APPLETON, Wis., Nov. 8 -Appleton today reported its net sales for the third quarter ended October 2, 2005, were $262.5 million, a 7 percent increase compared to the same quarter of 2004.
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The Company reported net income of $2.9 million for the third quarter of 2005 compared to net income of $6.4 million for the same quarter of 2004. During third quarter 2005, Appleton restructured its U.S. business and eliminated 20 salaried jobs. Also during the third quarter, Appleton's U.K. subsidiary, BemroseBooth, a provider of secure and specialized print services, announced that it will exit the traditional printing and binding portions of its information products business and eliminate approximately 70 jobs by the end of 2005. As a result of the two restructurings, Appleton recorded a $3.7 million charge.
Coated Solutions
In the third quarter 2005, sales revenue for carbonless products, which accounts for the majority of the Company's coated solutions segment, decreased 1 percent compared to the same quarter in 2004. Carbonless shipments decreased 2 percent for the third quarter of 2005 compared to the same quarter for 2004. The impact resulting from decreased shipments was partially offset by stronger pricing during third quarter 2005 compared to third quarter 2004.
Thermal and Advanced Technical Products
Revenue from thermal and advanced technical products decreased 1 percent during the third quarter 2005 compared to the same quarter of 2004. Total shipments for the quarter were 3 percent lower compared to the third quarter of 2004. Sales of the Company's thermal products used for point-of-sale transactions were negatively affected by economic disruptions resulting from the Gulf Coast hurricanes as well as competitive pricing pressures.
Security Products
Revenue from Appleton's security products rose 32 percent during the third quarter of 2005 compared to the same quarter of 2004 due to sales increases for both U.S.-based security products and for BemroseBooth.
Performance Packaging
Revenue from Appleton's performance packaging companies grew 107 percent in the third quarter of 2005 compared to the third quarter of 2004 due primarily to the January 2005 acquisition of New England Extrusion. Net sales for the third quarter of 2005, excluding the New England Extrusion acquisition, were nearly four percent higher than the same quarter in 2004.
Balance Sheet
During the nine months ended October 2, 2005, Appleton's cash decreased by $43.8 million to $26.1 million largely due to the acquisition of New England Extrusion. Also during the first nine months of 2005, Appleton made mandatory debt repayments of $1.9 million, plus interest, and voluntary debt repayments of $15.0 million, plus interest, on its senior credit facility. Also during the third quarter 2005, Appleton purchased $8.0 million of its $185 million outstanding 8.125% senior notes due June 15, 2011.
During the nine months ended October 2, 2005, Appleton's current assets, excluding cash, increased $19.9 million. The most significant was the $25.8 million increase in inventories. The scheduled inventory build of calendars and diaries at BemroseBooth in preparation for fourth quarter sales activity accounted for $11.0 million of the increase. Appleton's January 2005 acquisition of New England Extrusion resulted in a $4.7 million increase in inventories. Appleton's increase in inventories was partially offset by a $6.0 reduction in receivables. Appleton's current liabilities increased $23.9 million primarily as a result of Appleton's active management of its working capital to maximize debt repayments.
Earnings release conference call
Appleton will host a conference call to discuss its third quarter 2005 results Wednesday, November 9 at 11:00 a.m. ET. The call will be broadcast through its Web site, http://www.appletonideas.com/investors . A replay will be available through the end of November.
About Appleton
Appleton uses ideas that make a difference to create product solutions through its development and use of coating formulations and applications, encapsulation technology, and specialized and secure print services. The Company produces carbonless, thermal, security and performance packaging products. Appleton is headquartered in Appleton, Wisconsin, and has manufacturing operations in Wisconsin, Ohio, Pennsylvania, Massachusetts and the United Kingdom, employs approximately 3,300 people, and is 100 percent employee owned. For more information visit http://www.appletonideas.com .
