Packaging Dynamics Corporation Reports Results for the First Quarter Ended March 31, 2005

Packaging Dynamics Corporation Reports Results for the First
Quarter Ended March 31, 2005 


CHICAGO, April 28  /PRNewswire-FirstCall/ -- Packaging Dynamics Corporation
(NASDAQ:PKDY)(the "Company" or "Packaging Dynamics") reported results of
operations for the first quarter ended March 31, 2005.

Consolidated Results:

The Company reported net income for the first quarter of $2.0 million, or $0.19
per diluted share, a 36.4% increase over net income of $1.5 million, or $0.15
per diluted share, reported in the first quarter of 2004.

Continuing Operations:

Net sales were $86.8 million, a 26.6% increase over net sales of $68.5 million
in the first quarter of 2004.  Income from operations was $5.7 million, a 33.7%
increase over income from operations of $4.3 million in the first quarter of
2004.  Operating margin for the first quarter was 6.6% compared to 6.3% in the
prior year.  Income from continuing operations was $2.2 million, or $0.21 per
diluted share, a 20.0% increase over income from continuing operations of $1.9
million, or $0.19 per diluted share, in the first quarter of 2004.

Food Packaging Segment

Net sales of $67.4 million increased 51.0% from $44.7 million in the prior year
primarily due to the contribution of Papercon which was acquired in the third
quarter of 2004.  Segment operating income of $4.2 million increased 96.1% from
$2.1 million in the prior year and segment operating margin improved to 6.2%
from 4.8% in the prior year, reflecting the acquisition of Papercon and
positive results from the integration of Papercon and other cost and
productivity initiatives.

Specialty Laminations Segment

Net sales of $20.1 million declined 18.1% from $24.6 million in the prior year
primarily due to volume weakness for products sold into the building products
market as well as for other products.  Segment operating income was $1.6
million, a 27.6% decline from $2.2 million in the prior year and operating
margin declined to 7.8% from 8.8% in the prior year, reflecting the sales
decline.

Discontinued Operations:

Discontinued operations includes the Company's Specialty Paper operation which
was exited during the fourth quarter of 2003.  Net loss from discontinued
operations was $0.2 million, or $0.02 per diluted share, compared to a net loss
of $0.4 million, or $0.04 per diluted share, in the first quarter of 2004.  The
net loss for both periods represents costs associated with the ongoing program
to maintain and dispose of the Detroit property.

Balance Sheet:

Total debt was $116.2 at March 31, 2005, a $0.3 million decrease from $116.5
million at December 31, 2004.  Working capital, excluding cash and current
maturities of long-term debt, increased by $4.2 million during the quarter. 
The increase was primarily due to increased inventory levels as a result of
sales declines in the Specialty Laminations segment as well as efforts to
address lead time and pricing pressures in certain raw material categories.

Summary and Outlook:

"Our first quarter results were consistent with our full-year 2005 earnings
outlook and we continue to target diluted earnings per share from continuing
operations of $1.20 to $1.30.  Our Food Packaging segment benefited from the
ongoing integration of the Papercon acquisition.  We expect the integration
efforts to produce additional benefits as the year unfolds.  Our Specialty
Laminations segment continued to experience revenue challenges.  We expect
these challenges to continue in the second quarter but diminish during the
second half of the year," commented Frank V. Tannura, Chairman and Chief
Executive Officer.

Earnings Call:

The Company will hold a conference call on Friday, April 29, 2005 at 10:00 a.m.
(ET) to discuss the news release.  For access to the conference call, please
dial 877-209-0397 (U.S.) by 9:45 a.m. (ET) on April 29th.   The access code is
"Packaging Dynamics Earnings Call."  A replay of the call will be available
from approximately 5:00 p.m. (ET) on April 29th through 12:59 a.m. (ET) on May
14th.  To access the replay, please dial 800-475-6701 (U.S.) or 320-365-3844
(International), access code 776423.

Packaging Dynamics, headquartered in Chicago, Illinois, is a flexible packaging
company that laminates and converts paper, film and foil into various
value-added flexible packaging products for the food service, food processing,
bakery, supermarket, deli and concession markets as well as a limited number of
industrial markets.  For more information, visit our website at
http://www.pkdy.com/ .

The statements contained in this press release are forward-looking and are
identified by the use of forward-looking words and phrases, such as
"estimates," "plans," "expects," "to continue," "subject to," "target" and such
other similar phrases.  These forward-looking statements are based on the
current expectations of the company.  Because forward-looking statements
involve risks and uncertainties, the company's plans, actions and actual
results could differ materially.  Among the factors that could cause plans,
actions and results to differ materially from current expectations are: (i)
changes in consumer demand and prices resulting in a negative impact on
revenues and margins; (ii) raw material substitutions and increases in the
costs of raw materials, utilities, labor and other supplies; (iii) increased
competition in the company's product lines; (iv) changes in capital
availability or costs; (v) workforce factors such as strikes or labor
interruptions; (vi) the ability of the company and its subsidiaries to develop
new products, identify and execute capital programs and efficiently integrate
acquired businesses; (vii) the cost of compliance with applicable governmental
regulations and changes in such regulations, including environmental
regulations; (viii) the general political, economic and competitive conditions
in markets and countries where the company and its subsidiaries operate,
including currency fluctuations and other risks associated with operating in
foreign countries; and (ix) the timing and occurrence (or non-occurrence) of
transactions and events which may be subject to circumstances beyond the
control of the company and its subsidiaries.

Following are more detailed financial results for the three months ended March
31, 2005.

