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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2016

 

OR

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 001-32563

 

Orchids Paper Products Company

(Exact name of Registrant as Specified in its Charter)

 

Delaware	23-2956944
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

 

4826 Hunt Street

Pryor, Oklahoma 74361

(Address of Principal Executive Offices and Zip Code)

 

(918) 825-0616

(Registrant’s Telephone Number, Including Area Code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.  Yes  ☒  No  ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes  ☒   No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No  ☒

 

Number of shares outstanding of the issuer’s Common Stock, par value $.001 per share, as of April 29, 2016: 10,276,141 shares.

 

 

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ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

TABLE OF CONTENTS

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2016

 

		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements	3
	Consolidated Balance Sheets as of March 31, 2016 (Unaudited) and December 31, 2015	3
	Consolidated Statements of Income for the three months ended March 31, 2016 and 2015 (Unaudited)	4
	Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015 (Unaudited)	5
	Notes to Unaudited Consolidated Interim Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	30
ITEM 4.	Controls and Procedures	30
	PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	30
ITEM 1A.	Risk Factors	30
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
ITEM 3.	Defaults Upon Senior Securities	31
ITEM 4.	Mine Safety Disclosures	31
ITEM 5.	Other Information	31
ITEM 6.	Exhibits	31
	Signatures	32

 

  

PART I. FINANCIAL INFORMATION

 

ITEM 1.  Financial Statements

 

ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

 

 

See notes to unaudited consolidated interim financial statements. 

 

 

  

 

ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share and per share data)

 

 

See notes to unaudited consolidated interim financial statements.

 

  

 

ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 

 

See notes to unaudited consolidated interim financial statements.

 

 

ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

    

ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

 

  

ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

 

 

   

ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

 

 

ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

 

 

 ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

 

  

ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

 

 

ORCHIDS PAPER PRODUCTS COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued) 

 

  

ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Information

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements.  These statements relate to, among other things:

 

●

our business strategy;

●

the market opportunity for our products, including expected demand for our products;

●

our estimates regarding our capital requirements; and

●

any of our other plans, objectives, and intentions contained in this report that are not historical facts.

 

These statements relate to future events or future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “target,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology, or by discussion of strategy that may involve risks and uncertainties.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  The forward-looking statements contained in this Form 10-Q reflect our views and assumptions only as of the date hereof. You should not place undue reliance on forward-looking statements. We caution you that these forward-looking statements are only predictions, which are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

 

Some factors that could materially affect our actual results are detailed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC on March 7, 2016, and include but are not limited to the following items:

 

●

failure to complete the construction of our South Carolina facility on schedule or at all;

●

intense competition in our markets and aggressive pricing by our competitors could force us to decrease our prices and reduce our profitability;

●

a substantial percentage of our converted product revenues are attributable to a small number of customers who may decrease or cease purchases at any time;

●

disruption in our supply or increase in the cost of fiber;

●

Fabrica’s failure to execute under the Supply Agreement;

●

the additional indebtedness incurred to finance the construction of our South Carolina facility;

●

new competitors entering the market and increased competition in our region;

●

changes in our retail trade customers’ policies and increased dependence on key retailers in developed markets;

●

excess supply in the market may reduce our prices;

●

the availability of, and prices for, energy;

●

failure to purchase the contracted quantity of natural gas may result in financial exposure;

●

our exposure to variable interest rates;

●

the loss of key personnel;

●

labor interruption;

●

natural disaster or other disruption to our facilities;

●

ability to finance the capital requirements of our business; and

●

other factors discussed from time to time in our filings with the SEC.

 

If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected.  Any forward-looking statement you read in the following Management’s Discussion and Analysis of Financial Condition and Results of Operations reflects our current views with respect to future events and is subject to the risks listed above and other risks, uncertainties, and assumptions relating to our operations, results of operations, growth strategy, and liquidity.  We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise.

  

  

Overview of the Business

 

We are a customer focused, national supplier of high quality consumer tissue products.  We produce bulk tissue paper, known as parent rolls, and convert parent rolls into finished products, including paper towels, bathroom tissue and paper napkins. We sell any parent rolls not required by our converting operation to other converters.  Our integrated manufacturing facilities have flexible production capabilities, which allow us to produce high quality tissue products with short production times across all quality tiers for customers in our target regions. We predominately sell our products under private labels to our core customer base in the “at home” market, which consists primarily of dollar stores, discount retailers and grocery stores that offer limited alternatives across a wide range of products.  Our focus to date has been the dollar stores (which are also referred to as discount retailers) and the broader discount retail market because of their overall market growth, consistent order patterns and low number of stock keeping units (“SKUs”).  The “at home” tissue market consists of several quality levels, including a value tier, premium tier and ultra-premium tier. To a lesser extent, we service customers in the “away from home” market. Our core customer base in the “away from home” market consists of companies in the janitorial market and food service market. Most of the products we sell in the “away from home” market are included in the value tier.

