Orchids Paper Products' (TIS) CEO Jeffrey Schoen on Q4 2015 Results - Earnings Call Transcript

| About: Orchids Paper (TIS)

Orchids Paper Products Company (NYSEMKT:TIS)

Q4 2015 Earnings Conference Call

February 4, 2016 10:00 AM ET

Executives

Jeffrey Schoen - President, Chief Executive Officer, Director

Keith Schroeder - Chief Financial Officer

Analysts

Philip Ng - Jefferies LLC

Louie Toma - Craig-Hallum Capital Group

Marco Rodriguez - Stonegate Capital Markets

Michael Taglich - Taglich Brothers, Inc.,

John Nobile - Taglich Brothers, Inc.

Operator

Good morning and welcome to the Orchids Paper Products Fourth Quarter 2015 Earnings Conference Call.

On the call today are Jeff Schoen, President and Chief Executive Officer; and Keith Schroeder, Chief Financial Officer. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions [Operator Instructions]. Please note this event is being recorded.

I would now like to turn the call over to Keith Schroeder.

Keith Schroeder

Thank you, operator. Good morning and thank you to everyone for attending our 2015 fourth quarter earnings call. The agenda for our call today will begin with my review of the fourth quarter results. Jeff, will then provide his perspective on our results and on our business environment. We will conclude with a question-and-answer session.

I would like to remind you that certain statements made during this conference call are forward-looking statements within the Private Securities Litigation Reform Act of 1995 as amended. These forward-looking statements are based upon current expectations, estimates, assumptions and projections that are subject to change and actual results may differ materially from the forward-looking statements.

Factors that could cause actual results to differ materially include those risk and assumptions and uncertainties described from time-to-time in our filings with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2014, and Forms 10-Q for the quarters ended March 31, June 30 and September 30, 2015, as well as our earnings release and any supplemental information.

Any forward-looking statements are made only as of this date, and the Company assumes no obligation to update any forward-looking statements. I would like to point out that during my remarks, I’ll be making reference to both GAAP and non-GAAP or adjusted results. The adjusted results exclude certain charges that we believe are not indicative of our core operating performance.

The reconciliation between GAAP and non-GAAP measures is included in our earnings release which is available on our website. For the fourth quarter of 2015 these adjustments to EBITDA include 270,000 of non-cash stock compensation and for the 2014 quarter include $2,700,000 of non-cash stock compensation and $193,000 of demolition costs related to our Oklahoma paper machine project.

The full-year 2015 period includes $1 million of non-cash stock compensation expense while the prior year period includes $1.9 million of non-cash stock compensation expense, $1.6 million in acquisition expenses and $400,000 of equipment and demolition costs.

So with that, let’s get to the highlights. We are pleased to announce that we establish multiple annual records with our performance in the fourth quarter. The records established were annual records for net sales at $168.4 million, converted product sales of $161.1 million, adjusted EBITDA of $32.4 million and adjusted net income of 13.8.

Now for some details. Net sales for the fourth quarter increased by 1% to $41.9 million. Converted product sales were $40.2 million and 3% decrease when compared to the prior year’s quarter. As disclosed on our press release, net sales were adversely affected in the fourth quarter following an incident in one of our major converting lines.

This incident in the face of the strong open order book resulted in bottlenecks on certain product types, which resulted in lower shipments. The line was placed back into service in mid-December and it is now running essentially at pre-incident levels.

This was an insurable loss from both the property, casualty and business interruption perspective. We estimated approximately 300,000 cases of lost shipments in the quarter due to the interruption were about $4 million in net sales, which we anticipate will result in a claim approximately $1 million.

Let me clear, none of this business interruption claim was recognized in our 2015 earnings. Parent roll shipments in the quarter totaled 1,753 tons, which is compared to no shipments in the 2014 quarter due to the decommissioning in 2014 of two paper machines related to our paper machine projects in Oklahoma.

Parent roll shipments in the current year quarter were reduced as we built some parent roll inventory for the Barnwell start-up. On a sequential quarter basis, net sales were lowered by approximately $5 million or 10%. Converted product sales were lowered by approximately $3.5 million or 8% due to the converting line incident.

