Pregis Announces Fourth Quarter and Full Year 2009 Financial Results
DEERFIELD, Ill., March 24 /PRNewswire/ -- Pregis Corporation, a leading international manufacturer, marketer, and supplier of protective packaging products and specialty packaging solutions, today announced its 2009 fourth quarter and full year financial results.
For the fourth quarter of 2009, the Company generated net sales of $212.6 million, a decrease of 3.2% versus net sales of $219.6 million in the fourth quarter of 2008. Excluding the impact of favorable foreign currency translation, resulting from the U.S. dollar weakening against the euro and pound sterling on a year-over-year basis, the quarter's net sales were down 7.5% compared to the prior year quarter due primarily to unfavorable price and product mix. Selling prices were lower year-over-year as the significant price increases implemented in the third quarter of 2008 had their full impact in the fourth quarter of 2008.
For the full year, 2009 net sales decreased 21.4% to $801.2 million as compared to $1.019 billion in 2008. Excluding the impact of unfavorable foreign currency translation, 2009 net sales decreased 16.1%, due primarily to lower sales volumes, particularly in the first half of 2009, driven by the weak economic conditions.
Gross profit margin, as a percent of net sales, was 22.2% in the fourth quarter of 2009, compared to 20.7% in the fourth quarter of 2008. For the full year, our gross profit margin, as a percent of net sales, increased to 23.9% for 2009 compared to 21.6% for 2008. The year-over-year improvement in gross margin as a percent of net sales was driven primarily by the Company's cost reduction program.
For the fourth quarter of 2009, selling, general, and administrative expenses increased $6.6 million compared to the same quarter of 2008. The increase was primarily driven by increased legal expenses of $3.8 million, unfavorable currency of $1.7 million, as well as timing of other expenses. The increased legal expenses were the result of a patent dispute related to the Company's protective packaging segment. This dispute was resolved successfully by the Company in the first quarter of 2010.
The Company generated operating income of $2.5 million in the fourth quarter of 2009, which included pre-tax restructuring charges of $1.3 million relating to the Company's cost reduction program. This compared to operating loss of $12.3 million for the fourth quarter of 2008. The fourth quarter of 2008 operating loss reflects a $19.0 million non-cash goodwill impairment charge within one of the Company's specialty packaging businesses as well as a restructuring activity of $1.8 million and a related curtailment gain of $3.7 million. Adjusted for the amounts shown, operating income for the fourth quarter of 2009 was $3.8 million compared to $4.8 million in the fourth quarter of 2008. The decrease in operating income was due to increased SG&A expenses as discussed above offset by favorable deprecation expense.
Operating income for the full year of 2009 was $14.9 million, compared to 2008 operating income of $13.3 million. For the full year, 2009 operating income, adjusted for restructuring charges of $15.2 million and unfavorable foreign currency translation of $1.1 million, was $31.2 million. This compares to adjusted operating income of $37.9 million for 2008. The 2008 adjustments are for goodwill impairment charge of $19.0 million, restructuring activity of $9.3 million, and a related curtailment gain of $3.7 million. For the year, the decrease in adjusted operating income was primarily the result of lower year-over-year sales volumes, partially offset by the Company's cost reduction program and lower material costs in the first half of the year.
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 $17.9 million in the fourth quarter of 2009 compared to $19.0 million for the same period in 2008. The decrease in Adjusted EBITDA for the fourth quarter was due primarily to lower year-over-year selling prices and timing of certain SG&A expenses offset by favorable resin costs and the impact of cost reductions. Adjusted EBITDA for the full year 2009 was $85.4 million compared to $98.1 million for the full year 2008.
Commenting on the Company's results, Mike McDonnell, President and Chief Executive Officer, stated, "I am pleased with our fourth quarter and full year 2009 performance, which we accomplished despite very weak economic conditions. Throughout 2009, we experienced a negative earnings impact from significant volume declines, particularly in the first half of 2009. However, we were able to partially offset these declines through our aggressive cost reduction program. We realized savings from our cost reduction efforts of approximately $46 million in 2009, which we were able to achieve after driving a similar amount of cost reduction benefit in 2008."
