PORTOLA PACKAGING REPORTS SECOND QUARTER FISCAL YEAR 2008 RESULTS
BATAVIA, IL—April 14, 2008 - Portola Packaging, Inc. (“Portola” or the “Company”) today reported results for the second quarter of fiscal year 2008, ended February 29, 2008. The Company reported sales of $66.6 million for the second quarter of fiscal year 2008 compared to $63.7 million for the second quarter of fiscal year 2007, an increase of 4.6%. For the first six months of fiscal 2008, sales were $139.2 million compared to $131.1 million for the first six months of fiscal 2007, an increase of 6.2%. Portola reported an operating loss of $0.4 million for the second quarter of fiscal year 2008, compared to operating income of $2.4 million reported in the second quarter of fiscal year 2007, a decrease of $2.8 million. The decrease quarter over quarter was primarily due to lower gross margins of $2.4 million and higher product development and selling expenses. Gross margins were substantially impacted by a lag in passing higher resin costs to customers as well as higher utility, freight and labor costs. The increase in product development costs and selling expense relates to new product introductions that are being made over the next two quarters. For the first six months of fiscal 2008, the Company had operating income of $1.6 million compared to operating income of $5.7 million for fiscal year 2007. Portola reported a net loss of $5.1 million for the second quarter of fiscal year 2008 compared to a net loss of $3.3 million for the second quarter of fiscal year 2007. For the first six months of fiscal year 2008, the Company had a net loss of $7.6 million compared to a net loss of $5.4 million for the same period in fiscal year 2007.
EBITDA
(a), (c) decreased $2.0 million to $3.5 million in the second quarter of fiscal year 2008 compared to $5.5 million in the second quarter of fiscal year 2007 and decreased $1.6 million or 12.6% to $11.1 million for the first six months of fiscal 2008 compared to $12.7 million for the first six months of fiscal 2007. Adjusted EBITDA
(b), (c), which excludes the effect of restructuring charges, (gains) or losses on the sale of assets and other non-recurring expenses, decreased $1.9 million to $3.7 million in the second quarter of fiscal year 2008 compared to $5.6 million reported in the second quarter of fiscal year 2007 and decreased $1.5 million or 11.6% to $11.4 million for the first six months of fiscal 2008 compared to $12.9 million for the first six months of fiscal 2007. Lower year over year Adjusted EBITDA was due to the decreased operating income reported earlier partially offset by higher foreign exchange gains of $2.4 million year-to-date ($0.5 million occurred in the second quarter) due to currency.
Although the second quarter was extremely challenging principally due to resin and other energy related cost increases, there were some positives. The company has continued to make gains in growing sales as unit volume has increased 5.6% for the first six months of fiscal 2008 compared to the first six months of fiscal 2007. This growth has been assisted by various new product introductions in both existing markets as well as new markets. Throughout the second quarter, the company continued to implement several improvement initiatives aimed at reducing cost and enhancing margins in the coming quarters. Several cost reduction actions, including a re-structuring effort, were recently completed with more planned in the third quarter. These re-structuring efforts are expected to result in an annualized reduction in compensation expense of approximately $2.7 million. In response to rising energy and non-resin related cost increases that have been encountered in recent months, the company has begun implementing price increases. These price increases and cost reduction efforts should assist in providing a recovery in earnings later this fiscal year.
Furthermore, in April the company secured an extension to the $60.0 million senior secured revolving credit facility through April, 2011. In addition, the company secured a $15.0 million second lien term loan from Wayzata Investment Partners, LLC that matures in July, 2011, which together with the amendments to the senior secured revolving credit facility, has increased credit availability to approximately $19 million. With these facilities the company has adequate liquidity to support needs.
