Applied Extrusion Technologies, Inc. Announces Fiscal 2003 Third Quarter Results.Business Editors NEW CASTLE, Del.--(BUSINESS WIRE)--July 28, 2003 Applied Extrusion Technologies, Inc. (NASDAQ NMS - AETC) today announced financial results for its third fiscal quarter ended June 30, 2003. THIRD QUARTER 2003 RESULTS Sales for the third quarter of fiscal 2003 of $67,012,000 were $1,270,000, or 1.9 percent, lower than the comparable quarter in fiscal 2002. A 9.2 percent decline in volume was partially offset by an 8.1 percent increase in average selling price. The higher average selling price was due to both price increases and an improved mix of products sold. Gross profit of $12,262,000 was $2,905,000, or 19.2 percent, lower than the same period of last year. The decrease in gross profit was primarily due to a $5,800,000, or 26 percent, increase in raw material costs, which was partially offset by higher average selling prices and an improved mix of products sold. Gross margin was 18.3 percent versus 22.2 percent in the same period of last year. Operating expenses of $6,078,000 were $4,058,000, or 40 percent lower, than the third fiscal quarter of 2002. The reduction in operating expenses reflects the successful implementation of the September 2002 restructuring and ongoing cost reduction efforts. Additionally, approximately $900,000 of costs related to the QPF QPF - Quantitative Precipitation Forecast (National Weather Service) acquisition and integration were incurred in the third quarter of fiscal 2002. Operating profit for the third quarter of fiscal 2003 was $6,184,000, or 23 percent higher, compared with operating profit of $5,031,000 for the third quarter of fiscal 2002. For the three months ended June 30, 2003, the Company generated earnings before interest, taxes, depreciation and amortization (EBITDA) of $12,017,000, an increase of 19 percent compared with EBITDA of $10,140,000 for the third quarter of fiscal 2002. Loss before income taxes of $1,261,000 for the third quarter of fiscal 2003 was $1,354,000 lower than the loss before income taxes of $2,615,000 for the third quarter of fiscal 2002. The Company received a tax refund, in the third quarter of fiscal 2002, of $2,045,000 due to the change in the tax law regarding carry back of operating losses. Aside from this item, the Company's effective tax rate in fiscal 2002 and through the third quarter of fiscal 2003 was zero. Net loss for the third quarter of fiscal 2003 was $1,261,000, or $.10 per share, compared with a net loss of $570,000, or $.04 per share, for the third quarter of fiscal 2002. Exclusive of the tax refund (or benefit), last year's net loss would have been $2,615,000. NINE MONTHS 2003 RESULTS Sales for the first nine months of fiscal 2003 of $189,223,000 were $1,901,000, or 1 percent, higher than the comparable period in fiscal 2002. A 4.2 percent decline in volume was more than offset by a 5.4 percent increase in average selling price. The higher average selling price was due to both price increases and an improved mix of products sold. Gross profit of $37,162,000 was $279,000, or 1 percent, lower than the same period of last year. Raw material costs for the first nine months were approximately $12,500,000, or 19 percent higher than the same period of last year. These costs were largely offset by higher average selling prices and an improved mix of products sold. Gross margin was 19.6 percent versus 20.0 percent in the same period of last year. Operating expenses of $22,354,000 were approximately $4,665,000 lower in fiscal 2003 as a result of the restructuring initiated in September 2002, and included $862,000 in restructuring transition expenses. These transition expenses include duplicative headcount, travel, and relocation expenses specific to the implementation of the restructuring program. Operating profit for the first nine months of fiscal 2003 of $14,808,000 was $4,386,000, or 42 percent, higher compared with operating profit of $10,422,000 for the same period of last year. For the nine months ended June 30, 2003, the Company generated earnings before interest, taxes, depreciation and amortization (EBITDA) of $32,196,000, an increase of $6,922,000, or 27 percent, compared with EBITDA of $25,274,000 for the same period of the prior year. Interest expense, net of interest income, of $22,439,000 was $811,000 higher than the same period of the prior year. This was primarily due to lower interest income, less capitalized interest, and increased borrowings on our revolving credit facility compared with the same period in the prior year. Net loss for the first nine months of fiscal 2003 was $7,631,000, or $.60 per share, compared with a net loss of $9,161,000, or $.72 per share, for the same period of the prior year, which benefited from the $2,045,000, or $.16 per share, tax refund received in the third quarter of 2002. Exclusive of the tax refund, last year's net loss would have been $11,206,000. BALANCE SHEET, CASH FLOW AND LIQUIDITY At June 30, 2003 the Company had borrowings of $4,662,000 and letters of credit of $6,231,000 outstanding on its line of credit, resulting in unused availability, under its revolving credit facility, of approximately $31,000,000. Net Debt (total debt less cash) at June 30, 2003 was $282,292,000, representing 86 percent of total capitalization. COMPANY