Mr. McDonnell continued, "At present, we are in the process of increasing our selling prices to offset the steady increases in resin costs, freight, and other key raw materials which we experienced throughout 2009, as well as the significant additional cost increases implemented in the first quarter of this year. The selling price increases we implemented in the first quarter of 2010 will likely not be sufficient to offset the impact of the resin cost increases, as additional cost increases are expected. In response, we recently announced a second price increase in North America to be implemented in the second quarter. As always, we will continue our disciplined approach of pricing for full value and targeting to fully offset raw material cost increases with selling price increases."
Mr. McDonnell also stated, "We recently announced our acquisition of IntelliPack, a significant supplier of innovative foam-in-place technology. We are very pleased to welcome IntelliPack to the Pregis organization. The acquisition expands our global product offering with the addition of foam-in-place technology. This valuable technology is a great complement to our existing product offering and reflects our dedication to providing comprehensive, premium quality protective packaging and specialty packaging solutions. Foam-in-place is a perfect fit with our global growth strategy."
On February 19, 2010, Pregis acquired all of the outstanding stock of IntelliPack through one of its wholly owned subsidiaries, Pregis Management Corporation. The initial purchase price was funded with cash-on-hand. In accordance with the terms of the purchase agreement, additional future consideration may be payable by Pregis if certain future performance targets are achieved by IntelliPack.
On October 5, 2009, Pregis issued euro 125.0 million aggregate principal amount of second priority senior secured floating rate notes due 2013 (the "notes"). The notes bear interest at a floating rate of EURIBOR plus 5.00% per year. Interest on the notes resets quarterly and is payable on January 15, April 15, July 15, and October 15 of each year, beginning on October 15, 2009. The notes mature on April 15, 2013. The notes are treated as a single class under the indenture with the euro 100.0 million principal amount of our existing second priority senior secured floating rate notes due 2013, originally issued on October 12, 2005. The proceeds from this offering were used to repay the Term B-1 and Term B-2 indebtedness under our senior secured credit facilities.
Segment Performance
Comments on segment net sales and EBITDA performance for the fourth quarter of 2009 is as follows:
- Net sales of the protective packaging segment decreased by $7.7 million, or 5.4%. The 2009 fourth quarter sales decline was driven by unfavorable price/mix. This was partially offset by an increase in sales volumes and favorable currency.
- EBITDA of the protective packaging segment decreased $1.0 million, or 8.7%. The decrease in EBITDA for the fourth quarter was due primarily to lower year-over-year selling prices and timing of certain SG&A expenses offset by favorable resin costs and the impact of cost reductions.
- Net sales of the specialty packaging segment increased $0.7 million, or 0.9%. This sales increase was driven primarily by favorable foreign currency translation, which more than offset the impact of lower year-over-year volumes as well as unfavorable price/mix.
- EBITDA of the specialty packaging segment increased $1.6 million, or 17.9%. This increase was due to savings resulting from our cost reduction program and favorable currency partially offset by decreased volumes and unfavorable price/mix.
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 fourth quarter results on Thursday, March 25, 2010 at 3:00 p.m. ET (2:00 p.m. CT). The call can be accessed through the following dial-in numbers: Domestic: 866-700-5192; International: 617-213-8833; Participant Passcode: 42574550. A replay of the conference call will be available through April 9, 2010. The replay may be accessed using the following dial-in information: Domestic: 888-286-8010; International: 617-801-6888; Passcode: 58196627.
