FiberMark 8K Second Quarter 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, 2004

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 12. Results of Operations and Financial Condition.
 
On August 11, 2004, FiberMark announced its second-quarter 2004 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 information in this Form 8-K and the Exhibit 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.
 
     
 
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, 2004
By:  
/s/ John E. Hanley
 
 John E. Hanley
 
Vice President and Chief Financial Officer

 
     
 
EXHIBIT INDEX
 Exhibit No.
 Description
 
 
 99.1
 Press release dated August 11, 2004
 
 
     
 
 
 FOR IMMEDIATE RELEASE     Contact:  Janice C. Warren
       Director of Investor Relations and
       Corporate Communications
       802 257 5981
 
                                                                  

FIBERMARK ISSUES SECOND-QUARTER 2004 RESULTS


BRATTLEBORO, VERMONT, August 11, 2004—FiberMark, Inc., (OTCBB: FMKIQ) today reported net income of $0.6 million, or $0.08 per share, for the second quarter ended June 30, 2004, compared with a net loss of $8.5 million, or $1.21 per share, for the same 2003 quarter. Second-quarter results reflected two significant items related to the company’s voluntary chapter 11 filing on March 30, 2004. Interest expense declined by $8.1 million, reflecting the cessation of interest expense accruals on the company’s senior notes—beginning in April 2004—while its chapter 11 cases are pending. Additionally, second-quarter results included $2.0 million in reorganization expenses, of which $0.9 million were cash expenditures.

Net sales in the second quarter of 2004 were $111.0 million compared with $105.0 million for the same quarter in 2003, an increase of $6.0 million or 5.7%. Currency translation accounted for $3.4 million of the first-quarter 2004 sales increase. Net of currency translation, current year net sales increased by $2.6 million or 2.5% versus last year. Sales from German operations in the second quarter of 2004 were $52.6 million compared with $49.3 million in the prior-year quarter, an increase of $3.3 million or 6.7%. Excluding $2.9 million of translation effects from a stronger euro, sales from German operations grew by $0.4 million or 0.8%. Second-quarter 2004 sales from North American operations were $58.4 million compared with $55.7 million in the prior-year quarter, an increase of $2.7 million or 4.8%. Foreign exchange translation effects accounted for $0.5 million of the increase.

According to Alex Kwader, chairman and chief executive officer, the improvement from the company’s 2003 net loss to its second-quarter 2004 net income was primarily attributable to the following factors: interest expense declined by $8.1 million, largely due to the cessation of interest expense accruals on the senior notes upon the commencement of the company’s chapter 11 cases; a $1.8 million increase in income from operations, reflecting lower fixed costs, improved operating efficiencies and higher gross margins, partially offset by increased SG&A expenses and $2.0 million in 2004 chapter 11-related reorganization expenses. "We delivered higher operating income in our German operations and substantially lowered the operating loss in North American operations versus last year," Kwader said.

Overall, second-quarter 2004 showed sales improvement versus the second quarter of 2003, Kwader said. "On a euro basis, German operations sales were slightly higher than the strong 2003 quarter, delivering gains in automotive filter media and nonwoven wallcovering base, partially offset by continued weakness in vacuum bag filtration," Kwader said. North American operations sales improved, reflecting significant significant gains in publishing and packaging and m modest gains in office products, which more than offset weakness in our technical specialties markets. "Sequentially, we saw particularly strong gains in publishing and packaging, with gains in our decorative packaging business and a stronger elementary-high school textbook season."
 
In the second quarter of 2004, earnings before interest, taxes, depreciation, amortization and reorganization expenses (EBITDAR), excluding 2004 reorganization charges related to the company’s March 30, 2004, chapter 11 filing, improved from $7.9 million to $10.4 million in the prior-year quarter, largely reflecting fixed-cost reductions, operational productivity improvements and foreign exchange benefits. Compared with the first quarter of 2004, EBITDAR improved modestly in the U.S. and was seasonally down in Germany. 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.

The company continues to aim for completion of its financial reorganization and emergence from chapter 11 by year end, Kwader said. At the company’s request, FiberMark’s exclusive right to propose a Plan of Reorganization was extended by the Bankruptcy Court to November 15, 2004.

"In general, we are pleased with the improvement of FiberMark’s operational performance over the past three months," Kwader added. "With the loyalty and support of our customers, vendors and employees, we are making steady progress toward completing our financial reorganization, and positioning FiberMark for long-term strength and success."

