed to the decrease.
Commenting on the results, Mr. Robert Snyder, President and Chief Executive Officer, stated, “During the second quarter, we began a process of price increases and product content reductions as well as maintaining our focus on continuous improvement in our converting operation. The benefits of these, however, were mostly offset by higher costs, particularly those for waste paper and energy. These efforts will continue and we expect to obtain additional benefits during the rest of the year.”