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Pregis Announces Second Quarter 2010 Financial Results
13 Aug, 2010 @ 05:00 pm EDT
DEERFIELD, Ill., Aug. 13 /PRNewswire/ -- Pregis Corporation, a leading international manufacturer, marketer, and supplier of protective packaging products and specialty packaging solutions, today announced its 2010 second quarter financial results.
For the second quarter of 2010, the Company generated net sales of $217.8 million, an increase of 11.1% versus net sales of $196.0 million in the second 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 13.1% compared to the prior year quarter due to increased sales volumes, which were driven by the impact of economic recovery as well as the Company's growth initiatives, along with the impact of selling price increases implemented in the second quarter of 2010.
Gross profit margin, as a percent of net sales, was 21.3% in the second quarter of 2010, compared to 25.0% in the second 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 price increases, and the impact from the Company's cost reduction programs. Resin costs in North America and Europe, as measured by their respective indices, were 31% and 49% higher, respectively, than the 2009 second quarter.
The Company generated operating income of $4.5 million in the second quarter of 2010, which included pre-tax restructuring charges of $1.0 million relating to the Company's cost reduction programs, legal costs of $0.5 million, and non-cash purchase accounting charges related to the acquisition of Intellipack of $0.6 million. This compared to operating income of $6.5 million for the second quarter of 2009. The second quarter of 2009 operating loss reflects restructuring activity of $5.2 million. Adjusted for the amounts discussed above, operating income for the second quarter of 2010 was $6.6 million compared to $11.7 million in the second quarter of 2009. This decrease in operating profit was driven by the same factors impacting the gross profit margin percentage.
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 $19.4 million in the second quarter of 2010 compared to $24.9 million for the same period in 2009 and $18.2 million in the first quarter of 2010.
Commenting on the Company's results, Mike McDonnell, President and Chief Executive Officer, stated, "In the second quarter, we drove volume growth, both year-over-year and sequentially, as a result of our organic growth initiatives including new offerings in inflatable systems, sustainable products, foam-in-place and 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 and sequential increases in our key raw material costs, which were higher versus the 2009 second quarter by over 30% in North America and near 50% in Europe based on their respective indices."
Mr. McDonnell continued, "We implemented selling price increases in the second quarter in both North America and Europe, but we are disappointed that these increases will not be sufficient to fully offset the increases in key raw materials this year. We are continuing to implement additional increases over the next few months in Europe, as resin costs in Europe have continued to climb throughout the second quarter."
Mr. McDonnell concluded, "We continue to capitalize on the long term growth potential of Pregis. Our organic growth initiatives are showing strong progress and our first quarter acquisition of IntelliPack, a supplier of foam-in-place packaging systems, has enhanced our product portfolio and is an excellent example of our ability to grow through highly accretive acquisitions."
Segment Performance
Comments on segment net sales and EBITDA performance for the second quarter of 2010 is as follows:
-- Net sales of the protective packaging segment increased by $19.5
million, or 16.4%. The 2010 second quarter sales increase was driven
primarily by increased volumes due to improved economic conditions, the
impact from growth initiatives, and the impact of the IntelliPack
acquisition partially offset by unfavorable foreign currency
translation. Net sales for the second quarter 2010, excluding
IntelliPack and unfavorable foreign currency translation, increased by
15.6% compared to the same period in 2009.
-- EBITDA of the protective packaging segment decreased $4.7 million. The
decrease in EBITDA for the second quarter was due primarily to the
impact of significantly higher key raw material costs which were
partially offset by increased sales.
-- Net sales of the specialty packaging segment increased $2.3 million, or
3.0%. This increase was driven primarily by increased volumes in our
fresh food packaging markets, which offset the impact of unfavorable
foreign currency translation. Excluding the unfavorable foreign
currency translation, net sales for the second quarter 2010 increased
9.4% year-over-year.
-- EBITDA of the specialty packaging segment decreased $0.3 million. This
decrease was due to increased raw material 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 second quarter results on Monday, August 16, 2010 at 11:00 a.m. ET (10:00 p.m. CT). The call can be accessed through the following dial-in numbers: Domestic: 800-561-2601; International: 617-614-3518; Participant Passcode: 25259431. A replay of the conference call will be available through August 30, 2010. The replay may be accessed using the following dial-in information: Domestic: 888-286-8010; International: 617-801-6888; Passcode: 16508877.
