Pregis Announces Second Quarter 2010 Financial Results

DEERFIELD, Ill., Aug. 13 /PRNewswire/ -- Pregis Corporation, a leading international manufacturer, marketer, and supplier of protective packaging products and specialty packaging solutions, today announced its 2010 second quarter financial results.  

For the second quarter of 2010, the Company generated net sales of $217.8 million, an increase of 11.1% versus net sales of $196.0 million in the second quarter of 2009. 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, and the sales associated with our recently completed acquisition of IntelliPack, the quarter's net sales were higher by 13.1% compared to the prior year quarter due to increased sales volumes, which were driven by the impact of economic recovery as well as the Company's growth initiatives, along with the impact of selling price increases implemented in the second quarter of 2010.

Gross profit margin, as a percent of net sales, was 21.3% in the second quarter of 2010, compared to 25.0% in the second quarter of 2009.  The year-over-year decline in gross margin as a percent of net sales was driven by increased key raw material costs partially offset by increased volumes, year-over-year price increases, and the impact from the Company's cost reduction programs. Resin costs in North America and Europe, as measured by their respective indices, were 31% and 49% higher, respectively, than the 2009 second quarter.

The Company generated operating income of $4.5 million in the second quarter of 2010, which included pre-tax restructuring charges of $1.0 million relating to the Company's cost reduction programs, legal costs of $0.5 million, and non-cash purchase accounting charges related to the acquisition of Intellipack of $0.6 million.  This compared to operating income of $6.5 million for the second quarter of 2009.  The second quarter of 2009 operating loss reflects restructuring activity of $5.2 million.  Adjusted for the amounts discussed above, operating income for the second quarter of 2010 was $6.6 million compared to $11.7 million in the second quarter of 2009.  This decrease in operating profit was driven by the same factors impacting the gross profit margin percentage.  

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 $19.4 million in the second quarter of 2010 compared to $24.9 million for the same period in 2009 and $18.2 million in the first quarter of 2010.

Commenting on the Company's results, Mike McDonnell, President and Chief Executive Officer, stated, "In the second quarter, we drove volume growth, both year-over-year and sequentially, as a result of our organic growth initiatives including new offerings in inflatable systems, sustainable products, foam-in-place and food packaging, as well as strong performance in emerging markets.  However, the positive impact of this growth was more than offset by significant year-over-year and sequential increases in our key raw material costs, which were higher versus the 2009 second quarter by over 30% in North America and near 50% in Europe based on their respective indices."

Mr. McDonnell continued, "We implemented selling price increases in the second quarter in both North America and Europe, but we are disappointed that these increases will not be sufficient to fully offset the increases in key raw materials this year.  We are continuing to implement additional increases over the next few months in Europe, as resin costs in Europe have continued to climb throughout the second quarter."

Mr. McDonnell concluded, "We continue to capitalize on the long term growth potential of Pregis.  Our organic growth initiatives are showing strong progress and our first quarter acquisition of IntelliPack, a supplier of foam-in-place packaging systems, has enhanced our product portfolio and is an excellent example of our ability to grow through highly accretive acquisitions."

Segment Performance

Comments on segment net sales and EBITDA performance for the second quarter of 2010 is as follows:

• Net sales of the protective packaging segment increased by $19.5 million, or 16.4%. The 2010 second quarter sales increase was driven primarily by increased volumes due to improved economic conditions, the impact from growth initiatives, and the impact of the IntelliPack acquisition partially offset by unfavorable foreign currency translation.  Net sales for the second quarter 2010, excluding IntelliPack and unfavorable foreign currency translation, increased by 15.6% compared to the same period in 2009.  
• EBITDA of the protective packaging segment decreased $4.7 million.  The decrease in EBITDA for the second quarter was due primarily to the impact of significantly higher key raw material costs which were partially offset by  increased sales.
• Net sales of the specialty packaging segment increased $2.3 million, or 3.0%.  This increase was driven primarily by increased volumes in our fresh food packaging markets, which offset the impact of unfavorable foreign currency translation.  Excluding the unfavorable foreign currency translation, net sales for the second quarter 2010 increased 9.4% year-over-year.
• EBITDA of the specialty packaging segment decreased $0.3 million.  This decrease was due to increased raw material costs and unfavorable foreign currency translation partially offset by increased volumes.

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 2010 second quarter results on Monday, August 16, 2010 at 11:00 a.m. ET (10:00 p.m. CT).  The call can be accessed through the following dial-in numbers: Domestic: 800-561-2601; International: 617-614-3518; Participant Passcode: 25259431. A replay of the conference call will be available through August 30, 2010.  The replay may be accessed using the following dial-in information: Domestic: 888-286-8010; International: 617-801-6888; Passcode: 16508877.

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 47 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.

Note to above:

EBITDA is calculated internally as net income before interest, taxes, depreciation, amortization, restructuring expense and adjusted for other non-cash charges and benefits.  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.

Note to above:

EBITDA is calculated internally as net income before interest, taxes, depreciation, amortization, restructuring expense and adjusted for other non-cash charges and benefits.  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.  

SOURCE Pregis Corporation