Packaging Dynamics (NASDAQ:PKDY)
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CHICAGO, April 27 /PRNewswire-FirstCall/ -- Packaging Dynamics Corporation (NASDAQ:PKDY) (the "Company" or "Packaging Dynamics") reported results of operations for the first quarter ended March 31, 2006.
Consolidated Results:
The Company reported net income for the first quarter of $0.6 million, or $0.05 per diluted share, a 72.3% decrease from net income of $2.0 million, or $0.19 per diluted share, reported in the first quarter of 2005. As discussed further below, first quarter results include costs associated with the closing of the Company's Farmers Branch, Texas facility and transaction costs incurred in connection with the pending acquisition of the Company by Thilmany, L.L.C, an affiliate of Kohlberg & Company, L.L.C.
Continuing Operations:
Net sales were $94.7 million, a 9.1% increase over net sales of $86.8 million in the first quarter of 2005. Reported income from continuing operations of $0.6 million, or $0.05 per diluted share, includes $1.2 million of costs related to the closing of the Company's Farmers Branch, Texas facility, and $2.1 million of transaction costs incurred in connection with the pending acquisition of the Company (collectively $2.1 million after tax). Reported income from continuing operations for the quarter ended March 31, 2005 of $2.2 million, or $0.21 per diluted share, includes $0.3 million of management transition costs related to organizational integration and restructuring in the Company's Food Packaging segment ($0.2 million after tax). Excluding these costs, income from continuing operations was $2.6 million, or $0.24 per diluted share, a 6.9% increase over $2.4 million, or $0.22 per diluted share, in the first quarter of 2005.
Operating income was $3.0 million ($6.3 million excluding the facility exit costs and transaction costs), compared to $5.7 million ($6.1 million excluding the management transition costs) in the first quarter of 2005. Excluding these costs, operating margin declined to 6.7% from 7.0% in the first quarter of 2005 reflecting lower margins in the Food Packaging segment partially offset by higher margins in the Specialty Laminations segment.
Additionally, the Company adopted SFAS No. 123R, "Share-Based Payment," on a prospective basis which required the Company to record stock based compensation expense of $0.2 million ($0.1 million after tax) or $0.01 per diluted share during the first quarter of 2006.
Food Packaging Segment
Net sales of $70.1 million during the first quarter of 2006 increased 3.9% from $67.4 million in the first quarter of 2005 due to price increases and volume growth. Excluding the impact of facility closing costs and transactions costs, segment operating income was $4.0 million and segment operating margin was 5.8%. In the first quarter of 2005, excluding the impact of management transition costs, segment operating income was $4.5 million and segment operating margin was 6.7%. The decrease in segment operating income and margin reflects the impact of higher raw material and freight costs.
Specialty Laminations Segment
Net sales of $26.1 million during the first quarter of 2006 increased 29.4% from $20.1 million in the first quarter of 2005 due to price increases and volume growth in key markets. Excluding the impact of transaction costs, segment operating income of $2.3 million increased 46.1% from $1.6 million in the first quarter of 2005 and segment operating margin increased to 8.8% from 7.8% in the prior year. The increase in segment operating income and margin reflects the impact of price and volume increases.
Balance Sheet:
Total debt was $109.7 million at March 31, 2006, a $1.3 million decrease from $111.0 million at December 31, 2005. Working capital, excluding cash and current maturities of long-term debt, decreased by $1.9 million during the quarter. The decrease was primarily due to increased accounts payable partially offset by increased inventory and other current assets.
Summary and Outlook:
"We are pleased to report year-over-year earnings improvement in the first quarter, excluding the anticipated facility closure costs and costs related to the pending acquisition of the Company. Specialty Laminations again experienced strong sequential and year-over-year sales and earnings growth, continuing a trend which began in the fourth quarter of last year following several disappointing quarters. In Food Packaging, where first quarter results are typically the weakest of the year, price increases and volume growth failed to offset the impact of rising raw material and freight costs. We are aggressively pursuing initiatives to improve results in Food Packaging including achieving the expected benefits of pricing actions, the closure of the Farmers Branch facility, pending capital projects, and other growth and cost reduction activities," commented Frank V. Tannura, Chairman and Chief Executive Officer.
Mr. Tannura added, "We continue to make progress towards completion of the pending acquisition of the Company by Thilmany, an affiliate of Kohlberg & Company, and expect the transaction to be completed during the second quarter of 2006. Required antitrust approvals have been received and we expect to mail the merger proxy statement to our stockholders shortly."
Earnings Call:
The Company will hold a conference call on Friday, April 28, 2006 at 10:00 a.m. (ET) to discuss the news release. For access to the conference call, please dial 800-553-0358 (U.S.) by 9:45 a.m. (ET) on April 28th. 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 28th through 11:59 p.m. (ET) on May 12th. To access the replay, please dial 800-475-6701 (U.S.) or 320-365-3844 (International), access code 825992.
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; (ix) the ability of our pending acquisition by Thilmany L.L.C. to be consummated in a timely manner if at all, (x) the risk that the merger agreement with Thilmany may be terminated under circumstances that would require the Company to pay Thilmany a termination fee of $5 million and (xi) 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, 2006.
