Appleton reports Q1 2010 results
Wednesday, May 12, 2010
Press release from the issuing company
Appleton's first quarter 2010 net sales of $232.2 million increased 9.2 percent compared to first quarter 2009 net sales of $212.6 million. Appleton's first quarter 2010 net loss of $7.4 million compared to net income of $1.2 million in first quarter 2009.
First quarter 2010 results include an $8.2 million environmental expense recovery as a result of an insurance settlement, a $5.5 million increase in interest expense and a $5.5 million debt extinguishment expense resulting from the voluntary refinancing of the Company's debt. First quarter 2009 results included $5.4 million of debt extinguishment gain as a result of making market purchases of senior subordinated notes at a price significantly less than face value.
"Our strong sales resulted from improved market demand for our products and increased market share, especially in the carbonless and thermal paper segments," said Mark Richards, Appleton's chairman, president and chief executive officer. "The excellent response to the launch of our new Superior carbonless sheet product, as well as increased international demand, helped drive up carbonless sales over 3 percent. Sales of our thermal paper grew by 23 percent on shipment volume that increased 36 percent. Those results reflect significant share gains for both our point-of-sale and high value-added grades." He added that sales for the Performance Packaging Division, when adjusted for the December sale of C&H Packaging, increased $3.6 million compared to first quarter 2009.
Richards said the Encapsys business unit, which is now reported as a separate segment, continues to grow. Encapsys applies Appleton's extensive knowledge of the microencapsulation process in creative and collaborative ways to develop and deliver better products to customers. "We are excited about the opportunities to explore new markets and develop relationships beyond the paper industry where we can leverage this core competency. Our goal is to be the partner of choice for technology collaborations related to microencapsulation," Richards said.
The positive impact that the Company's strong sales and shipment volumes had on earnings was offset by unfavorable product pricing and mix, as well as higher than expected raw material costs, especially for pulp and energy. Expenses associated with the Company's debt refinancing, also reduced earnings for the quarter. "We are being very aggressive in our efforts to control costs and spending and improve operating efficiencies to soften the impact of raw material inflation," Richards stated.
Technical Papers first quarter 2010 operating income of $6.2 million decreased $1.8 million from that of first quarter 2009 due to unfavorable price and mix (-$18.1 million), inflation of raw materials and utilities pricing (-$2.4 million) and higher distribution costs (-$0.6 million) offset by reduced manufacturing costs (+$9.1 million), reductions in mill curtailments to match customer demand (+$3.8 million), overall higher shipment volumes (+$3.5 million) and reduced start-up costs of the thermal coater at the West Carrollton, Ohio paper mill (+$2.9 million).
Richards said the Company will continue to seek ways to reduce operating costs and drive continued growth of sales and market share. The Company has successfully implemented price increases across all its paper products; however, the Company does not expect to see a significant benefit from these increases until the second half of the year due to pricing agreements already in place with many of its customers.
"Demand for our products is returning and we are encouraged by the signs of a broader economic recovery. Those improvements may not be as consistent or timely as we would like, but there are indications that the worst of the recession is behind us," Richards said. He added that the strength, breadth and brand value of Appleton's paper product lines have the Company well-positioned to serve its core markets as market demand continues to improve. Appleton is especially optimistic about continued sales growth of its thermal paper products that leverage the capabilities of the Company's new coater.
"Inflation will pose some near-term challenges for us, but our strategies, discipline and market leadership positions will serve us well as the year progresses," said Richards.
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