410 0 Kommentare Winpak Reports Second Quarter Results

WINNIPEG, MANITOBA--(Marketwired - July 24, 2014) - Winpak Ltd. (WPK) (TSX:WPK) today reports consolidated results in US dollars for the second quarter of 2014, which ended on June 29, 2014.

	Quarter Ended		Year-To-Date Ended
	June 29	June 30	June 29	June 30
	2014	2013	2014	2013
(thousands of US dollars, except per share amounts)
Revenue	199,426	177,032	387,503	346,981
Net income	19,538	17,392	35,994	33,242

Income tax expense	9,367	8,041	16,602	14,903
Net finance expense	107	114	44	219
Depreciation and amortization	7,351	6,260	14,716	12,831
EBITDA ¹	36,363	31,807	67,356	61,195

Net income attributable to equity holders of the Company	19,406	17,095	35,569	33,084
Net income attributable to non-controlling interests	132	297	425	158
Net income	19,538	17,392	35,994	33,242

Basic and diluted earnings per share (cents)	30	26	55	51

Winpak Ltd. manufactures and distributes high-quality packaging materials and related packaging machines. The Company's products are used primarily for the packaging of perishable foods, beverages and in health-care applications.

¹ EBITDA is not a recognized measure under International Financial Reporting Standards (IFRS). Management believes that in addition to net income, this measure provides useful supplemental information to investors including an indication of cash available for distribution prior to debt service, capital expenditures and income taxes. Investors should be cautioned, however, that this measure should not be construed as an alternative to net income, determined in accordance with IFRS, as an indicator of the Company's performance. The Company's method of calculating this measure may differ from other companies, and accordingly, the results may not be comparable.

(presented in US dollars)

Forward-looking statements: Certain statements made in the following report contain forward-looking statements including, but not limited to, statements concerning possible or assumed future results of operations of the Company. Forward-looking statements represent the Company's intentions, plans, expectations and beliefs, and are not guarantees of future performance. Such forward-looking statements represent Winpak's current views based on information as at the date of this report. They involve risks, uncertainties and assumptions and the Company's actual results could differ, which in some cases may be material, from those anticipated in these forward-looking statements. Unless otherwise required by applicable securities law, we disclaim any intention or obligation to publicly update or revise this information, whether as a result of new information, future events or otherwise. The Company cautions investors not to place undue reliance upon forward-looking statements.

Financial Performance

Net income attributable to common shareholders for the second quarter of 2014 expanded to $19.4 million or 30 cents in earnings per share compared to $17.1 million or 26 cents per share in the corresponding quarter of 2013, an increase of 13.5 percent. Substantial organic revenue growth boosted earnings per share by 3.5 cents but the effects were muted by a reduction in gross profit margins which lowered earnings per share by 2.5 cents. Additional savings were generated by restricting operating expense growth, which contributed 2.0 cents in earnings per share, while foreign exchange positively impacted earnings per share in the quarter by 1.0 cent. A reduction in the proportion of earnings attributable to non-controlling interests in the second quarter of 2014 resulted in an addition of 0.5 cents to earnings per share but was offset by the negative impact on net income of a higher effective income tax rate.

For the six months ended June 29, 2014, net income attributable to common shareholders of $35.6 million or 55 cents surpassed the 2013 first-half result of $33.1 million or 51 cents by 7.5 percent. Greater sales volumes in 2014 enhanced earnings per share by 6.5 cents and was supplemented by controlled growth in operating expenses which added a further 3.0 cents to earnings per share. Foreign exchange also favorably complemented 2014 first-half earnings by 1.0 cent per share. On the other hand, a lower gross profit margin in the first six months of 2014 compared to the prior year corresponding period decreased earnings per share by 5.5 cents while a greater proportion of earnings attributable to non-controlling interests and a higher effective income tax rate negatively impacted earnings per share by 0.5 cents each.

