Exhibit 99.1
| Contact: | Brian P. Crescenzo | |||
| 302-326-5648 |
FOR IMMEDIATE RELEASE
APPLIED EXTRUSION TECHNOLOGIES, INC.
ANNOUNCES FISCAL 2003 RESULTS
NEW CASTLE, DE, November 24, 2003 – Applied Extrusion Technologies, Inc. (NASDAQ NMS – AETC) today announced financial results for its year ended September 30, 2003.
FULL YEAR FISCAL 2003 RESULTS
Sales for fiscal 2003 of $247 million were $4.7 million or two percent lower compared with fiscal 2002. A seven percent decline in volume was partially offset by a six percent increase in average selling price. The higher average selling price was due to both price increases and an improved mix of products sold. Higher average pricing resulted in a $14 million increase in revenues which was entirely offset by an equal increase in raw material costs, an increase of 17% over fiscal 2002. Additional manufacturing cost reductions offset an approximate $3 million increase in depreciation expense, resulting in gross profit of $44 million, which was equal to the prior year. Gross margin was 17.9 percent versus 17.5 percent in fiscal 2002.
The restructuring, announced in September 2002, has been very successful in reducing costs. Operating expenses in fiscal 2003 were $30.2 million compared with $48.6 million in fiscal 2002. As a result, operating profit increased by $18.7 million to $14 million. Exclusive of the $9 million restructuring charge in fiscal 2002, operating expenses were $9.4 million, or 24 percent, lower than last year and operating profit improved by $9.7 million, a three-fold increase over fiscal 2002.
During fiscal 2003, the Company generated earnings before interest, taxes, depreciation and amortization (EBITDA) of $37.4 million, an increase of 51 percent compared with EBITDA of $24.7 million for fiscal 2002.
Income tax expense of $1.1 million was recorded in the fourth quarter of fiscal 2003 and represents an adjustment to the valuation allowance against deferred taxes. The Company received a tax refund in fiscal 2002, and accordingly recorded a $2 million benefit. Aside from these items, the Company’s effective tax rate in fiscal 2002 and fiscal 2003 was
zero. The net loss for fiscal 2003 was $17 million, or $1.33 per share, compared with a net loss of $31.8 million, or $2.55 per share, for fiscal 2002.
FOURTH QUARTER 2003 RESULTS
Sales for the fourth quarter of fiscal 2003 of $58.1 million were $6.6 million, or 10 percent, lower than the comparable quarter in fiscal 2002. A 16 percent decline in volume was partially offset by a seven percent increase in average selling price. The higher average selling price was due to both price increases and an improved mix of products sold.
Gross profit of $7 million was eight percent higher than the same period of last year. The increase in average selling prices offset the impact of both the lower sales volumes and a $2 million, or 10 percent, increase in raw material costs. Gross margin was 12.1 percent versus 10.1 percent in fiscal 2002.
Operating expenses of $7.8 million were $13.8 million lower compared with $21.6 million in fiscal 2002. Operating losses during the 4th quarter of $0.8 million were $14.3 million less compared with losses of $15.1 million in fiscal 2002. Exclusive of the September 2002 $9 million restructuring charge, operating expenses were $4.8 million, or 38 percent, lower than last year. The reduction in operating expenses reflects the successful implementation of the September 2002 restructuring and ongoing cost reduction efforts. The operating losses for the fourth quarter, again exclusive of restructuring charges, were $5.3 million lower than fiscal 2002.
For the three months ended September 30, 2003, the Company generated earnings before interest, taxes, depreciation and amortization (EBITDA) of $5.2 million compared with a negative EBITDA of $0.6 million for the fourth quarter of fiscal 2002. The net loss for the fourth quarter of fiscal 2003 was $9.3 million, or $.73 per share, compared with a net loss of $22.6 million, or $1.81 per share, for the fourth quarter of fiscal 2002.
BALANCE SHEET, CASH FLOW AND LIQUIDITY
At September 30, 2003, the Company had borrowings of $29 million pursuant to its revolving line of credit. The Company used these borrowings, in part, for the prepayment in September 2003 of its $6.5 million industrial revenue bond which was due in 2004. Unused availability under this revolving credit facility at year end was approximately $8 million. As previously announced, the Company entered into a new $100 million credit facility with GE Capital Finance on October 3, 2003. The credit facility consists of a $50 million term loan and a $50 million revolving line of credit. Under the terms of the new revolving line of credit, the Company has increased its availability by $17 million. Net Debt (total debt less cash) at September 30, 2003 was $298 million, representing 89 percent of total capitalization.
COMPANY COMMENTS
Commenting on the results, Amin J. Khoury, Chairman and Chief Executive Officer, said: “The OPP Films industry continues to be plagued by weak demand and over capacity. While we have made progress in increasing our prices and improving our product mix, these improvements have been substantially offset by increased raw material costs.”
