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Pregis Announces Third Quarter 2009 Financial Results
DEERFIELD, Ill., Nov. 12 /PRNewswire/ -- Pregis Corporation, a leading international manufacturer, marketer, and supplier of protective packaging products and specialty packaging solutions, today announced its 2009 third quarter financial results. For the third quarter of 2009, the Company generated net sales of $207.0 million, a decrease of 21.9% versus net sales of $265.2 million in the third quarter of 2008. Excluding the impact of unfavorable foreign currency translation, resulting from the U.S. dollar strengthening against the euro and pound sterling on a year-over-year basis, the quarter's net sales were down 17.2% compared to the prior year quarter due to continued global weak economic conditions. Gross profit margin, as a percent of net sales, was 24.6% in the third quarter of 2009, compared to 22.4% in the third quarter of 2008. The 220 basis point increase in margin percentage was driven by the impact of the Company's aggressive cost reduction initiatives and the impact from lower raw material costs. The Company generated operating income of $7.4 million in the third quarter of 2009, which included pre-tax restructuring charges of $2.1 million relating to the Company's cost reduction initiatives. This compared to operating income of $10.1 million for the third quarter of 2008 and pre-tax restructuring charges of $5.2 million. Adjusted for the restructuring charges and unfavorable foreign currency translation, operating income for the third quarter of 2009 was $9.5 million compared to $15.3 million in the third quarter of 2008. This decrease was primarily a result of lower volumes, partially offset by the impact of Company's aggressive cost reduction initiatives. Adjusted EBITDA, or "Consolidated Cash Flow" as defined by our indentures, is a significant operating measure used by the Company to measure its operating performance and liquidity. Adjusted EBITDA was $25.2 million in the third quarter of 2009 compared to $30.2 million for the same period in 2008. The lower year-over-year Adjusted EBITDA was a result of the same drivers impacting operating income as described above. Commenting on the Company's results, Mike McDonnell, President and Chief Executive Officer, stated, "Our third quarter Adjusted EBITDA performance remained relatively strong, despite continued weakness in demand as well as increased resin costs. Our third quarter Adjusted EBITDA of $25.2 million increased sequentially from the second quarter 2009 amount of $24.2 million, and was at the upper end of the range of $22-$26 million which we communicated during our recent offering of euro-based floating rate notes. While our third quarter Adjusted EBITDA was lower year-over-year, the prior year quarter was one of the strongest quarters from an Adjusted EBITDA standpoint in company history." Mr. McDonnell continued, "Our sales rates improved sequentially from the second quarter, primarily driven by seasonality along with some modest economic improvement. Regarding raw material costs, we did see further sequential increases in the third quarter for resin. According to their respective indices, resin costs increased during the third quarter by 11% in North America and 17% in Europe sequentially from the second quarter 2009. Our margin improvement initiatives enabled us to partially offset this quarter's increase in resin costs. However, if resin costs continue to increase, which is our current expectation, we will need to respond aggressively with selling price increases." Segment Performance Comments on segment net sales and EBITDA performance for the third quarter of 2009 is as follows:
A summary of Adjusted EBITDA, a significant measure required by the Company's indentures and used by the Company to measure its operating performance and liquidity, is presented in the supplemental information at the end of this release. Conference Call: The Company will conduct an investor conference call to review its 2009 third quarter results on Friday, November 13, 2009 at 10:00 a.m. ET (9:00 a.m. CT). The call can be accessed through the following dial-in numbers: D About Pregis: Pregis Corporation is a leading global provider of innovative protective, flexible, and foodservice packaging and hospital supply products. The specialty-packaging leader currently operates 46 facilities in 18 countries around the world. Pregis Corporation is a wholly owned subsidiary of Pregis Holding II Corporation. For more information about Pregis, visit the Company's web site at www.pregis.com. Safe Harbor Statement: This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. You can generally identify forward-looking statements by the Company's use of forward-looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "seek," "should," or "will," or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company's control. For a discussion of key risk factors, please see the risk factors disclosed in the Company's annual report, which is available on its website, www.pregis.com. These risks may cause actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these risk and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. The Company undertakes no duty to update its forward-looking statements.
