Orchids Paper Products Company (NYSE American: TIS), a national supplier of high-quality consumer tissue products, today reported results for the quarter ended March 31, 2018. The following table provides selected financial results for first quarter 2018 compared to first quarter 2017 and fourth quarter 2017.
Jeff Schoen, President and Chief Executive Officer, stated, “Orchids continues to ramp production volume at its new Barnwell, SC facility, which drove sequential revenue growth of 10.9% in the first quarter of 2018. We expect sales at this facility to continue to increase in coming quarters as a result of continued ramp of ultra-premium retail and parent roll business. The mill is successfully producing ultra-premium quality paper and we are selling excess parent rolls.”
“On April 17, 2018, we appointed Mindy Bartel as our new chief financial officer. Ms. Bartel has a strong manufacturing background, with over 25 years of experience in manufacturing and technology service industries. Ms. Bartel’s solid background in manufacturing, finance and operations will be a significant asset to Orchids as we continue to execute on our long-term strategic objectives.”
“In March 2018, we engaged Guggenheim Securities LLS as a financial advisor to, among other things, explore strategic and financial alternatives for the Company, including to explore possibilities for the Company to repay its existing credit facilities.”
First Quarter Results
Revenue
The company reported net sales of $48.2 million in the first quarter of 2018, up 36.5% compared to the year-ago period. Converted product sales were $43.6 million, a year over year increase of 32.7%, and parent roll sales were $4.6 million, up 86.8% over the first quarter of 2017. The increase in converted product sales was a result of the company ramping new customer volume at the Barnwell facility. Parent roll growth was driven by an increase in the volume of excess parent rolls sold from Barnwell.
Gross Profit
Gross profit in the first quarter of 2018 was $2.9 million, an increase from $2.0 million in the first quarter of 2017, or growth of 46%. Gross profit margins increased from 5.6% in the first quarter of 2017 to 6.0% in the first quarter of 2018. The improvement in gross profit margins reflects the favorable impact of the increased sales volume combined with higher average selling prices, primarily due to changes in the mix of products sold. However, gross profit margins remained under pressure from challenging, industry-wide conditions, as input costs, including fiber and freight costs, continued to rise.
Operating Loss
Orchids had a first quarter operating loss of $1.0 million in 2018 and a loss of $0.9 million in the first quarter of 2017. The increase in the operating loss was driven by SG&A increasing to $3.6 million in the first quarter of 2018, up $1.0 million from $2.6 million in the year-ago period. SG&A increased due to professional and consulting fees associated with our previously announced initiatives to review strategic alternatives and our debt refinancing efforts.
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