Liquidity

As of June 30, 2004, FiberMark’s cash position was $11.6 million worldwide. Since March 30, the company has funded its operations entirely with cash on hand and cash flow from operations and has not found it necessary to draw down any of its $30 million debtor-in-possession (DIP) facility covering the FiberMark North American entities that filed for chapter 11 protection. The DIP facility, which received final approval from the Bankruptcy Court on April 27, 2004, continues to be available as needed during the chapter 11 process to help fund North American operations. German operations, which were not included in the company’s chapter 11 filing, had $16.4 million of outstanding borrowings at June 30, 2004, on its revolving credit facilities, compared with $24.0 million as of March 31, 2004. FiberMark’s pro-forma unused borrowing capacity as of the end of the second quarter was $37.9 million. Capital expenditures were $3.5 million in the second quarter and $5.4 million for the first six months of 2004.

Six-months Results

For the six months ended June 30, 2004, the company reported a net loss of $16.3 million compared with a net loss of $13.9 million in the same 2003 period. The larger loss was primarily attributable to reorganization expenses of $13.9 million in 2004 related to the chapter 11 filing. The reorganization expenses were partially offset by two factors: lower interest expense of $7.9 million, primarily due to the cessation of interest expense accruals on the senior notes beginning at the commencement of the company’s chapter 11 cases; and higher income from operations of $3.0 million reflecting higher gross margins partially offset by increased SG&A expenses. The income statements for the 2003 and 2004 periods reflect the reclassification of the first quarters’ foreign exchange gain from cost of sales to foreign exchange transaction gain, which had no effect on net income, but reduced income from operations.

Net sales for the six months ended June 30, 2004, were $223.4 million versus $210.3 million in the corresponding 2003 period, an increase of $13.1 million or 6.2%. Currency translation increased year-to-date 2004 sales by $11.7 million compared with 2003. Net of currency translation, current year net sales increased by $1.4 million or 0.7% versus last year.

Net sales from German operations in the six months ended June 30, 2004, were $108.2 million compared with $97.7 million in the prior-year period, an increase of $10.5 million or 10.7%. Excluding the translation effects from a stronger euro, which accounted for $10.8 million in sales for the 2004 six-month period, sales from German operations were essentially equal compared with last year. Net sales from North American operations were $115.3 million in the first half of 2004 compared with $112.6 million in the prior-year period, an increase of $2.7 million or 2.4%. Foreign exchange translation effects accounted for $0.9 million of the increase.
 
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.

This press release contains forward-looking statements. Actual results may differ depending on the economy and other risk factors discussed in the company's Forms 10K as filed with the SEC on March 30, 2004, which is accessible on the company's Web site: www.fibermark.com .

 
(tables follow)
 
 
     
 

 
FIBERMARK, INC.
Condensed Consolidated Statements of Operations
Three Months Ended June 30, 2004 and 2003
 
(In thousands, except per share amounts)
 
Unaudited
 
 
    
2004
   
2003
 
   
 
 
 
    
 
    
 
  
Net sales
 
$ 
    111,011
 
$
104,975
 
 
    
 
    
 
  
Cost of sales
   
92,162
   
89,597
 
   
 
 
 
    
 
    
 
  
Gross profit
   
18,849
   
15,378
 
 
    
 
    
 
  
Selling, general and administrative expenses
   
12,486
   
10,828
 
   
 
 
 
    
 
    
 
  
Income from operations
   
6,363
   
4,550
 
 
    
 
    
 
  
Foreign exchange transaction (gain) loss
   
(44
)
 
625
 
Other expense, net
   
198
   
304
 
Interest expense, net (excluding post-petition contractual interest of $8,525 in 2004)
   
662
   
8,774
 
Reorganization expense
   
1,957
   
-
 
   
 
 
 
    
 
    
 
  
Income (loss) before income taxes
   
3,590
   
(5,153
)
 
    
 
    
 
  
Income tax expense
   
3,000
   
3,363
 
   
 
 
 
    
 
    
 
  
Net income (loss)
 
$
590
 
$
(8,516
)
   
 
 
 
    
 
    
 
  
Basic earnings (loss) per share
 
$
0.08
 
$
(1.21
)
   
 
 
 
    
 
    
 
  
Diluted earnings (loss) per share
 
$
0.08
 
$
(1.21
)
   
 
 
 
    
 
    
 
  
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, 2004 and 2003
 
(In thousands, except per share amounts)
 
Unaudited
 
 
    
2004
   
2003
 
   
 
 
 
    
 
    
 
  
Net sales
 
$ 
    223,439
 
$
210,289
 
 
    
 
    
 
  
Cost of sales
   
183,346
   
174,726
 
   
 
 
 
    
 
    
 
  
Gross profit
   
40,093
   
35,563
 
 
    
 
    
 
  
Selling, general and administrative expenses
   
24,574
   
23,066
 
   
 
 
 
    
 
    
 
  
Income from operations
   
15,519
   
12,497
 
 
    
 
    
 
  
Foreign exchange transaction loss (gain)
   
(271
)
 
609
 
Other expense, net
   
934
   
261
 
Interest expense, net (excluding post-petition contractual interest of $8,617 in 2004)
   
