Applied Extrusion Technologies, Inc. Announces Fiscal 2004 Second Quarter Results.Business Editors/High-Tech Writers NEW CASTLE, Del.--(BUSINESS WIRE)--April 27, 2004 Applied Extrusion Technologies, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on NMS See NetWare Management System. - AETC AETC Air Education & Training Command (US Air Force) AETC Air Education and Training Command AETC AIDS Education and Training Centers AETC Alabama Educational Technology Conference AETC Advanced Engineering Technology Conference ) today announced financial results for its second fiscal quarter ended March 31, 2004. SECOND QUARTER 2004 RESULTS Sales for the second quarter of fiscal 2004 of $70.3 million were $7.4 million, or 12 percent, higher compared with the second quarter of fiscal 2003. A 17 percent increase in unit volume was driven by the Company's inventory reduction initiatives, which contributed to a 4 percent decrease in average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. . The decline in average selling price principally reflects a significant increase in the volume of lower price films. Exclusive of the sale of lower priced commodity goods to reduce inventories, volume and price were up by 2 percent each, as compared to the prior year. Gross profit for the second quarter of $9.9 million was $2.8 million, or 22 percent, lower than the second quarter of fiscal 2003. The $2.8 million reduction was due to an increase in raw material costs of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $4.2 million and a $1 million increase in depreciation expense, partially offset by the gross profit contribution from the increased sales volume. Gross margin was 14.1 percent versus 20.2 percent in fiscal 2003. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. of $7.5 million were $0.6 million, or 7 percent, lower as compared with the same period of the prior year. Operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $2.4 million for the second quarter was $2.2 million lower than the same period in fiscal 2003. Excluding the $1 million increase in depreciation expense, operating profit was $1.2 million lower than the prior year. Interest expense of $8.4 million was $0.7 million higher than the second quarter of fiscal 2003. This is due to a higher average debt balance and lower capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. . The net loss for the second quarter of fiscal 2004 was $6 million, or $.47 per share, compared with a net loss of $3.1 million, or $.24 per share, for the second quarter of fiscal 2003. The $2.9 million increase in the net loss is principally due to a large increase in raw material costs, as well as increases in depreciation, and interest expense. For the three months ended March 31, 2004, the Company generated earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
SIX MONTHS 2004 RESULTS Sales for the first six months of fiscal 2004 of $127.8 million were $5.6 million, or 4.6 percent, higher compared with the first six months of fiscal 2003. A 5 percent increase in unit volume was partially offset by a 1 percent decrease in average selling prices. The decline in average selling price principally reflects a significant increase in the volume of lower price films. Exclusive of the sale of lower priced commodity goods to reduce inventories, volume was 2 percent lower and prices were approximately 2 percent higher, as compared to the prior year. Gross profit for the first six months of $19.4 million was $5.5 million, or 22 percent, lower than the first six months of fiscal 2003. The $5.5 million reduction was due to an approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. increase of $7.2 million in raw material costs and a $2 million increase in depreciation expense, partially offset by the gross profit contribution from the increased sales volume. Gross margin was 15.2 percent versus 20.4 percent in fiscal 2003. Operating expenses of $14.7 million were $1.6 million, or 10 percent, lower as compared with the same period of the prior year. Operating profit of $4.8 million was $3.8 million lower than the same period in fiscal 2003. Excluding the $2 million increase in depreciation expense, operating profit was $1.8 million lower than the prior year. Interest expense of $19 million was $4 million higher than the first six months of fiscal 2003. This increase reflects approximately $2.2 million of nonrecurring Non`re`cur´ring a. 1. Nonrecurrent; as, the costs of a layoff are considered as a nonrecurring expense s>. expenses, principally the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of deferred financing charges associated with the Company's prior credit facility, which was refinanced with GE Commercial Finance on October October: see month. 