COMMENTS "The OPP Films business continues to be extremely challenging," commented Amin J. Khoury, Chairman and Chief Executive Officer. "While we have made continued progress in increasing our prices and improving our product mix, these improvements have been offset by approximately $12,500,000 of raw material cost increases. While raw material costs have started to decline since the peak in April, these costs are projected to be approximately 9 percent higher in the fourth quarter of this year as compared to the fourth quarter of 2002." "Sales volumes remain below last year primarily as a result of weak market conditions, and also reflect some lost volume as a result of our pricing policy. A number of flexible packaging converters and end users, such as Kraft, Pepsi Bottling Group, General Mills, Sara Lee, and Lance all have reported that industry unit volume was down in the quarter just ended. The lack of demand caused sales to fall short of our revenue plan, which caused inventory levels to increase. Therefore, we shut down one of our OPP film lines in July, reduced our staffing accordingly, and do not plan to restart this line until market conditions strengthen and inventories return to normal levels. The annual reduction in output, going forward, is approximately 15 million pounds. In addition, during the fourth quarter, the Company intends to temporarily shut down certain other production assets, which will result in a 5 million pound reduction in output. The projected reduction in production in the fourth quarter, from these two actions, is 8 million pounds and will result in a charge to cost of sales of approximately $3,000,000. As a result of this charge, our EBITDA projection, for fiscal 2003, has been reduced to $40 to $43 million." Mr. Khoury further remarked, "We are encouraged that operating profit and EBITDA increased by 22 and 18 percent, respectively, as compared with the third quarter of fiscal 2002. This is primarily due to ongoing cost reduction efforts as well as our improvements in product mix and selling price. We will continue to carefully control capital expenditures and constantly re-evaluate our cost structure. Our focus is on executing a successful turnaround in a difficult business environment and to return the Company to a profitable footing." CONFERENCE CALL As previously announced, the Company will hold a conference call at 10:00 AM Eastern Time on July 28, 2003 to discuss the results. To listen live via the Internet, visit the Investor Relations section of AET's website at http://www.aetfilms.com. To access the conference call by phone, dial 1-888-273-9891 and reference access code "AET Call". A taped replay of the conference call will also be available from approximately 12:30 PM Eastern Time on July 28, 2003 until midnight on August 4, 2003. To listen to the replay, dial 1-800-475-6701 from within the U.S. or 320-365-3844 from outside the U.S. and enter access code 693405. Applied Extrusion Technologies, Inc. is a leading North American developer and manufacturer of specialized oriented polypropylene (OPP) films used primarily in consumer products labeling and flexible packaging applications. Except for the historical information contained herein, the matters discussed in this report are forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, including those risks related to the ability to implement price increases and related volume losses, the timely development and acceptance of new products, fluctuations in raw materials and other production costs, the ability to satisfy our debt service requirements, the loss of one or more significant customers, the impact of competitive products and pricing, the timely completion of capital projects, the success of the Company's efforts to access capital markets on satisfactory terms, and to acquire, integrate, and operate new businesses and expand into new markets, as well as other risks detailed in Exhibit 99.1 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2002 and from time to time in the Company's other reports filed with the Securities and Exchange Commission.
APPLIED EXTRUSION TECHNOLOGIES, INC.
Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended
---------------------
June 30, June 30,
2003 2002
---------- ----------
As
Restated
----------
Sales $ 67,012 $ 68,282
Cost of sales 54,750 53,115
---------- ----------
Gross profit 12,262 15,167
Operating expenses:
Selling, general and administrative 4,601 7,548
Research and development 1,477 1,688
QPF acquisition and integration costs 900
---------- ----------
Total operating expenses 6,078 10,136
Operating profit 6,184 5,031
Non operating expenses:
Interest expense, net 7,445 7,646
---------- ----------
Loss before income taxes $ (1,261) $ (2,615)
========== ==========
Income tax expense (benefit) - (2,045)
Net loss $ (1,261) (570)
========== ==========
Loss per common share $ (0.10) $ (0.04)
========== ==========
Average common shares outstanding 12,833 12,806
========== ==========
EBITDA (Net Loss Reconcilation)
Net loss $ (1,261) $ (570)
Interest expense, net 7,445 7,646
Income tax (benefit) - (2,045)
Depreciation and amortization 6,336 5,457
Less amortization included in interest expense (504) (348)
Other - -
---------- ----------
EBITDA $ 12,017 $ 10,140
========== ==========
APPLIED EXTRUSION TECHNOLOGIES, INC.
