Blue Ridge Paper Products Inc. Reports First Quarter 2006 Results.CANTON Canton, cities, United States Canton. 1 City (1990 pop. 13,922), Fulton co., W central Ill., in the corn belt; inc. 1849. It is a trade and industrial center for a coal and farm area. 2 Town (1990 pop. 18,530), Norfolk co. , N.C. -- Blue Ridge Blue Ridge, eastern range of the Appalachian Mts., extending south from S Pa. to N Ga.; highest mountains in the E United States. Mt. Mitchell, 6,684 ft (2,037 m) high, is the tallest peak. Beginning with a narrow ridge in the north, c. Paper Products Inc. (BLOOMBERG Bloomberg A major global provider of 24-hour financial news and information including real-time and historic price data, financials data, trading news and analyst coverage, as well as general news and sports. : bluerd) today reported a net loss of $2.9 million for the first quarter ended March 31, 2006. This compared to a net loss of $11.6 million for the fourth quarter ended December December: see month. 31, 2005 and a net profit of $0.7 million for the first quarter ended March 31, 2005. Total net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the first quarter ended March 31, 2006 were $140.1 million, up 10.8% and 9.0% when compared to net sales for the fourth quarter ended December 31, 2005 of $126.4 million and net sales of $128.5 million for the first quarter ended March 31, 2005, respectively. Commenting on the quarter, Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a Lozyniak, Chief Executive Officer, stated, "While we are disappointed that we did not return to profitability in the first quarter, we are very encouraged by the significant improvement in our operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. , which resulted from improved pricing for our products, exceptionally strong productivity and some moderation in input costs. High energy costs, however, continue to be an area of concern." Key Business Highlights --The uncoated paper market strengthened in the first quarter ended March 31, 2006. Shipments in the first quarter ended March 31, 2006 exceeded fourth quarter ended December 31, 2005 by 2,733 tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. or 4.0%. First quarter ended March 31, 2006 average pricing for uncoated paper grades increased 4.7% when compared to pricing for the fourth quarter ended December 31, 2005. Pricing in the second quarter ending June June: see month. 30, 2006 is projected to increase over the average pricing for the first quarter ended March 31, 2006 due to price increases implemented on March 27, 2006. This increase included $60 per ton for white wove wove v. Past tense of weave. wove Verb a past tense of weave wove, woven weave envelope (1) A range of frequencies for a particular operation. (2) A group of bits or items that is packaged and treated as a single unit. (3) See also pushing the envelope. , offset, reply card, multipurpose mul·ti·pur·pose adj. Designed or used for several purposes: a multipurpose room; multipurpose software. multipurpose Adjective and tablet See digitizer tablet and tablet computer. TABLET - A query language. ["Human Factor Comparison of a Procedural and a Non-procedural Query Language", C. Welty et al, ACM Trans Database Sys 6(4):626-649 (Dec 1981)]. grades and $40 per ton for envelope kraft. --Shipments in the packaging segment for the first quarter ended March 31, 2006 totaled 68,596 tons, which was 10.5% above the fourth quarter ended December 31, 2005. This increase reflected strong shipments of the Company's non-converted coated board grades from 27,585 tons to 35,781 tons. Pricing in the first quarter ended March 31, 2006 for the Company's non-converted coated board grades was 7.1% higher than pricing recorded in the fourth quarter ended December 31, 2005. The Company's carton pricing was up 1.6% in the first quarter ended March 31, 2006 when compared to pricing in the fourth quarter ended December 31, 2005. --In the first quarter ended March 31, 2006, raw material costs compared to fourth quarter ended December 31, 2005 were flat. However, the Company received moderate cost decreases toward the end of the first quarter for low density polyethylene Low-density polyethylene (LDPE) is a thermoplastic made from oil. It was the first grade of polyethylene, produced in 1933 by Imperial Chemical Industries (ICI) using a high pressure process via free radical polymerisation [1]. , wood chips and caustic soda caustic soda: see sodium hydroxide. caustic soda Sodium hydroxide (NaOH), an inorganic compound. The alkalies called caustic soda and caustic potash (potassium hydroxide) are very important industrial chemicals, with uses in the manufacture of . Energy costs were up in the first quarter ended March 31, 2006 due primarily to contractual increases for coal that were effective January January: see month. 1, 2006. Transportation costs were down approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.2 million in the first quarter ended March 31, 2006 compared to the fourth quarter ended December 31, 2005. This was primarily due to a reduction in accessorial ac·ces·so·ry n. pl. ac·ces·so·ries 1. a. A subordinate or supplementary item; an adjunct. b. Something nonessential but desirable that contributes to an effect or result. See Synonyms at appendage. charges that were at all time highs immediately following the Gulf Coast hurricanes in the third quarter ended September September: see month. 