Blue Ridge Paper Products Inc. Reports Second 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 income of $2.0 million for the second quarter ended June June: see month. 30, 2006. This compared to a net loss of $2.9 million for the first quarter ended March 31, 2006 and a net loss of $4.4 million for the second quarter ended June 30, 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 second quarter ended June 30, 2006 were $144.9 million, an increase of 3.4 % and 15.7 %, respectively, when compared to net sales for the first quarter ended March 31, 2006 of $140.1 million and net sales of $125.2 million for the second quarter ended June 30, 2005. 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, "Despite extremely high energy and transportation costs, we returned to profitability in the second quarter due to record productivity, improved pricing for our products and gains from our Six Sigma Not to be confused with Sigma 6. Six Sigma is a set of practices originally developed by Motorola to systematically improve processes by eliminating defects.[1] A defect is defined as nonconformity of a product or service to its specifications. and Lean Manufacturing Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. initiatives." Mr. Lozyniak added, "The ratification The confirmation or adoption of an act that has already been performed. A principal can, for example, ratify something that has been done on his or her behalf by another individual who assumed the authority to act in the capacity of an agent. of our new three-year labor agreement gives our people a well-deserved well-deserved adj → merecido well-deserved well adj → (bien) mérité(e) well-deserved well adj → raise and sends a strong signal to our customers, suppliers, lenders and the community of the dedication of the employees of Blue Ridge to its long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. success." Key Business Highlights --The uncoated paper market continued to strengthen in the second quarter ended June 30, 2006. Average pricing in the second quarter ended June 30, 2006 increased 8.6% compared to the first quarter ended March 31, 2006 and 12.1% compared to the second quarter ended June 30, 2005. Increased pricing reflects the implementation of the March 27, 2006 price increase 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 , envelope kraft 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. --Shipments in the Company's packaging segment for the quarter ended June 30, 2006 increased 5.2% or 3,541 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. when compared to the first quarter ended March 31, 2006 and 8.5% when compared to the second quarter ended June 30, 2005. The increase in packaging segment shipment volume was primarily due to increased shipments of coated board rolls. Pricing for the packaging segment for the second quarter ended June 30, 2006 decreased when compared to the first quarter ended March 31, 2006 due to a higher mix of coated rolls sales, which have a lower revenue realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. than cartons. --The Canton mill conducted a planned pine 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 second quarter ended June 30, 2006. The planned outage had a negative impact on second quarter earnings of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.6 million. There was not a corresponding outage in the first quarter ended March 31, 2006. The Canton mill is scheduled to have a 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 outage in the third quarter ending September September: see month. 30, 2006. Due to additional planned maintenance work, the costs of the third quarter outage are expected to exceed the costs of the second quarter outage. --Raw material costs improved in the second quarter ended June 30, 2006 compared to the first quarter ended March 31, 2006 by approximately $1.9 million. This reduction in costs was primarily due to a net decrease in the cost of low-density polyethylene low-density polyethylene n. Abbr. LDPE A form of polyethylene having many side branches off the main carbon backbone and a less closely packed structure than that of high-density polyethylene. of approximately 10% in the second quarter ended June 30, 2006 compared to the first quarter ended March 31, 2006. Both chemical and wood chip costs experienced slight decreases in costs in the second quarter ended June 30, 2006 compared to first quarter ended March 31, 2006. --On July July: see month. 7, 2006, the United Steelworkers United Steelworkers (USW) historic labour union representing workers in steel, aluminum, and other metallurgical industries for much of the 20th century. In the U.S. International Union (USW USW Und So Weiter (German: and so on) USW Undersea Warfare USW United Steel Workers USW US Wheat Associates USW Ultrasonic Welding USW Ultra Short Wave USW US West Telecommunications (stock symbol) ) ratified rat·i·fy tr.v. rat·i·fied, rat·i·fy·ing, rat·i·fies To approve and give formal sanction to; confirm. See Synonyms at approve. a new three-year labor agreement with the Company. The new contract provides for annual increases of 4%, 3% and 3% over the next three years, retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a to May 14, 2006. Included in the package were additional cost-sharing measures in the Company's health and welfare programs. The new contract follows a seven-year agreement in which there were no general wage increases for the collective bargaining collective bargaining, in labor relations, procedure whereby an employer or employers agree to discuss the conditions of work by bargaining with representatives of the employees, usually a labor union. unit. 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 June 30, 2006 was $10.0 million compared to Adjusted EBITDA of $6.5 million for the three-month period ended March 31, 2006.