3, 2003. The remaining increase of $1.8 million is due to a higher average debt balance and lower capitalized interest. The net loss for the first six months of fiscal 2004 was $14.3 million, or $1.11 per share, compared with a net loss of $6.4 million, or $.50 per share, for the same period of fiscal 2003. The $7.9 million increase in the net loss is principally due to increased depreciation and amortization, and interest expense of $2.2 million and $4 million, respectively. For the six months ended March 31, 2004, the Company generated earnings before interest, taxes, depreciation and amortization (EBITDA) of $18.4 million compared with EBITDA of $20.2 million for the same period of fiscal 2003. BALANCE SHEET, CASH FLOW AND LIQUIDITY The Company used approximately $20 million of cash in the first six months. This was principally due to a $10 million increase in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying as a result of the significant increase in sales during the second quarter. Inventories increased by $8.1 million for the first six months. Finished goods and raw materials inventories increased by $4.6 million and $3.5 million, respectively, due primarily to increased resin resin, any of a class of amorphous solids or semisolids. Resins are found in nature and are chiefly of vegetable origin. They are typically light yellow to dark brown in color; tasteless; odorless or faintly aromatic; translucent or transparent; brittle, fracturing costs and a unit increase in raw material inventories. During the second quarter, the unit volume of finished goods was reduced by approximately 7 million lbs. and is expected to decline further throughout the year. However, the reduction in the unit volume of finished goods was partially offset by a $3.5 million increase in the average cost of finished goods due principally to increased raw material costs. Additionally, raw material inventories increased by approximately $2.2 million due to the purchase of materials in advance of higher resin costs. As a result, total inventories were reduced by approximately $0.8 million during the quarter. As previously announced, the Company amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. its credit facility with GE Commercial Finance on March 23, 2004. This amendment increased the Company's revolving line of credit Revolving line of credit A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years. by $10 million to $60 million, and reduces the EBITDA covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the through the third quarter of fiscal 2005. The additional liquidity and flexibility, provided by this amendment, supports the Company's continued implementation of its high-value proprietary products strategy, during a period of rapidly increasing material costs. At March 31, 2004, the Company had borrowings of $43.3 million pursuant to its revolving line of credit. Unused availability under the revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility at quarter end was approximately $12 million. Net Debt (total debt less cash) at March 31, 2004 was $361 million, representing 94 percent of total capitalization Total capitalization The total long-term debt and all types of equity of a company that constitutes its capital structure. total capitalization See capitalization. . COMPANY COMMENTS Commenting on the results, Amin AMIN Arabic Media Internet Network J. Khoury Khoury (occasionally Khouri or Coury; Arabic: خوري) is an Arabic surname that is unique to Arab Christians. The term Khoury means "priest" in Arabic. , Chairman and Chief Executive Officer, said: "Our recently implemented sales initiatives provided substantial volume and revenue growth during the quarter. Nevertheless, principally, as a result of our inability to pass the $4.2 million in resin increases through to customers, during the quarter, the Company lost $6 million. We expect top line growth to accelerate in the third quarter with the anticipated seasonal demand increase, and the continued implementation of our inventory reduction initiatives. Additionally, in response to the unprecedented increase in resin costs during the second quarter, industry wide price increases have recently been announced, and as a result gross profit is expected to improve during the second half." Mr. Khoury further remarked, "We remain encouraged by the commercial prospects for our high-value proprietary products. We will continue to carefully control capital expenditures; additionally management is currently reviewing its cost structure with a view to further decreases in cost. We remain focused on executing a successful turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. in a difficult business environment. Our objective is to generate positive free cash flow in 2004 and to achieve acceptable levels of profitability over time through continuous improvement in product mix and capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. ." CONFERENCE CALL As previously announced, the Company will hold a