FORWARD-LOOKING STATEMENTS
The contents of this press release may include predictions, estimates or other information regarding the Company’s financing alternatives, financial position, business strategy, plans and objectives of management for future operations, and industry conditions that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties which could cause actual results to differ materially. Although the Company believes that the expectations reflected in any such forward-looking statements are reasonable; it can give no assurance that such expectations will prove to be correct. You are cautioned not to place undue reliance on these forward-looking statements and please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements. You should also review our most recent Form 10-K and Form 10-Q’s for a more complete discussion of our risk factor.
CONFERENCE CALL:
Portola Packaging, Inc. executives will hold a conference call to discuss the second quarter of fiscal year 2008 results. The conference call is scheduled for April 15, 2008 at 10:00 AM Central Time. The United States Dial-In Number is 888-400-7916. The International Dial-In Number is 703-925-2612. This press release and any additional financial and operating information, if any, will be available under the “in the news” section on the Company’s web site at www.portpack.com.
ABOUT PORTOLA PACKAGING, INC:
Portola Packaging is a leading designer, manufacturer and marketer of tamper-evident plastic closures used in dairy, fruit juice, bottled water, sports drinks, institutional food and other non-carbonated beverage markets. The Company also produces a wide variety of plastic bottles for use in dairy, water and juice markets, including various high density bottles, as well as five-gallon polycarbonate water bottles. In addition, the Company designs, manufactures and markets capping equipment for use in high speed bottling, filling and packaging production lines. Portola is also engaged in the manufacture and sale of tooling and molds used for blow molding. For more information about Portola Packaging, visit the Company’s web site at www.portpack.com.
ABOUT PORTOLA TECH INTERNATIONAL, INC:
Portola Tech International (“PTI”) is a wholly-owned subsidiary of Portola and is a leading manufacturer, marketer and designer of plastic packaging components for the cosmetic, fragrance and toiletries markets. PTI’s capabilities include injection and compression molding, thermal and ultraviolet metallizing, ultraviolet one-coat spray technologies, silk screening, hot stamping, lining and multiple component assembly. In addition to offering the largest stock line of closures in the industry, with over 450 styles and sizes, PTI has a complementary line of heavy-wall PETG and polypropylene jars. For more information about PTI, visit PTI’s web site at .
FOR ADDITIONAL INFORMATION CONTACT:
Brian J. Bauerbach
President and Chief Executive Officer
(630) 326-2117 |
Portola Packaging, Inc.
951 Douglas Road
Batavia, Illinois 60510
Web Site: www.portpack.com |
John G. LaBahn
Senior Vice President
Chief Financial Officer
(630) 326-2074 |
Phone: (630) 406-8440 (888)739-0936
Fax: (630) 406-8442
Email: Info@portpack.com |
PORTOLA PACKAGING, INC.
Financial Results (in millions)
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Q2 08 |
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YTD 08 |
|
Q2 07 |
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YTD 07 |
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Sales |
$66.6 |
|
$139.2 |
|
$63.7 |
|
$131.1 |
Cost of sales |
59.6 |
|
123.0 |
|
54.3 |
|
111.4 |
Gross profit |
7.0 |
|
16.2 |
|
9.4 |
|
19.7 |
Gross profit % (d) |
10.5% |
|
11.6% |
|
14.8% |
|
15.0% |
SG&A, R&D and amortization |
