FiberMark Reports Second-quarter 2005 Results
 



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

FORM 8-K

 
  


Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report: August 12, 2005

FiberMark, Inc. 
(Exact name of registrant as specified in charter) 

Delaware  
001-12865  
82-0429330 
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)
 


161 Wellington Road 
P.O. Box 498 
Brattleboro, Vermont 05302 
(802) 257-0365 
 
 
 
 


Item 2.02 Results of Operations and Financial Condition
 
On August 12, 2005, FiberMark announced its second-quarter 2005 results. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.

The Exhibit associated with this item attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.


Item 9.01 Financial Statements and Exhibits

Exhibit 99.1  Press Release Dated August 12, 2005
 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  
 

     
 
FiberMark 
     
Date: August 12, 2005
By:  
/s/ John E. Hanley
 
 John E. Hanley
 
Vice President and Chief Financial Officer
 


 


EXHIBIT INDEX
 
Exhibit No.
 
 Description
 
 
  
Exhibit 99.1
 
 
 
 
 Press release dated August 12, 2005

 
 
 
 FOR IMMEDIATE RELEASE
 Contact:    
  Janice C. Warren
     Director, Investor Relations and Corporate Communications
     802 257 5981

 
FiberMark Reports Second-quarter 2005 Results

BRATTLEBORO, VERMONT, August 12, 2005—FiberMark, Inc., (OTCBB: FMKIQ) today issued its financial results for the second quarter ended June 30, 2005. The company reported a net loss of $1.4 million, or $0.20 per share, versus net income of $0.6 million, or $0.08 per share, in 2004. The change to a net loss position was largely due to higher raw material, energy and manufacturing costs and higher depreciation expenses, partially offset by lower selling and administrative expenses due to lower information technology maintenance costs and professional services, a $1.9 million asset disposal gain due to the sale of an idle facility, price increases, improvements in product mix and lower fixed costs. In addition, reorganization expenses related to the chapter 11 filing were $1.1 million higher than in the second quarter of 2004. Foreign exchange translation benefits contributed to $0.4 million of the change.

Net sales in the second quarter of 2005 were $115.6 million compared with $111.0 million in the prior-year quarter, an increase of $4.6 million or 4.1%. Favorable foreign exchange rates increased second quarter 2005 sales by $2.6 million compared with the 2004 quarter. Net of currency effects, current year net sales increased by $2.0 million or 1.8% versus the prior year period.

Net sales from German operations in the second quarter of 2005 were $57.4 million compared with $52.6 million in the prior-year quarter, an increase of $4.8 million or 9.1%. Excluding the translation effects of a stronger euro, which accounted for $2.5 million in sales for the second quarter compared with the prior-year quarter, sales from German operations grew by $2.3 million, or 4.4%. During the quarter, the company made continued gains in its German businesses due to a combination of market share gains, geographic growth and the growth of key customers, partially offset in certain markets by pockets of pricing pressure and a weaker product mix. The nonwoven wallcovering business continued to be negatively affected by weak economic conditions in Germany and rising competitive pressures, particularly in export markets.

Second quarter 2005 net sales from North American operations were $58.2 million compared with $58.4 million in the prior-year quarter, a decrease of $0.2 million or 0.3%. The company’s office products business posted modest gains aided by price increases, continued growth in our graphic design/paper merchant business and market share gains by a key customer. The company’s publishing/packaging and technical specialties businesses both experienced declines. Publishing sales were nearly even with 2004 levels, due to a stronger educational market (elementary/high-school textbook) and a key new product launch, offset by lower legal publishing sales, order timing differences, customer market position challenges, shifts to competitive materials or technologies and product mix downgrades. With fewer large packaging projects in 2005, volume declined in the company’s packaging business.


In the second quarter of 2005, earnings before interest, taxes, depreciation, amortization and chapter 11-related reorganization expenses (EBITDAR), improved to $11.3 million from $10.4 million in the prior-year quarter, largely reflecting a gain on the disposal of assets and lower SG&A expenses, which were partially offset by lower volume in the company’s North American operations and higher energy, raw material and manufacturing costs. FiberMark believes that such non-GAAP financial information assists investors and others by providing financial information in a format that presents comparable financial trends of ongoing business activities.

Liquidity

As of June 30, 2005, FiberMark’s pro forma unused borrowing capacity under its existing credit facilities was $45.1 million. In addition, the company has extended our DIP revolving credit facility through the balance of 2005. Since the end of the first quarter of 2005, short-term borrowings declined by $7.9 million due to strong cash flow from operating activities.

Six Months Results

For the six months ended June 30, 2005, the company reported a net loss of $3.7 million in 2005 compared with a net loss of $16.3 million in 2004. The $12.6 million reduction in net loss was primarily due to lower interest expense ($8.5 million lower), largely due to the cessation of interest expense accruals on the senior notes pending the outcome of the bankruptcy process and lower reorganization expenses related to chapter 11 ($5.3 million lower), offset by lower income from operations ($1.2 million lower). Lower income from operations reflects lower SG&A expenses ($1.6 million decrease) and a $1.9 million gain on disposal of assets.