ADJUSTED EBITDA - RECONCILIATION OF NON-GAAP MEASURES ($000)
Three-Months Ended
June 30, 2006 March 31, 2006
Net Income/(Loss) $ 1,993 $ (2,896)
Income taxes -- --
Interest expense 4,481 4,475
Depreciation expense 3,662 3,662
Amortization expense 381 370
EBITDA 10,517 5,611
ESOP expense (A) 511 1,116
Flood impact (B) (979) (189)
Adjusted EBITDA $ 10,049 $ 6,538
============== ===========
(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 ESOP Plan specified spec·i·fy tr.v. spec·i·fied, spec·i·fy·ing, spec·i·fies 1. To state explicitly or in detail: specified the amount needed. 2. To include in a specification. 3. that 40% of the common stock authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: would be allocated to the ESOP participants from May 14, 1999 through May 13, 2006. As of May 14, 2006, the value of all shares have been accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. , except for any valuation changes that may occur on December December: see month. 31, 2006. (B) Flood 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 costs of flood prevention, offset by grant funds received from the state and federal government. 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, as updated in our quarterly reports on Form 10-Q Form 10-Q See 10-Q. for the fiscal quarters ended March 31, 2006 and June 30, 2006.
BLUE RIDGE PAPER PRODUCTS INC.
Condensed Consolidated Balance Sheets
June 30, 2006 and December 31, 2005
(Dollars in thousands)
(unaudited)
June 30, Dec. 31,
2006 2005
-------------------
Assets
Current assets:
Cash $ 748 $ 2,110
Accounts receivable, net of allowance for doubtful
accounts and discounts of $1,324 and $2,298 in
2006 and 2005, respectively 60,795 56,002
Inventories 50,147 53,988
Prepaid expenses 1,530 1,029
Insurance proceeds receivable -- 291
Income tax receivable -- 50
Deferred tax asset 4,163 4,448
--------- --------
Total current assets 117,383 117,918
--------- --------
Property, plant, and equipment, net of accumulated
depreciation of $112,555 and $105,253 in 2006
and 2005, respectively 188,392 190,463
Deferred financing costs, net 4,357 5,108
Other assets 1,208 193
--------- --------
Total assets $ 311,340 $313,682
========= ========
Liabilities and Stockholder's Equity (Deficit)
Current liabilities:
Current portion of senior debt $ 43 $ 41
Current portion of capital lease obligation 505 595
Accounts payable 42,874 48,917
Accrued expenses and other current liabilities 29,624 33,987
Interest payable 1,874 1,875
--------- --------
Total current liabilities 74,920 85,415
--------- --------
Senior debt, net of current portion 164,150 159,749
Parent Pay-In-Kind (PIK) Senior Subordinated Note 46,424 44,425
Capital lease obligations 745 979
Pension and postretirement benefits 23,814 22,678
Deferred tax liability 4,163 4,448
Other liabilities 1,119 730
--------- --------
Total liabilities 315,335 318,424
--------- --------
Obligation to redeem ESOP shares 29,340 27,716
Obligation to redeem restricted stock units of
Parent 1,655 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 64,099 64,121
Accumulated deficit (86,955) (86,054)
Unearned compensation -- (25)
Accumulated other comprehensive loss (4,183) (4,183)
--------- --------
(27,039) (26,141)
Receivable from Parent (7,951) (7,948)
--------- --------
Total stockholder's equity (deficit) (34,990) (34,089)
--------- --------
Total liabilities and stockholder's equity
(deficit) $ 311,340 $313,682
========= ========
BLUE RIDGE PAPER PRODUCTS INC.