 

Our strategy is to capitalize on positive market trends by leveraging our industry experience, customer relationships and low cost, strategic operating footprint to drive growth and profitability for the business. Since our inception, we have strategically expanded capacity in both paper manufacturing and finished product converting to meet market demand and customers’ quality requirements. Our facilities have been designed to have the flexibility to produce and convert parent rolls across different product tiers and to use both virgin and recycled fibers to maximize quality and to control costs. We own an integrated facility in Pryor, Oklahoma which has the capacity to supply 74,000 tons of parent rolls per year primarily to service the central United States. This brings our paper manufacturing capacity at this facility in line with our paper production capacity in Oklahoma. Since 2006, we have consistently invested to modernize the paper making and converting equipment at this location and provide the flexibility discussed above. Furthermore, over the past several years, we have invested approximately $39 million at this facility for a new paper machine and a new converting line. The new paper machine commenced operations in March 2015. The new paper machine improved our margins by reducing our manufacturing cost and has provided us additional parent roll capacity. Our new converting line commenced operations in June 2015 and has increased our capacity to 83,000 tons of converting capacity in our Pryor facility. In June 2014, we expanded our geographic presence to service the United States West Coast through a strategic transaction with Fabrica de Papel San Francisco, S.A. de C.V. (“Fabrica”), one of the largest tissue manufacturers by capacity in Mexico. The Fabrica Transaction provided us access to its U.S. customers, which we believe will allow us to further penetrate the region, and the supply agreement (“Supply Agreement”) we entered into with Fabrica has provided access to up to 19,800 tons of product each year (up to 27,500 tons in the first two years of the agreement).

 

As part of our strategy to be a national supplier of high quality consumer tissue products, we are also constructing a world-class integrated tissue operation in Barnwell, South Carolina. We believe that this new facility will allow us to better serve our existing customers in the Southeast United States, while also enabling us to penetrate new customers in this region. The facility is designed to provide highly flexible, cost competitive production across all quality tiers with paper making capacity of between 35,000 and 40,000 tons per year and converting capacity of between 30,000 and 32,000 tons per year. The first converting line became operational late in the first quarter of 2016 and the second converting line is expected to be operational by the end of the second quarter of 2016. The paper machine will utilize a highly versatile process capable of producing ultra-premium tier products, and is expected to be operational in the first quarter of 2017. We estimate the total costs of the project to be approximately $136 million, which is being financed through a combination of bank debt, proceeds from our 2015 follow-on stock offering, proceeds from our New Market Tax Credit transaction and cash from operations.

 

Our strategy is to sell all of the parent rolls we manufacture as converted products, which generally carry higher margins than non-converted parent rolls. However, any parent rolls we can produce in excess of converting production requirements are sold into the market.  We adjust our paper making production based on our internal converting needs for parent rolls in our Oklahoma and South Carolina facilities and the open market demand for parent rolls. The capacity obtained under the previously described Fabrica Transaction will be sold in converted product form and we do not plan to sell any excess capacity arising from this transaction in parent roll form.   Parent rolls are a commodity product and thus are subject to market pricing.  We plan to continue to sell any excess parent roll capacity on the open market as long as market pricing is profitable.  When converting production requirements exceed paper mill capacity, we will purchase parent rolls in the open market to meet those converting requirements.

 

 

We supply both large national and regional customers, with a focus on high growth regions of the United States. We focus our sales efforts on areas within approximately 500 miles of either our manufacturing facility in Oklahoma or Fabrica’s manufacturing facility in Mexicali, Mexico, as we believe this radius maximizes our freight cost advantage. Because we are one of the few integrated tissue paper manufacturers in the areas around both our Oklahoma facility and Fabrica’s Mexicali facilities, we believe we typically have lower freight costs to our customers’ distribution centers located in our target regions. Our target region around our Oklahoma facility includes Texas, Oklahoma, Kansas, Missouri and Arkansas. The Fabrica Transaction has allowed us to more effectively service customers that are located on the West Coast by directly shipping them products that are produced in Mexico under the Supply Agreement. As a result, we have expanded our target region to include California, Nevada, Arizona, New Mexico and Utah. Our manufacturing facility in Barnwell, South Carolina is intended to help us meet the growing demand in the Southeast United States. Demand for tissue in the “at home” tissue market has historically been closely correlated to population growth and, as such, performs well in a variety of economic conditions. Our expanded target region has typically experienced strong population growth for the past fourteen years relative to the national average, and these trends are expected to continue.

 

Our products are sold primarily under our customers’ private labels and, to a lesser extent, under our brand names such as Colortex®, My Size®, Velvet®, Big Mopper®, Linen Soft®, Soft & Fluffy®, and Tackle®. The Fabrica Transaction gave us the exclusive right to sell products under Fabrica’s brand names into the United States, including under the names Virtue®, Truly Green®, Golden Gate Paper® and Big Quality®. All of our converted product net sales are derived through truck load purchase orders from our customers.  Parent roll net sales are derived from purchase orders that generally cover a one-month time period. We do not have supply contracts with any of our customers, which is normal practice within our industry.  Because our products are a daily consumable item, the order stream from our customer base is fairly consistent with limited seasonal fluctuations. However, we typically experience some mild seasonal softness in the first and fourth quarters of each year, primarily due to the effects of winter weather on consumers’ buying habits and occasional effects of holidays on shipping schedules.  Changes in the national economy, in general, do not materially affect the market for our converted products due to their non-discretionary nature and high degree of household penetration.

 

Our profitability depends on several key factors, including but not limited to:

 

●

the volume of converted product sales;

●

the cost of fiber used in producing paper;

●

the market price of our products;

●

the efficiency of operations in both our paper mill and converting facility; and

●

the cost of energy.

 

The private label market of the tissue industry is highly competitive, and many discount retail customers are extremely price sensitive. As a result, it is difficult to affect price increases.  We expect these competitive conditions to continue.