Pregis Holding II Corporation
Consolidated Balance Sheets
Unaudited
(dollars in thousands)
September 30, December 31,
2009 2008
------------- ------------
Assets (Unaudited)
Current assets
Cash and cash equivalents $100,202 $41,179
Accounts receivable
Trade, net of allowances of $6,205 and
$5,357 respectively 123,250 121,736
Other 7,944 13,829
Inventories, net 85,751 87,867
Deferred income taxes 4,867 4,336
Due from Pactiv 1,166 1,399
Prepayments and other current assets 8,788 8,435
----- -----
Total current assets 331,968 278,781
Property, plant and equipment, net 238,193 245,124
Other assets
Goodwill 128,015 127,395
Intangible assets, net 39,540 41,254
Deferred financing costs, net 4,506 7,734
Due from Pactiv, long-term 10,025 13,234
Pension and related assets 25,973 22,430
Other 406 424
--- ---
Total other assets 208,465 212,471
------- -------
Total assets $778,626 $736,376
-------- --------
Liabilities and stockholder's equity
Current liabilities
Current portion of long-term debt $258 $4,902
Accounts payable 89,401 79,092
Accrued income taxes 4,672 6,964
Accrued payroll and benefits 15,994 11,653
Accrued interest 10,337 6,905
Other 19,067 21,740
------ ------
Total current liabilities 139,729 131,256
Long-term debt 510,531 460,714
Deferred income taxes 23,915 24,913
Long-term income tax liabilities 8,281 11,310
Pension and related liabilities 4,831 6,119
Other 13,409 11,963
Stockholder's equity:
Common stock - $0.01 par value;
1,000 shares authorized, 149.0035 shares
issued and outstanding at September 30,
2009 and December 31, 2008 - -
Additional paid-in capital 151,671 150,610
Accumulated deficit (75,004) (64,318)
Accumulated other comprehensive income 1,263 3,809
----- -----
Total stockholder's equity 77,930 90,101
------ ------
Total liabilities and stockholder's equity $778,626 $736,376
-------- --------
Pregis Holding II Corporation
Consolidated Statements of Operations
Unaudited
(dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----
Net Sales $207,047 $265,188 $588,594 $799,726
Operating costs and expenses:
Cost of sales, excluding
depreciation and
amortization 156,088 205,673 444,144 624,443
Selling, general and
administrative 28,660 31,232 83,059 100,407
Depreciation and amortization 12,607 13,584 35,383 40,734
Other operating expense, net 2,267 4,601 13,602 8,500
----- ----- ------ -----
Total operating costs and
expenses 199,622 255,090 576,188 774,084
------- ------- ------- -------
Operating income 7,425 10,098 12,406 25,642
Interest expense 9,192 13,392 28,072 37,293
Interest income (54) (92) (176) (518)
Foreign exchange loss (gain), net (886) 9,562 (5,817) 6,641
---- ----- ------ -----
Loss before income taxes (827) (12,764) (9,673) (17,774)
Income tax expense (benefit) 2,514 (802) 1,013 3,029
----- ---- ----- -----
Net loss $(3,341) $(11,962) $(10,686) $(20,803)
------- -------- -------- --------
Pregis Holding II Corporation
Consolidated Statements of Cash Flows
Unaudited
(dollars in thousands)
Nine Months Ended
September 30,
-----------------
2009 2008
---- ----
Operating activities
Net loss $(10,686) $(20,803)
Adjustments to reconcile net loss to
cash provided by operating activities:
Depreciation and amortization 35,383 40,734
Deferred income taxes (1,483) (1,419)
Unrealized foreign exchange loss (gain) (5,552) 6,814
Amortization of deferred financing costs 1,781 1,781
Gain on disposal of property, plant and equipment (249) (246)
Stock compensation expense 1,061 678
Impairment of interest rate swap asset - 1,299
Changes in operating assets and liabilities
Accounts and other receivables, net 9,874 (12,024)
Due from Pactiv 3,792 6,630
Inventories, net 5,364 (9,738)
Prepayments and other current assets 1,961 (143)
Accounts payable 6,771 7,568
Accrued taxes (5,637) (4,778)
Accrued interest 3,547 4,577
Other current liabilities 856 1,871
Pension and related assets and liabilities, net (2,931) (2,815)
Other, net (2,395) 177
------ ---
Cash provided by operating activities 41,457 20,163
------ ------
Investing activities