7.6 |
|
14.8 |
|
6.9 |
|
13.8 |
Gain on sale of assets |
(0.2) |
|
(0.2) |
|
- |
|
- |
Restructuring |
- |
|
- |
|
0.1 |
|
0.2 |
Operating (loss) income |
(0.4) |
|
1.6 |
|
2.4 |
|
5.7 |
Interest expense |
4.7 |
|
9.3 |
|
4.4 |
|
8.9 |
Amortization of debt issuance costs |
0.4 |
|
0.8 |
|
0.4 |
|
0.8 |
Foreign exchange loss (gain) |
(0.5) |
|
(2.2) |
|
0.3 |
|
0.2 |
Other (income) expense, net |
0.6 |
|
0.5 |
|
0.6 |
|
0.5 |
Loss before income taxes |
(5.6) |
|
(6.8) |
|
(3.3) |
|
(4.7) |
Income tax (benefit) expense |
(0.5) |
|
0.8 |
|
- |
|
0.7 |
Net loss |
$(5.1) |
|
$(7.6) |
|
$(3.3) |
|
$(5.4) |
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Add: |
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|
|
Interest expense |
$4.7 |
|
$9.3 |
|
$4.4 |
|
$8.9 |
Income tax (benefit) expense |
(0.5) |
|
0.8 |
|
- |
|
0.7 |
Depreciation expense |
3.8 |
|
7.5 |
|
3.6 |
|
7.2 |
Goodwill impairment |
- |
|
- |
|
0.2 |
|
0.2 |
Amortization of intangibles |
0.2 |
|
0.3 |
|
0.2 |
|
0.3 |
Amortization of debt issuance costs |
0.4 |
|
0.8 |
|
0.4 |
|
0.8 |
EBITDA (a), (c) |
$3.5 |
|
$11.1 |
|
$5.5 |
|
$12.7 |
EBITDA % (a), (c) (d) |
5.3% |
|
8.0% |
|
8.6% |
|
9.7% |
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|
|
|
|
|
|
|
Adjustments to EBITDA (b), (c): |
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Restructuring |
$- |
|
$- |
|
$0.1 |
|
$0.2 |
Gain on sale of assets |
(0.2) |
|
(0.2) |
|
- |
|
- |
Other |
0.4 |
|
0.5- |
|
- |
|
- |
Adjusted EBITDA (b), (c) |
$3.7 |
|
$11.4 |
|
$5.6 |
|
$12.9 |
Adjusted EBITDA % (b), (c) (d) |
5.6% |
|
8.2% |
|
8.8% |
|
9.8% |
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February 29, 2008
|
|
Audited
August 31, 2007 |
|
|
|
|
Current assets |
$71.3 |
|
$69.0 |
Property, plant and equipment, net |
73.6 |
|
71.7 |
Other assets |
19.4 |
|
20.8 |
|
|
|
|
Total assets |
$164.3 |
|
$161.5 |
|
|
|
|
Current liabilities and short term revolver debt |
$84.5 |
|
$35.6 |
Long term revolverand other debt |
- |
|
39.6 |
Senior notes |
180.0 |
|
180.0 |
Other liabilities |
3.1 |
|
3.0 |
Total liabilities
|
267.6 |
|
258.2 |
Other equity |
8.4 |
|
7.4 |
Accumulated deficit |
(111.7) |
|
(104.1) |
Total equity (deficit) |
(103.3) |
|
(96.7) |
|
|
|
|
Total liabilities and shareholders’
equity (deficit) |
$164.3 |
|
$161.5 |
(a) EBITDA represents, for any relevant period, income (loss) before income taxes, depreciation of property, plant and equipment, interest expense (including amortization of debt issuance costs) and amortization of intangible assets.
(b) Adjusted EBITDA represents, for any relevant period, income (loss) before income taxes, depreciation of property, plant and equipment, net interest expense, amortization of debt issuance costs, amortization of intangible assets, impairment of intangible assets, restructuring costs, gains and losses on sale of assets and other non-recurring expenses. Adjusted EBITDA excludes restructuring charges of $0.1 and $0.2 million for the three and six months ended February 28, 2007, respectively. There were no restructuring charges for the three and six months ended February 29, 2008
(c) EBITDA and Adjusted EBITDA are not intended to represent and should not be considered more meaningful than, or an alternative to, net income (loss), cash flow or other measures of performance in accordance with generally accepted accounting principles. EBITDA and Adjusted EBITDA data are included because the Company understands that such information is used by certain investors as one measure of an issuer’s historical ability to service debt and because certain restrictive covenants in the Indenture are based on a term very similar to the Company’s Adjusted EBITDA.
(d) Percentages are calculated as a percent of sales.