 

Our Strategy

 

Our goal is to be a customer focused national supplier of high quality consumer tissue products.  We believe we will achieve this goal by:

 

●

strengthening and expanding our customer base through cooperative and innovative product development and superior customer service;

●

focusing on higher growth geographic regions and private label channels;

●

maintaining flexible, low cost integrated facilities able to produce a broad product spectrum;

●

expanding our manufacturing footprint via the Fabrica Transaction and our expansion in South Carolina; and

●

employing a disciplined capital strategy by focusing on growing free cash flow and targeting high return capital projects.

   

  

Part of our strategy is to increase our volume of premium and ultra-premium tier products shipped to customers, as these products typically have a higher gross margin than value tier products. The following graph shows shipments of our premium tier and ultra-premium tier products as a percentage of total cases shipped. Shipments of premium tier and ultra-premium tier products as a percentage of total cases shipped decreased following the Fabrica Transaction in June 2014 as a majority of the products shipped under the Supply Agreement are considered value tier products.

 

  

Comparative Three-Month Periods Ended March 31, 2016 and 2015

 

Net Sales

 

		Three Months Ended March 31,
		2016				2015
		(in thousands, except tons)
Converted product net sales		$	45,252			$	37,415
Parent roll net sales			2,491				-
Net sales		$	47,743			$	37,415
Converted product tons shipped			23,408				18,837
Parent roll tons shipped			2,791				-
Total tons shipped			26,199				18,837

 

Net sales in the quarter ended March 31, 2016 increased $10.3 million, or 28%, from $37.4 million in 2015 to $47.7 million in 2016. Net sales figures represent the gross selling price, including freight, less discounts and pricing allowances. The increase in net sales is due to a $7.8 million increase in the sales of converted products and a $2.5 million increase in the net sales of parent rolls.

 

Net sales of converted product increased $7.8 million, or 21%, from $37.4 million in 2015 to $45.3 million in 2016. The increase in converted product net sales is primarily due to a 24% increase in tonnage shipped, which was partially offset by a 3% decrease in net selling price per ton.  Converted product tons shipped increased due to higher shipment volumes from both our Pryor location and under the Supply Agreement. Net selling price per ton decreased due to the mix of products sold.

 

Net sales of parent rolls were $2.5 million in 2016. There were no parent rolls sold in 2015, as we demolished two old paper machines in the fourth quarter of 2014 to build a new paper machine, which did not start up until late in the first quarter of 2015. This resulted in having no excess parent rolls available for sale in 2015.

 

Cost of Sales

 

 

		Three Months Ended March 31,
		2016				2015
		(in thousands, except gross profit margin %)
Cost of goods sold		$	33,725			$	30,541
Depreciation			2,637				2,088
Cost of sales		$	36,362			$	32,629
Gross profit		$	11,381			$	4,786
Gross profit margin %			23.8	%			12.8	%

 

 

 

 

  

The major components of cost of sales are the cost of internally produced paper, raw materials, direct labor and benefits, freight costs of products shipped to customers, insurance, repairs and maintenance, energy, utilities, depreciation and the cost of converted products purchased under the Supply Agreement with Fabrica.

 

Cost of sales increased $3.7 million, or 11%, to $36.4 million, compared to $32.6 million in the same period of 2015, due primarily to increased sales and higher depreciation expense.  As a percentage of net sales, cost of sales decreased to 76.2% in the 2016 quarter from 87.2% in the 2015 quarter.

 

Gross Profit

 

Gross profit in the quarter ended March 31, 2016 increased $6.6 million, or 138%, to $11.4 million compared to $4.8 million in the same period last year.  Gross profit as a percentage of net sales in the 2016 quarter was 23.8% compared to 12.8% in the 2015 quarter.  The gross profit increase as a percent of net sales was primarily the result of lower unit production costs in our Oklahoma paper making and converting production operations, higher gross margins under the Supply Agreement and lower fiber costs. Per unit paper production and converting production costs in Oklahoma decreased in 2016 primarily due to a 53% and a 24% increase in production in our paper mill and our converting operation, respectively. These improvements in paper production costs are primarily due to the previously discussed paper machine project. Improvements in converting production costs are primarily due to increased operating rates across all production lines and the addition of a new converting line in the second quarter of 2015, which resulted in increased absorption of fixed and semi-variable costs. A strong U.S. dollar exchange rate with the Mexican peso, coupled with SKU optimization and price increases in the “away from home” business improved the margins under the Supply Agreement in the three months ended March 31, 2016 compared with the same quarter of 2015. Furthermore, average fiber prices across our fiber basket were lower in the first quarter of 2016 compared to the same period in 2015, resulting in an approximate $800,000 increase in gross profit.

  

Selling, General and Administrative Expenses

 

		Three Months Ended March 31,
		2016				2015
		(in thousands, except SG&A as a % of net sales)
Commission expense		$	353			$	329
Other S,G&A expenses			2,369				2,168
Selling, General & Adm exp		$	2,722			$	2,497
SG&A as a % of net sales			5.7	%			6.7	%

 

Selling, general and administrative expenses include salaries, commissions to brokers and other miscellaneous expenses.  Selling, general and administrative expenses increased $225,000, or 9%, in the quarter ended March 31, 2016 as compared to the same period in 2015 primarily due to higher professional fees, higher artwork and design fees, and increased commissions due to higher sales volumes. As a percentage of net sales, selling, general and administrative expenses decreased to 5.7% in the first quarter of 2016 compared to 6.7% in the same period of 2015.

 

Amortization of Intangibles

 

The Company recognized $377,000 of amortization expense related to the intangible assets acquired in the Fabrica Transaction during the quarters ended March 31, 2016 and 2015, respectively.