Revenue

Revenue in the second quarter of 2014 rose to $199.4 million, a progression of $22.4 million or 12.6 percent over the same period in 2013 and represented the fifth consecutive three-month period of quarterly highs in revenue. Volume growth was strong at 12.7 percent and was widespread across many of the Company's product groups. The rigid container and lidding product groups experienced escalations in volumes in the second quarter of between 15 and 20 percent as business was robust in yogurt, condiment and specialty beverage containers and lids. Shipments were also up solidly at over 10 percent in modified atmosphere packaging with growth from the existing client base as well as new customer additions to the portfolio. Packaging machinery volumes continued to be brisk, advancing over 20 percent from the second quarter of 2013. Biaxially oriented nylon and specialty films were both challenged in the growth area with volumes remaining flat to slightly negative although the product mix of the latter was more favorable than the corresponding quarter of 2013 with increasing shrink bag sales. Selling price/mix changes had a favorable impact of 0.9 percent on revenues for the quarter while foreign exchange, due to a weakening in the Canadian dollar, decreased revenues in the quarter by 1.0 percent in comparison to the second quarter of 2013.

For the first half of 2014, revenue of $387.5 million advanced by $40.5 million or 11.7 percent from the 2013 comparable period. Volumes rose by a sizable 11.8 percent versus the first half of the prior year. Rigid container volumes outpaced all of the other product groups, bettering the 2013 year-to-date results by nearly 20 percent, followed closely behind by lidding shipments, primarily on the strength of yogurt and specialty beverage offerings. Modified atmosphere packaging, biaxially oriented nylon film and packaging machinery first-half volumes all exceeded the prior year corresponding shipments by approximately 10 percent. Only specialty film quantities lagged behind the previous year-to-date demand, albeit at a more favorable product mix. Selling price/mix changes had an overall positive effect on revenue of 0.9 percent while foreign exchange negatively impacted top-line growth in comparison to the first half of 2013 by 1.0 percent.

Gross profit margins

Gross profit margins for the second quarter of 2014 fell 1.2 percentage points to 27.8 percent of revenue from the 29.0 percent recorded in the same quarter of 2013. However, this was an improvement of 0.6 percentage points from the gross profit margin realized in the first quarter of this year. A narrowing of the spread between raw material costs and selling prices along with higher manufacturing costs were responsible for a reduction in earnings per share of 2.5 cents compared to the second quarter of 2013. Manufacturing variances, although unfavorable in relation to the second quarter of last year, showed improvement from the first three months of 2014 as recently added capacity was more fully utilized and familiarity with new products and processes was attained.

For the first six months of 2014, gross profit margins of 27.5 percent of revenue fell short of 2013 year-to-date levels of 28.9 percent by 1.4 percentage points. This translated into a decrease in earnings per share of 5.5 cents. Product mix and a response to competitive conditions at a few selected accounts were primarily responsible for a compression in the difference between selling prices and raw material costs.

Manufacturing performance, although showing signs of improvement in the past quarter, has nonetheless lagged behind the achievement from the first two quarters of 2013 due to higher waste levels in 2014 encountered on new processes and under-utilized capacity of recent capital expenditures.

For reference, the following presents the weighted indexed purchased cost of Winpak's eight primary raw materials in the reported quarter and each of the preceding eight quarters, where base year 2001 = 100. The index was rebalanced as of December 30, 2013 to reflect the mix of the eight primary raw materials purchased in 2013.

Quarter and Year		2/14		1/14		4/13		3/13		2/13		1/13		4/12		3/12		2/12
Purchase Price Index		178.1		178.7		175.0		173.2		173.5		176.5		170.6		167.3		174.5

The purchase price index in the second quarter of 2014 was virtually unchanged from the previous quarter, declining by a mere 0.3 percent. While certain items within the index declined and others rose, no one component changed by more than 4 percent in the quarter. Stability was definitely the feature on an overall basis and has been so for the past year, with the index fluctuating within a narrow 3 percent band during this time.

Expenses and Other

Operating expenses in the second quarter of 2014, adjusted for foreign exchange, increased by almost 7 percent while volumes progressed by over 12 percent when referenced to the applicable period in 2013. The increase in operating expenses was only 1.6 percent when freight and distribution costs, which tend to vary directly with volume, are excluded. The net result was an advancement in earnings per share of approximately 2.0 cents. A lesser proportion of earnings attributable to non-controlling interests further supplemented earnings per share by 0.5 cents in the second quarter which was offset by greater income taxes as a result of more earnings being realized in higher income tax rate jurisdictions. Foreign exchange had a favorable impact on earnings per share of approximately 1.0 cent. The weaker Canadian dollar in the second quarter of 2014 versus the comparative period in 2013 had a positive impact on earnings as expenses exceeded revenues in that currency. In addition, although on average the Canadian currency was weaker in the second quarter of 2014 than the same period in 2013, the Canadian dollar strengthened from the start to the end of the quarter versus its US counterpart and resulted in foreign exchange gains on the translation of Canadian net monetary assets; the opposite was true in the second quarter of 2013.

