Orient Paper, Inc. Reports First Quarter 2014 Results

            Orient Paper, Inc. Reports First Quarter 2014 Results  PR Newswire  BAODING, China, May 15, 2014  BAODING, China, May 15, 2014 /PRNewswire/ -- Orient Paper, Inc. (NYSE MKT: ONP) ("Orient Paper" or the "Company"), a leading manufacturer and distributor of diversified paper products in North China, today announced its financial results for the first quarter ended March 31, 2014.  Financial Highlights:  US$ million              1Q 2014 YoY Change Revenue                  25.8    30.4% Corrugating medium paper 17.1    35.6% Offset printing paper    7.4     14.3% Digital photo paper      1.3     85.6% Gross profit             4.7     186.5% Gross margin             18.1%   9.8pp Corrugating medium paper 16.0%   7.5pp Offset printing paper    21.4%   13.1pp Digital photo paper      27.5%   24.2pp Operating income         3.8     406.3% Net income               2.5     735.9% EBITDA                   5.7     111.1% Pp represents percentage points  Key Highlights for First Quarter 2014:    oSignificant improvement year-over-year of key financial metrics with an     over sevenfold increase in net income   oPM1 conducting test runs to prepare for trial production. Early completion     of PM1 renovation is expected during the second quarter.   oPM6 monthly annualized utilization reached 80% in March2014   oFull year 2014 guidance unchanged  Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper, commented, "Our first quarter results for 2014 has shown significant improvement on top-line and bottom-line figures. This is largely due to the normalization of operations in the period for both CMP and offset printing paper, which were affected by the county-wide environmental inspection in the first quarter of 2013."  Mr. Liu continued, "In addition, we are pleased to report a successful ramp up of PM6 with a utilization rate of 80% for March after our seasonally slower months of January-February due to the Chinese New Year break and scheduled annual equipment maintenance. This has contributed to the increase of our CMP sales volumes in the quarter, compared to the same period a year. We have also completed PM1 installation and are currently conducting test runs to prepare for trial production before we commence actual commercial production of insulation liner paper."  "Furthermore, we are very pleased to report that, through our continued efforts to optimize the production schedules at our digital photo paper facility since the second half of 2013, we are seeing an increase in digital photo paper production and a 76% growth in sales volumes, while minimizing disturbance to the neighboring residents," added Mr. Liu.  Financial Review:  Quarter ended March 2014 Financial Results compared with quarter ended March 2013  Changes in revenues, sales volumes, and Average Selling Prices ("ASPs") for 1Q 2014 are presented as follows:                                                 YOY    Revenue       YOY    ASP   YOY                          SalesVolumes(Tonnes) Change                Change       Change                                                       (US$millions)        (US$) CorrugatingMediumPaper 45,335                +37.1% 17.1           +35.6% 377   -1.1% Offset Printing Paper    10,860                +14.9% 7.4            +14.3% 678   -0.4% Digital Photo Paper      326                   +76.2% 1.3            +85.6% 3,970 +5.3%  Revenue  Total Revenue in the first quarter of 2014 was $25.8 million, an increase of 30.4% from $19.7 million for the previous year.  Corrugating Medium Paper ("CMP")    oRevenue from CMP increased 35.6% to $17.1 million, representing a 66.4% of     total revenue.   oVolumes sold during the first quarter wereup37.1% to 45,335 tonnes. The     increase is mainly due to the interruption of operation at our Xushui     Paper Mill for government environment protection inspections in February     and March 2013.   oASP dropped slightly (by 1.1%) year-over-year to $377/tonne.  Offset Printing Paper    oRevenue from offset printing paper in the quarter increased 14.3% to $7.4     million, representing 28.6% of total revenue.   oVolumes sold were up 14.9% to 10,860 tonnes. The increase is mainly due to     the interruption of operation at our Xushui Paper Mill for government     environment protection inspections in February and March 2013.   oASP decreased 0.4% year-over-year to $678/tonne.  Digital Photo Paper    oRevenue from digital photo paper increased 85.6% to $1.3 million,     representing5.0% of total revenue.   oVolumes sold increased 76.2% to 326 tonnes, as a result of our continued     efforts to optimize the production schedules at our digital photo paper     facility since the second half of 2013,  while minimizing disturbance to     neighboring residences.   oASP increased 5.3% year-over-year to $3,970/tonne.  Cost of Sales  Cost of Sales in the first quarter of 2014 was $21.1 million, up16.4%, due to declining raw material price and the increased production quantities. CMP cost per tonne decreased from $349 in the first quarter of 2013 to $317 in the first quarter of 2014.  Gross Profit  Gross profit in the first quarter of 2014 was $4.7 million, up193.7% from $1.6 million for the first quarter of 2013. We benefited from the cheaper raw material unit cost and the resulting lower unit cost of sales relative to the very slight drop in product ASPs.  Overall gross margin in the first quarter of 2014 was 18.1%, up from8.3% for the first quarter of 2013. Gross profit margins for CMP, offset printing paper and digital photo paper for the first quarter of 2014 were 16.0%, 21.4% and 27.5%, respectively, compared to 8.5%, 8.3% and 3.3% respectively in the same period last year due to the low utilization of production capacity.  Selling, General and Administrative Expenses  Selling, general and administrative expenses were $908,916 for the first quarter of 2014, compared to$887,166 for the first quarter of 2013.  Income from Operations& Operating Margin  Income from operations was $3.8 million for the first quarter of 2014, up 406.3% from$743,071 for the first quarter of 2013, primarily due to the below-normal level of production activities in the first quarter of 2013 for the government environmental inspection.  