Consolidated net sales for the six months ended June 30 were $230.4 million in 2005 compared with $223.4 million in 2004, an increase of $7.0 million or 3.1%. Currency translation increased year-to-date 2005 sales by $5.5 million compared with 2004. Net of currency translation, current year net sales increased by $1.5 million, or 0.7% versus last year.

Net sales from German operations in the six months ended 2005 were $118.6 million compared with $108.2 million in the prior-year period, an increase of $10.4 million or 9.6%. Excluding the translation effects of a stronger euro, which accounted for $5.3 million in sales for the six-month period in 2005 compared with the prior period, sales from German operations rose by $5.1 million or 4.7%. Gains in nearly all markets, particularly in our filtration and abrasive base businesses, overshadowed smaller declines in our nonwoven wallcovering and coating base businesses.

Net sales from North American operations were $111.7 million in 2005 compared with $115.3 million in the prior-year period, a decrease of $3.6 million or 3.1%. Modest gains in office products were more than offset by declines in publishing/packaging and technical specialties.

In the first six months of 2005, earnings before interest, taxes, depreciation, amortization and chapter 11-related reorganization expenses (EBITDAR), improved to $23.8 million from $23.7 million in the prior-year period, largely reflecting a gain on the disposal of assets and lower SG&A expenses, which were partially offset by lower volume in the company’s North American operations and higher raw material, energy and manufacturing costs.

FiberMark, headquartered in Brattleboro, Vt., is a leading producer of specialty fiber-based materials meeting industrial and consumer needs worldwide, operating 11 facilities in the eastern United States and Europe. Products include filter media for transportation and vacuum cleaner bags; base materials for specialty tapes, electrical and graphic arts applications; wallpaper, building materials and sandpaper; and cover/decorative materials for office and school supplies, publishing, printing and premium packaging.

 
(tables follow)


 
FIBERMARK, INC.
Condensed Consolidated Statements of Operations
Three Months Ended June 30, 2005 and 2004
 
(In thousands, except per share amounts)
 
Unaudited
 
     
2005
 
 
2004
  
               
Net sales
  
$
115,561
  
$
111,011
  
               
Cost of sales
    
100,543
    
92,790
  
               
Gross profit
    
15,018
    
18,221
  
               
Selling, general and administrative expenses
    
11,013
    
11,858
  
Restructuring and facility closure expense
    
94
    
-
 
Gain on disposal of assets
  
 (1,905
)
 -
  
               
Income from operations
    
5,816
    
6,363
  
               
Foreign exchange transaction gain
    
(114
)
  
(44
)
Other expense, net
    
265
    
198
  
Interest expense, net (excluding post-petition contractual interest of $8,525 in  both 2005 and 2004)
   
523
    
662
  
Reorganization expense
    
3,133
    
1,957
  
               
Income before income taxes
    
2,009
    
3,590
  
               
Income tax expense
    
3,388
    
3,000
  
               
Net income (loss)
  
$
(1,379
)
$
590
  
               
Basic earnings (loss) per share
  
$
(0.20
)
$
0.08
  
               
Diluted earnings (loss) per share
  
$
(0.20
)
$
0.08
  
               
Weighted average basic shares outstanding
    
7,066
    
7,066
  
Weighted average diluted shares outstanding
    
7,066
    
7,066
  




FIBERMARK, INC.
Condensed Consolidated Statements of Operations
Six Months Ended June 30, 2005 and 2004
 
(In thousands, except per share amounts)
 
Unaudited
 
     
2005
 
 
2004
  
               
Net sales
  
$
230,358
  
$
223,439
  
               
Cost of sales
    
195,532
    
183,974
  
               
Gross profit
    
34,826
    
39,465
  
               
Selling, general and administrative expenses
    
22,334
    
23,946
  
Restructuring and facility closure expense
   
94
    
-
 
Gain on disposal of assets
  
 (1,905
)
 -
  
               
Income from operations
    
14,303
    
15,519
  
               
Foreign exchange transaction (gain) loss
    
148
    
(271
)
Other expense, net
    
585
    
934
  
Interest expense, net (excluding post-petition contractual interest of $17,050 and
$8,617 in 2005 and 2004, respectively)
    
1,108
    
9,610
  
Reorganization expense
    
8,635
    
13,942
  
               
Income (loss) before income taxes
    
3,827
    
(8,696
)
               
Income tax expense
    
7,532
    
7,564
  
               
Net loss
  
$
(3,705
)
$
(16,260
)
               
Basic loss per share
  
$
(0.52
)
$
(2.30
)
               
Diluted loss per share
  
$
(0.52
)
$
(2.30
)
               