Statements of Income
(In thousands, except per share data)
(Unaudited)
Nine Months Ended
---------------------
June 30, June 30,
2003 2002
---------- ----------
As
Restated
----------
Sales $ 189,223 $ 187,322
Cost of sales 152,061 149,881
---------- ----------
Gross profit 37,162 37,441
Operating expenses:
Selling, general and administrative 16,912 21,215
Research and development 5,442 4,854
QPF acquisition and integration costs 950
---------- ----------
Total operating expenses 22,354 27,019
Operating profit 14,808 10,422
Non operating expenses:
Interest expense, net 22,439 21,628
---------- ----------
Loss before income taxes $ (7,631) $ (11,206)
========== ==========
Income tax expense (benefit) - (2,045)
Net loss $ (7,631) $ (9,161)
========== ==========
Loss per common share $ (0.60) $ (0.72)
========== ==========
Average common shares outstanding 12,718 12,709
========== ==========
EBITDA (Net Loss Reconcilation)
Net loss $ (7,631) $ (9,161)
Interest expense, net 22,439 21,628
Income tax (benefit) - (2,045)
Depreciation and amortization 18,483 15,921
Less amortization included in interest expense (1,402) (1,043)
Other 307 (26)
---------- ----------
EBITDA $ 32,196 $ 25,274
========== ==========
APPLIED EXTRUSION TECHNOLOGIES, INC.
Balance Sheets
(In thousands, except per share data)
(Unaudited)
June September
30, 30,
2003 2002
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 557 $ 17,558
Accounts receivable 38,939 40,010
Inventory 52,433 32,531
Prepaid expenses 2,451 2,365
---------- ----------
Total current assets 94,380 92,464
Property, plant and equipment, net 282,916 276,916
Goodwill 9,874 9,874
Other intangible assets 10,406 11,043
Other assets 14,426 14,765
---------- ----------
$ 412,002 $ 405,062
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,950 $ 10,701
Accrued interest 14,871 7,428
Accrued expenses and other current liabilities 23,056 33,348
Borrowings under line of credit 4,662
---------- ----------
Total current liabilities 56,538 51,477
Long-term debt 278,187 277,876
Long-term liabilities 33,080 36,948
Stockholders' equity:
Preferred stock - -
Common stock 130 130
Additional paid-in-capital 103,250 103,250
Accumulated deficit (64,420) (56,789)
Accumulated comprehensive loss 7,489 (5,577)
---------- ----------
46,449 41,014
Treasury stock (2,253) (2,253)
---------- ----------
Total stockholders' equity 44,196 38,761
---------- ----------
$ 412,002 $ 405,062
========== ==========
APPLIED EXTRUSION TECHNOLOGIES, INC.
Statements of Cash Flows
(In thousands, except per share data)
(Unaudited)
---------- ----------
June 30, June 30,
2003 2002
---------- ----------
OPERATING ACTIVITIES:
Net loss $ (7,631) $ (9,161)
Adjustments to reconcile net loss to net cash
from operating activities:
Provision for doubtful accounts 450 81
Depreciation and amortization 18,483 16,574
Amortization of sale-leaseback gains (3,712) (3,618)
Stock issued for retirement plans, share
incentive plan and other compensation - 425
Changes in assets and liabilities:
Accounts receivable 1,424 (1,682)
Inventory (19,182) (422)
Prepaid expenses and other current assets (236) (1,149)
Accounts payable and accrued expenses 333 (902)
Other 617 8,740
---------- ----------
Net cash from operating activities (9,454) 8,886
INVESTING ACTIVITIES:
Additions to property, plant and equipment (13,495) (26,531)
Proceeds from sale of property, plant, and
equipment 2,110 350
Repurchase of leased assets (17,156)
Collection of short-term receivable 23,212
Proceeds from sale-leaseback transactions - 18,225
---------- ----------
Net cash from investing activities (11,385) (1,900)
FINANCING ACTIVITIES:
Borrowings under line of credit agreement, net 4,662 -
Debt Issuance costs (899) -
Proceeds from issuance of stock, net - 1,045
---------- ----------
Net cash from financing activities 3,763 1,045
Effect of exchange rate changes on cash 75 13
---------- ----------
Increase in cash and cash equivalents, net (17,001) 8,044
Cash and cash equivalents, beginning 17,558 22,176
---------- ----------
Cash and cash equivalents, ending $ 557 $ 30,220
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest during the period for:
Interest, including capitalized interest $ 15,295 $ 16,459
Income taxes - -
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