 

  

Operating Income

 

As a result of the foregoing factors, operating income for the quarter ended March 31, 2016, was $8.3 million compared to operating income of $1.9 million for the same period of 2015.

 

Interest Expense and Other Income

 

		Three Months Ended March 31,
		2016				2015
		(in thousands)
Interest expense		$	263			$	214
Other (income) expense, net		$	(201	)		$	(186	)
Income before income taxes		$	8,220			$	1,884

 

Interest expense includes interest on all debt and amortization of deferred debt issuance costs.  Interest expense for the first quarter of 2016 totaled $263,000 compared to interest expense of $214,000 in the same period in 2015. Interest expense for 2016 excludes $134,000 of interest capitalized on significant projects during the quarter. The higher level of total interest in 2016 resulted from higher debt balances due primarily to additional debt incurred in conjunction with additional borrowings to finance capital expenditures.

 

Other (income) expense for the three months ended March 31, 2016 and 2015 includes $197,000 and $185,000, respectively, of income related to the Company’s pooled financing agreement with the Oklahoma Development Financing Authority (ODFA).

 

Income Before Income Taxes

 

As a result of the foregoing factors, income before income taxes increased $6.3 million to $8.2 million in the quarter ended March 31, 2016, compared to $1.9 million in the same period in 2015.

 

Income Tax Provision

 

As of March 31, 2016, our annual estimated effective tax rate for the full year is estimated to be 34.2%. The annual estimated effective tax rate for 2016 differs from the statutory rate primarily due to U.S. manufacturing tax credits and deductions and foreign income taxes.  The actual effective tax rate for the quarter ended March 31, 2015 was 34.4%.  The annual estimated effective tax rate for 2015 differs from the statutory rate due primarily to U. S. manufacturing tax credits and deductions and foreign income taxes. 

 

 

Liquidity and Capital Resources

 

Liquidity refers to the liquid financial assets available to fund our business operations and pay for near-term obligations.  These liquid financial assets consist of cash as well as unused borrowing capacity under our credit facility. Our cash requirements have historically been satisfied through a combination of cash flows from operations and debt and equity financings.  We expect this trend to continue.

 

Currently, the most significant event effecting liquidity and capital needs is the construction of our integrated converting facility in Barnwell, South Carolina, which has a total estimated cost of $136 million. In April 2015, we issued and sold 1,500,000 shares at $23.00 per share in an underwritten public offering resulting in aggregate net proceeds to us of approximately $32.2 million, after giving effect to the underwriting discount and estimated expenses. We have been using and intend to continue to use the net proceeds from the offering, together with new bank financing and cash on hand, to construct the Barnwell facility, consisting of a new facility to house a new paper machine and converting equipment to convert the parent rolls into finished product and to provide warehouse space for finished product and raw materials. In June 2015, we entered into an agreement with US Bank National Association (“US Bank”) which: (i) combined our existing $20 million revolving line of credit designated for the purchase and construction of a paper machine and converting line in Pryor, Oklahoma and $27.3 million currently outstanding under our existing term loan into a $47.3 million term loan due in 2020; (ii) increased our delayed draw term loan facility from $40 million to $115 million; (iii) extended the maturity of the delayed draw facility from August 2015 to June 2020; and (iv) added a $50 million accordion feature. Proceeds from the delayed draw term loan must be used solely to finance the acquisition and construction of buildings and equipment at our Barnwell facility. Advances under the facility bear interest at variable rates. The term loan is payable in quarterly installments of $675,000 through June 2016 and $1 million per quarter thereafter, while borrowings against the delayed draw term loan facility are payable in quarterly installments of 1.5% of the June 30, 2017 outstanding balance beginning in September 2017.

 

In December 2015, we entered into a NMTC transaction, which provided $16.2 million of loan proceeds, which will be used to finance capital expenditures associated with our South Carolina facility. This transaction allowed the Company to fix the interest on $11.1 million of its long-term debt for seven years and includes the potential for future debt forgiveness of approximately $5.1 million in seven years. In connection with this transaction, the maximum borrowing capacity under our delayed draw facility was reduced from $115 million to $99.6 million.

 

During the three months ended March 31 2016, cash increased $3.7 million, to $8.0 million at March 31, 2016, compared to $4.4 million at December 31, 2015.  During the 2016 period, we incurred $25.6 million of capital expenditures, removed restrictions on $4.8 million of cash, received $1.9 million of proceeds from economic incentives related to the construction of our South Carolina facility, received $18.0 million of borrowings under our revolving credit lines (including our delayed draw loan), and paid $3.6 million in dividends to stockholders.

 

As of March 31, 2016, total debt outstanding was $92.9 million.  Cash as of March 31, 2016, totaled $8.0 million, resulting in a net debt level of $84.9 million.  This compares to $75.6 million in total debt and cash of $4.4 million as of December 31, 2015, resulting in a net debt level of $71.2 million.  We had $10.0 million and $26.5 million outstanding under our $25.0 million revolving line of credit and our $99.6 million delayed draw term loan, respectively, as of March 31, 2016.

 

 

The following table summarizes key cash flow information for the three-month periods ended March 31, 2016 and 2015:

 

		Three Months Ended March 31,
		2016				2015
		(in thousands)
Cash flows provided by (used in):
Operating activities		$	8,863			$	5,551
Investing activities		$	(20,785	)		$	(10,943	)
Financing activities		$	15,600			$	7,645

 

Cash flows provided by operating activities was $8.9 million in the three-month period ended March 31, 2016, which primarily resulted from earnings before non-cash charges, including depreciation and amortization, and an increase in accrued liabilities, which were partially offset by increases in accounts receivable and a decrease in accounts payable. The increase in accrued liabilities is primarily due to increased income taxes payable due to higher taxable income and increased accrued sales promotions due to increased sales. The increase in accounts receivable is primarily related to the timing of sales and related cash receipts. The decrease in accounts payable is primarily related to the timing of purchases and cash payments.