PACKAGING DYNAMICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
For the Three Months Ended For the Three Months Ended
March 31, 2006 March 31, 2005
Reported Adjustments Adjusted Reported Adjustments Adjusted
Net sales $ 94,657 $- $ 94,657 $ 86,784 $ - $86,784
Cost of
goods
sold 81,843 81,843 74,110 74,110
Gross
profit 12,814 - 12,814 12,674 - 12,674
Operating
expenses 9,789 (3,307)(1) 6,482 6,935 (320)(2) 6,615
Operating
income 3,025 3,307 6,332 5,739 320 6,059
Interest
expense 2,120 2,120 2,088 2,088
Income
before
income
taxes 905 3,307 4,212 3,651 320 3,971
Income tax
provision 345 1,257 1,602 1,406 123 1,529
Income from
continuing
operations 560 $2,050 2,610 2,245 $197 2,442
Loss from
discontinued
operations,
net of tax - - (223) (223)
Net income $560 $2,610 $2,022 $ 2,219
Income (loss)
per share:
Basic:
Continuing
operations $0.05 $0.24 $0.21 $0.23
Discontinued
operations - - (0.02) (0.02)
Net
Income $0.05 $0.24 $0.19 $0.21
Diluted:
Continuing
operations $0.05 $0.24 $0.21 $0.22
Discontinued
operations - - (0.02) (0.02)
Net
Income $0.05 $0.24 $0.19 $0.20
Cash dividend
declared per
share: $- $ - $0.065 $ 0.065
Weighted
average
shares
outstanding:
Basic 10,752,786 10,752,786 10,525,653 10,525,653
Diluted 11,073,120 11,073,120 10,924,037 10,924,037
Reconciliation of
Operating income
to EBITDA
Operating
income $3,025 $3,307 $6,332 $5,739 $320 $ 6,059
Depreciation
and amorti-
zation 2,041 2,041 2,043 2,043
Stock-based
compensation 196 196 - -
EBITDA $5,262 $3,307 $8,569 $7,782 $320 $ 8,102
Segment Net
Sales:
Food
Pack-
aging $70,061 $- $70,061 $67,409 $67,409
Specialty
Lamin-
ations 26,056 26,056 20,143 20,143
Elimination
of
Specialty
Laminations
Inter-
company
Sales (1,460) (1,460) (768) (768)
Total $94,657 $- $ 94,657 $ 86,784 $- $86,784
Segment
Operating
Income:
Food
Pack-
aging $1,306 $2,736 $4,042 $4,172 $320 $ 4,492
Specialty
Lamin-
ations 1,719 571 2,290 1,567 - 1,567
Operating
Income $3,025 $3,307 $6,332 $5,739 $320 $ 6,059
FOOTNOTES:
(1) The Company incurred $1,201 of costs related to the closing of the
Farmers Branch facility and $2,106 of transaction costs in connection
with the pending sale of the Company.
(2) The Company incurred management transition costs of $320 related to
organizational integration and restructuring in the Company's Food
Packaging segment.
PACKAGING DYNAMICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
March 31, December 31,
2006 2005
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $- $3
Accounts receivable trade (net of
allowance for doubtful accounts
of $530 and $776) 31,271 31,263
Inventories, net 44,705 42,036
Other 7,107 6,502
Total current assets 83,083 79,804
Property, Plant and Equipment
Property, plant and equipment 91,657 87,970
Less-Accumulated depreciation (38,205) (36,456)
Total property, plant and equipment 53,452 51,514
Other Assets:
Goodwill 81,263 81,263
Other assets, net 19,280 19,632
Total other assets 100,543 100,895
Total Assets $237,078 $232,213
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $14,095 $14,093
Cash overdraft 4,376 6,573
Accounts payable 30,948 25,038
Accrued salary and wages 2,791 2,628
Other accrued liabilities 8,332 6,989
Total current liabilities 60,542 55,321
Long-term Debt 95,558 96,894
Other Liabilities 2,695 3,041
Deferred Income Taxes 19,249 18,877
Total Liabilities 178,044 174,133
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.01 par value -
40,000,000 shares authorized;
10,759,583 and 10,751,249 shares
issued and outstanding at
March 31, 2006 and December 31, 2005,
respectively 107 107
Preferred stock, $.01 par
value - 5,000,000 shares authorized;
no shares issued and outstanding - -
Paid in capital in excess of par value 60,544 60,260
Accumulated other comprehensive income 551 441
Accumulated deficit (2,168) (2,728)
Total stockholders' equity 59,034 58,080
Total Liabilities and
Stockholders' Equity $237,078 $232,213
PACKAGING DYNAMICS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
Three Months Ended March 31
2006 2005
Cash flows from operating activities:
Net income $560 $2,022
Loss from discontinued operations - 223
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 2,041 2,043
Amortization and write-off
of deferred finance costs 158 154
Stock-based compensation expense 196 -
Provision for doubtful accounts (246) 3
Deferred income taxes 85 924
Changes in operating assets and
liabilities:
Accounts receivable 238 157
Inventories (2,669) (4,085)
Other assets (240) 158
Accounts payable and
accrued liabilities 7,894 2,093
Net cash from continuing
operating activities 8,017 3,692
Net cash used by discontinued
operating activities (35) (313)
Net cash from operating
activities 7,982 3,379
Cash flows used by investing activities:
Additions to property, plant and
equipment (3,844) (755)
Net cash used by investing activities (3,844) (755)
Cash flows used by financing activities:
Principal payments for loan obligations (5,109) (1,460)
Proceeds under revolving line of credit 23,050 19,700
Repayments under revolving line of credit (19,275) (18,500)
Change in cash overdraft (2,197) (2,633)
Payment of dividends (698) (685)
Other, net 88 159
Net cash used by financing activities (4,141) (3,419)
Net decrease in cash and cash equivalents (3) (795)
Cash and cash equivalents at beginning of period 3 1,175
Cash and cash equivalents at end of period $- $380
DATASOURCE: Packaging Dynamics Corporation
CONTACT: Mr. Patrick Chambliss of Packaging Dynamics Corporation,
+1-773-843-8113
Web site: http://www.pkdy.com/