Weighted average basic shares outstanding
    
7,066
    
7,066
  
Weighted average diluted shares outstanding
    
7,066
    
7,066
  




FIBERMARK, INC.
Condensed Consolidated Balance Sheets
 
(In thousands, except share and per share amounts)
 
Unaudited
 
 
 
June 30,
2005
    
December 31,
2004
  
ASSETS
              
Current assets:
              
Cash
  
$
-
  
$
1,194
  
Accounts receivable, net of allowances
    
69,270
    
61,116
  
Inventories
    
67,902
    
73,650
  
Prepaid expenses
    
3,937
    
4,339
  
               
Total current assets 
    
141,109
    
140,299
  
               
Property, plant and equipment, net
    
231,569
    
248,853
  
Goodwill
    
8,303
    
9,167
  
Other intangible assets, net
    
2,029
    
2,629
  
Other long-term assets
  
 4,661
  
 4,858
  
               
Total assets
  
$
387,671
  
$
405,806
  
               
LIABILITIES AND STOCKHOLDERS’ DEFICIT
              
Current liabilities:
              
Revolving credit line
  
$
4,666
  
$
2,628
  
Accounts payable
    
20,029
    
24,063
  
Accrued liabilities
    
23,359
    
21,269
  
Accrued income taxes payable
    
18,013
    
15,458
  
Deferred income taxes
    
248
    
279
  
               
Total current liabilities not subject to compromise
    
66,315
    
63,697
  
               
Long-term liabilities:
              
Deferred income taxes
    
18,080
    
28,497
  
Other long-term liabilities
    
46,838
    
48,788
  
               
Total long-term liabilities not subject to compromise
    
64,918
    
77,285
  
               
Liabilities subject to compromise
    
365,329
    
366,700
  
               
Total liabilities
    
496,562
    
507,682
  
               
Stockholders’ deficit:
              
Preferred stock, par value $.001 per share;
              
   2,000,000 shares authorized, and none issued
    
-
   
-
 
Series A Junior participatory preferred stock, par value $.001;
              
   7,066 shares authorized, and none issued
    
-
   
-
 
Common stock, par value $.001 per share; 20,000,000 shares authorized
              
   7,070,026 shares issued and 7,066,226 shares outstanding in 2005 and 2004
    
7
    
7
  
Additional paid-in capital
    
65,496
    
65,496
  
Accumulated deficit
    
(178,413
)
  
(174,708
)
Accumulated other comprehensive income
   
4,054
    
7,364
  
Less treasury stock, 3,800 shares at cost in 2005 and 2004
    
(35
)
  
(35
)
               
Total stockholders’ deficit
    
(108,891
)
  
(101,876
)
               
Total liabilities and stockholders’ deficit
  
$
387,671
  
$
405,806
  


 


FiberMark, Inc.
 
Supplemental Financial Information
 
Reconciliation of Net Income/(Loss) to EBITDAR
 
EBITDAR, a non-GAAP measure, is defined as earnings before interest, taxes, depreciation, amortization and reorganization expenses. This financial metric reflects liquidity and operating profitability commonly used by the investment community and internally for evaluation purposes. Such measures should be considered in addition to, but not in lieu of, financial measures reported under GAAP.
     
 
  
Three Months Ended June 30,
Variance
     
2005
    
2004
    
$ 
  
 
%
 
                           
Net income/(loss)
  
$
(1,379
)
$
590
    
(1,969
)
  
-334
%
                           
Adjustments to reconcile to EBITDAR:
                          
Income tax
    
3,388
    
3,000
    
(388
)
      
Net interest
    
523
    
662
    
139
        
Depreciation and amortization
    
5,587
    
4,215
    
(1,372
)
      
Chapter 11 reorganization expense
  
 3,133
  
 1,957
  
 (1,176
)
      
     
12,631
    
9,834
    
(2,797
)
  
-28
%
                           
EBITDAR1
    
11,252
    
10,424
    
828
    
8
%
                           
1Includes:
                         
Foreign exchange transaction (gain)
    
(114
)
  
(44
)
  
70
        
 Gain on disposal of asset
    
(1,905
)
  
-
   
1,905
        


 
  
Six Months Ended June 30,
Variance
     
2005
    
2004
  
 $
  
%
 
                           
Net loss
  
$
(3,705
)
$
(16,260
)
  
12,555
    
77
%
                           
Adjustments to reconcile to EBITDAR:
                          
Income tax
    
7,532
    
7,564
    
32
        
Net interest
    
1,108
    
9,610
    
8,502
        
Depreciation and amortization
    
10,266
    
8,878
    
(1,388
)
      
Chapter 11 reorganization expense
  
 8,635
  
 13,942
  
 5,307
        
     
27,541
    
39,994
    
12,453
    
31
%
                           
EBITDAR1
    
23,836
    
23,734
    
102
    
0.4
%
                           
1Includes:
                         
Foreign exchange transaction (gain)/loss
    
148
    
(271
)
  
(419
)
      
Gain on disposal of asset
    
(1,905
)
  
-
   
1,905