Condensed Consolidated Statements of Operations
Three- and Six-Month Periods Ended June 30, 2006 and 2005
(Dollars in thousands)
(unaudited)
Three-Month Period Six-Month Period
Ended Ended
June 30, June 30,
2006 2005 2006 2005
-------- -------- -------- --------
Net sales $144,856 $125,206 $284,963 $253,753
Cost of goods sold:
Cost of goods sold, excluding
depreciation and amortization,
flood-related loss and repairs
and insurance recoveries 128,700 113,895 256,501 227,090
Depreciation and amortization 3,634 3,833 7,238 7,737
Flood-related loss and repairs -- 478 -- 1,326
Insurance recoveries -- -- -- (100)
-------- -------- -------- --------
Gross profit 12,522 7,000 21,224 17,700
-------- -------- -------- --------
Selling, general and
administrative expenses 6,107 5,042 11,896 10,189
Depreciation and amortization 28 426 86 862
Insurance recoveries -- -- -- (23)
ESOP expense 511 1,631 1,627 3,262
Profit-sharing expense -- -- -- 80
-------- -------- -------- --------
Operating profit (loss) 5,876 (99) 7,615 3,330
-------- -------- -------- --------
Other income (expense):
Interest expense, excluding
amortization of deferred
financing costs (4,481) (4,397) (8,956) (8,655)
Amortization of deferred
financing costs (381) (341) (751) (673)
Government grant income 979 428 1,185 2,306
Gain on equity method
investment -- -- 4 --
-------- -------- -------- --------
(3,883) (4,310) (8,518) (7,022)
-------- -------- -------- --------
Profit (loss) before income
taxes 1,993 (4,409) (903) (3,692)
Income tax -- -- -- --
-------- -------- -------- --------
Net income (loss) $ 1,993 $ (4,409) $ (903)$ (3,692)
======== ======== ======== ========
BLUE RIDGE PAPER PRODUCTS INC.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2006 and 2005
(Dollars in thousands)
(unaudited)
2006 2005
-----------------
Cash flows from operating activities:
Net loss $ (903)$(3,692)
Adjustment to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 7,324 8,599
Compensation expense for Parent restricted stock 25 148
Amortization of deferred financing costs 751 673
ESOP expense 1,627 3,262
Gain on sale of assets (17) --
Parent PIK Senior Subordinated Note for interest 2,044 1,872
Changes in operating assets and liabilities:
Accounts receivable, net (4,793) (7,431)
Inventories 3,841 (2,114)
Prepaid expenses (501) 919
Insurance proceeds receivable 291 4,539
Income tax receivable 50 21
Accounts payable (5,288) (9,319)
Accrued expenses and other current liabilities (4,363) (3,693)
Interest payable (46) (29)
Pension and postretirement benefits 1,136 472
Other assets and liabilities (625) (625)
-----------------
Net cash provided by (used in) operating
activities 553 (6,398)
-----------------
Cash flows used in investing activities:
Additions to property, plant, and equipment (5,253) (4,608)
Proceeds from sale of property, plant, and equipment 17 --
-----------------
Net cash used in investing activities (5,236) (4,608)
-----------------
Cash flows from financing activities:
Repurchase of Parent common and preferred stock (3) (3)
Proceeds from borrowings under line of credit 75,610 84,090
Repayment of borrowings under line of credit (71,187)(72,705)
Repayments of long-term debt and capital lease
obligations (344) (311)
Other financing activities (755) --
-----------------
Net cash provided by financing activities 3,321 11,071
-----------------
Net increase (decrease) in cash (1,362) 65
Cash, beginning of period 2,110 2,466
-----------------
Cash, end of period $ 748 $ 2,531
=================
Supplemental disclosures of cash flow information:
Cash paid for interest, including capitalized
interest of $461 and $146 in 2006 and 2005,
respectively $7,420 $ 6,839
Noncash investing and financing activities:
Conversion of accrued interest to note payable 1,999 1,831
Issuance of restricted stock units -- 333
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