Notice regarding forward-looking statements
This news release contains forward-looking statements. The words "will," "believes," "anticipates," "intends," "estimates," "expects," "projects," "plans," or similar expressions are intended to identify forward-looking statements. All statements in this news release other than statements of historical fact, including statements which address our strategy, future operations, future financial position, estimated revenues, projected costs, prospects, plans and objectives of management and events or developments that Appleton expects or anticipates will occur, are forward-looking statements. All forward-looking statements speak only as of the date on which they are made. They rely on a number of assumptions concerning future events and are subject to a number of risks and uncertainties, many of which are outside of Appleton's control, that could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, the factors listed under the heading "Risk Factors" in Appleton's 2004 Annual Report on Form 10-K. Appleton disclaims any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Appleton Papers Inc. is a wholly owned subsidiary of Paperweight Development Corp. Paperweight Development Corp. has guaranteed Appleton's senior credit facility and senior and senior subordinated notes.
Appleton Papers Inc.
Consolidated Statements of Operations
(dollars in thousands)
For the For the
Three Months Ended Three Months Ended
October 2, 2005 October 3, 2004
(unaudited) (unaudited)
Net sales $262,496 $244,476
Cost of sales 193,657 178,629
Gross profit 68,839 65,847
Selling, general and administrative 50,410 48,047
Restructuring and other charges 3,678 189
Operating income 14,751 17,611
Interest expense 12,703 11,310
Interest income (254) (217)
Other (income) expense (78) 426
Income before income taxes 2,380 6,092
Benefit for income taxes (556) (269)
Net income $2,936 $6,361
Other Financial Data:
Operating income $14,751 $17,611
Depreciation and amortization 19,508 19,015
Appleton Papers Inc.
Consolidated Statements of Operations
(dollars in thousands)
For the For the
Nine Months Ended Nine Months Ended
October 2, 2005 October 3, 2004
(unaudited) (unaudited)
Net sales $777,506 $728,648
Cost of sales 581,177 537,054
Gross profit 196,329 191,594
Selling, general and administrative 155,021 147,674
Restructuring and other charges 8,030 1,018
Operating income 33,278 42,902
Interest expense 37,261 37,848
Debt extinguishment expenses - 30,779
Interest income (671) (1,664)
Other expense 527 1,368
Loss before income taxes (3,839) (25,429)
Benefit for income taxes (1,497) (1,428)
Net loss $(2,342) $(24,001)
Other Financial Data:
Operating income $33,278 $42,902
Depreciation and amortization 60,176 58,739
Appleton Papers Inc.
Consolidated Balance Sheets
(dollars in thousands)
October 2, January 1,
2005 2005
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $26,134 $69,938
Accounts receivable, less allowance for
doubtful accounts of $2,447 and
$3,437, respectively 123,732 129,754
Inventories 154,702 128,914
Other current assets 14,874 14,715
Total current assets 319,442 343,321
Property, plant and equipment, net 471,709 488,667
Goodwill 77,058 52,817
Intangible assets, net 109,838 99,247
Environmental indemnification receivable 68,229 71,664
Other assets 16,895 18,723
Total assets $1,063,171 $1,074,439
LIABILITIES, REDEEMABLE COMMON STOCK,
ACCUMULATED DEFICIT AND
ACCUMULATED OTHER COMPREHENSIVE LOSS
Current liabilities
Current portion of long-term debt $2,441 $2,500
Accounts payable 86,289 62,498
Restructuring reserve 7,308 5,478
Other accrued liabilities 79,921 81,577
Total current liabilities 175,959 152,053
Senior secured notes payable 229,455 246,250
Variable rate industrial development bonds 8,650 8,650
Postretirement benefits other than pension 59,357 61,128
Accrued pension 50,309 47,377
Environmental liability 92,915 95,294
Other long-term liabilities 8,043 13,185
Senior notes and senior subordinated notes
payable 334,000 342,000
Commitments and contingencies (Note 12) - -
Redeemable common stock, $0.01 par value,
shares authorized: 30,000,000, shares issued
and outstanding: 11,805,885 and 11,647,005,
respectively 175,331 159,329
Accumulated deficit (51,290) (37,202)
Accumulated other comprehensive loss (19,558) (13,625)
Total liabilities, redeemable common stock,
accumulated deficit and accumulated other
comprehensive loss $1,063,171 $1,074,439