Net selling prices per ton compared to Q3 were up about 1%. Parent roll sales were lowered by about 1,400 tons primarily due to the previously discussed inventory build for the Barnwell converting plant start-up. As a reminder, the converting production in Barnwell will be supported by either utilizing our own internally produced parent rolls to the extent that they are available or by purchasing parent rolls on the open market until the paper machines begins production in early 2017.

On a year-to-date basis, the previously mentioned record converted products sales were influenced by both the full-year effect of the Fabrica transaction which closed in June of 2014 and higher shipments from Oklahoma facility.

Again, the full-year converted product shipments from Oklahoma were hampered by the converting line incident in Q4. For the year, converted product sales were up 18% and a 24% increase in tonnage shipped being somewhat offset by a 5% decrease in net selling prices. As discussed in earlier calls, net selling prices are lower on a year-over-year basis into the full-year effective sales under these supply agreements and due to some changes in our product mix.

Gross profit for the fourth quarter was $8.1 million, an increase of $1.7 million or 26% over prior year quarter. Gross profit margin for the quarter was 19.4% compared to 15.6% in the prior year quarter. Margins in the prior quarter were reduced due to the effect of the paper machine project in Oklahoma which reduced our production and increased our operating costs.

Gross profit margin in the current year quarter were aided by improved margins under our supply agreement and lower production costs in our paper making operation. These improvements were somewhat offset by higher fiber costs, higher converted product production costs, and higher depreciation. The continued strong U.S. dollar coupled with some SKU rationalization earlier in 2015 up improved margins under the supply agreement. Our paper machine project in Oklahoma continues to provide the expected returns with lower production cost that’s 20% when excluding changes in fiber.

Turning to fiber, the current forecast for recovered fiber are relatively flat pricing to the end of 2016. Forecast for virgin fiber indicate relatively flat pricing from eucalyptus through the end of 2016 and some minor increases in NBSK.

On a year-to-date basis, our gross profit increased $3.8 million or 14%. Our gross profit margin in 2015 period was 18.1% which was lower than 18.9% experienced in last year primarily due to the effects of the Oklahoma paper machine project on our results for the first quarter of this year which we discussed in our previous conference calls. Higher fiber prices, higher converted production costs and some higher depreciation.

The previously discussed factors with the expectation of depreciation resulted in an increase in adjusted EBITDA in 2015 quarter of 39% to $9 million and adjusted EBITDA margin of 21.4% compared to the prior year quarter. This brings our year-to-date adjusted EBITDA to $32.4 million or 19.3% of net sales.

SG&A in the fourth quarter was $2.4 million or 5.6% of net sales compared with SG&A in the prior year of $3.6 million or 6.3% of net sales. SG&A decreased primarily due to lower sales commissions due to customer mix.

Now turning to our taxes, our effective rate for the full-year is estimated at 30.9%, this estimate is lower than our estimates at the end of the third quarter due to the adoption by Congress in the fourth quarter several tax expenders including the Indian Employment Credit, which is extended for both 2015 and 2016 and due to higher state investment tax credits were previously estimated. Per GAAP we are not allowed to record the effects of the any employment credit until it was made law.

Now turning to the balance sheet and cash flow. During the quarter, we entered into a new market tax credit transaction which provided funding from the Barnwell expansion project. The affects of this transaction was total of $16 million of barrowings in which $11 million was provided by U.S. Bank and approximately $5 million was provided by a New Market Tax Credit CDE. As a result, our syndicated loan for the Barnwell project was reduced by a like amount, so overall borrowings will remain flat for the project.

The effects of the transaction are very positive for Orchids as we were provide a fixed rate loans at a weighted average interest rate of around 3.5% for a minimum of seven years. Also the $5 million of borrowings by CDE can be put to Orchids for $1,000 after seven years.

Cash flow operations in the quarter was $5.6 million. Cash flow from operations are mainly affected by increased income taxes receivables, higher parent roll inventory and higher prepaid expenses. The higher income tax receivable as a result of ratification by Congress for the bonus depreciation provision in the fourth quarter of this year which was a significant portion of our income tax expense from current to deferred.