conference call at 9:00 AM Eastern Time on April 28, 2004 to discuss the results. To listen live via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , visit the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of AET's website at http://www.aetfilms.com. To access the conference call by phone, dial 1-888-394-8045 and reference access code "AET AET Aetna, Inc. AET After Extra Time AET Actual Evapotranspiration AET Alliance for Environmental Technology AET Alpha-Ethyltryptamine AET Applied Extrusion Technologies, Inc. Call". A taped replay of the conference call will also be available from approximately 12:30 PM Eastern Time on April 28, 2004 until midnight on May 8, 2004. To listen to the replay, dial 1-877-519-4471 from within the U.S. or 973-341-3080 from outside the U.S. and enter access code 4713865. Applied Extrusion Technologies, Inc. is a leading North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. developer and manufacturer of specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. polypropylene polypropylene (pŏl'ēprō`pəlēn), plastic noted for its light weight, being less dense than water; it is a polymer of propylene. It resists moisture, oils, and solvents. (OPP OPP Opposite OPP Opportunity/Opportunities OPP Office of Pesticide Programs OPP Ontario Provincial Police (Ontario, Canada) OPP Office of Polar Programs (National Science Foundation) ) 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended September September: see month. 30, 2003 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)
Six Months Ended
---------------------------------
March 31, 2004 March 31, 2003
---------------- ----------------
Sales $ 127,853 $ 122,211
Cost of sales 108,407 97,311
--------------- ----------------
Gross profit 19,446 24,900
Operating expenses:
Selling, general and administrative 11,274 12,310
Research and development 3,382 3,965
--------------- ----------------
Total operating expenses 14,656 16,275
Operating Profit 4,790 8,625
Non operating expenses:
Interest expense, net 19,042 14,994
--------------- ----------------
Loss before income taxes $ (14,252) $ (6,369)
--------------- ----------------
Income tax expense (benefit) - -
--------------- ----------------
Net loss $ (14,252) (6,369)
=============== ================
Loss per common share $ (1.11) $ (0.50)
=============== ================
Average common shares outstanding 12,833 12,650
=============== ================
EBITDA (Net Loss Reconcilation)
Net loss $ (14,252) $ (6,369)
Interest expense, net 19,042 14,994
Income tax (benefit) - -
Depreciation and amortization 14,550 12,343
Less amortization included in
interest expense (956) (898)
Other 21 92
--------------- ----------------
EBITDA $ 18,405 $ 20,162
=============== ================
EBITDA (Operating Cash Flow
Reconcilation)
Net cash from operating activities $ (19,764) $ (17,210)
Interest expense, net 19,042 14,994
Changes in assets and liabilities,
net of assets acquired and
divested 20,238 21,009
Other non-cash adjustments (176) 2,175
Amortization included in interest
expense (956) (898)
Other 21 92
--------------- ----------------
EBITDA $ 18,405 $ 20,162
=============== ================
APPLIED EXTRUSION TECHNOLOGIES, INC.
Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended
---------------------------------
March 31, 2004 March 31, 2003
---------------- ----------------
Sales $ 70,278 $ 62,850
Cost of sales 60,365 50,131
--------------- ----------------
Gross profit 9,913 12,719
Operating expenses:
Selling, general and administrative 5,796 6,090
Research and development 1,716 2,024
--------------- ----------------
Total operating expenses 7,512 8,114
Operating Profit 2,401 4,605
Non operating expenses:
Interest expense, net 8,436 7,715
--------------- ----------------
Loss before income taxes $ (6,035) $ (3,110)
--------------- ----------------
Income tax expense (benefit) - -
--------------- ----------------
Net loss $ (6,035) (3,110)
=============== ================
Loss per common share $ (0.47) $ (0.24)
=============== ================
Average common shares outstanding 12,833 12,718
=============== ================
EBITDA (Net Loss Reconcilation)
Net loss $ (6,035) $ (3,110)
Interest expense, net 8,436 7,715
Income tax (benefit) - -
Depreciation and amortization 7,316 6,153
Less amortization included in
interest expense (483) (469)
Other (13) 93
--------------- ----------------
EBITDA $ 9,221 $ 10,382
=============== ================
EBITDA (Operating Cash Flow
Reconcilation)
Net cash from operating activities $ (19,501) $ (22,446)
Interest expense, net 8,436 7,715
Changes in assets and liabilities,
net of assets acquired and
divested 20,932 24,401
Other non-cash adjustments (150) 1,088
Amortization included in interest
expense (483) (469)
Other (13) 93
--------------- ----------------
EBITDA $ 9,221 $ 10,382
=============== ================
APPLIED EXTRUSION TECHNOLOGIES, INC.