 

Cash flows used in investing activities in the first three months of 2016 included $25.6 million of expenditures on capital projects during the period, partially offset by the release of $4.8 million of restricted cash to finance capital expenditures associated with our South Carolina facility.

 

Cash flows provided by financing activities was $15.6 million in the three-month period ended March 31, 2016, primarily due to $18.0 million of borrowings under our credit facility and $1.9 million of proceeds from economic incentives associated with our South Carolina facility, which were partially offset by $3.6 million of cash dividends paid to stockholders. While we expect to continue to declare quarterly dividends, the payment of future dividends is at the discretion of the Board of Directors and the timing and amount of any future dividends will depend upon many factors, including our financial condition, earnings, cash requirements of our business, legal requirements, regulatory constraints, industry practice and other factors that the Board deems relevant. Our credit agreement contains an indirect restriction on the amount of cash dividends we pay in that the amount of dividends paid is included in the calculation of our fixed charge coverage ratio.

 

Cash flows provided by operating activities was $5.6 million in the three-month period ended March 31, 2015, which primarily resulted from earnings before non-cash charges, a decrease in accounts receivable, and increases in accounts payable and accrued liabilities, which were partially offset by an increase in inventories.  The decrease in accounts receivable and increases in accounts payable and accrued liabilities are primarily related to the timing of cash receipts, purchases and cash payments, while the increase in inventories is primarily due to anticipated sales volumes for the remainder of 2015.

 

Cash flows used in investing activities was $10.9 million in the first three months of 2015 as a result of $10.9 million in expenditures on capital projects.

 

Cash flows provided by financing activities was $7.6 million in the three-month period ended March 31, 2015, primarily as a result of $13.1 million of borrowings under our line of credit, which was partially offset by a $1.7 million decrease in bank overdrafts, $675,000 of debt payments, and $3.1 million of cash dividends paid to stockholders.

 

Critical Accounting Policies and Estimates

 

The preparation of our financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.  On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances.  Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances.  We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our financial statements:

 

 

Accounts Receivable.  Accounts receivable consist of amounts due to us from normal business activities.  Our management must make estimates of accounts receivable that will not be collected.  We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s creditworthiness as determined by our review of their current credit information.  We continuously monitor collections and payments from our customers and maintain a provision for estimated losses based on historical experience and specific customer collection issues that we have identified.  Trade receivables are written-off when all reasonable collection efforts have been exhausted, including, but not limited to, external third-party collection efforts and litigation.  While such credit losses have historically been within management’s expectations and the provisions established, there can be no assurance that we will continue to experience the same credit loss rates as in the past.  During the first quarter of 2016 and 2015, no accounts receivable were written off against the allowance for doubtful accounts, nor was the provision for bad debts increased or decreased based on sales levels, historical experience and an evaluation of the quality of existing accounts receivable, resulting in no change to the allowance.

 

Inventory.  Our inventory consists of converted finished goods, bulk paper rolls and raw materials and is stated at the lower of cost or market based on standard cost, specific identification, or FIFO (first-in, first-out).  Standard costs approximate actual costs on a FIFO basis.  Material, labor and factory overhead necessary to produce the inventories are included in the standard cost.  Our management regularly reviews inventory quantities on hand and records a provision for excess and obsolete inventory based on the age of the inventory and forecasts of product demand.  A significant decrease in demand could result in an increase in the amount of excess inventory quantities on hand.  During the first three months of 2016, the inventory allowance was increased $24,000 based on a specific review of estimated slow moving or obsolete inventory items. No amounts were written off against the allowance, resulting in a net increase in the allowance of $24,000. During the first three months of 2015, the inventory allowance was increased $200,000 based on a specific review of estimated slow moving or obsolete inventory items and was decreased $106,000 due to actual write-offs of obsolete inventory items, resulting in a net increase in the allowance of $94,000. 

 

Property, Plant and Equipment.  Significant capital expenditures are required to establish and maintain paper mills and converting facilities. Our property, plant and equipment consists of land, buildings and improvements, machinery and equipment, vehicles, parts and spares and construction-in-process, which are stated at cost, net of accumulated depreciation. Depreciation of property, plant and equipment is calculated using the straight-line method over the estimated useful lives of the assets. Our management regularly reviews estimated useful lives to determine whether any changes are necessary to reflect the related assets’ actual productive lives. The lives of our property, plant and equipment currently range from 2.5 to 40 years.

 

Stock-based Compensation. U.S. GAAP requires equity-classified, share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of grant and to be expensed over the applicable vesting period. We recognize this expense on a straight-line basis over the options’ expected terms. We issue stock options that vest over a specified period (time-based vesting) and stock options that vest when the price of the Company’s common stock reaches a certain price (market-based vesting).  We also issue restricted stock.

 

We granted options to purchase 5,000 shares of our common stock in the first three months of 2016. There were no options granted in the first three months of 2015. We recorded stock-based compensation expense of $145,000 and $255,000 during the three-month periods ended March 31, 2016 and 2015, respectively, in connection with the option grants.  In February 2013, we granted 16,000 shares of restricted stock. We recorded stock-based compensation expense of $4,000 and $13,000 during the three–month periods ended March 31, 2016 and 2015, respectively, in connection with the restricted stock grants. Grants of restricted stock are valued using the closing market price of our common stock on the date of grant.