Inventories increased primarily due to the previously discussed build-up of parent roll inventory to support the Barnwell’s start-up being somewhat offset by lower finished goods inventory due to the converting line incident. Prepaid increased due to the classification of repair items covered by our property and casualty insurance on the converting line incident.

Our capital expenditures totaled $63 million for the year and $27.5 million in the quarter. Our capital expenditures from Barnwell are $42 million for year and $25 million for the quarter. Our total debt outstanding as of December 31 was $75.6 million including the new market credit transaction. There were no amounts outstanding on the revolving credit line.

Net debt outstanding as of December 31, 2015 was $71.7 million. Our fixed charge coverage ratio was 2.34-to-1 and our funded debt to EBITDA ratio was 2.33-to-1. We returned $3.6 million of cash to shareholders in the quarter, including the year-to-date total of 13.8.

Now, I will turn to the outlook for 2016. We normally do not provide sales, forecast, our guidance I’ll elaborate with the start-up of the converting plant in Barnwell in 2016 we thought it prudent to provide a range of sales. Our current estimate of net sales for 2016 has been $185 million and $195 million.

EBITDA margins will be affected on a quarter-by-quarter basis due to the start curve of the converting lines in Barnwell. Also during the entirety of 2016 will be supporting the parent roll requirements for Barnwell by providing a combination of excess parent rolls from Oklahoma and purchases of parent rolls. As a result margins on the products produced in Barnwell during 2016 will be reduced until the paper machine starts up in early 2017.

We expect cash flow from operations being $7 million to $8 million per quarter range and some quarters may be affected by small inventory builds as we start up Barnwell. For 2016, we are anticipating total capital expenditures around $96 million comprise approximately $90 million for Barnwell and $6 million for Oklahoma facility.

I will now turn the call over to Jeff.

Jeffrey Schoen

Thanks, Keith. Good morning everyone. As we look forward into 2016 I must give brief comments. As Keith discussed year-over-year sales and EBITDA improved by about 20% this occurred within a very competitive environment and as we were executing a major capital expansion in the form of a new paper machine and converting line in the Pryor facility. The results of these projects were 20% improvement in overall cash production cost per ton excluding fiber.

Looking back for a second the machine event that negatively impacted sales in Q4 is behind us. Notwithstanding this event we had strong sales opportunities in Q4 due to the programs we have developed and executed with our customers throughout 2015. These opportunities are still with us and even though we lost sales opportunities we view those as a temporary setback as we have not lost customers and are still in a strong order position for the first quarter.

We delayed some new product rollouts that will get back on track in Q2 as we ramp up Barnwell and continue to improve efficiencies in Pryor. The Barnwell expansion is on track to start shipping product in early March as we enter the start-up pace of the new converting line.

We are very pleased with the execution of this project to date and look forward to a strong start in Barnwell as we have new business to source the converting line as it progresses on it start-up curve. We expect to be in full production on that line by the end of Q2 equating to about 2 million cases of capacity dependent on mix and search capacity retained. We add new business in the pipeline to help ensure a solid ramp up.

The second converting line will start-up in late Q2, we will be in full production on all lines by the end of Q4. The paper machine is also on track as we expected this start-up in the first quarter of 2017. The paper machine is designed to provide significant competitive advantages from both the product design and the cost standpoint we eagerly anticipated start-up.

With that, I will now turn the call back to the operator for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Philip Ng of Jefferies. Please go ahead.

Philip Ng

Hey, good morning guys. Can you talk about how much of that new capacity that you are bringing on in Barnwell between – I am sorry at Barnwell between the new converting lines and the paper capacity? How much of that it’s committed at this point and give any color on the progress you're making penetrating the growth [can be in this] store channel? Thanks.

Jeffrey Schoen

We have gained new business with existing customers on the East Coast, difficult for me to talk about what that looks like relative to being sold out because the line will be in start-up so relative to that I expect us to sellout as we ramp it up. We also have pipeline stuff that is going to be sold in this quarter, which will support that line as well but we are in the process of doing that. So its difficult for me to guarantee anything given we’re still in selling phase for that particular line.

