Orchids Paper Product Company (NYSEMKT:TIS) shares plummeted 12% today, extending the twelve months selloff to 70%; volatility in its financial numbers drove the selloff in share price. Orchids Paper Product shares currently trade around the 52-week low price of $9 a share – with the market capitalization of $112 million.
The company has also been struggling to expand its cash position, and they are looking for debt refinancing alternative to support it. Previously, Orchids Paper Product has issued common stock to generate cash for its capital investments and debt reduction.
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Poor Financial Numbers Impacted Stock Price
TIS missed revenue and earnings estimates for the fourth quarter by a wide margin of $1.6 million and $0.06 per share. Its financial numbers for fiscal 2017 were also not convincing, particularly regarding depressed margins and the significant drop in earnings per share.
Its net sales of $162 million in fiscal 2017 declined $2 million from the past year, mainly due to lower sales from converted paper sales.
Its gross profit margin and operating income also declined substantially from the past year period. The company posted the gross margin of $8.7 million in FY2017, down from $30 million in the last year; the company blamed higher costs related to the start-up of Barnwell facility for lower gross margin. Its cost of sales as a percentage of sales jumped to 94.6% from 81.7% in 2016.
SG&A expenses of $11.7 million increased $1.5 million from the year-ago period, while higher debt levels also exploded its interest expense by $3.3 million year-on-year in fiscal 2017.
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Cash Position Declines Significantly
The company’s cash balance declined drastically from the year-ago period, due to its investments in Barnwell facility. Orchids Paper Product ended fiscal 2017 with the cash balance of $3.8 million, down from $8.7 million in the past year period. Despite raising more than $5.2 million in proceeds from the issuance of common stock, the company appears in a poor cash position to pay its short-term debt of $168 million. Thus, the company is looking for external sources to refinance its debt structure.
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