APPLETON, Wis., Nov. 13 /PRNewswire/ — Appleton announced today that net sales for the third quarter ended October 1, 2006, increased 3.7 percent to $272.2 million compared to net sales of $262.5 million for the same quarter of 2005. For the first nine months of 2006, net sales increased 4.2 percent to $810.1 million compared to net sales of $777.5 million for the same period of 2005.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030106/CGM007LOGO )
Net income for the third quarter increased 72 percent to $5.0 million compared to net income of $2.9 million for the same quarter of 2005 due primarily to a reduction in restructuring costs. Selling, general, administrative expenses, which includes distribution costs, as a percent of sales fell from 19.2 percent in the third quarter of 2005 to 18.9 percent in the third quarter of 2006.
For the first nine months of 2006, net income was $11.8 million, a $14.1 million increase compared to the $2.3 million net loss reported for the first nine months of 2005. The improved results were driven primarily by higher sales and lower restructuring costs compared to the same period of 2005. Selling, general, administrative and expenses as a percent of sales dropped to 19.0 percent for the first three quarters of 2006 from 19.9 percent for the first three quarters of 2005.
Technical Papers
Technical papers net sales for the third quarter of 2006 increased 3.8 percent to $218.4 million compared to net sales of $210.5 million for the same period of 2005. For the first nine months of 2006, technical papers net sales increased 3.0 percent to $653.3 million compared to $634.4 million for the first nine months of 2005.
During the third quarter of 2006, coated solutions net sales and volumes decreased approximately 4 percent compared to the third quarter of 2005. Coated solutions net sales for the first nine months of 2006 were approximately 4 percent lower than net sales for the first nine months of 2005.
Thermal net sales increased approximately $12 million or 22 percent during third quarter 2006. Shipment volumes increased 27 percent compared to third quarter 2005. While all geographic regions saw substantial volume increases, Canadian and overseas markets achieved sales volume increases of more than 50 percent. For the first nine months of 2006, thermal net sales increased 22 percent compared to the same period of 2005.
Net sales from security papers rose approximately 26 percent during third quarter 2006 compared to the same quarter of 2005 as a result of solid sales growth in many of its product offerings. During the first three quarters of 2006, net sales for security papers increased approximately 16 percent compared to the first three quarters of 2005.
Secure and Specialized Print Services
Net sales for third quarter 2006 decreased 7 percent from $27 million to $25 million compared to the third quarter 2005. The timing of orders and reduced demand for seasonal products were factors contributing to the decrease in net sales. Operating loss for the third quarter of 2006 was $0.2 million, an improvement of $0.8 million due primarily to lower restructuring costs compared to third quarter 2005. Comparing the first nine months of 2006 with that of 2005, net sales were relatively flat while the operating loss of $0.4 million was a $3.0 million improvement over the same period last year largely due to reduced restructuring costs and lower selling, general and administrative expenses.
Performance Packaging
Third quarter net sales for Appleton’s performance packaging companies grew approximately 15 percent compared to third quarter 2005 as a result of stronger orders from existing customers and higher selling prices. For the first nine months of 2006, net sales grew by nearly $13 million or 18 percent compared to the same period in 2005. Operating income for both the third quarter and the first three quarters nearly doubled due to strong sales growth and improved expense control.
Balance Sheet
As of October 1, 2006, the Company had a cash balance of nearly $20 million. That compares to a cash balance of $6 million on July 2, 2006, and $18 million on December 31, 2005. During third quarter 2006, Appleton made debt repayments totaling $8.5 million on the senior credit facility. Total debt on the balance sheet as of October 1, 2006 was $542 million compared to $574 million as of December 31, 2005.
During the three months ended October 1, 2006, Appleton’s net working capital, excluding cash, decreased $10 million. The accrual for interest to be paid on Appleton’s senior notes payable and senior subordinated notes payable accounted for the majority of this decrease.
Capital expenditures for third quarter 2006 were $8 million compared to $7 million during third quarter 2005. Capital expenditures for the first nine months of 2006 were $18 million compared to $26 million for the first nine months of 2005.
As a result of diversification requests, retirements and employee terminations, the Company repurchased a portion of its stock at an aggregate price of approximately $18 million during the first nine months of 2006. During the same period, the Company received approximately $5 million from the issuance of its stock as purchased by the employees using pre-tax deferrals, rollovers and loan payments.
Earnings release conference call
Appleton will host a conference call to discuss its third quarter 2006 results Tuesday, November 14 at 11:30 a.m. ET. The call will be broadcast through its Web site, http://www.appletonideas.com/investors . A replay will be available through December 13.