30, 2005. --The Canton mill conducted a planned hardwood hardwood: see wood. hardwood Timber obtained from broad-leaved, flower-bearing trees. Hardwood trees are deciduous trees, except in the warmest regions. pulp mill A pulp mill is a manufacturing facility that converts wood chips or other plant fiber source into a thick fiber board which can be shipped to a paper mill for further processing. outage out·age n. 1. A quantity or portion of something lacking after delivery or storage. 2. A temporary suspension of operation, especially of electric power. in the fourth quarter ended December 31, 2005. The planned outage had a negative impact on fourth quarter earnings of approximately $3.1 million. There was not a corresponding outage in the first quarter ended March 31, 2006. The Canton mill is scheduled to have a pine pulp mill outage in the second quarter ending June 30, 2006. The Company defines EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become as net income before interest, taxes and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for certain unusual and non-cash items. EBITDA and Adjusted EBITDA are non-GAAP measures. The Company believes that EBITDA and Adjusted EBITDA can assist investors in analyzing and assessing its ability to service debt. In addition, management focuses on EBITDA and Adjusted EBITDA, as defined, as measures of the Company's operating performance and as measures of the ability of the business to generate cash. These measures should not be considered in isolation or as an alternative to net income in measuring operating performance or as an alternative to cash flows from operations in measuring its liquidity. EBITDA and Adjusted EBITDA as the Company defines these terms may not be comparable to similarly titled financial performance measures presented by other companies. The Adjusted EBITDA for the three-month period ended March 31, 2006 was $6.5 million compared to Adjusted EBITDA of a negative $4.3 million for the three-month period ended December 31, 2005.
ADJUSTED EBITDA - RECONCILIATION OF NON-GAAP MEASURES ($000)
Three-Months Ended
-----------------------------------------------
March 31, 2006 December 31, 2005
------------------ ------------------
Net Loss $(2,896) $(11,596)
Income taxes - -
Interest expense 4,475 4,431
Depreciation expense 3,662 3,967
Amortization expense 370 360
----------------- ------------------
EBITDA 5,611 (2,838)
ESOP expense (A) 1,116 (428)
Flood impact (B) (189) (692)
Bad debt expense (C) - 36
Gain on asset sales (D) - (380)
----------------- ------------------
Adjusted
EBITDA $6,538 $(4,302)
================= ==================
(A) ESOP ESOP See: Employee Stock Ownership Plan ESOP See Employee Stock Ownership Plan (ESOP). expense is a non-cash labor expense the Company incurs each year in connection with the Employee Stock Ownership Plan of the Company's parent. The adjustment for the three-month period ended December 31, 2005 reflects an adjustment to account for a decrease in the valuation of the 2005 share price. (B) Flood flood, in hydrology flood, inundation of land by the rise and overflow of a body of water. Floods occur most commonly when water from heavy rainfall, from melting ice and snow, or from a combination of these exceeds the carrying capacity of the river impact from Hurricanes Frances and Ivan Ivan - A Diana-like language making up part of VHDL. ["VHDL - The Designer Environment", A. Gilman, IEEE Design & Test 3, (Apr 1986)]. reflects the losses associated with property damage, repairs and maintenance plus business interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. , offset by insurance recoveries booked and funds received from the state and federal government. (C) Reflects bad debt expenses. (D) Reflects a gain on the sale of equipment or other operating assets Operating Assets Another term for working capital. sold during the period. For additional information, please refer to 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 December 31, 2005. Certain statements in this presentation constitute 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. or statements that may be deemed or construed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The words "forecast," "estimate," "project," "intend," "expect," "should," "would," "believe" and similar expressions and all statements that are not historical facts are intended to identify forward-looking statements. These forward-looking statements involve and are subject to known and unknown risks, uncertainties and other factors, which could cause our actual results, performance (financial or operation), or achievements to differ from the future results, performance (financial or operating), or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements. These factors include but are not limited to the following: changes in underlying paper and packaging prices, raw material prices and demand for our products, and the success of various cost-savings initiatives. These and other risks are more fully discussed in our annual report on Form 10-K for the fiscal year ended December 31, 2005.
BLUE RIDGE PAPER PRODUCTS INC.