EBITDA  Excluding the impact of interest expenses, income tax expenses, depreciation and amortization, EBITDA, a non-GAAP measurement, was $5.7million, up111.1% from $2.7 million. See Note 2 hereto for a reconciliation of Net Income to EBITDA.  Net Income  Net income was $2.5 million, up 735.9% from $303,055. The increase was primarily attributable to the below-normal level of production activities in the first quarter of 2013 for the government environmental inspection. Basic and diluted earnings per share for the first quarter of 2014 were $0.14, compared to $0.02 for the corresponding period of 2013.  Cash, Liquidity and Financial Position  As of March 31, 2014, cash and cash equivalents were $5.8million, compared to $16.6 million twelve months ago.  As of March 31, 2014, we had $31.5 million of current assets and $32.2 million of current liabilities (including $2.3 million of various related party payables), resulting in a working capital deficit of$648,599. As of March 31, 2014, shareholders' equity totaled $162.2 million, compared to $161.1 million at the end of 2013.  Operations and Business Updates  PM1 Modernization Plan  We have completed the installation of the new PM1 and are now conducting test runs to prepare for trial production of insulation liner paper. As announced earlier, Orient Paper has voluntarily shut down PM1 as part of its facility upgrade plan. The modernization plan is to convert PM1 into a more energy-efficient production line, producing insulation liner paper, which is used to sandwich certain insulation materials as a construction material for wall and floor insulation. Revenue contribution from PM1 when operation commences is expected to be in the range of between $7 million to $9 million for 2014.  Tissue Paper Expansion (PM8 and PM9)  Building of the factory and other infrastructures for the tissue paper production facilities located in the Wei County Industrial Park in Hebei Province is largely completed while installation of PM8, the first 15,000 tonnes-per-year production line is underway with expected completion on or before the end of the second half of 2014.  The Company has also started planning for the installation of PM9, the second 15,000 tonnes-per-year tissue paper production line. If cash flow permits, installation could start by the end of the year, with a target to roll out production by the second half of 2015.  Outlook  Industry analysts expect market demand to remain around the same pace as the last quarter, while continued action by the government to eliminate outdated capacity would help to curb surplus capacity in certain sectors in the paper industry. Raw material prices for domestically sourced recycled paper may remain lower but may show some volatility going forward, as paper mills in China attempt to reduce the imported OCC and take advantage of the domestic recycled paper.  Looking ahead, the Company intends to maintain strong operating cash flows, look for opportunities to restructure its short term liabilities, and to best utilize its available cash to support our investments and expansion. We plan to achieve this in the remaining quarters of the year by executing our business strategy. This includes the ramp up of PM6, commencing commercial production of the renovated PM1 and ramping up production thereafter. At the same time, we believe our future growth lies very much in our tissue business expansion and we would strive to complete the installation and launch of PM8 by the end of the year within our available resources.  2014 Guidance  The Company is maintaining its full year guidance for 2014, with revenue ranging between $146 million and $161 million, gross profit to be between $27 million and $30million, net income to be between $15million and $17million, and basic and diluted earnings per share between $0.81and $0.90.  Conference Call  Orient Paper's management will host a conference call for institutional and retail investors at 8:30 am US Eastern Time (5:30 am US Pacific Time/8:30 pm Beijing Time) on Friday, May 16, 2014, to discuss its quarterly results and recent business, operational and corporate activities.  To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time:  Mainland China:  400-120-0654 Hong Kong:               800-903-737 United States:                 1-855-500-8701 International:              +65-6723-9385 Passcode:               32473080  A replay of this conference call will be available by dialing:  Mainland China:  400-632-2162 / 800-870-0205 Hong Kong:               800-963-117 United States:                 1-855-452-5696 International:              +61-2-9003-4211 Passcode:            32473080  The replay will be archived for fifteen days following the earnings announcement until May 31, 2014.  This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://www.orientpaperinc.com. Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. A replay will be archived for one year shortly after the call by accessing the same link.  About Orient Paper, Inc.  Orient Paper, Inc. ("Orient Paper") is a leading paper manufacturer in North China. Using recycled paper as its primary raw material, Orient Paper produces and distributes three types of paper products namely, packaging paper (corrugating medium paper), offset printing paper, and other paper products, including digital photo paper, and household/tissue paper that the company is currently expanding into.  With production operations based in Baoding in North China's Hebei Province, Orient Paper is located strategically close to the Beijing and Tianjin region, home to a growing base of industrial and manufacturing activities and one of the largest markets for paper products consumption in the country.  Orient Paper's production facilities are controlled and operated by its wholly owned subsidiary Shengde Holdings, Inc., which in turn controls and operates Baoding Shengde Paper Co., Ltd., and Hebei Baoding Orient Paper Milling Co., Ltd for manufacturing digital photo, printing and packaging paper.  Founded in 1996, ONP has been listed on the NYSE MKT Board since December 2009. (Please visit http://www.orientpaperinc.com.)  