Appleton reduces 4Q losses
Tuesday, March 02, 2010
Press release from the issuing company
Appleton, Wis. - Appleton's 2009 net sales of $862.1 million declined 10.9 percent compared to 2008 net sales of $967.2 million. Appleton's 2009 net income of $25.1 million increased $122.5 million over the $97.4 million net loss in 2008.
The 2009 results include $17.7 million of alternative fuel tax credits recorded as a reduction to cost of sales, $42.6 million of net debt extinguishment income and a goodwill impairment charge of $6.3 million within the performance packaging business.
The 2008 net loss includes a $47.1 million loss from the discontinued operations of Appleton's former subsidiary, BemroseBooth, prior to its sale in August 2008. The net loss also includes impairment charges of $39.6 million within the performance packaging business and $2.6 million of restructuring charges in continuing operations.
Focused execution drove improved results
"I am proud of the determination and discipline our employees showed in serving our customers, achieving strong results, and positioning us to win in the future," Richards said. "We base that optimism on the talents of our people and the capabilities of operations. We are especially pleased with the operation of the new coater that supports our growing thermal paper business." He added that the Company also gained greater flexibility to operate by revamping its capital structure and extending debt maturities. "We will remain intensely focused on the fundamentals of our business and serving the needs of our customers," Richards stated.
Coated solutions average weekly net sales decreased 6.1 percent compared to fourth quarter 2008, primarily due to lower shipment volumes and reduced prices. Average weekly net sales of thermal papers increased 18.6 percent compared to the prior year quarter due to a year-on-year increase in shipment volumes, while average weekly net sales of security papers increased 16.1 percent compared to fourth quarter 2008.
Technical Papers fourth quarter 2009 operating income of $3.7 million increased $10.5 million over fourth quarter 2008 due to reduced manufacturing spending (+$14.5 million), favorable selling, general and administrative spending (+$8.1 million), deflation of raw material and utility costs (+$6.0 million), the alternative fuels tax credit (+$4.7 million) and lower distribution costs (+$1.3 million) which were partially offset by unfavorable pricing and product mix (-$23.0 million) and lower shipment volumes (-$1.1 million).
Technical Papers net sales for 2009 were $762.4 million, 10.8 percent lower than 2008 net sales of $854.9 million. Total year 2009 shipment volumes were 8.8 percent lower than the same period of 2008 with 2009 international volumes 13.0 percent lower than last year.
Coated solutions 2009 net sales decreased $96.4 million, or 17.8 percent, compared to 2008 due to volume shortfalls in all market channels and unfavorable pricing, product mix and market channel mix.
Net sales of thermal papers increased $0.9 million, or 0.3 percent, compared to 2008. Despite a year-on-year increase in shipment volumes of 7.6 percent, aggressive price competition negatively impacted sales revenues. Net sales of security papers increased $2.9 million, or 8.6 percent, compared to 2008, due to higher shipment volumes.
Technical Papers operating income for 2009 increased $23.3 million, or over 100 percent, to $45.6 million due to deflation of raw material and utility costs (+$27.0 million), the alternative fuels tax credit (+$17.7 million), favorable selling, general and administrative spending (+$16.9 million), reduced manufacturing spending (+$11.3 million), lower distribution costs (+$8.9 million) and reduced start-up costs of the thermal coater at the West Carrollton, Ohio paper mill (+$5.4 million) which were partially offset by unfavorable price and mix (-$42.7 million), lower shipment volumes (-$12.2 million) and mill curtailments to match customer demand (-$9.0 million).
Fourth quarter 2009 operating loss of $4.1 million was an improvement of $18.3 million over fourth quarter 2008. An operating loss of $2.0 million was recorded for the full year 2009 compared to an operating loss of $34.3 million for the prior year. Fourth quarter and full year 2009 operating results include a $6.3 million goodwill impairment charge, while 2008 operating results included total goodwill impairment charges of $39.6, of which, $21.9 million was recorded in the fourth quarter.
Sale of C&H Packaging Completed
In September 2009, the Company completed a voluntary debt-for-debt exchange transaction. This transaction exchanged $92.0 million of Appleton's 8.125% senior notes payable due June 2011 and $110.3 million of 9.75% senior subordinated notes payable due June 2014 for $158.2 million of newly issued 11.25% second lien notes payable due December 2015. In addition, $3.6 million of additional 11.25% notes were issued as in-kind consent fees to the note holders agreeing to the exchange. The transaction resulted in a debt reduction of $44.1 million as well as extended maturities for a majority of the notes payable.
During 2009, Appleton generated cash from operations of $61.2 million which is an increase of $59.4 million over 2008. Working capital reductions contributed $15.8 million to this year's cash from operations. During 2009, Appleton contributed $10 million to its pension fund. Appleton used $7.7 million for investing activities in 2009, which included $24.6 million invested on capital projects and $16.9 million in proceeds received from the sale of C&H. This compares to the $100.4 million used in 2008 which included $84.3 million invested in the expansion project at the West Carrollton, Ohio facility. Finally, Appleton used $47.8 million for financing activities in 2009, which was mainly the result of debt reduction and redemptions of PDC common stock, compared to $57.6 million provided in 2008, largely the result of increased debt.
"The past fifteen months have tested us and made our company more nimble, flexible and durable," stated Richards. He said the Company is well prepared to compete and to extend its market positions in its core businesses despite the uncertainties of an economic recovery. "Building on what we accomplished in 2009, we have a plan to continue business improvement in 2010 and beyond," said Richards.
Notice regarding forward-looking statements
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