                       PACKAGING DYNAMICS CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (dollars in thousands, except per share data)
                                 (unaudited)

                                        For the Three Months Ended March 31,
                                                   2005          2004

  Net sales                                      $86,784       $68,534
    Cost of goods sold                            74,108        59,474
  Gross profit                                    12,676         9,060
    Operating expenses                             6,937         4,768
  Income from operations                           5,739         4,292
    Interest expense                               2,088         1,200
  Income before income taxes                       3,651         3,092
    Income tax provision                           1,406         1,221
  Income from continuing operations                2,245         1,871
  Loss from discontinued operations                 (223)         (389)
  Net income                                      $2,022        $1,482

  Income (loss) per share:
    Basic:
      Continuing operations                        $0.21         $0.19
      Discontinued operations                      (0.02)        (0.04)
        Net income                                 $0.19         $0.15
    Fully diluted:
      Continuing operations                        $0.21         $0.19
      Discontinued operations                      (0.02)        (0.04)
        Net income                                 $0.19         $0.15
  Weighted average shares outstanding:
    Basic                                     10,525,653     9,681,504
    Fully diluted                             10,924,037     9,970,277


  Reconciliation of Income from Operations
    to EBITDA
    Income from operations                        $5,739        $4,292
    Depreciation and amortization                  2,043         1,484
    EBITDA                                        $7,782        $5,776


  Segment Net Sales:
    Food Packaging                               $67,409       $44,656
    Specialty Laminations                         20,143        24,590
    Elimination of Specialty Laminations
      intercompany sale                             (768)         (712)
      Total                                      $86,784       $68,534

  Segment Operating Income:
    Food Packaging                                $4,172        $2,128
    Specialty Laminations                          1,567         2,164
      Total                                       $5,739        $4,292


                        PACKAGING DYNAMICS CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                (dollars in thousands, except per share data)
                                 (unaudited)

                                                  March 31,    December 31,
                                                     2005          2004
                   ASSETS                        (unaudited)
  Current Assets:
    Cash and cash equivalents                         $380       $1,175
    Accounts receivable trade (net of
      allowance for doubtful accounts
      of $828 and $825)                             31,014       31,174
    Inventories                                     40,591       36,506
    Prepaid expenses and other                       6,259        5,962
      Total current assets                          78,244       74,817

  Property, Plant and Equipment:
    Property, plant and equipment                   81,733       80,978
    Less -- accumulated depreciation               (31,077)     (29,284)
      Total property, plant and equipment           50,656       51,694
  Other Assets:
    Goodwill                                        81,263       81,263
    Other                                           20,513       20,893
      Total other assets                           101,776      102,156
  Total Assets                                    $230,676     $228,667

        LIABILITIES AND STOCKHOLDERS' EQUITY
  Current Liabilities:
    Current maturities of long-term debt            $6,343       $6,093
    Cash overdraft                                   3,706        6,339
    Accounts payable                                24,643       20,793
    Accrued salary and wages                         3,087        3,420
    Other accrued liabilities                        7,310        8,207
      Total current liabilities                     45,089       44,852
  Long-term Debt                                   109,876      110,386
  Other Liabilities                                  6,937        7,592
  Deferred Income Taxes                             16,960       15,975
  Total Liabilities                                178,862      178,805
  Commitments and Contingencies
  Stockholders' Equity:
    Common stock, $.01 par value - 40,000,000
      shares authorized; 10,542,505 and
      10,514,837 shares issued and outstanding at
      March 31, 2005 and December 31, 2004             106          105
    Preferred stock, $.01 par value - 5,000,000
      shares authorized; no shares issued and
      outstanding                                        -            -
    Paid in capital in excess of par value          57,826       57,570
    Other comprehensive income                         844          486
    Accumulated deficit                             (6,962)      (8,299)
      Total stockholders' equity                    51,814       49,862
  Total Liabilities and Stockholders' Equity      $230,676     $228,667



                        PACKAGING DYNAMICS CORPORATION
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (dollars in thousands)
                                 (unaudited)

                                       For the Three Months Ended March 31,
                                                   2005           2004
  Cash flows from operating activities:
    Net income                                    $2,022         $1,482
    Adjustments to reconcile net income to
      net cash from operating activities:
      Depreciation and amortization                2,043          1,484
      Amortization of deferred finance costs         154             86
      Provision for doubtful accounts                  3             94
      Deferred income taxes                          924            114
      Changes in assets and liabilities:
        Accounts receivable                          157         (1,445)
        Inventories                               (4,085)          (663)
        Other assets                                 158           (648)
        Accounts payable and accrued liabilities   2,093          1,226
      Net cash from continuing operating
        activities                                 3,469          1,730
      Net cash used by discontinued operating
        activities                                   (90)        (1,232)
      Net cash from operating activities           3,379            498
  Cash flows used by investing activities:
    Additions to property, plant and equipment      (755)        (1,544)
      Net cash used by continuing investing
        activities                                  (755)        (1,544)
      Net cash from discontinued investing
        activities                                     -            152
      Net cash used by investing activities         (755)        (1,392)
  Cash flows from (used by) financing activities:
    Principal payments for loan obligations       (1,460)        (1,250)
    Proceeds under revolving line of credit       19,700         14,600
    Repayments under revolving line of credit    (18,500)       (14,700)
    Payment of dividends                            (685)          (484)
    Change in cash overdrafts                     (2,633)         2,703
    Other, net                                       159             (4)
      Net cash from (used by) financing
        activities                                (3,419)           865
  Net decrease in cash and cash equivalents         (795)           (29)
  Cash and cash equivalents at beginning of
    period                                         1,175            453
  Cash and cash equivalents at end of period        $380           $424


DATASOURCE: Packaging Dynamics Corporation



CONTACT:  Ms. Sharon Thompson of Packaging Dynamics Corporation,

[phone]



Web site:  http://www.pkdy.com/

Copyright