Capital expenditures (17,644) (25,270)
Proceeds from sale of assets 692 1,042
Insurance proceeds - 1,868
Other, net - (593)
--- ----
Cash used in investing activities (16,952) (22,953)
------- -------
Financing activities
Proceeds from revolving credit facility 38,700 -
Financing fees (1,284) -
Repayment of debt (4,312) (1,435)
Other, net (125) 62
---- ---
Cash provided (used in) financing activities 32,979 (1,373)
Effect of exchange rate changes on cash
and cash equivalents 1,539 (788)
----- ----
Increase (decrease) in cash and cash equivalents 59,023 (4,951)
Cash and cash equivalents, beginning of period 41,179 34,989
------ ------
Cash and cash equivalents, end of period $100,202 $30,038
-------- -------
Pregis Holding II Corporation
Supplemental Information
(Unaudited)
Calculation of Adjusted EBITDA ("Consolidated Cash Flow")
---------------------------------------------------------
Three Months Ended
(unaudited) September 30,
------------------
(dollars in thousands) 2009 2008
---- ----
Net loss of Pregis Holding II Corporation $(3,340) $(11,962)
Interest expense, net of interest income 9,138 13,300
Income tax expense (benefit) 2,514 (802)
Depreciation and amortization 12,606 13,584
------ ------
EBITDA 20,918 14,120
Other non-cash charges (income):
Unrealized foreign currency transaction losses
(gains), net (859) 10,246
Non-cash stock based compensation expense 327 244
Net unusual or nonrecurring gains or losses:
Restructuring, severance and related expenses 2,769 5,489
Other unusual or nonrecurring (gains) or losses 1,609 (239)
Other adjustments:
Amounts paid pursuant to management agreement with
Sponsor 472 324
--- ---
Adjusted EBITDA ("Consolidated Cash Flow") $25,236 $30,184
------- -------
Note to above:
--------------
EBITDA is defined as net income before interest expense, interest income,
income tax expense, depreciation and amortization. Adjusted EBITDA,
referred to as Consolidated Cash Flow within the context of the Company's
indentures, is presented herein because it is a material element of the
fixed charge coverage ratio and secured indebtedness leverage ratio
included in the Company's indentures and is a significant operating
measure used by the Company to measure its operating performance and
liquidity.
Pregis Holding II Corporation
Supplemental Information
(Unaudited)
Calculation of Adjusted EBITDA ("Consolidated Cash Flow")
---------------------------------------------------------
Twelve Months Ended
(unaudited) September 30,
-------------------
(dollars in thousands) 2009 2008
---- ----
Net loss of Pregis Holding II Corporation $(37,613) $(28,092)
Interest expense, net of interest income 39,315 48,300
Income tax (benefit) expense (3,881) 2,533
Depreciation and amortization 46,992 55,797
------ ------
EBITDA 44,813 78,538
Other non-cash charges (income):
Unrealized foreign currency transaction losses, net 2,370 7,846
Non-cash stock based compensation expense 1,344 902
Non-cash asset impairment charge 20,101 403
Other non-cash expenses, primarily fixed asset
disposals and write-offs - 427
Net unusual or nonrecurring gains or losses:
Restructuring, severance and related expenses 13,251 12,409
Nonrecurring charges related to acquisitions and
dispositions - 4,512
Other unusual or nonrecurring gains or losses 2,524 123
Other adjustments:
Amounts paid pursuant to management agreement with
Sponsor 2,040 1,834
Pro forma earnings and costs savings - 454
--- ---
Adjusted EBITDA ("Consolidated Cash Flow") $86,443 $107,448
------- --------
Note to above:
--------------
EBITDA is defined as net income before interest expense, interest income,
income tax expense, depreciation and amortization. Adjusted EBITDA,
referred to as Consolidated Cash Flow within the context of the Company's
indentures, is presented herein because it is a material element of the
fixed charge coverage ratio and secured indebtedness leverage ratio
included in the Company's indentures and is a significant operating
measure used by the Company to measure its operating performance and
liquidity.