Balance Sheets
(In thousands, except per share data)
(Unaudited)
---------------- ----------------
March 31, September 30,
2004 2003
---------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents $ 923 $ 2,835
Accounts receivable, net of
allowance for doubtful accounts of 43,096 33,407
$1,467 at March 31, 2004 and
$1,864 at September 30, 2003
Inventory 60,650 52,517
Prepaid expenses and other current
assets 3,353 2,995
--------------- ----------------
Total current assets 108,022 91,754
Property, plant and equipment, net 290,335 281,384
Goodwill 9,874 9,874
Other intangible assets 10,682 10,505
Other assets 926 14,178
--------------- ----------------
Total assets $ 419,839 $ 407,695
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,250 $ -
Revolving debt 43,284 28,670
Accounts payable 13,547 9,485
Accrued interest 10,027 7,544
Accrued expenses and other current
liabilities 8,800 18,008
---------------- ----------------
Total current liabilities 81,908 63,707
Long-term debt 312,622 271,790
Long-term liabilities 2,055 18,339
Deferred gain on sale-leaseback
transactions - 19,502
Stockholders' equity:
Preferred stock - -
Common stock 130 130
Additional paid-in-capital 103,317 103,204
Accumulated deficit (87,994) (73,742)
Accumulated comprehensive income 9,848 7,018
--------------- ----------------
25,301 36,610
Treasury stock (2,047) (2,253)
--------------- ----------------
Total stockholders' equity 23,254 34,357
--------------- ----------------
Total liabilities and
stockholders' equity $ 419,839 $ 407,695
=============== ================
APPLIED EXTRUSION TECHNOLOGIES, INC.
Statements of Cash Flows
(In thousands, except per share data)
(Unaudited)
Six Months Ended
---------------------------------
March 31, 2004 March 31, 2003
---------------- ----------------
OPERATING ACTIVITIES:
Net loss $ (14,252) $ (6,369)
Adjustments to reconcile net loss
to net cash from operating
activities:
Provision for doubtful accounts 300 300
Depreciation and amortization 14,550 12,343
Amortization of sale-leaseback
gains (69) (2,475)
Stock compensation 113 -
Gain on sale of assets (168) -
Changes in assets and
liabilities:
Accounts receivable (9,859) (418)
Inventory (7,938) (15,994)
Prepaid expenses and other
current assets 13,770 (1,732)
Accounts payable and accrued
expenses (16,109) (2,483)
Other (102) (382)
--------------- ----------------
Net cash from operating
activities (19,764) (17,210)
INVESTING ACTIVITIES:
Additions to property, plant and
equipment (4,822) (9,569)
Proceeds from sale of property,
plant, and equipment 203 1,220
Repurchase of leased assets (36,961) -
--------------- ----------------
Net cash from investing
activities (41,580) (8,349)
FINANCING ACTIVITIES:
Borrowings (Repayments) under line
of credit agreement, net 14,615 (673)
Debt Issuance costs (2,092) -
Principal payment on term loan (3,125) 10,097
Proceeds from Term Loan 50,000 -
--------------- ----------------
Net cash from financing
activities 59,398 9,424
Effect of exchange rate changes on
cash 34 (4)
--------------- ----------------
Decrease in cash and cash
equivalents, net (1,912) (16,139)
Cash and cash equivalents,
beginning 2,835 17,558
--------------- ----------------
Cash and cash equivalents, ending $ 923 $ 1,419
=============== ================
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