Note 1: Production Facilities of Orient Paper                                Designed Capacity PM#  Paper Product                              Location                               (tonnes/year) PM1* Insulation liner paper   50,000            Xushui County, Baoding city,                                                 Hebei PM2  Offset printing paper    50,000 PM3  Offset printing paper    40,000            province PM4  Digital photo paper      2,500             ONP's Headquarters Compound PM5  Digital photo paper      2,500** PM6  Corrugatingmediumpaper 360,000           Xushui County, Baoding city,                                                 Hebei PM7* Specialty paper          10,000                                                 province PM8* Tissue paper             15,000            Economic Development Zone in                                                 Wei PM9* Tissue paper             15,000                                                 County, Hebei Province   *: Paper machines under renovation or under construction, or in the planning stage.  **: PM4 and PM5 have a total coating capacity of 2,500 tonnes per year.    Note 2:    Reconciliation of Net Income to EBITDA  (Amounts expressed in US$)                                      For the Three Months Ended (in millions)                                    March 31                                    2014          2013 Net income                         $     2.5          0.3 Add: Income tax                          1.0          0.2 Add: Net interest expense                0.3          0.2 Add: Depreciation and amortization       1.9          1.9 EBITDA                             $     5.7          2.7  Safe Harbor Statement  This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, anticipated revenues from the digital photo paper business segment; the actions and initiatives of current and potential competitors; the Company's ability to introduce new products; the Company's ability to implement the planned capacity expansion of tissue paper; market acceptance of new products; general economic and business conditions; the ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the Company's filings with the Securities and Exchange Commission. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the companies and the industry. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.  ORIENT PAPER, INC.  CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME  FOR THETHREE MONTHS ENDED  MARCH 31, 2014 AND 2013  (Unaudited)                                          ThreeMonthsEnded                                        March 31,                                        2014             2013 Revenues                               $ 25,753,864     $ 19,746,656 Cost of Sales                            (21,083,028)     (18,116,419) Gross Profit                             4,670,836        1,630,237 Selling, general and administrative                                          (908,916)        (887,166)  expenses Income from Operations                   3,761,920        743,071 Other Income (Expense): Interest income                          5,397            18,993 Interest expense                         (275,292)        (226,325) Income before Income Taxes               3,492,025        535,739 Provision for Income Taxes               (958,731)        (232,684) Net Income                               2,533,294        303,055 Other Comprehensive Income: Foreign currency translation                                          (1,375,490)      963,574  adjustment Total Comprehensive Income             $ 1,157,804      $ 1,266,629 Earnings Per Share: Basic and Fully Diluted Earnings per                                        $ 0.14           $ 0.02  Share Weighted Average Number of Shares Outstanding- Basic and Fully Diluted    18,753,900       18,459,775    ORIENT PAPER, INC.  CONDENSED CONSOLIDATED BALANCE SHEETS  AS OF MARCH 31, 2014 AND DECEMBER 31, 2013  (Unaudited)                                                                                March 31,         December31,                                                                              2014              2013 ASSETS Current Assets Cash and cash equivalents                                                    $ 5,840,226       $ 3,131,163 Restricted cash                                                                4,494,418         2,454,108 Accounts receivable (netofallowancefordoubtfulaccountsof  $59,435and $67,592 as of March 31, 2014 and December                    2,912,313         3,327,494  31, 2013, respectively) Inventories                                                                    12,894,835        11,428,405 Prepayments and other current assets                                           876,768           1,068,031 Assets held for sale                                                           4,096,411         4,130,590 Deferred tax assets- current                                                  410,115           413,537 Total current assets                                                           31,525,086        25,953,328 Prepayment on property, plant and equipment                                    1,479,751         1,492,098 Property, plant, and equipment, net                                            177,961,502       178,535,259 Recoverable VAT                                                                3,129,650         3,277,188 Deferred tax asset- non-current                                               103,806           268,329 Total Assets                                                                 $ 214,199,795     $ 209,526,202 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-term bank loans                                                        $ 6,490,135       $ 6,544,288 Current portion of long-term loan from credit                                                                                1,646,872         1,660,613 union Current obligations under capital lease                                        8,193,163         8,264,795 Accounts payable                                                               964,263           926,571 Notes payable                                                                  9,086,189         4,908,216 Security deposit from a related