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 45 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 risks 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) December 31, ---------------------- 2009 2008 ---- ---- Assets Current assets Cash and cash equivalents $80,435 $41,179 Accounts receivable Trade, net of allowances of $6,015 and $5,357 respectively 120,812 121,736 Other 12,035 13,829 Inventories, net 81,024 87,867 Deferred income taxes 5,079 4,336 Due from Pactiv 1,169 1,399 Prepayments and other current assets 7,929 8,435 ------- ------- Total current assets 308,483 278,781 Property, plant and equipment, net 226,882 245,124 Other assets Goodwill 126,250 127,395 Intangible assets, net 38,054 41,254 Deferred financing costs, net 8,092 7,734 Due from Pactiv, long-term 8,429 13,234 Pension and related assets 13,953 22,430 Other 404 424 ------- ------- Total other assets 195,182 212,471 ------- ------- Total assets $730,547 $736,376 ======= ======= Liabilities and stockholder's equity Current liabilities Current portion of long-term debt $300 $4,902 Accounts payable 78,708 79,092 Accrued income taxes 5,236 6,964 Accrued payroll and benefits 14,242 11,653 Accrued interest 7,722 6,905 Other 18,011 21,740 ------- ------- Total current liabilities 124,219 131,256 Long-term debt 502,534 460,714 Deferred income taxes 19,721 24,913 Long-term income tax liabilities 5,463 11,310 Pension and related liabilities 4,451 6,119 Other 15,367 11,963 Stockholder's equity: Common stock - $0.01 par value; 1,000 shares authorized, 149.0035 shares issued and outstanding at December 31, 2009 and 2008 - - Additional paid-in capital 151,963 150,610 Accumulated deficit (82,328) (64,318) Accumulated other comprehensive income (loss) (10,843) 3,809 ------- ------- Total stockholder's equity 58,792 90,101 ------- ------- Total liabilities and stockholder's equity $730,547 $736,376 ------- ------- Pregis Holding II Corporation Consolidated Statements of Operations Unaudited (dollars in thousands) Three Months Ended Year ended December 31, December 31, ----------------- -------------- 2009 2008 2009 2008 ---- ---- ---- ---- Net Sales $212,630 $219,638 $801,224 $1,019,364 Operating costs and expenses: Cost of sales, excluding depreciation and amortization 165,371 174,247 609,515 798,690 Selling, general and administrative 33,989 27,393 117,048 127,800 Depreciation and amortization 9,400 11,610 44,783 52,344 Goodwill impairment - 19,057 - 19,057 Other operating expense, net 1,378 (354) 14,980 8,146 ----- ---- ------ ----- Total operating costs and expenses 210,138 231,953 786,326 1,006,037 ------- ------- ------- --------- Operating income (loss) 2,492 (12,315) 14,898 13,327 Interest expense 14,532 11,776 42,604 49,069 Interest income (218) (357) (394) (875) Foreign exchange loss (gain), net (486) 8,087 (6,303) 14,728 ---- ----- ------ ------ Loss before income taxes (11,336) (31,821) (21,009) (49,595) Income tax benefit (4,012) (4,894) (2,999) (1,865) ------ ------ ------ ------ Net loss $(7,324) $(26,927) $(18,010) $(47,730) ------- -------- -------- -------- Pregis Holding II Corporation Consolidated Statements of Cash Flows Unaudited (dollars in thousands) Year ended December 31, ---------------------- 2009 2008 ---- ---- Operating activities Net loss $(18,010) $(47,730) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 44,783 52,344 Deferred income taxes (1,060) (7,769) Unrealized foreign exchange loss (gain) (6,126) 14,022 Amortization of deferred financing costs 5,247 2,374 Gain on disposal of property, plant and equipment (270) (313) Stock compensation expense 1,353 951 Defined benefit pension plan income (1,189) (187) Curtailment gain on defined benefit pension plan - (3,736) Gain on insurance