Philip Ng

Got it. All now its sounds like it’s progressing as plan?

Jeffrey Schoen

It’s progressing as planned.

Philip Ng

Okay. That’s helpful. And the revenue per ton picked up this quarter and you called out away from home prices increase. But can you talk about how the competitive activity has been shaking out in light of some of the new capacity that’s coming on I know it's more focused on the parent roll side, but any color on pricing would be helpful?

Jeffrey Schoen

The capacity that you’re talking about hasn’t really come on yet from our perspective. We are not seeing that type of pressure at this point. Our focus is on adding in new types of products and increasing our selling prices through that factor. Of course, everybody who is paying attention to the space knows that there is new capacity that’s coming on late this year or early next year. And we believe that will have an influence on selling prices per ton as people try to sell that capacity.

We have a strategy, we believe that helps come back that which will be focused on, but for any existing business I think anybody out there – if all you do is compete on price, you will see selling prices go down, you’ve got to have a strategy that does some other things from a selling perspective to offset that.

Philip Ng

Okay. And is that strategy is more so function of how you guys are fairly integrated? Is that how we should be thinking about the strategy?

Jeffrey Schoen

I think one of things we try to do with workers in the last couple of years is improve our capabilities to meet market needs and ways that other people aren’t meeting them. So I think that's a big factor. The assets we’re putting in place are world class, they allow us to do different things with products and we have been able to do in the past and we will be taking advantage of those capabilities as we grow our paper capacity as well as our converting capacity.

Philip Ng

Okay. And just one last one for me, should we expect some of the working capital headwinds you called out in 2015 reverse this year and CapEx released for 2016 seems you are running a little higher than we expected or some of the investments in terms of the costs ramping up some of the Greenfield capacity attract little higher than you thought? Thanks.

Keith Schroeder

Okay. So this is Keith. I’ll answer those questions. The first one is yes. The headwinds that we called out in the first and the fourth quarter will be a tailwind going forward. With the change in the Barns depreciation or I guess to say the enactment of the Barns depreciation. In the fourth quarter, we ended up in overpaid position for 2014.

So that will affect, it will possibly affect our cash flow in the first half if you will in 2016 and plus some of the parent roll build that we did which was another factor that has less parent rolls that we have to buy during this start-up phase. We build over 2,000 tons of inventories, so that should last us here three or four months or into the first three or four months of the start-up phase.

Philip Ng

And then on CapEx?

Keith Schroeder

Okay. That's mostly timing we are just maybe just a tad over, but I think overall I think there are still some guidance that we gave you, there are still some capital expenditures that will fall over into 2017. But overall, the project may come in just a bit over where we thought and nothing that large it all.

Philip Ng

Okay. All right. Very helpful, thanks.

Operator

Our next question will come from Louie Toma from Craig-Hallum Capital Group. Please go ahead.

Louie Toma

Hi guys. I just had a couple of questions. Can you give us a little bit of insight given the new capacity coming online, how we should be modeling gross margins and EBITDA margins throughout the quarters?

Keith Schroeder

Well, I think not in terms – if you are talking about in the short-term, well I think it was modeling our results and finding the focus is much on the fact that we will be buying parent rolls either or I assume if we are going to using our internal parent rolls to support the Barnwell start-up to the extent that are available or we’ll be buying parent rolls.

And so that will put a reduction on those margins of the sales out of South Carolina for the first year and that’s [indiscernible] starts up in 2017. As far as the timing of any price pressures on any new capacity coming online, well we can't say exactly when that would start to be expelled.

Jeffrey Schoen

And I think another way of maybe thinking about this. Historically, when you have a business that just runs parent rolls, your margins get cut in half versus an integrated mill. We don't think it will be that much because the model we’re putting into Barnwell, we are not adding a lot of SG&A to do that so to speak. So we think that will be a little bit better than that.

Now, when we use our own parent rolls it's really our cost structure plus rate to get it there is what we pay for that. So in an environment where we could support Barnwell with all of our excess parent roll capacity that would help that scenario, of course that's really not my goal, my goal was to set-up that parent roll capacity at Pryor and then put us in a position we have to buy on the outside.

