Consumables

Orchids Paper Products Company Reports 2011 First Quarter Results

Thursday 28. April 2011 - Orchids Paper Products Company (NYSE Amex: TIS) today reported first quarter 2011 financial results.

Summary:
— First quarter 2011 net income of $620,000 decreased $740,000, or 54%,
compared with $1.4 million of net income in the same period of 2010.
— Diluted net income per share for the first quarter 2011 was $0.08 per
diluted share compared with $0.18 per diluted share in the same period
in 2010.
— Net sales in the first quarter of 2011 increased 8% to $22.7 million
compared with $21.0 million in the same period in 2010.
Mr. Robert Snyder, President and Chief Executive Officer, stated, “The results of the first quarter of 2011 were consistent with our overall business expectations of relatively flat converted product sales and a strengthened parent roll market. Our previously announced additional converting product business is on track. Additionally, we are excited about the future converted product business opportunities that continue to present themselves in the market.”
Mr. Snyder added, “Our product development efforts continue to yield positive results that improve the quality attributes of our product offerings. We expect these efforts and improved offerings will enhance our ability to penetrate new higher quality, mid-tier business.”
Three-month period ended March 31, 2011
Net sales in the quarter ended March 31, 2011 were $22.7 million, an increase of $1.6 million, or 8%, compared to $21.0 million in the same period of 2010. Net sales of converted product were $18.0 million in the 2011 quarter, favorable by $347,000, or 2%, compared to the $17.6 million of net sales in the same quarter last year. Net sales of parent rolls were $4.7 million in the first quarter of 2011, an increase of $1.3 million, or 38%, compared to $3.4 million of parent roll sales in the same quarter last year. The increase in converted product sales resulted from an increase in net selling prices of 7% which was mostly offset by a 5% decrease in converting tonnage shipped. Net sales of parent rolls were positively affected by a 21% increase in tonnage shipped and a 14% increase in net selling prices. The increase in parent roll tonnage shipments was due to improved paper making production and excess paper making capacity resulting from lower requirements from our converting operation.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the quarter ended March 31, 2011 was $2.9 million, a decrease of $398,000, or 12%, compared to $3.3 million in the same period in the prior year. As a percent of net sales, EBITDA was 12.7% in the 2011 quarter compared with 15.6% in the 2010 quarter.
Gross profit for the first quarter of 2011 was $2.7 million, a decrease of $1.2 million, or 30%, when compared with a gross profit of $3.9 million in the prior year quarter. Gross profit as a percent of net sales was 11.9% in the first quarter of 2011 compared to 18.4% for the same period in 2010. As a percent of net sales, gross profit decreased primarily due to higher depreciation expense, higher waste paper prices, higher per unit converting production costs, and a higher percentage of parent roll sales, being partially offset by lower warehousing costs.
Depreciation expense increased $605,000 primarily due to a $27 million converting expansion project that was completed and placed into service in mid-year 2010. Cost per ton of waste paper in the first quarter of 2011 was 7% higher than the costs incurred in the same quarter of 2010, resulting in increased cost of sales of $341,000. Our converting production costs on a per unit basis were unfavorable compared to the prior year primarily due to higher overhead expenses. Parent roll tonnage shipments increased in the quarter due to increased availability of parent rolls caused by the lower requirements in converting operations and a stronger parent roll market that allowed profitable shipments to outside customers. As a result, parent roll sales increased as a percent of overall sales, which had a negative effect on overall gross profit because parent roll sales generally provide a lower gross profit margin than converted product sales. No third-party warehousing costs were experienced in the current year quarter compared to $534,000 of third-party warehousing costs experienced in the prior year quarter.
Selling, general and administrative expenses in the first quarter of 2011 totaled $1.6 million, favorable by $155,000, or 9%, compared to the $1.7 million of selling, general and administrative expenses incurred in the first quarter of 2010. Lower accruals under our incentive bonus program were the primary reason for the reduced selling, general and administrative expenses. As a percent of net sales, selling, general and administrative expenses decreased to 7.0% for the quarter ended March 31, 2011, compared to 8.2% in the prior year quarter.
Interest expense for the first quarter of 2011 totaled $249,000 compared to interest expense of $215,000 in the same period in 2010. The higher level of interest expense resulted from increased borrowing levels during 2010 to finance a waste water treatment plant expansion and a new warehouse project.
As of March 31, 2011, the full year effective tax rate is estimated to be 30.3%.
As previously announced, the Company entered into a new $36 million credit facility on April 25, 2011 and simultaneously paid off its prior credit facility. Details of the new credit facility were reported on the Company’s Form 8-K on April 26, 2011.