9,610
   
17,473
 
Reorganization expense
   
13,942
   
-
 
   
 
 
 
    
 
    
 
  
Loss before income taxes
   
(8,696
)
 
(5,846
)
 
    
 
    
 
  
Income tax expense
   
7,564
   
8,073
 
   
 
 
 
    
 
    
 
  
Net loss
 
$
(16,260
)
$
(13,919
)
   
 
 
 
    
 
    
 
  
Basic loss per share
 
$
(2.30
)
$
(1.97
)
   
 
 
 
    
 
    
 
  
Diluted loss per share
 
$
(2.30
)
$
(1.97
)
   
 
 
 
    
 
    
 
  
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,
2004 
    
December 31,
2003
 
   
 
 
ASSETS
   
 
    
 
  
Current assets:
   
 
    
 
  
Cash
 
$
11,576
 
$
6,111
 
Accounts receivable, net of allowances
   
66,940
   
53,752
 
Inventories
   
64,980
   
63,443
 
Prepaid expenses
   
2,924
   
1,671
 
   
 
 
 
    
 
    
 
  
Total current assets    
    
146,420
   
124,977
 
 
    
 
    
 
  
Property, plant and equipment, net
   
242,345
   
248,194
 
Goodwill
   
8,347
   
8,602
 
Other intangible assets, net
   
3,347
   
12,745
 
Other long-term assets
   
1,532
   
1,601
 
Other pension assets
   
3,472
   
3,588
 
   
 
 
 
    
 
    
 
  
Total assets
 
$
405,463
 
$
399,707
 
   
 
 
 
    
 
    
 
  
LIABILITIES AND STOCKHOLDERS’ DEFICIT
   
 
    
 
  
 
    
 
    
 
  
Current liabilities:
   
 
    
 
  
Revolving credit line
 
$
16,427
 
$
5,906
 
Current portion of long-term debt
   
-
   
3,955
 
Accounts payable
   
23,521
   
23,168
 
Accrued liabilities
   
20,267
   
22,013
 
Accrued income taxes payable
   
6,687
   
9,930
 
Deferred income taxes
   
633
   
656
 
   
 
 
 
    
 
    
 
  
Total current liabilities not subject to compromise
   
67,535
   
65,628
 
   
 
 
 
    
 
    
 
  
Long-term liabilities:
   
 
    
 
  
Long-term debt
   
-
   
338,749
 
Deferred income taxes
   
14,983
   
15,528
 
Other long-term liabilities
   
44,142
   
48,654
 
   
 
 
 
    
 
    
 
  
Total long-term liabilities not subject to compromise
   
59,125
   
402,931
 
   
 
 
 
    
 
    
 
  
Liabilities subject to compromise
   
367,480
   
-
 
   
 
 
 
    
 
    
 
  
Total liabilities
   
494,140
   
468,559
 
   
 
 
 
    
 
    
 
  
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 and 7,066,226 shares issued and outstanding in 2004 and 2003
   
7
   
7
 
Additional paid-in capital
   
65,496
   
65,496
 
Accumulated deficit
   
(165,371
)
 
(149,111
)
Accumulated other comprehensive income
   
11,226
   
14,791
 
Less treasury stock, 3,800 shares at cost in 2004 and 2003
   
(35
)
 
(35
)
   
 
 
 
    
 
    
 
  
Total stockholders’ deficit
   
(88,677
)
 
(68,852
)
   
 
 
 
    
 
    
 
  
Total liabilities and stockholders’ deficit
 
$
405,463
 
$
399,707
 
   
 
 
 
 
     
 

FIBERMARK, INC.
Supplemental Financial Information
Reconciliation of Net Loss to EDITDAR
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
  
 
  
Three Months Ended June 30, 
Variance
   
 
    
2004

 

 
2003

 

 

$ 

 
 
%
 
   
 
 
 
 
Net Income (Loss)
   
590
   
(8,516
)
 
9,106
   
107
%
 
    
 
    
 
    
 
    
 
  
Adjustments to reconcile to EBITDAR
   
 
    
 
    
 
    
 
  
Income taxes
   
3,000
   
3,363
   
(363
)
 
 
  
Net interest
   
662
   
8,774
   
(8,112
)
 
 
  
Chapter 11 reorganization expense
   
1,957
   
-
   
1,957
   
 
  
Depreciation and amortization
   
4,215
   
4,251
   
(36
)
 
 
  
   
 
 
       
 
    
9,834
   
16,388
   
(6,554
)
 
 
  
 
    
 
    
 
    
 
    
 
  
EBITDAR
   
10,424
   
7,872
   
2,552
   
32
%
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
 
EBITDAR is defined as earnings before interest, taxes, depreciation, amortization and reorganization expenses.