So it’s kind of equation of – can we get more parent rolls out of our facility in Pryor that are excess compared to what we need to support Pryor. That would be a great goal. That’s what we are focused on. So I’ll try to give you a little bit perspective. That's why I’d think about it.

Louie Toma

When we look at it for the whole year, last for 2015 you had gross margins of 18%, is it reasonable to think that they would be at that range or below it or above it just in terms of the whole year and putting everything in perspective?

Keith Schroeder

For the whole year I would anticipate a little bit of a pressure on those margins. Again because you have at the start-up curve do you have it’s not anything like the paper machine project in fact we had here of course during 2015 and in the end of 2014, but when you have your plan it’s on the first start-up we still have all people so the production ramps over roughly three-month of so timeframe and then we are buying parent rolls. So what we would expect to see in the early parts of the year would be a little bit of – put pressure on those margins and then as the lines come up to full speed and we are starting to sell those out then the margins will start to come back.

Jeffrey Schoen

Of course all things has been equal, Keith is right. However, I tell people all the time, but I still believe we have a lot of costs to kick out of Pryor. So we want to try to balance that and we have improvement opportunities of Pryor that we expected to help offset some of that deterioration you will see because of Barnwell.

Louie Toma

Got it. Thank you. And just lastly given the taxes for this quarter and then Jeff you mentioned should we expect a 31% tax rate similar type of tax rate for the full-year of 2016?

Jeffrey Schoen

I would model really was a 32% tax rate.

Louie Toma

Great. Thank you very much.

Jeffrey Schoen

You’re welcome.

Operator

Our next question will come from Marco Rodriguez from Stonegate Capital Markets. Please go ahead.

Marco Rodriguez

Good morning guys. Thank you for taking my questions. I had a few questions, one follow-up here in regard to the previous questions on margins. I understand the gross margin impact; you are having a little bit come off. I’m just trying to get a little bit better sense as far as the magnitude are we talking 100 basis points, 200 basis points how should we kind of think through that?

Keith Schroeder

You would probably look at maybe a 100 basis points or so during the first part of the year.

Marco Rodriguez

Gotcha. And then clarification on the commentary about I think you might have been talking about when you're running completely parent roll you lose margins by about a half, so I’m just trying to get a clarification there. So if Barnwell in a normalize states running about 20% EBITDA margins. Is the expectation there that you might be running somewhere in the mid-teens until you get fully ramped up?

Keith Schroeder

Cut that between 10% and 15% is probably that just a way for me to say that.

Marco Rodriguez

Gotcha. And then in terms of the CapEx, can you give us a sense as far as how that spend will progress through the year?

Jeffrey Schoen

We don't have that handy, Marco I can follow-up with you right after the call.

Marco Rodriguez

Gotcha, okay. We will do that. And then last quick question I’ll jump back in the queue. In terms of Barnwell some nice color in terms of when the launch is starting up in the paper machine. Can you kind of give us a sense maybe from a timing perspective I know you talked about a little bit here, but the capacity that’s coming online how quickly can it come online and when do you think you can get operational at full capacity there if you will?

Jeffrey Schoen

Well, I think the first line will be a full capacity by the end of second quarter, I mean obviously we want to do it better we actually have a record of doing it better. But it’s a new line you got brand-new people; you got brand-new everything in the facility. So you have to build the team, educate the team it may take a little bit longer of course it could also happen shorter.

So certainly by the end of this year we’re at full capacity. So our salespeople are excited to go sell the stuff out and really its – the ability to sell against our ramping goes for the new lines is what our approaches to this and so managing that process of keeping the lines loaded up, while we’re ramping it up is that the challenge that we have in front of us.

Marco Rodriguez

Gotcha. That’s helpful. Last quick question. The incident that happened in Q4 on the line there were there any injuries?

Jeffrey Schoen

No, no.

Marco Rodriguez

Gotcha. All right great. Thanks a lot guys.

Jeffrey Schoen

It impacted the sectional machine there were no injuries and there was no damage outside of that particular part of the machine.

