FiberMark announces reorganization, third quarter results

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FiberMark announces reorganization, third quarter results

Sun, 11/14/2004 - 8:00pm -- tim

FiberMark - Specialty Fiber-based Materials

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FIBERMARK, INC. FILES PLAN OF REORGANIZATION,
ACHIEVING MILESTONE TOWARD EMERGENCE FROM CHAPTER 11
AND REPORTS THIRD-QUARTER 2004 RESULTS
 

BRATTLEBORO, Vt.—November 15, 2004—FiberMark, Inc. (OTCBB: FMKIQ) today
announced that it has filed a Plan of Reorganization and Disclosure Statement with the
United States Bankruptcy Court for the District of Vermont. FiberMark's Plan includes
negotiated terms that FiberMark expects to result in a consensual reorganization
among the company and the official committee of FiberMark's unsecured creditors.

"The filing of our reorganization plan represents a key milestone on FiberMark's path to
emergence from chapter 11 and marks the commencement of the final phase of the
company's financial restructuring," said Alex Kwader, chairman of the board and chief
executive officer.
"We believe that the Plan provides the framework for a successful financial
reorganization that will allow FiberMark to emerge in the first quarter of 2005 as a
stronger company. We especially want to thank our customers, vendors, employees
and lenders for their continued support, which is reflected in our improved third-quarter
and nine-month results."

Before FiberMark's Plan of Reorganization is voted on by creditors and considered for
confirmation by the Bankruptcy Court, the Disclosure Statement must be approved by
the Bankruptcy Court. While the Plan of Reorganization and Disclosure Statement as
filed detail the classes of creditors and equity holders and their proposed treatment
under the Plan, the Plan is likely to receive further modification before the Disclosure
Statement is approved, and actual recoveries by stakeholders may vary from the
treatment outlined in the Plan. A hearing to address the Disclosure Statement is now
scheduled for December 14.

Separately, FiberMark today reported its financial results for the 2004 third quarter,
which included a net loss of $4.7 million, or $0.66 per share, for the three months
ended September 30, 2004, compared with a net loss of $102.9 million, or $14.57 per
share, for the same 2003 quarter, which had reflected a $92.3 million goodwill
impairment charge. Third-quarter 2004 results also reflected two significant items
related to the company's voluntary chapter 11 filing. First, interest expense declined by
$8.2 million, reflecting the cessation of interest expense accruals on the company's
senior notes, beginning in April 2004, following the company's chapter 11 filing on
March 30, 2004. Second, third-quarter results included $6.5 million in chapter 11
reorganization expenses, of which $5.8 million were cash expenditures.

Net sales in the third quarter of 2004 were $107.7 million compared with $93.8 million
for the same quarter in 2003, an increase of $13.9 million or 14.8%. Currency
translation accounted for $4.3 million of the third-quarter 2004 sales increase. Net of
currency effects, current quarter net sales increased by $9.6 million or 10.2% versus
the prior-year quarter.

Sales from German operations in the third quarter of 2004 were $47.9 million compared
with $42.2 million in the prior-year quarter, an increase of $5.7 million or 13.5%.
Excluding the translation effects of a stronger euro, which accounted for $3.9 million in
sales for the 2004 third quarter compared with the prior-year quarter, sales from
German operations grew by $1.8 million, or 4.3%. Third-quarter 2004 net sales from
North American operations were $59.8 million compared with $51.5 million in the
prior-year quarter, an increase of $8.3 million or 16.1%. Favorable foreign exchange
rates accounted for $0.4 million of the increase.

According to Kwader, the substantially reduced loss compared with the 2003 third
quarter was primarily attributable to the following factors: the lack of the $92.3 million
goodwill impairment charge recorded in 2003; a decline in interest expense of $8.2
million; and a $1.8 million increase in income from operations. Operating income gains
reflected higher gross margins as operating efficiencies improved, lower fixed costs
related to facility consolidations, and foreign currency benefits, partially offset by
increases in pulp costs, maintenance and supply expenses, and selling, general and
administrative expenses. "We again delivered higher operating income in our German
operations and substantially lowered the operating loss in our North American
operations versus the same period last year," Kwader said.

Overall, sales in the 2004 third quarter improved versus the third quarter of 2003.
"Sales from both our German and North American operations were higher than the
prior-year quarter. German operations achieved gains in most businesses, but
particularly in automotive filtration, partially offset by continued weakness in vacuum
bag filtration," Kwader said. "North American operations sales improved across all of
our primary product families versus 2003, reflecting both economic improvement and
new business gains. We recorded gains in publishing and packaging driven by a late
and strengthening elementary/high school textbook market and market share gains in
decorative packaging. However, the largest gains came from a recovery in our technical
specialties markets."

In the third quarter of 2004, earnings before interest, taxes, depreciation, amortization,
goodwill impairment and chapter 11 reorganization expenses (EBITDAR) improved
from $4.1 million in the prior-year quarter to $9.0 million, largely reflecting stronger
sales levels, operational productivity improvements, benefits of 2003 plant closures and
foreign exchange benefits, partially offset by higher pulp 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.
 