On a year-to-date basis, operating expenses, excluding foreign exchange, increased at a much lower rate than the growth in sales volumes, resulting in an addition to earnings per share of 3.0 cents. Freight and distribution costs, which are variable in nature, accounted for the entire rise in operating expenses; all other expenses in aggregate were flat. Costs related to additional head count to foster sales growth were offset by a reduction in pre-production expenses in 2014. A greater proportion of year-to-date earnings attributable to non-controlling interests and a higher effective income tax rate in 2014 each resulted in a decrease in earnings per share of approximately 0.5 cents. In comparison to the first half of 2013, foreign exchange had a positive effect on earnings per share of 1.0 cent primarily due to the lower average value of the Canadian dollar in 2014 in relation to the US currency and the resulting impact from converting the Company's net Canadian dollar expenses into US funds.

Summary of Quarterly Results

Thousands of US dollars, except per share amounts (US cents)

	Q2	Q1	Q4	Q3	Q2	Q1	Q4	Q3
	2014	2014	2013	2013	2013	2013	2012*	2012*

Revenue	199,426	188,077	187,964	179,926	177,032	169,949	173,226	165,399
Net income attributable to equity holders of the Company	19,406	16,163	20,951	17,362	17,095	15,989	22,071	16,783
EPS	30	25	32	27	26	25	34	26

*Amounts have been restated to reflect the retrospective impact of amended IAS 19 "Employee Benefits", which included an increase in net finance expense due to the reduction in the expected return on defined benefit pension plan assets and an increase in general and administrative expenses following the reclassification of certain plan administration costs.

Capital Resources, Cash Flow and Liquidity

The Company's cash and cash equivalents balance ended the second quarter of 2014 at $114.2 million, a rise of $1.3 million from the end of the first quarter. Cash flow from operating activities before changes in working capital of $34.9 million outpaced the prior year quarter by $2.8 million on the strength of higher net income production. Working capital additions consumed $11.9 million, primarily in trade and other receivables and inventories, in concert with the revenue growth in the quarter. In addition, cash was utilized for plant and equipment additions of $9.5 million, income tax payments of $9.5 million, dividends to common shareholders of $1.8 million, and other items totalling $0.9 million.

For the first six months of 2014, the cash and cash equivalents balance declined by $46.9 million, primarily due to the payment of a special dividend of $58.5 million ($65.0 million Canadian) in the first quarter of the year. Winpak continued to generate strong cash flows from operating activities before changes in working capital of $65.3 million, an increment of $4.1 million from the first half of 2013. Cash was employed for working capital additions of $11.9 million, mainly to foster growth in sales volumes. Furthermore, cash was utilized for plant and equipment expenditures of $21.7 million, income tax payments of $12.6 million, regular quarterly dividends of $3.6 million, employee defined benefit plan payments of $3.1 million and other items totaling $0.8 million. The Company remains debt-free and has unutilized operating lines of $38 million, with the ability to increase borrowing capacity further should the need arise.

Looking Forward

After a solid start to the first half of the year where volumes grew by close to 12 percent, the Company continues to remain optimistic for the remainder of 2014 with regard to new revenue generation. A number of significant opportunities remain in the sales pipeline and have the potential to result in meaningful future revenue growth; however, the timing for conversion of these into new business for Winpak remains uncertain as customers' protocols for new supply govern the process. In the near term, raw material costs are expected to tilt slightly upward for most materials with the exception of resins dependent on benzene such as nylon and polystyrene, where the price escalation is expected to be more pronounced. Manufacturing performance has been a prime focus for the organization in 2014 and should continue to improve as the year progresses as capacity utilization expands and production of new products becomes more refined. Capital spending is expected to accelerate in the second half of the year to finish in the $55 to $65 million range for 2014 to address growth prospects and areas where existing capacity is currently constrained. The Company remains committed to organic growth through capital investment and will continue to pursue acquisition opportunities in Winpak's core competencies in sophisticated food and health-care packaging but will remain patient in executing a transaction only when the proper fit and price are present to add long-term value to the Company's shareholders.

Winpak Ltd.

