Appvion Reports First Quarter 2016 Results
May 9, 2016 (Press Release) - Appvion reported first quarter 2016 operating income of $9.6 million compared to $4.3 million during first quarter 2015. Current year quarterly earnings were higher due to continued improvements in operating performance and execution of cost-saving initiatives in both the thermal papers and carbonless papers businesses, as well as improved pricing in the thermal papers business. In addition, current quarter selling, general and administrative (SG&A) expenses were $1.6 million, or 5.7%, lower than the previous year quarter primarily due to lower people costs and distribution expenses.
First quarter 2016 adjusted EBITDA rose 25% compared to the same period in 2015. First quarter 2016 earnings benefited from improved prices for the Company's thermal products and a more than $7 million reduction in manufacturing and raw materials spending resulting from strong operational performance.
"We continued to build on the operational improvements we achieved in the second half of 2015 to deliver strong first quarter results," said Kevin Gilligan, Appvion's chief executive officer. "Improved operating performance enables us to focus on innovating for our customers through new product development and introduction." Those efforts included introduction of three new Triumph™ high-speed inkjet products and an expanding development pipeline of new thermal products.
Appvion's first quarter 2016 net sales of $180.5 million decreased $3.4 million, or 1.8%, compared to first quarter 2015. Shipment volumes were approximately 2% lower compared to a strong first quarter 2015, though over 3% higher than fourth quarter 2015 shipments. Thermal papers net sales of $101.9 million were $7.3 million, or 7.7%, higher than the first quarter of 2015, with shipment volumes increasing approximately 7%. Carbonless papers net sales of $78.6 million were $10.7 million, or 12.0%, lower than the first quarter of 2015, with shipment volumes down approximately 11% against first quarter 2015 which was the segment's strongest prior year quarter.
Continued volume growth for the Company's thermal tag, label and entertainment (TLE) products as well as its thermal receipt paper, combined with specialty products volume growth, helped Appvion offset volume decline for carbonless paper. Volume for Appvion's thermal TLE products rose nearly 9% in first quarter 2016 compared to first quarter 2015. Volume for the Company's thermal receipt paper grew nearly 4% in first quarter 2016 compared to the same period in 2015, and specialty products volume increased more than 2%.
The average selling price for the Company's thermal receipt paper increased 7% compared to fourth quarter 2015. Prices for the Company's thermal receipt paper are also approximately 11% higher than their low in 2015 and reflect increasing demand for the product that began in the second half of 2015.
"Improved pricing and demand for our thermal products, combined with our strong operational performance and reduced spending, were the keys to our improved first quarter performance," said Gilligan. "Our company performed well and I'm confident that we will continue to improve."
Thermal papers first quarter 2016 net sales of $101.9 million increased $7.3 million, or 7.7%, compared to first quarter 2015 net sales of $94.6 million. During the first quarter of 2016, shipment volumes increased approximately 7% compared to the same period last year. Shipment volumes of TLE products were up nearly 9% while shipments of receipt paper were approximately 4% higher than first quarter 2015.
The thermal papers segment recorded operating income of $3.9 million for first quarter 2016. This compared to a first quarter 2015 operating loss of $2.0 million. Continued improvements in operating performance and execution of cost savings initiatives added $3.6 million to earnings. Current quarter operating results were also favorably impacted by volume, $1.5 million, and improved pricing and product mix of $1.3 million, slightly offset by unfavorable fluctuations in the Euro and Canadian dollar of $1.3 million. During first quarter 2016, SG&A and other expenses were $0.8 million lower than in first quarter 2015.
Carbonless papers first quarter 2016 net sales of $78.6 million declined $10.7 million, or 12.0%, compared to the same period last year. Current quarter shipment volumes were approximately 11% lower when compared to a strong first quarter 2015, though were more than 5% higher than fourth quarter 2015 shipments.
The carbonless papers segment recorded operating income of $7.5 million for first quarter 2016 compared to operating income of $8.5 million in first quarter 2015. Current quarter operating results were impacted by unfavorable volume and product pricing of $6.1 million, as well as unfavorable fluctuations in the Canadian dollar of $0.5 million, partially offset by reduced downtime costs from first quarter 2015 at the Roaring Spring, Pennsylvania mill, continued improvements in operating performance and execution of cost savings initiatives totaling $3.7 million. During first quarter 2016, SG&A and other were $1.9 million lower than in first quarter 2015.
Other (unallocated) includes unallocated corporate expenses. First quarter 2016 expenses of $1.8 million were $0.4 million lower than first quarter 2015.
At the end of the first quarter 2016, the Company held cash balances of $2.3 million compared to cash balances of $1.8 million at year-end 2015. Due to the required adoption of a new accounting standard, $8.1 million of unamortized debt issuance costs were reclassified from other long-term assets to long-term debt on the year-end 2015 Condensed Consolidated Balance Sheet as of January 2, 2016 resulting in restated net debt of $413.5 million. At the end of first quarter 2016, net debt was $414.3 million.
Gilligan said Appvion will continue to focus on improved operational performance and strategic cost reduction initiatives. "We have identified and prioritized significant improvement opportunities and cost-saving initiatives which we expect will help us to continue to deliver operational improvements and earnings enhancements."
Gilligan added that second quarter earnings will reflect the cost of the annual maintenance shutdown of the Roaring Spring, Pennsylvania mill. Historically, the cost to complete this scheduled annual maintenance work is $3.5 - $4.0 million.
The Company expects continued strong demand for its thermal receipt paper and TLE grades as a result of improved market conditions and account gains. The Company has built inventory accordingly to maintain service levels to customers. Appvion expects to realize ongoing benefit of improved pricing for its thermal receipt paper as a result of the 4% to 6% price increase that became effective January 1.
The Company expects its carbonless segment will continue to benefit from sales of its expanding portfolio of specialty papers that includes its kaBoom!™ colored papers and the first quarter introduction of three new Triumph™ high-speed inkjet products.
Appvion produces thermal, carbonless, security, inkjet, digital specialty and colored papers.