"We achieved gains in both sales and operating income compared with the prior-year
quarter," Kwader added. "With the loyalty and support of our customers, vendors and
employees, we have made significant progress toward completing our financial
reorganization and positioning FiberMark for long-term strength and success. As our
customers and vendors know, we have met our service and financial obligations to
each of them, and we will continue to do so."
 
Nine-Month Results

For the nine months ended September 30, 2004, the company reported a net loss of
$20.9 million compared with a net loss of $116.9 million in the same 2003 period. The
smaller loss was primarily attributable to the lack in 2004 of goodwill impairment, which
accounted for $92.3 million of the 2003 loss; the lack in 2004 of any restructuring/facility
closure expense ($1.7 million in 2003); and lower interest expense, primarily due to the
cessation of interest expense accruals on the senior notes beginning at the time of the
company's chapter 11 filing ($16.0 million); and higher income from operations of $4.8
million reflecting higher gross margins, partially offset by $20.4 million of chapter 11
reorganization expenses and increased selling, general and administrative expenses.

Net sales for the nine months ended September 30, 2004, were $331.2 million
compared with $304.1 million in the same 2003 period, an increase of $27.1 million or
8.9%. Favorable foreign currency rates increased year-to-date 2004 sales by $16.0
million compared with 2003. Net of currency effects, current year net sales increased by
$11.1 million, or 3.7% versus last year.

Net sales from German operations in the nine months ended September 30, 2004,
were $156.1 million compared with $139.9 million in the same prior-year period, an
increase of $16.2 million or 11.6%. Excluding favorable foreign currency effects, which
accounted for $14.6 million in sales for the nine-month period in 2004 compared with
the same prior-year period, sales from German operations increased by $1.6 million or
1.1%. Net sales from North American operations were $175.1 million in the first nine
months of 2004 compared with $164.1 million in the same prior-year period, an
increase of $11.0 million or 6.7%. Favorable foreign exchange effects accounted for
$1.4 million of the increase.

Liquidity

The company continues to have adequate liquidity and access to working capital to
meet its operational needs and maintain normal operations. As of September 30, 2004,
FiberMark's cash position was $0.9 million worldwide. Between March 30 and
September 30 of this year, the company funded its operations entirely with cash on
hand and cash flow from operations and did not draw down any of its $30 million
debtor-in-possession (DIP) credit facility. The DIP facility 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 $12.7
million of outstanding borrowings at September 30, 2004, on their revolving credit
facilities, compared with $16.4 million as of June 30, 2004. FiberMark's total pro-forma
unused borrowing capacity as of the end of the third quarter was $40.0 million. Capital
expenditures were $3.4 million in the third quarter and $8.9 million for the first nine
months of 2004.

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 document also contains forward-looking statements. Actual results may differ
depending on the economy and other risk factors discussed in the company's Forms
10-K as filed with the SEC on March 30, 2004, which is accessible on the company's
Web site at www.fibermark.com . A copy of the company's proposed Plan of
Reorganization and accompanying Disclosure Statement are also available on
FiberMark's Web site.

(tables follow)
 

FIBERMARK, INC.
 

Condensed Consolidated Statements of Operations
 

Three Months Ended September 30, 2004 and 2003
 

 

 

 

 

(In thousands, except per share amounts)
 

 

 

 

 

Unaudited
 

 

 

 

 

 

2004
 

 

2003
 

 

 

 

 

Net sales

$107,748

 

$93,777

 

 

 

 

Cost of sales

92,383
 

 

81,371
 

 

 

 

 

Gross profit

15,365
 

 

12,406
 

 

 

 

 

Selling, general
and administrative
expenses

10,943
 

 

9,805
 

Restructuring and
facility closure
expense (reversal)

(209)
 

 

1,682
 

Goodwill
impairment

-

 

92,261
 

 

 

 

 

Income (loss) from
operations

4,631
 

 

(91,342)
 

 

 

 

 

Foreign exchange
transaction (gain)
loss

(211)
 

 

75
 

Other expense, net

225
 

 

574
 

Interest expense,
net (excluding
post-petition
contractual interest
of $8,525 in 2004)

549
 

 

8,723
 

Reorganization
expense

6,477
 

 

-

 

 

 

 

Loss before
income taxes

(2,409)
 

 

(100,714)
 

 

 

 

 

Income tax
expense

2,248
 

 

2,223
 

 

 

 

 

Net loss

$(4,657)
 

 

$(102,937)
 

 

 

 

 

Basic loss per
share

$(0.66)
 

 

$(14.57)
 

 

 

 

 

Diluted loss per
share

$(0.66)
 

 

$(14.57)
 

 

 

 

 

Weighted average
basic shares
outstanding

7,066
 

 

7,066
 

Weighted average
diluted shares
outstanding

7,066
 

 

7,066