 

We estimate the grant date fair value of time-based stock option awards using the Black-Scholes option valuation model, which requires assumptions involving an estimate of the fair value of the underlying common stock on the date of grant, the expected term of the options, volatility, discount rate and dividend yield.  Separate values were determined for options having exercise prices ranging from $5.18 to $30.09. For options valued using the Black-Scholes option valuation model, we calculated expected option terms based on the “simplified” method for “plain vanilla” options, due to the Company’s limited exercise information. The “simplified method” calculates the expected term as the average of the vesting term and the original contractual term of the options. We calculated volatility using the daily volatilities of our common stock since our Initial Public Offering (“IPO”), while the discount rate was estimated using the interest rate for a treasury note with the same contractual term as the options granted.  Dividend yield is estimated at our current dividend rate, with adjustments for any known future changes in the rate.

 

We have engaged a valuation specialist to estimate the grant date fair value of market-based stock option awards.  Separate values were determined for options having exercises prices ranging from $25.24 to $31.125. The specialist utilizes a Monte Carlo valuation method to estimate the grant date fair value of the options granted in order to simulate a range of our possible future stock prices.  Significant assumptions to the Monte Carlo method include the expected life of the option, volatility and dividend yield.  The expected life of the option is based on the average of the service period and the contractual term of the option, using the “simplified” method for “plain vanilla” options.  Volatility is calculated based on a mix of historical and implied volatility during the expected life of the options.  Historical volatility is considered since our IPO and implied volatility is based on the publicly traded options of a three company peer group within the paper industry.  Dividend yield is estimated based on our average historical dividend yield and our current dividend yield as of the grant date.  The Monte Carlo analysis is performed under a risk-neutral premise, under which price drift is modeled using treasury note yields matching the expected life of the options.

 

Under U.S. GAAP, we expense the compensation cost related to the marked-based stock option awards on a straight-line basis over the derived service periods of the options as calculated under the Monte Carlo valuation method.  However, if the market condition is achieved for any tranche of these options prior to the end of the derived service period, all remaining expense related to that tranche would be recognized in the period in which the market condition is achieved.  Additionally, if the service period is met but the share price target required for the options to become exercisable is never achieved, no compensation cost may be reversed.  As such, we may recognize expense for options that never become exercisable.

  

  

In addition, we are required to develop an estimate of the number of share-based awards that will be forfeited due to employee turnover. The guidance on stock compensation requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates in order to derive our best estimate of awards ultimately expected to vest. We estimate forfeitures based on historical experience related to our own stock-based awards granted. We anticipate that these estimates will be revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 

Intangible Assets and Goodwill. We allocate the cost of business acquisitions to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition (commonly referred to as the purchase price allocation). As part of the purchase price allocations for our business acquisitions, identifiable intangible assets are recognized as assets apart from goodwill if they arise from contractual or other legal rights, or if they are capable of being separated or divided from the acquired business and sold, transferred, licensed, rented or exchanged.  We have engaged a valuation specialist to estimate the fair value of our purchase price and the related intangible assets acquired.

 

In June 2014, we acquired certain assets and the U.S. business of Fabrica.  Due to these transactions, we separately recognized the fair values of a combined Supply and Lease Agreement, trademarks, a non-compete agreement and customer relationships. The fair value of these assets was determined using an income approach, as follows: Supply and Lease Agreement - discounted cash flows method, trademarks — “relief from royalty” method, non-compete agreement - “with and without” method, and customer relationships - excess earnings method.  An income approach requires estimates of future income.  Under the discounted cash flow method, we utilized assumptions related to the term of the agreements, the net benefit from the agreements and any changes in that benefit over the term of the agreement, future tax rates and discount rates.  Under the relief from royalty method, we estimated the useful lives of the trademarks, future revenues associated with the trademarks, a royalty rate and a discount rate.  The with and without method requires assumptions related to the probability of competition in the absence of the non-compete agreement, the loss of future revenues due to competition and discount rates.  Under the excess earnings method, we must estimate future revenues, including growth and attrition rates, income tax rates, a rate of return on assets, and discount rates.  Future revenues and estimated benefits from the agreements are based on management’s knowledge of the industry, customers, operations and the agreements.  Tax rates are based on current effective tax rates.  The royalty rate is based on analysis of current royalty rates for corporate and product trademarks for similar products and evaluation of factors such as alternative trademarks available, legal defensibility, remaining useful life, licensing power, net revenue margin, market share, barriers to entry, capital requirements and customers’ bargaining power.  The discount rate used to determine the present value of future cash flows was based on the weighted average cost of capital method.

 

The value assigned to goodwill equals the amount of the purchase price of the business acquired in excess of the sum of the amounts assigned to identifiable acquired assets, both tangible and intangible, less liabilities assumed. At March 31, 2016, we had goodwill of $7.6 million and identifiable intangible assets, net of accumulated amortization, of $15.4 million.