Marco Rodriguez

Perfect. Appreciate it guys.

Jeffrey Schoen

Thank you.

Operator

Our next question will come from Michael Taglich of Taglich Brothers. Please go ahead.

Michael Taglich

Good morning guys. I thought that was a good quarter. I have two quick questions and thanks for working hard. First one is the – the Q4 incident the – is the $0.06 a pre-tax number or post-tax numbers for us the pro forma if you would?

Keith Schroeder

That’s a post-tax number.

Michael Taglich

Post-tax okay great that’s better okay. And if I look at Q4 you ended a year balance sheet how much of you know I’m looking from enterprise value standpoint how much that the backout that is in assets that are not yet generating cash flow, specifically in your line?

Keith Schroeder

Well actually just the borrowings on the Barnwell project are – it’s around $45 million I believe yes…

Michael Taglich

Right so I got $45 million in capital but I sort of backout of my balance sheet because it producing the return my enterprise value?

Keith Schroeder

Correct.

Michael Taglich

Right, okay. All right great good quarter. I am looking forward to seeing you guys at the year. Thanks.

Jeffrey Schoen

Thanks, Michael.

Operator

[Operator Instructions] Our next question will come from John Nobile of Taglich Brothers. Please go ahead.

John Nobile

Hello, good morning. Just a couple of questions a lot of them were answered. But I wanted to talk about the parent rolls in the fourth quarter I know as they were a little over 1,700 tons. I was little surprised at that given the reduced level of converted sales. I was hoping you could talk a little bit about that should I make the assumption that it’s all because these are going to Barnwell or was this something that might have happened in this?

Keith Schroeder

For the most part John it’s we ended up, our decision was that we try and sell a lot of parent rolls in the fourth quarter which hasn’t had ideal time that would really dump a bunch of parent rolls on the market or do we go ahead and keep in an inventory for Barnwell. So we build 2,500 tons or so of inventory. So that’s really that driving back.

John Nobile

Okay and I know you talk about it in terms of cases 300,000 cases that were a shortfall in the fourth quarter. I was hoping you could actually convert that to tonnage because I know you talk about tonnage shipped but then you talk about cases with the shortfall. So I just want to compare apples-to-apples and find out what is 300,000 cases that was in tonnage, you said it was about $4 million equated to on revenue is that correct?

Keith Schroeder

That is correct.

John Nobile

Okay.

Keith Schroeder

In terms of tons John it’s just over 2,000 tons.

John Nobile

Okay slightly more than 2,000 tons. And how much because you did mention it was until Q1 that you got to the pre-production rates before the incident so. Q1 is going to be affected by this I am just curious if you could quantify how much you believe Q1 will be affected by that lost converted production in tonnage if you could give me that would be great?

Keith Schroeder

Well, we’re not really prepared to do that in that for the most part it’s not going to be a significant number at all like we had in the fourth quarter. Because the fourth quarter was really loss sales the line did come up and start running, it was running at a fairly high percent of its pre-incident levels when it came backup and certainly not up to 100%. So starting a week or so ago I guess to give the exact date it was pretty much back of full rates, so we are not going to see a huge effect in the first quarter like we saw in the fourth quarter.

John Nobile

Okay. But there will be somewhat of an effect in the first quarter.

Jeffrey Schoen

Maybe small amount, yes.

John Nobile

Okay. And run rates, Fabrica and Oklahoma converted tonnage what would you say would have it as a current run rate on an annual basis right now considering the converting line as back to where it should be?

Keith Schroeder

At the last call we gave guidance around 90,000 tons and we’re still in that range.

John Nobile

Okay, which is equating to your $185 million to $195 million in revenue.

Keith Schroeder

Correct.

John Nobile

Just one final question with the Fabrica you have an option to purchase 7,700 additional tons, now that’s going to end in the second half of this year, so that’s going to drop you down to I guess about 19,800 if I recall correctly with the Fabrica versus like you are doing in the low to mid-20s now. I was curious, is there any chance that this agreement could be extended or does it look like it's definitely going to be kept that I think 19,800 tons coming in Q3 to Q4 this year?