Mr. Khoury further remarked, “We are encouraged by the increases in operating profit and EBITDA as compared with fiscal 2002. This is primarily due to ongoing cost reduction efforts as well as our improvements in product mix. We will continue to carefully control capital expenditures and constantly reevaluate our cost structure. We remain focused on executing a successful turnaround in a difficult business environment. Our objective is to generate positive free cash flow in 2004 and to improve gross margins through the commercialization of our high-value proprietary products. We expect to achieve acceptable levels of profitability over time through continuous improvement in product mix and capacity utilization.”
CONFERENCE CALL
As previously announced, the Company will hold a conference call at 9:00 AM Eastern Time on November 25, 2003 to discuss the results. To listen live via the Internet, visit the Investor Relations section of AET’s website at http://www.aetfilms.com. To access the conference call by phone, dial 1-800-473-6123 and reference access code “AET Call”. A taped replay of the conference call will also be available from approximately 12:30 PM Eastern Time on November 25, 2003 until midnight on December 2, 2003. To listen to the replay, dial 1-877-519-4471 from within the U.S. or 973-341-3080 from outside the U.S. and enter access code 4314082.
Applied Extrusion Technologies, Inc. is a leading North American developer and manufacturer of specialized oriented polypropylene (OPP) films used primarily in consumer products labeling and flexible packaging applications.
Except for the historical information contained herein, the matters discussed in this report are forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from those in the forward-looking statements, including those risks related to the ability to implement price increases and related volume losses, the timely development and acceptance of new products, fluctuations in raw materials and other production costs, the ability to satisfy our debt service requirements, the loss of one or more significant customers, the impact of competitive products and pricing, the timely completion of capital projects, the success of the Company’s efforts to access capital markets on satisfactory terms, and to acquire, integrate, and operate new businesses and expand into new markets, as well as other risks detailed in Exhibit 99.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2002 and from time to time in the Company’s other reports filed with the Securities and Exchange Commission.
APPLIED EXTRUSION TECHNOLOGIES, INC.
Statements of Income
(In thousands, except per share data)
(Unaudited)
| Three Months Ended |
||||||||
| September 30, 2003 |
September 30, 2002 |
|||||||
| Sales |
$ | 58,141 | $ | 64,770 | ||||
| Cost of sales |
51,093 | 58,218 | ||||||
| Gross profit |
7,048 | 6,552 | ||||||
| Operating expenses: |
||||||||
| Selling, general and administrative |
6,077 | 10,870 | ||||||
| Research and development |
1,767 | 1,751 | ||||||
| Restructuring charges |
— | 9,002 | ||||||
| QPF acquisition and integration costs |
— | — | ||||||
| Total operating expenses |
7,844 | 21,623 | ||||||
| Operating loss |
(796 | ) | (15,071 | ) | ||||
| Non operating expenses: |
||||||||
| Interest expense, net |
7,473 | 7,519 | ||||||
| Loss before income taxes |
$ | (8,269 | ) | $ | (22,590 | ) | ||
| Income tax expense (benefit) |
1,053 | — | ||||||
| Net loss |
$ | (9,322 | ) | (22,590 | ) | |||
| Loss per common share |
$ | (0.73 | ) | $ | (1.81 | ) | ||
| Average common shares outstanding |
12,833 | 12,465 | ||||||
| EBITDA (Net Loss Reconcilation) |
||||||||
| Net loss |
$ | (9,322 | ) | $ | (22,590 | ) | ||
| Interest expense, net |
7,473 | 7,519 | ||||||
| Income tax (benefit) |
1,053 | — | ||||||
| Depreciation and amortization |
6,445 | 5,421 | ||||||
| Less amortization included in interest expense |
(510 | ) | 67 | |||||
| Other |
46 | 9,002 | ||||||
| EBITDA |
$ | 5,185 | $ | (581 | ) | |||
APPLIED EXTRUSION TECHNOLOGIES, INC.
Statements of Income
(In thousands, except per share data)
(Unaudited)
| Twelve Months Ended |
||||||||
| September 30, 2003 |
September 30, 2002 |
|||||||
| Sales |
$ | 247,364 | $ | 252,092 | ||||
| Cost of sales |
203,154 | 208,099 | ||||||
| Gross profit |
44,210 | 43,993 | ||||||
| Operating expenses: |
||||||||
| Selling, general and administrative |
22,989 | 32,085 | ||||||
| Research and development |
7,209 | 6,605 | ||||||
| Restructuring charges |
— | 9,002 | ||||||
| QPF acquisition and integration costs |
— | 950 | ||||||
| Total operating expenses |
30,198 | 48,642 | ||||||
| Operating profit (loss) |
14,012 | (4,649 | ) | |||||
| Non operating expenses: |
||||||||
| Interest expense, net |
29,912 | 29,147 | ||||||
| Loss before income taxes |
$ | (15,900 | ) | $ | (33,796 | ) | ||
| Income tax expense (benefit) |
1,053 | (2,045 | ) | |||||
| Net loss |
$ | (16,953 | ) | $ | (31,751 | ) | ||
| Loss per common share |
$ | (1.33 | ) | $ | (2.55 | ) | ||
| Average common shares outstanding |
12,741 | 12,465 | ||||||
| EBITDA (Net Loss Reconcilation) |
||||||||
| Net loss |
$ | (16,953 | ) | $ | (31,751 | ) | ||
| Interest expense, net |
29,912 | 29,147 | ||||||
| Income tax (benefit) |
1,053 | (2,045 | ) | |||||
| Depreciation and amortization |
24,928 | 21,342 | ||||||
| Less amortization included in interest expense |
(1,911 | ) | (1,002 | ) | ||||
| Other |
336 | 9,002 | ||||||
| EBITDA |
$ | 37,365 | $ | 24,693 | ||||
APPLIED EXTRUSION TECHNOLOGIES, INC.