Pregis Holding II Corporation
Third Quarter 2009
Supplemental Information
(Unaudited)
(Amounts and percentage changes are approximations due to rounding.)
Gross Margin Calculations
-------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
(dollars in 2009 2008 Change 2009 2008 Change
thousands) ---- ---- ------ ---- ---- ------
Net sales $207,047 $265,188 $(58,141) $588,594 $799,726 $(211,132)
Cost of sales,
excluding
depreciation
and
amortization (156,088) (205,673) 49,585 (444,144) (624,443) 180,299
-------- -------- ------ -------- -------- -------
Gross margin $50,959 $59,515 $(8,556) $144,450 $175,283 $(30,833)
------- ------- ------- -------- -------- --------
Gross margin,
as a percent
of net sales 24.6% 22.4% 2.2% 24.5% 21.9% 2.7%
---- ---- --- ---- ---- ---
Net Sales by Segment
--------------------
Three Months Ended
September 30,
------------------
2009 2008 $ Change % Change
---- ---- -------- --------
(dollars in thousands)
Segment:
Protective Packaging $128,930 $172,088 $(43,158) (25.1)%
Specialty Packaging 78,117 93,100 (14,983) (16.1)%
------ ------ ------- -----
Total $207,047 $265,188 $(58,141) (21.9)%
-------- -------- -------- -----
Change Attributable to the
Following Factors
--------------------------
Price / Currency
Mix Volume Translation
------- ------ -----------
Segment:
Protective Packaging $(9,055) (5.3)% $(27,676) (16.1)% $(6,427) (3.7)%
Specialty Packaging (2,497) (2.7)% (6,317) (6.8)% (6,169) (6.6)%
------ ---- ------ ---- ------ ----
Total $(11,552) (4.4)% $(33,993) (12.8)% $(12,596) (4.7)%
-------- ---- -------- ----- -------- ----
Nine Months Ended
September 30,
-----------------
2009 2008 $ Change % Change
---- ---- -------- --------
(dollars in thousands)
Segment:
Protective Packaging $363,107 $520,226 $(157,119) (30.2)%
Specialty Packaging 225,487 279,500 (54,013) (19.3)%
------- ------- ------- -----
Total $588,594 $799,726 $(211,132) (26.4)%
-------- -------- --------- -----
Change Attributable to the
Following Factors
--------------------------
Price / Currency
Mix Volume Translation
------- ------ -----------
Segment:
Protective Packaging $(12,133) (2.3)% $(115,448) (22.2)% $(29,538) (5.7)%
Specialty Packaging (3,105) (1.1)% (17,290) (6.2)% (33,618)(12.0)%
------ ---- ------- ---- ------- -----
Total $(15,238) (1.9)% $(132,738) (16.6)% $(63,156) (7.9)%
-------- ---- --------- ----- -------- ----
Pregis Holding II Corporation
Supplemental Information
(Unaudited)
(Amounts and percentage changes are approximations due to rounding.)
EBITDA by Segment
-----------------
Three Months Ended
September 30,
------------------
2009 2008 $ Change % Change
---- ---- -------- --------
(dollars in thousands)
Segment:
Protective Packaging $15,462 $20,271 $(4,809) (23.7)%
Specialty Packaging 11,363 11,147 216 1.9%
------ ------ ---
Total segment EBITDA $26,825 $31,418 $(4,593) (14.6)%
------- ------- -------
Nine Months Ended
September 30,
-----------------
2009 2008 $ Change % Change
---- ---- -------- --------
(dollars in thousands)
Segment:
Protective Packaging $42,201 $49,813 $(7,612) (15.3)%
Specialty Packaging 30,792 33,574 (2,782) (8.3)%
------ ------ ------
Total segment EBITDA $72,993 $83,387 $(10,394) (12.5)%
------- ------- --------
SOURCE Pregis Corporation
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