Interim Condensed Consolidated Financial Statements

Second Quarter Ended: June 29, 2014

These interim condensed consolidated financial statements have not been audited or reviewed by the Company's independent external auditor, KPMG LLP. For a complete set of notes to the condensed consolidated financial statements, refer to www.sedar.com or the Company's website, www.winpak.com.

Winpak Ltd.
Condensed Consolidated Balance Sheets
(thousands of US dollars) (unaudited)

		June 29	December 29
		2014	2013

Assets

Current assets:
	Cash and cash equivalents	114,171	161,090
	Trade and other receivables	107,799	98,408
	Income taxes receivable	6,721	3,580
	Inventories	99,728	92,304
	Prepaid expenses	5,028	3,074
	Derivative financial instruments	239	-
		333,686	358,456

Non-current assets:
	Property, plant and equipment	337,909	329,714
	Intangible assets	15,070	14,960
	Employee benefit plan assets	9,084	7,131
	Deferred tax assets	2,610	2,943
		364,673	354,748
Total assets		698,359	713,204

Equity and Liabilities

Current liabilities:
	Trade payables and other liabilities	70,009	63,182
	Provisions	427	427
	Income taxes payable	2,871	2,048
	Derivative financial instruments	51	903
		73,358	66,560

Non-current liabilities:
	Employee benefit plan liabilities	3,971	3,365
	Deferred income	15,476	14,490
	Provisions	6,585	6,524
	Deferred tax liabilities	32,016	29,652
		58,048	54,031
Total liabilities		131,406	120,591

Equity:
	Share capital	29,195	29,195
	Reserves	138	(661	)
	Retained earnings	521,351	547,891
Total equity attributable to equity holders of the Company		550,684	576,425
Non-controlling interests		16,269	16,188
Total equity		566,953	592,613
Total equity and liabilities		698,359	713,204



Winpak Ltd.
Condensed Consolidated Statements of Income
(thousands of US dollars, except per share amounts) (unaudited)

		Quarter Ended		Year-To-Date Ended
		June 29	June 30	June 29	June 30
		2014	2013	2014	2013
Revenue		199,426	177,032	387,503	346,981
Cost of sales		(144,072)	(125,754)	(280,941)	(246,832)
Gross profit		55,354	51,278	106,562	100,149

Sales, marketing and distribution expenses		(15,889)	(14,464)	(31,155)	(28,559)
General and administrative expenses		(5,875)	(6,428)	(13,521)	(14,251)
Research and technical expenses		(4,004)	(3,539)	(7,356)	(6,923)
Pre-production expenses		(251)	(1,074)	(251)	(1,600)
Other expenses		(323)	(226)	(1,639)	(452)
Income from operations		29,012	25,547	52,640	48,364
Finance income		113	94	264	199
Finance expense		(220)	(208)	(308)	(418)
Income before income taxes		28,905	25,433	52,596	48,145
Income tax expense		(9,367)	(8,041)	(16,602)	(14,903)
Net income for the period		19,538	17,392	35,994	33,242

Attributable to:
	Equity holders of the Company	19,406	17,095	35,569	33,084
	Non-controlling interests	132	297	425	158
		19,538	17,392	35,994	33,242
Basic and diluted earnings per share - cents		30	26	55	51


Condensed Consolidated Statements of Comprehensive Income
(thousands of US dollars) (unaudited)

		Quarter Ended		Year-To-Date Ended
		June 29	June 30	June 29	June 30
		2014	2013	2014	2013
Net income for the period		19,538	17,392	35,994	33,242

Items that will not be reclassified to the statements of income:
Cash flow hedge gains (losses) recognized		-	8	-	(94)
Cash flow hedge gains transferred to property, plant and equipment		-	(17)	-	(50)
Income tax effect		-	-	-	-
		-	(9)	-	(144)
Items that are or may be reclassified subsequently to the statements of income:
Cash flow hedge gains (losses) recognized		709	(982)	(178)	(1,418)
Cash flow hedge losses transferred to the statements of income		587	88	1,269	67
Income tax effect		(346)	239	(292)	361
		950	(655)	799	(990)
Other comprehensive income (loss) for the period - net of income tax		950	(664)	799	(1,134)
Comprehensive income for the period		20,488	16,728	36,793	32,108

Attributable to:
	Equity holders of the Company	20,356	16,431	36,368	31,950
	Non-controlling interests	132	297	425	158
		20,488	16,728	36,793	32,108

Winpak Ltd.