Balance Sheets
(In thousands, except per share data)
(Unaudited)
| September 30, 2003 |
September 30, 2002 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 2,835 | $ | 17,558 | ||||
| Accounts receivable |
33,407 | 40,010 | ||||||
| Inventory |
52,517 | 32,531 | ||||||
| Prepaid expenses |
2,995 | 2,365 | ||||||
| Total current assets |
91,754 | 92,464 | ||||||
| Property, plant and equipment, net |
281,384 | 276,916 | ||||||
| Goodwill |
9,874 | 9,874 | ||||||
| Other intangible assets |
10,505 | 11,043 | ||||||
| Other assets |
14,178 | 14,765 | ||||||
| Total assets |
$ | 407,695 | $ | 405,062 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 9,485 | $ | 10,701 | ||||
| Accrued interest |
7,544 | 7,428 | ||||||
| Accrued expenses and other current liabilities |
18,008 | 33,348 | ||||||
| Borrowings under line of credit |
28,670 | |||||||
| Total current liabilities |
63,707 | 51,477 | ||||||
| Long-term debt |
271,790 | 277,876 | ||||||
| Long-term liabilities |
37,841 | 36,948 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock |
— | — | ||||||
| Common stock |
130 | 130 | ||||||
| Additional paid-in-capital |
103,204 | 103,250 | ||||||
| Accumulated deficit |
(73,742 | ) | (56,789 | ) | ||||
| Accumulated comprehensive income (loss) |
7,018 | (5,577 | ) | |||||
| 36,610 | 41,014 | |||||||
| Treasury stock |
(2,253 | ) | (2,253 | ) | ||||
| Total stockholders’ equity |
34,357 | 38,761 | ||||||
| Total liabilities and stockholders’ equity |
$ | 407,695 | $ | 405,062 | ||||
APPLIED EXTRUSION TECHNOLOGIES, INC.
Statements of Cash Flows
(In thousands, except per share data)
(Unaudited)
| Twelve Months Ended |
||||||||
| September 30, 2003 |
September 30, 2002 |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (16,953 | ) | $ | (31,751 | ) | ||
| Adjustments to reconcile net loss to net cash from operating activities: |
||||||||
| Provision for doubtful accounts |
900 | 1,713 | ||||||
| Depreciation and amortization |
24,928 | 21,342 | ||||||
| Amortization of sale-leaseback gains |
(4,949 | ) | (4,855 | ) | ||||
| Stock issued for retirement plans, share incentive plan and other compensation |
(46 | ) | 1,003 | |||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
6,332 | (607 | ) | |||||
| Inventory |
(19,224 | ) | 2,358 | |||||
| Prepaid expenses and other current assets |
(506 | ) | (856 | ) | ||||
| Accounts payable and accrued expenses |
(16,553 | ) | 5,503 | |||||
| Other |
6,531 | 2,129 | ||||||
| Net cash from operating activities |
(19,540 | ) | (4,021 | ) | ||||
| INVESTING ACTIVITIES: |
||||||||
| Additions to property, plant and equipment |
(17,938 | ) | (26,756 | ) | ||||
| Proceeds from sale of property, plant, and equipment |
2,110 | 1,503 | ||||||
| Repurchase of leased assets |
(17,156 | ) | ||||||
| Collection of short-term receivable |
23,212 | |||||||
| Proceeds from sale-leaseback transactions |
— | 18,225 | ||||||
| Net cash from investing activities |
(15,828 | ) | (972 | ) | ||||
| FINANCING ACTIVITIES: |
||||||||
| Borrowings under line of credit agreement, net |
28,670 | — | ||||||
| Debt Issuance costs |
(1,687 | ) | (615 | ) | ||||
| Redemption of industrial revenue bonds |
(6,500 | ) | ||||||
| Proceeds from issuance of stock, net |
— | 993 | ||||||
| Net cash from financing activities |
20,483 | 378 | ||||||
| Effect of exchange rate changes on cash |
162 | (3 | ) | |||||
| Decrease in cash and cash equivalents, net |
(14,723 | ) | (4,618 | ) | ||||
| Cash and cash equivalents, beginning |
17,558 | 22,176 | ||||||
| Cash and cash equivalents, ending |
$ | 2,835 | $ | 17,558 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
| Cash paid during the period for: |
||||||||
| Interest, including capitalized interest |
$ | 30,391 | $ | 31,518 | ||||