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)
June 30, December 31,
2010 2009
--------- -------------
Assets (Unaudited)
Current assets
Cash and cash equivalents $31,783 $80,435
Accounts receivable
Trade, net of allowances of $4,909 and
$6,015 respectively 133,214 120,812
Other 10,786 12,035
Inventories, net 86,412 81,024
Deferred income taxes 5,083 5,079
Due from Pactiv 1,125 1,169
Prepayments and other current assets 8,659 7,929
----- -----
Total current assets 277,062 308,483
Property, plant and equipment, net 211,355 226,882
Other assets
Goodwill 139,559 126,250
Intangible assets, net 53,862 38,054
Deferred financing costs, net 6,532 8,092
Due from Pactiv, long-term 7,803 8,429
Pension and related assets 13,331 13,953
Restricted cash 3,500 -
Other 366 404
Total other assets 224,953 195,182
------- -------
Total assets $713,370 $730,547
-------- --------
Liabilities and stockholder's equity
Current liabilities
Short-term debt $8,225 $-
Current portion of long-term debt 339 300
Accounts payable 99,667 78,708
Accrued income taxes 5,316 5,236
Accrued payroll and benefits 12,731 14,242
Accrued interest 7,103 7,722
Other 18,321 18,011
------ ------
Total current liabilities 151,702 124,219
Long-term debt 458,852 502,534
Deferred income taxes 21,914 19,721
Long-term income tax liabilities 5,085 5,463
Pension and related liabilities 3,614 4,451
Other 20,728 15,367
Stockholder's equity:
Common stock -$0.01 par value; 1,000
shares authorized,
149.0035 shares issued and outstanding
at
June 30, 2010 and December 31, 2009 - -
Additional paid-in capital 153,021 151,963
Accumulated deficit (98,118) (82,328)
Accumulated other comprehensive income
(loss) (3,428) (10,843)
Total stockholder's equity 51,475 58,792
------ ------
Total liabilities and stockholder's
equity $713,370 $730,547
-------- --------
Pregis Holding II Corporation
Consolidated Statements of Operations
Unaudited
(dollars in thousands)
Three Months Six Months Ended
Ended June 30, June 30,
-------------- ----------------
2010 2009 2010 2009
---- ---- ---- ----
Net Sales $217,801 $196,003 $427,837 $381,547
Operating costs and
expenses:
Cost of sales, excluding
depreciation
and amortization 171,368 147,049 333,838 288,056
Selling, general and
administrative 29,561 26,403 66,441 54,399
Depreciation and
amortization 11,464 11,305 22,659 22,776
Other operating expense,
net 919 4,734 1,566 11,335
Total operating costs and
expenses 213,312 189,491 424,504 376,566
------- ------- ------- -------
Operating income 4,489 6,512 3,333 4,981
Interest expense 11,628 9,482 23,618 18,880
Interest income - (95) (22) (122)
Foreign exchange
(gain)/loss, net (369) (8,105) 908 (4,931)
---- ------ --- ------
Income (loss) before income
taxes (6,770) 5,230 (21,171) (8,846)
Income tax expense
(benefit) (3,188) 2,167 (5,381) (1,501)
------ ----- ------ ------
Net income (loss) $(3,582) $3,063 $(15,790) $(7,345)
------- ------ -------- -------
Pregis Holding II Corporation
Consolidated Statements of Cash Flows
Unaudited
(dollars in thousands)
Six Months Ended
June 30,
----------------
2010 2009
---- ----
Operating activities
Net loss $(15,790) $(7,345)
Adjustments to reconcile net loss to
cash provided by (used in) operating
activities:
Depreciation and amortization 22,659 22,776
Amortization of inventory step-up 406 -
Deferred income taxes (6,479) (2,845)
Unrealized foreign exchange loss (gain) 1,123 (4,693)
Amortization of deferred financing costs 1,757 1,187
Amortization of debt discount 1,436 157
Gain on disposal of property, plant and
equipment (86) (257)
Stock compensation expense 1,058 734
Changes in operating assets and
liabilities
Accounts and other receivables, net (22,982) 8,436
Due from Pactiv (134) -
Inventories, net (13,058) 6,504
Prepayments and other current assets (981) 1,251
Accounts payable 28,418 (5,642)
Accrued taxes 674 (1,963)
Accrued interest (256) (785)
Other current liabilities (3,517) (1,827)
Pension and related assets and
liabilities, net (942) (1,825)
Other, net 1,515 (1,856)
----- ------
Cash provided by (used in) operating
activities (5,179) 12,007
------ ------
Investing activities
Capital expenditures (14,323) (9,973)
Proceeds from sale of assets 163 363
Acquisition of business, net of cash
acquired (31,385) -
Change in restricted cash (3,500) -
---
Cash used in investing activities (49,045) (9,610)
------- ------
Financing activities
Repayment of debt - (4,312)
Proceeds from revolving credit facility 500 -
Proceeds from foreign lines of credit