party                                          1,622,534         1,636,072 Due to a related party                                                         104,576           64,546 Accrued payroll and employee benefits                                          432,920           498,010 Other payables and accrued liabilities                                         1,730,466         2,651,472 Income taxes payables                                                          1,902,567         1,218,140 Total current liabilities                                                      32,173,685        28,372,723 Loan from credit union                                                         4,218,588         4,253,788 Loan from a related party                                                      2,369,859         2,389,633 Deferred gain on sale-leaseback                                                1,035,603         1,160,271 Long-term obligations under capital lease                                      12,191,108        12,296,639 Total liabilities                                                              51,988,843        48,473,054 Commitments and Contingencies Stockholders' Equity Commonstock,500,000,000sharesauthorized,$0.001parvalue  per share, 18,753,900 and 18,753,900 shares issued and                   18,754            18,754 outstandingasofMarch31,2014andDecember31,2013,respectively Additional paid-in capital                                                     46,909,543        46,909,543 Statutory earnings reserve                                                     6,038,406         6,038,406 Accumulated other comprehensive income                                         15,770,818        17,146,308 Retained earnings                                                              93,473,431        90,940,137 Total stockholders' equity                                                     162,210,952       161,053,148 Total Liabilities and Stockholders' Equity                                   $ 214,199,795     $ 209,526,202    ORIENT PAPER, INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013  (Unaudited)                                                                                                    Three Months Ended                                                                                                  March31,                                                                                                  2014            2013 Cash Flows from Operating Activities: Net income                                                                                       $ 2,533,294     $ 303,055 Adjustments to reconcile net income to net cash provided byoperatingactivities Depreciation and amortization                                                                      1,938,794       1,932,853 Recovery from bad debts                                                                            (7,654)         (9,285) Deferred tax                                                                                       163,509         50,058 Changes in operating assets and liabilities: Accounts receivable                                                                                398,185         463,799 Prepayments and other current assets                                                               305,382         1,012,752 Inventories                                                                                        (1,572,609)     669,641 Accounts payable                                                                                   45,697          321,979 Notes payable                                                                                      4,249,964       (557,600) Accrued payroll and employee benefits                                                              (61,855)        (88,404) Other payables and accrued liabilities                                                             (866,457)       113,080 Income taxes payable                                                                               699,672         161,728 Net Cash Provided by Operating Activities                                                          7,825,922       4,373,656 Cash Flows from Investing Activities: Purchases of property, plant and equipment                                                         (4,703)         (2,888) Payment for construction in progress                                                               (2,960,341)     (1,319,122) Net Cash Used in Investing Activities                                                              (2,965,044)     (1,322,010) Cash Flows from Financing Activities: Proceeds from related party loans                                                                  123,500         358,197 Repayment of related party loans                                                                   (123,500)       (358,197) Payment of capital lease obligation                                                                (6,039)         - (Increase) Decrease in restricted cash                                                             (2,075,943)     278,800 Net Cash (Used in)Provided by Financing Activities                                                (2,081,982)     278,800 Effect of Exchange Rate Changes on Cash and Cash Equivalents                                       (69,833)        99,254 Net Increase in Cash and Cash Equivalents                                                          2,709,063       3,429,700 Cash and Cash Equivalents - Beginning of Period                                                    3,131,163       13,140,288 Cash and Cash Equivalents - End of Period                                                        $ 5,840,226     $ 16,569,988 Supplemental Disclosure of Cash Flow Information: Cash paid for interest, net of capitalized interest cost                                         $ 111,290       $ 62,833 Cash paid for income taxes                                                                       $ 95,550        $ 20,899  SOURCE Orient Paper, Inc.  Website: http://www.orientpaperinc.com Contact: Orient Paper, Inc., 1-562-818-3817, ir@orientpaperinc.com or FleishmanHillard, +852-2530-0228, ir@orientpaperinc.com