Condensed Consolidated Statements of Changes in Equity

(thousands of US dollars) (unaudited)


	Attributable to equity holders of the Company

			Share capital	Reserves	Retained earnings	Total	Non-controlling interests	Total equity

Balance at December 31, 2012			29,195	250	470,925	500,370	15,718	516,088

	Comprehensive (loss) income for the period
		Cash flow hedge losses, net of tax	-	(1,133)	-	(1,133)	-	(1,133)
		Cash flow hedge losses transferred to the statements of income, net of tax	-	49	-	49	-	49
		Cash flow hedge gains transferred to property, plant and equipment	-	(50)	-	(50)	-	(50)
	Other comprehensive loss		-	(1,134)	-	(1,134)	-	(1,134)
	Net income for the period		-	-	33,084	33,084	158	33,242
	Comprehensive (loss) income for the period		-	(1,134)	33,084	31,950	158	32,108

	Dividends		-	-	(3,773)	(3,773)	(218)	(3,991)

Balance at June 30, 2013			29,195	(884)	500,236	528,547	15,658	544,205



Balance at December 30, 2013			29,195	(661)	547,891	576,425	16,188	592,613

	Comprehensive income for the period
		Cash flow hedge losses, net of tax	-	(130)	-	(130)	-	(130)
		Cash flow hedge losses transferred to the statements of income, net of tax	-	929	-	929	-	929
	Other comprehensive income		-	799	-	799	-	799
	Net income for the period		-	-	35,569	35,569	425	35,994
	Comprehensive income for the period		-	799	35,569	36,368	425	36,793

	Dividends		-	-	(62,109)	(62,109)	(344)	(62,453)

Balance at June 29, 2014			29,195	138	521,351	550,684	16,269	566,953



Winpak Ltd.
Condensed Consolidated Statements of Cash Flows
(thousands of US dollars) (unaudited)

				Quarter Ended				Year-To-Date Ended
				June 29		June 30		June 29		June 30
				2014		2013		2014		2013

Cash provided by (used in):

Operating activities:

	Net income for the period			19,538		17,392		35,994		33,242
	Items not involving cash:
		Depreciation		7,742		6,456		15,332		13,215
		Amortization - deferred income		(520	)	(308	)	(879	)	(602	)
		Amortization - intangible assets		129		112		263		218
		Employee defined benefit plan expenses		938		1,066		1,833		2,103
		Net finance expense		107		114		44		219
		Income tax expense		9,367		8,041		16,602		14,903
		Other		(2,411	)	(762	)	(3,892	)	(2,081	)
			Cash flow from operating activities before the following	34,890		32,111		65,297		61,217
	Change in working capital:
		Trade and other receivables		(5,038	)	(2,894	)	(9,391	)	(6,767	)
		Inventories		(7,931	)	(2,592	)	(7,424	)	(4,638	)
		Prepaid expenses		(26	)	(306	)	(1,954	)	(1,044	)
		Trade payables and other liabilities		1,118		668		6,837		1,031

	Provisions			(1	)	(430	)	(25	)	(616	)
	Employee defined benefit plan payments			(317	)	(511	)	(3,141	)	(2,383	)
	Income tax paid			(9,458	)	(9,612	)	(12,609	)	(17,280	)
	Interest received			42		129		129		204
	Interest paid			(135	)	(3	)	(138	)	(8	)
			Net cash from operating activities	13,144		16,560		37,581		29,716

Investing activities:

	Acquisition of property, plant and equipment - net			(9,527	)	(10,165	)	(21,692	)	(25,161	)
	Acquisition of intangible assets			(175	)	(38	)	(362	)	(296	)
				(9,702	)	(10,203	)	(22,054	)	(25,457	)

Financing activities:

	Dividends paid			(1,763	)	(1,919	)	(62,102	)	(3,876	)
	Dividend paid to non-controlling interests in subsidiary			(344	)	(218	)	(344	)	(218	)
				(2,107	)	(2,137	)	(62,446	)	(4,094	)

Change in cash and cash equivalents				1,335		4,220		(46,919	)	165

Cash and cash equivalents, beginning of period				112,836		129,248		161,090		133,303

Cash and cash equivalents, end of period				114,171		133,468		114,171		133,468