settlement - - Goodwill impairment - 19,057 Trademark impairment 194 1,297 Impairment of interest rate swap asset - 1,299 Changes in operating assets and liabilities Accounts and other receivables, net 7,283 13,907 Due from Pactiv 5,195 6,630 Inventories, net 9,153 13,597 Prepayments and other current assets 17 79 Accounts payable (2,944) (13,121) Accrued taxes (7,876) (6,373) Accrued interest 1,043 68 Other current liabilities (1,829) (7,014) Pension and other (9,347) 272 ------ ------ Cash provided by operating activities 25,617 39,654 ------ ------ Investing activities Capital expenditures (25,045) (30,882) Proceeds from sale of assets 1,766 1,063 Sales leaseback proceeds 9,850 - Other business acquisitions, net of cash acquired - (958) Insurance proceeds - 3,205 Other, net - (969) ------ ------ Cash used in investing activities (13,429) (28,541) ------ ------ Financing activities Proceeds from 2009 note issuance, net of discount 172,173 - Proceeds from revolving credit facility 42,000 (115) Retirement of term B1 & B2 notes (176,991) - Deferred financing costs (6,466) - Repayment of debt (4,312) (1,893) Other, net (269) - ------ ------ Cash provided (used in) financing activities 26,135 (2,008) Effect of exchange rate changes on cash and cash equivalents 933 (2,915) ------ ------ Increase (decrease) in cash and cash equivalents 39,256 6,190 Cash and cash equivalents, beginning of period 41,179 34,989 ------ ------ Cash and cash equivalents, end of period $80,435 $41,179 ------ ------ Pregis Holding II Corporation Supplemental Information (Unaudited) Calculation of Adjusted EBITDA ("Consolidated Cash Flow") Three Months Ended December 31, (unaudited) ------------------------------- (dollars in thousands) 2009 2008 ---- ---- Net loss of Pregis Holding II Corporation $(7,324) $(26,927) Interest expense, net of interest income 14,314 11,419 Income tax (benefit) expense (4,012) (4,894) Depreciation and amortization 9,400 11,610 ------ ------ EBITDA 12,378 (8,792) Other non-cash charges (income): Unrealized foreign currency transaction losses (gains), net (573) 7,922 Non-cash stock based compensation expense 292 273 Non-cash asset impairment charge 194 20,354 Other non-cash expenses, primarily fixed asset disposals and write-offs - - Net unusual or nonrecurring gains or losses: Restructuring, severance and related expenses 1,023 (1,864) Curtailment gain - - Nonrecurring charges related to acquisitions and dispositions - - Other unusual or nonrecurring gains or losses 4,126 636 Other adjustments: Amounts paid pursuant to management agreement with Sponsor 481 476 Pro forma earnings and costs savings - - ------ ------ Adjusted EBITDA (“Consolidated Cash Flow") $17,921 $19,005 ------ ------ 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 December 31, (unaudited) ------------------------------- (dollars in thousands) 2009 2008 ---- ---- Net loss of Pregis Holding II Corporation $(18,010) $(47,730) Interest expense, net of interest income 42,210 48,194 Income tax (benefit) expense (2,999) (1,865) Depreciation and amortization 44,783 52,344 ------ ------ EBITDA 65,984 50,943 Other non-cash charges (income): Unrealized foreign currency transaction losses (gains), net (6,125) 14,736 Non-cash stock based compensation expense 1,363 951 Non-cash asset impairment charge (59) 20,354 Other non-cash expenses, primarily fixed asset disposals and write-offs - 427 Net unusual or nonrecurring gains or losses: Restructuring, severance and related expenses 16,138 11,418 Curtailment gain - (3,736) Nonrecurring charges related to acquisitions and dispositions - - Other unusual or nonrecurring gains or losses 6,013 1,283 Other adjustments: Amounts paid pursuant to management agreement with Sponsor 2,045 1,724 Pro