Condensed Consolidated Balance Sheets
March 31, 2006 and December 31, 2005
(Dollars in thousands)
(unaudited)
March December
31, 31,
2006 2005
-------- ---------
Assets
Current assets:
Cash $ 1,396 $ 2,110
Accounts receivable, net of allowance for
doubtful accounts and discounts of $1,213 and
$2,298 in 2006 and 2005, respectively 58,174 56,002
Inventories 51,353 53,988
Prepaid expenses 1,290 1,029
Insurance proceeds receivable 291 291
Income tax receivable 50 50
Deferred tax asset 4,190 4,448
-------- --------
Total current assets 116,744 117,918
-------- --------
Property, plant, and equipment, net of
accumulated depreciation of $108,915 and
$105,253 in 2006 and 2005, respectively 188,935 190,463
Deferred financing costs, net 4,738 5,108
Other assets 200 193
-------- --------
Total assets $310,617 $313,682
========= =========
Liabilities and Stockholder's Equity (Deficit)
Current liabilities:
Current portion of senior debt $ 42 $ 41
Current portion of capital lease obligation 566 595
Accounts payable 45,858 48,917
Accrued expenses and other current liabilities 28,614 33,987
Interest payable 5,579 1,875
-------- --------
Total current liabilities 80,659 85,415
-------- --------
Senior debt, net of current portion 162,513 159,749
Parent Pay-In-Kind (PIK) Senior Subordinated Note 44,425 44,425
Capital lease obligations 847 979
Pension and postretirement benefits 23,379 22,678
Deferred tax liability 4,190 4,448
Other liabilities 1,118 730
-------- --------
Total liabilities 317,131 318,424
-------- --------
Obligation to redeem ESOP shares 28,829 27,716
Obligation to redeem restricted stock units of
Parent 1,643 1,631
Commitments and contingencies (See notes)
Stockholder's equity:
Common stock (par value $0.01, 1000 shares
authorized and outstanding in 2006 and 2005,
respectively) -- --
Additional paid-in capital 64,111 64,121
Accumulated deficit (88,950) (86,054)
Unearned compensation (13) (25)
Accumulated other comprehensive loss (4,183) (4,183)
-------- --------
(29,035) (26,141)
Receivable from Parent (7,951) (7,948)
-------- --------
Total stockholder's equity (deficit) (36,986) (34,089)
-------- --------
Total liabilities and stockholder's equity
(deficit) $310,617 $313,682
========= =========
BLUE RIDGE PAPER PRODUCTS INC.
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2006 and 2005
(Dollars in thousands)
(unaudited)
2006 2005
--------- ---------
Net sales $140,107 $128,547
Cost of goods sold:
Cost of goods sold, excluding depreciation and
amortization, flood-related loss and repairs
and insurance recoveries 127,801 113,195
Depreciation and amortization 3,604 3,904
Flood-related loss and repairs -- 848
Insurance recoveries -- (100)
--------- ---------
Gross profit 8,702 10,700
--------- ---------
Selling, general and administrative expenses 5,789 5,147
Depreciation and amortization 58 436
Insurance recoveries -- (23)
ESOP expense 1,116 1,631
Profit-sharing expense -- 80
--------- ---------
Operating profit 1,739 3,429
--------- ---------
Other income (expense):
Interest expense, excluding amortization
of deferred financing costs (4,475) (4,258)
Amortization of deferred financing costs (370) (332)
Government grant income 206 1,878
Gain on equity method investment 4 --
--------- ---------
(4,635) (2,712)
--------- ---------
Profit (loss) before income taxes (2,896) 717
Income tax -- --
--------- ---------
Net income (loss) $(2,896) $717
========= =========
BLUE RIDGE PAPER PRODUCTS INC.
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2006 and 2005
(Dollars in thousands)
(unaudited)
2006 2005
-------- --------
Cash flows from operating activities:
Net income (loss) $ (2,896) $ 717
Adjustment to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 3,662 4,340
Compensation expense for Parent restricted
stock 13 76
Amortization of deferred financing costs 370 332
ESOP expense 1,116 1,631
Parent PIK Senior Subordinated Note for
interest 1,000 915
Changes in operating assets and liabilities:
Accounts receivable, net (2,172) (10,558)
Inventories 2,635 (3,201)
Prepaid expenses (261) 459
Insurance proceeds receivable -- 4,439
Income tax receivable -- 21
Accounts payable (4,247) (10,664)
Accrued expenses and other current
liabilities (5,373) (2,668)
Interest payable 2,704 2,820
Pension and postretirement benefits 701 643
Other assets and liabilities 379 (126)
-------- --------
Net cash used in operating activities (2,369) (10,824)
-------- --------
Cash flows used in investing activities:
Additions to property, plant, and equipment (2,134) (2,020)
-------- --------
Net cash used in investing activities (2,134) (2,020)
-------- --------
Cash flows from financing activities:
Repurchase of Parent common and preferred
stock (3) (3)
Proceeds from borrowings under line of credit 39,701 54,050
Repayment of borrowings under line of credit (36,926) (41,175)
Repayments of long-term debt and capital lease
obligations (171) (147)
Other financing activities 1,188 --
-------- --------
Net cash provided by financing
activities 3,789 12,725
-------- --------
Net decrease in cash (714) (119)
Cash, beginning of period 2,110 2,466
-------- --------
Cash, end of period $ 1,396 $ 2,347
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest, including capitalized
interest of $217 and $79 in 2006 and 2005,
respectively $ 896 $ 614
Noncash investing and financing activities:
Issuance of restricted stock units -- 339
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