About Appleton
Appleton uses ideas that make a difference to create product solutions through its development and use of coating formulations and applications, encapsulation technology and secure and specialized print services. The Company produces carbonless, thermal, security and performance packaging products. Appleton is headquartered in Appleton, Wisconsin, and has manufacturing operations in Wisconsin, Ohio, Pennsylvania, Massachusetts and the United Kingdom, employs approximately 3,200 people and is 100 percent employee owned. For more information visit http://www.appletonideas.com/ .
Notice regarding forward-looking statements
This news release contains forward-looking statements. The words “will,” “believes,” “anticipates,” “intends,” “estimates,” “expects,” “projects,” “plans,” or similar expressions are intended to identify forward-looking statements. All statements in this news release other than statements of historical fact, including statements which address our strategy, future operations, future financial position, estimated revenues, projected costs, prospects, plans and objectives of management and events or developments that Appleton expects or anticipates will occur, are forward-looking statements. All forward-looking statements speak only as of the date on which they are made. They rely on a number of assumptions concerning future events and are subject to a number of risks and uncertainties, many of which are outside of Appleton’s control, that could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the factors listed under the heading “Risk Factors” in Appleton’s 2005 Annual Report on Form 10-K. Appleton disclaims any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Appleton Papers Inc. is a wholly- owned subsidiary of Paperweight Development Corp. Paperweight Development Corp. has guaranteed Appleton’s senior credit facility and senior and senior subordinated notes.
Table 1Appleton Papers Inc.
Consolidated Statements of Operations
(unaudited)
(dollars in thousands)For the For the
Three Months Three Months
Ended Ended
October 1, October 2,
2006 2005
Net sales $272,227 $262,496Cost of sales 202,179 193,657
Gross profit 70,048 68,839
Selling, general and administrative expenses 51,370 50,410
Restructuring and other charges 1,402 3,678Operating income 17,276 14,751
Interest expense 12,622 12,703
Interest income (177) (254)
Other expense (income) 23 (78)Income before income taxes 4,808 2,380
Benefit for income taxes (238) (556)Net income $5,046 $2,936
Other Financial Data:
Operating income $17,276 $14,751
Depreciation and amortization 18,848 19,508Table 2
Appleton Papers Inc.
Consolidated Statements of Operations
(unaudited)
(dollars in thousands)For the For the
Nine Months Nine Months
Ended Ended
October 1, October 2,
2006 2005
Net sales $810,139 $777,506Cost of sales 606,923 581,177
Gross profit 203,216 196,329
Selling, general and administrative expenses 153,668 155,021
Restructuring and other charges 2,088 8,030Operating income 47,460 33,278
Interest expense 37,206 37,261
Interest income (633) (671)
Other (income) expense (281) 527Income (loss) before income taxes 11,168 (3,839)
Benefit for income taxes (654) (1,497)Net income (loss) $11,822 $(2,342)
Other Financial Data:
Operating income $47,460 $33,278
Depreciation and amortization 56,942 60,176Table 3
Appleton Papers Inc.
Consolidated Balance Sheets
(unaudited)
(dollars in thousands)October 1, December 31,
2006 2005
ASSETS
Current assets
Cash and cash equivalents $19,756 $18,422
Accounts receivable, less allowance for
doubtful accounts of $2,566 and
$1,984, respectively 134,671 123,968
Inventories 142,982 142,592
Other current assets 23,969 21,016
Total current assets 321,378 305,998
Property, plant and equipment, net 429,457 460,357
Goodwill 80,325 77,882
Intangible assets, net 99,817 106,238
Environmental indemnification receivable 50,739 57,312
Other assets 24,812 17,147
Total assets $1,006,528 $1,024,934LIABILITIES, REDEEMABLE COMMON STOCK,
ACCUMULATED DEFICIT AND
ACCUMULATED OTHER COMPREHENSIVE LOSS
Current liabilities
Current portion of long-term debt $2,057 $7,941
Accounts payable 66,582 61,150
Restructuring reserve 2,621 6,597
Other accrued liabilities 94,316 84,501
Total current liabilities 165,576 160,189
Senior secured notes payable 198,991 223,368
Revolving lines of credit 923 2,000
Variable rate industrial development bonds 8,650 8,650
Postretirement benefits other than pension 57,830 58,928
Accrued pension 54,656 55,211
Environmental liability 75,739 82,312
Other long-term liabilities 9,779 7,820
Senior notes and senior subordinated
notes payable 328,900 329,000
Commitments and contingencies – –
Redeemable common stock, $0.01 par value,
shares authorized: 30,000,000,shares issued
and outstanding: 11,629,010 and 11,938,060,
respectively 189,281 185,292Accumulated deficit (63,621) (61,982)
Accumulated other comprehensive loss (20,176) (25,854)
Total liabilities, redeemable common stock,
accumulated deficit and accumulated other
comprehensive loss $1,006,528 $1,024,934