draws 8,992 -
Other, net (23) (215)
--- ----
Cash provided by (used in) financing
activities 9,469 (4,527)
Effect of exchange rate changes on cash
and cash equivalents (3,897) (248)
------ ----
Decrease in cash and cash equivalents (48,652) (2,378)
Cash and cash equivalents, beginning of
period 80,435 41,179
------ ------
Cash and cash equivalents, end of period $31,783 $38,801
------- -------
Pregis Holding II Corporation
Supplemental Information
(Unaudited)
Calculation of Adjusted EBITDA ("Consolidated Cash Flow")
---------------------------------------------------------
Three Months Ended
(unaudited) June 30,
------------------
(dollars in thousands) 2010 2009
---- ----
Net loss of Pregis Holding II Corporation $(3,582) $3,063
Interest expense, net of interest income 11,628 9,387
Income tax (benefit) expense (3,188) 2,167
Depreciation and amortization 11,464 11,305
------ ------
EBITDA 16,322 25,922
Other non-cash charges (income):
Unrealized foreign currency transaction losses
(gains), net (100) (8,159)
Non-cash stock based compensation expense 394 301
Non-cash asset impairment charge - (253)
Net unusual or nonrecurring gains or losses:
Restructuring, severance and related expenses 1,314 5,614
Other unusual or nonrecurring gains or losses 945 164
Other adjustments:
Amounts paid pursuant to management agreement
with Sponsor 527 599
Pro forma adjusted EBITDA of acquired business - 715
Adjusted EBITDA ("Consolidated Cash Flow") $19,402 $24,903
------- -------
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")
---------------------------------------------------------
Twelve Months Ended
(unaudited) June 30,
-------------------
(dollars in thousands) 2010 2009
---- ----
Net loss of Pregis Holding II Corporation $(26,454) $(46,235)
Interest expense, net of interest income 47,048 43,477
Income tax (benefit) expense (6,879) (7,197)
Depreciation and amortization 44,665 47,970
------ ------
EBITDA 58,380 38,015
Other non-cash charges (income):
Unrealized foreign currency transaction
losses (gains), net (310) 13,475
Non-cash stock based compensation expense 1,678 1,261
Non-cash asset impairment charge 194 20,101
Net unusual or nonrecurring gains or
losses:
Restructuring, severance and related
expenses 6,302 15,971
Other unusual or nonrecurring gains or
losses 11,516 676
Other adjustments:
Amounts paid pursuant to management
agreement with Sponsor 2,442 1,892
Pro forma adjusted EBITDA of acquired
business 2,277 -
Adjusted EBITDA ("Consolidated Cash Flow") $82,479 $91,391
------- -------
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
Second Quarter 2010
Supplemental Information
(Unaudited)
(Amounts and percentage changes are approximations due to rounding.)
Gross Margin Calculations
-------------------------
Three Months Ended June 30,
---------------------------
(dollars in thousands) 2010 2009 Change
---- ---- ------
Net sales $217,801 $196,003 $21,798
Cost of sales, excluding
depreciation and
amortization (171,368) (147,049) (24,319)
-------- -------- -------
Gross margin $46,433 $48,954 $(2,521)
------- ------- -------
Gross margin, as a percent
of net sales 21.3% 25.0% (3.7)%
---- ---- -----
Net Sales by Segment
--------------------
Three Months Ended
June 30,
------------------
2010 2009
---- ----
(dollars in
thousands)
Segment:
Protective
Packaging $138,251 $118,748
Specialty
Packaging 79,550 77,255
Total $217,801 $196,003
-------- --------
%
$Change Change
------- ------
Segment:
Protective
Packaging $19,503 16.4 %
Specialty
Packaging 2,295 3.0 %
Total $21,798 11.1 %
-------
Change Attributable to the
Following Factors
-----------------
Price /
Mix Volume
--- ------
Segment:
Protective
Packaging $2,148 1.8 % $16,362 13.8 %
Specialty
Packaging 915 1.2 % 6,334 8.2 %
--- -----
Total $3,063 1.6 % $22,696 11.6 %
------ -------
Change Attributable to the
Following Factors
-----------------
Currency
Acquisition Translation
----------- -----------
Segment:
Protective
Packaging $5,006 4.2 % $(4,013) (3.4)%
Specialty
Packaging - - % (4,954) (6.4)%
--- ------
Total $5,006 2.6 % $(8,967) (4.6)%
------ -------
EBITDA by Segment
-----------------
Three Months Ended
June 30,
------------------
%
2010 2009 $Change Change
---- ---- ------- -------
(dollars in
thousands)
Segment:
Protective
Packaging $10,658 $15,372 $(4,714) (30.7)%
Specialty
Packaging 9,857 10,118 (261) (2.6)%
Total segment
EBITDA $20,515 $25,490 $(4,975) (19.5)%
------- ------- -------
SOURCE Pregis Corporation
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