Jeffrey Schoen

We are very confident the agreement will be extended in fact we want to continue to grow it. I mean our partnership with Fabrica is not based on this; it’s based on growing the West Coast. So we are not concerned about that at this point.

John Nobile

Okay. But will you make public?

Jeffrey Schoen

We got better plans for the West Coast and just this particular agreement.

John Nobile

Okay. Although that is significant 7,700 additional tons, so I was just hoping that you might be out there publicly when this indeed does happen, you feel confident, but I just want to see that as a done deal hopefully soon.

Jeffrey Schoen

Yes, understood.

John Nobile

All right. Thank you.

Operator

Our next question will come from [indiscernible]. Please go ahead.

Unidentified Analyst

Good morning. I have a couple of questions. My first one is in the last couple of quarters going back to the second quarter and again in the third quarter; we spoke about longer-term goals of $60 million in EBITDA and 250 to 340 in earnings per share. Is that still intact? Is anything changed as far as that long-term forecast?

Jeffrey Schoen

Nothing has changed regarding that long-term forecast. We are still committed to that. Nothing has changed.

Unidentified Analyst

Okay. And then my second question is I’m trying to get my arms around the negative reaction to the stock this morning, if I take the estimates that were on the Street the consensus would it be an assumption – I assume that if we add back in the $0.06 from the lost business and the potential of the lost revenue from the incident in Oklahoma that we actually would have beat numbers both on the revenue and on the earnings line?

Jeffrey Schoen

Yes. Michael that’s the way I look at it, we are not having incident, our sales numbers would have been right at or over Street estimates and our earnings per share would've been over Street estimates. So really all-in-all I think it’s a really good quarter.

Unidentified Analyst

Right. What it look like, so yes that’s why I was just trying to get my arms around, stocks down almost 3 points, it’s a little I guess an overreaction to say it just to put it lightly. Okay, so thank you very much and keep up the good work.

Operator

Our next question is a follow-up from Louie Toma from Craig-Hallum Capital Group. Please go ahead.

Louie Toma

Hi guys. Just want to make sure I understood correctly. So are you saying that the 2016 EBITDA margin should be between 10% and 15%? Is that what you are saying earlier?

Jeffrey Schoen

No for Barnwell at the company, but for Barnwell because you are not – because you don't have an integrated mill there, you don't have a value of a paper machine basically. You either going to buy parent rolls or we are going to source some out of Barnwell. If we source out of Pryor, those margins will be on the higher end of mid-teens. If we have to go 100% parent rolls they are going to be in the lower-teens.

Louie Toma

Got it, okay.

Jeffrey Schoen

I think about that business relatively low volume versus what we have for the rest of the Company, so you'll see some margins. You have margin, yes, I guess you don’t think about it that way. However we are also working on and continuing to improve margins in Pryor and in Mexico. So the net effect to all that it's hard to say right now, we have to execute our plans, but I don’t think it’s impactful as the way it sounds when we talk about low-teen margins.

Louie Toma

Got it. That makes a lot more sense. Okay, thank you very much.

End of Q&A

Operator

Ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Jeff Schoen for closing remarks.

Jeffrey Schoen

So let me summarize kind of where we are right now. We missed Street estimates by about $0.02 in an environment where we had very strong sales better than what we expected and we have this incident. I would hope that people are looking forward in the question that they would ask is what has is done with your customer relationships. And the answer to that question is our customer relationships are very strong.

In the first quarter, we are having a strong first quarter; five weeks into it we have a strong first quarter. There is nothing that happened as I previously stated that changes my thinking about our long-term goals for the Company. We are very excited about Barnwell. We are very excited about getting the paper machine. Everything we discussed is on track to meet that goal of $60 million EBITDA and $2.50 to $3.40.

Of course we are in a very competitive environment, but the way we are growing Orchids is to be the person that can take on that competition to be successful. We’ve invested a lot of money over the last couple years not only in Pryor, but in Barnwell we expect to continue to make investments that give us competitive advantage. And I guess we’ll see – we’ll talk to you again at the end of this quarter.

Operator

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