 

Intangible assets are amortized over their respective estimated useful lives ranging from two to twenty years. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to our future cash flows rather than the period of time that it would take us to internally develop an intangible asset that would provide similar benefits. The estimate of the useful lives of our intangible asset is based on an analysis of all pertinent factors, in particular:

 

●

the expected use of the asset by the entity;

●

the expected useful life of another asset or group of assets to which the useful life of the intangible asset may relate;

●

any legal, regulatory or contractual provisions that may limit the useful life;

●

any legal, regulatory, or contractual provisions that enable renewal or extension of the asset’s legal or contractual life without substantial cost (provided there is evidence to support renewal or extension and renewal or extension can be accomplished without material modifications of the existing terms and conditions);

●

the effects of obsolescence, demand, competition and other economic factors (such as the stability of the industry, known technological advances, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels); and

●

the level of regular maintenance expenditures (but not enhancements) required to obtain the expected future cash flows from the asset (for example, a material level of required maintenance in relation to the carrying amount of the asset may suggest a limited useful life).

 

If no legal, regulatory, contractual, competitive, economic, or other factors limit the useful life of an intangible asset, the useful life of the asset is considered to be indefinite. The term indefinite does not mean infinite. An intangible asset with a finite useful life is amortized over that useful life; an intangible asset with an indefinite useful life is not amortized. We have no intangible assets with indefinite useful lives. Under U.S. GAAP, goodwill is not amortized.

 

 

Impairment of Goodwill and Other Long-Lived Assets. We review long-lived assets such as property, plant and equipment, intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable, and also review goodwill annually.  U.S. GAAP requires that goodwill be tested, at a minimum, annually for each reporting unit. The first step in testing goodwill to assess qualitative factors to determine whether it is more likely than not that goodwill is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test.  If the first step indicates a quantitative test must be performed, the second step is to identify any potential impairment by comparing the carrying value of the reporting unit to its fair value. If a potential impairment is identified, the third step is to measure the impairment loss by comparing the implied fair value of goodwill with the carrying value of goodwill of the reporting unit. Alternatively, the Company may bypass the qualitative assessment in any period and proceed directly to performing the second step.

 

The Company performed its initial goodwill impairment test on October 1, 2015 by performing the first step, a qualitative impairment test, to determine whether it was more likely than not that goodwill was impaired. Goodwill is tested at a level of reporting referred to as the “reporting unit”. The Company has two reporting units, which are defined as the “at home” business and the “away from home” business. Based on this qualitative test, we determined it was more likely than not that the fair value of the Company’s reporting units were greater than their carrying amounts; as such, we determined that performing the second and third steps of the impairment test were not necessary and that goodwill was not impaired. In performing this qualitative assessment, we considered factors including, but not limited to, the following:

 

●

Macroeconomic conditions, including general economic conditions, limitations on accessing capital, and other developments in equity and credit markets;

●

Industry and market considerations, including any deterioration in the environment in which we operate, an increased competitive environment, a decline in market-dependent multiples or metrics, a change in the market for our products or services, and regulatory or political developments;

●

Cost factors such as increases in raw materials, labor, exchange rates or other costs that have a negative effect on earnings and cash flows;

●

Overall financial performance, including negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods;

●

Other relevant entity-specific events, such as changes in management, key personnel, strategy, customers, or litigation; and

●

Whether a sustained, material decrease in share price had occurred.

 

Subsequent to October 1, 2015 we did not note any additional qualitative factors that would indicate that the Company’s goodwill was impaired.

 

New Accounting Pronouncements

 

Refer to the discussion of recently adopted/issued accounting pronouncements under Part I, Notes to Unaudited Interim Financial Statements Note 14 — New and Recently Adopted Accounting Pronouncements.

 

Non-GAAP Discussion

 

In addition to our GAAP results, we also consider non-GAAP measures of our performance for a number of purposes.  The three non-GAAP financial measures used within this report are: (1) EBITDA, (2) Adjusted EBITDA and (3) Net Debt.

 

EBITDA and Adjusted EBITDA

 

We use EBITDA and Adjusted EBITDA as a supplemental measure of our performance that is not required by, or presented in accordance with GAAP. EBITDA and Adjusted EBITDA should not be considered as an alternative to net income, operating income or any other performance measure derived in accordance with GAAP, or as an alternative to cash flows from operating activities or a measure of our liquidity.

 

EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization. Amortization of deferred debt issuance costs is included in net interest expense.  Adjusted EBITDA represents EBITDA before non-cash stock compensation expense.  We believe EBITDA and Adjusted EBITDA facilitate operating performance comparisons from period to period and company to company by eliminating potential differences caused by variations in capital structures (affecting relative interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), the age and book depreciation of facilities and equipment (affecting relative depreciation expense), and non-cash compensation and valuation (affecting stock compensation expense).

 

  

 

EBITDA and Adjusted EBITDA have limitations as an analytical tool, and you should not consider them in isolation, or as a substitute for any of our results as reported under GAAP.  Some of these limitations are:

 

●

they do not reflect our cash expenditures for capital assets;

●

they do not reflect changes in, or cash requirements for, our working capital requirements;

●

they do not reflect cash requirements for cash dividend payments;

●

they do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our indebtedness;

●

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; and

●

other companies, including other companies in our industry, may calculate these measures differently than we do, limiting their usefulness as a comparative measure.

 

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business or to reduce our indebtedness.  We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis.