forma earnings and costs savings - - ------ ------ Adjusted EBITDA ("Consolidated Cash Flow") $85,359 $98,100 ------ ------ 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 Fourth Quarter 2009 Supplemental Information (Unaudited) (Amounts and percentage changes are approximations due to rounding.) Gross Margin Calculations ------------------------- Three Months Ended December 31, ------------------------------- (dollars in thousands) 2009 2008 Change ---- ---- ------ Net sales $212,630 $219,638 $(7,008) Cost of sales, excluding depreciation and amortization (165,371) (174,247) 8,876 ------- ------- ----- Gross margin $47,259 $45,391 $1,868 ------- ------- ----- Gross margin, as a percent of net sales 22.2% 20.7% 1.5% ------- ------- ----- Year Ended December 31, ------------------------------- (dollars in thousands) 2009 2008 Change ---- ---- ------ Net sales $801,224 $1,019,364 $(218,140) Cost of sales, excluding depreciation and amortization (609,515) (798,690) 189,175 ------- ------- ----- Gross margin $191,709 $220,674 $(28,965) ------- ------- ----- Gross margin, as a percent of net sales 23.9% 21.6% 2.3% ------- ------- ----- Net Sales by Segment ------------------------- Three Months Ended December 31, ------------------------------- 2009 2008 $Change % Change ---- ---- ------ -------- (dollars in thousands) Segment: Protective Packaging $134,037 $141,750 $(7,713) (5.4)% Specialty Packaging 78,593 77,888 705 0.9% ------- ------- ------ ---- Total $ 212,630 $ 219,638 $(7,008) (3.2)% ------- ------- ------ ---- Change Attributable to the Following Factors -------------------------------------------------------- Price / Currency Mix Volume Translation ------------------ --------------- ------------- Segment: Protective Packaging $(16,021) (11.2)% $4,881 3.4% $3,427 2.4% Specialty Packaging (2,095) (2.7)% (3,198) (4.1)% 5,998 7.7% ------ ----- ----- ---- ----- ---- Total $(18,116) (8.3)% $1,683 0.8 % $9,425 4.3% ====== ===== ===== ==== ===== ==== Year Ended December 31, ------------------------------- 2009 2008 $Change % Change ---- ---- ------ -------- (dollars in thousands) Segment: Protective Packaging $ 497,144 $ 661,976 $(164,832) (24.9)% Specialty Packaging 304,080 357,388 (53,308) (14.9)% ------- ------- ------ ---- Total $ 801,224 $1,019,364 $(218,140) (21.4)% ------- --------- -------- ---- Change Attributable to the Following Factors -------------------------------------------------------- Price / Currency Mix Volume Translation ------------------ --------------- ------------- Segment: Protective Packaging $(28,154) (4.3)% $(110,567) (16.7)% $(26,111) (3.9)% Specialty Packaging (5,200) (1.5)% (20,488) (5.7)% (27,620) (7.7)% ------ ----- ----- ---- ----- ---- Total $(33,354) (3.2)% $(131,055) (12.9)% $(53,731) (5.3)% ====== ===== ======= ==== ===== ==== Pregis Holding II Corporation Supplemental Information (Unaudited) (Amounts and percentage changes are approximations due to rounding.) EBITDA by Segment ----------------- Three Months Ended December 31, ------------------------------- 2009 2008 $Change % Change ---- ---- ------- -------- (dollars in thousands) Segment: Protective Packaging $10,360 $11,353 $(993) (8.7)% Specialty Packaging 10,547 8,949 1,598 17.9% ------ ------ ----- ----- Total segment EBITDA $20,907 $20,302 $605 3.0% ====== ====== ===== ===== Year Ended December 31, ----------------------- 2009 2008 $Change % Change ---- ---- ------- -------- (dollars in thousands) Segment: Protective Packaging $52,561 $61,166 $(8,605) (14.1)% Specialty Packaging 41,339 42,523 (1,184) (2.8)% ------ ------ ----- ------ Total segment EBITDA $93,900 $103,689 $(9,789) (9.4)% ====== ======= ===== ======
SOURCE Pregis Corporation
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