 

The following table reconciles EBITDA and Adjusted EBITDA to net income for the three months ended March 31, 2016 and 2015:

 

		Three Months Ended March 31,
		2016				2015
		(in thousands, except % of net sales)
Net income		$	5,409			$	1,236
Plus: Interest expense, net			263				214
Plus: Income tax expense			2,811				648
Plus: Depreciation			2,637				2,088
Plus: Intangibles amortization			377				377
EBITDA		$	11,497			$	4,563
% of net sales			24.1	%			12.2	%
Plus: Stock compensation expense			149				267
Adjusted EBITDA		$	11,646			$	4,830
% of net sales			24.4	%			12.9	%

 

Adjusted EBITDA increased $6.8 million, or 141%, to $11.6 million in the quarter ended March 31, 2016, compared to $4.8 million in the same period in 2015.  Adjusted EBITDA as a percent of net sales increased to 24.4% in the first quarter of 2016 from 12.9% in the first quarter of 2015.  EBITDA increased $6.9 million, or 152%, to $11.5 million in the quarter ended March 31, 2016, compared to $4.6 million in the same period in 2015.  EBITDA as a percent of net sales increased to 24.1% in the first quarter of 2016 from 12.2% in the first quarter of 2015.  The foregoing factors discussed in the net sales, cost of sales and selling, general and administrative expenses sections are the reasons for the increase.

 

  

 

 Net Debt

 

We use Net Debt as a supplemental measure of our leverage that is not required by, or presented in accordance with, GAAP. Net Debt should not be considered as an alternative to total debt, total liabilities or any other performance measure derived in accordance with GAAP. Net Debt represents total debt reduced by cash and short-term investments. We use this figure as a means to evaluate our ability to repay our indebtedness and to measure the risk of our financial structure.

 

Net Debt represents the amount that Cash is less than total Debt (excluding deferred debt issuance costs) of the Company. The amounts included in the Net Debt calculation are derived from amounts included in the historical Balance Sheets. We have reported Net Debt because we regularly review Net Debt as a measure of the Company’s leverage. However, the Net Debt measure presented in this document may not be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.

 

Net Debt increased from $71.2 million on December 31, 2015, to $84.9 million on March 31, 2016, primarily as a result of an increase in long-term debt due to additional borrowings for capital expenditures, which was partially offset by an increase in cash primarily due to cash flows from operations in the first quarter of 2016.

 

The following table presents Net Debt as of March 31, 2016, and December 31, 2015:

 

		As of
		March 31,				December 31,
		2016				2015
		(in thousands)
Current portion long-term debt		$	4,214			$	3,882
Long-term debt			87,292				70,357
Total debt			91,506				74,239
Plus: Deferred Debt Issuance Costs			1,387				1,342
Total Cash Required to Settle Debt			92,893				75,581
Less: Cash			(8,039	)			(4,361	)
Net debt		$	84,854			$	71,220

 

ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk

 

There has been no material change in the information provided in response to Item 7A of the Company’s Form 10-K for the year ended December 31, 2015.

 

ITEM 4. Controls and Procedures

 

Our management, under the supervision and with the participation of our chief executive officer and our chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q.  Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.  Based on such evaluation, our chief executive officer and our chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2016.

 

There were no significant changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II.  OTHER INFORMATION

 

ITEM 1.  Legal Proceedings

 

In management’s opinion, as of the date of this report, the Company is not engaged in legal proceedings which individually or in the aggregate are expected to have a materially adverse effect on the Company’s results of operations or financial condition. 

 

ITEM 1A. Risk Factors

 

We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations.   Factors that could materially affect our actual results, levels of activity, performance or achievements include, but are not limited to, those detailed below, those under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC on March 7, 2016, and those in our subsequent filings with the SEC. Such risks, uncertainties and other factors may cause our actual results, performances and achievements to be materially different from those expressed or implied by our forward-looking statements.  If any of these risks or events occur, our business, financial condition or results of operations may be adversely affected.

 

   

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

(a) Unregistered Sales of Equity Securities

 

None.

 

(b) Initial Public Offering and Use of Proceeds from the Sale of Registered Securities

 

None.

 

(c) Repurchases of Equity Securities

 

We do not have any programs to repurchase shares of our common stock and no such repurchases were made during the three months ended March 31, 2016.

 

ITEM 3.

Defaults Upon Senior Securities

 

None.

 

ITEM 4.

Mine Safety Disclosures

 

Not applicable.

 

ITEM 5.

Other Information

 

None.

 

ITEM 6.

Exhibits

 

See the Exhibit Index following the signature page to this Form 10-Q, which Exhibit Index is hereby incorporated by reference herein.

 

 

 

  

SIGNATURES

 

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 thereunto duly authorized.

 

ORCHIDS PAPER PRODUCTS COMPANY
Date: April 29, 2016	By:	/s/ Keith R. Schroeder
		Keith R. Schroeder
		Chief Financial Officer
		(On behalf of the registrant and as Chief Accounting Officer)

 

  

Exhibit Index

 

Exhibit		Description
3.1		Amended and Restated Certificate of Incorporation of the Registrant dated May 17, 2013, incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-Q (SEC Accession No. 0001104659-13-058279) filed with the SEC on July 31, 2013.
3.2		Amended and Restated Bylaws of the Registrant amended May 17, 2013, incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-Q (SEC Accession No. 0001104659-13-058279) filed with the SEC on July 31, 2013.
31.1		Certification of Chief Executive Officer Pursuant to Section 302.
31.2		Certification of Chief Financial Officer Pursuant to Section 302.
32.1		Certification of Chief Executive Officer Pursuant to Section 906.
32.2		Certification of Chief Financial Officer Pursuant to Section 906.
101		The following financial information from Orchids Paper Products Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income for the three months ended March 31, 2016 and 2015, (ii) Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015, (iii) Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015, and (iv) Notes to Consolidated Unaudited Interim Financial Statements.

 

 

 

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