News Column

Winpak Reports Second Quarter Results

July 24, 2014

WINNIPEG, MANITOBA--(Marketwired - July 24, 2014) - Winpak Ltd. (WPK) (TSX:WPK) today reports consolidated results in US dollars for the second quarter of 2014, which ended on June 29, 2014.

Quarter Ended Year-To-Date Ended ----------------- ------------------ June 29 June 30 June 29 June 30 2014 2013 2014 2013 -------- -------- -------- --------- (thousands of US dollars, except per share amounts) Revenue 199,426 177,032 387,503 346,981 -------- -------- -------- --------- Net income 19,538 17,392 35,994 33,242 -------- -------- -------- --------- -------- -------- -------- --------- Income tax expense 9,367 8,041 16,602 14,903 Net finance expense 107 114 44 219 Depreciation and amortization 7,351 6,260 14,716 12,831 -------- -------- -------- --------- EBITDA (1) 36,363 31,807 67,356 61,195 -------- -------- -------- --------- -------- -------- -------- --------- Net income attributable to equity holders of the Company 19,406 17,095 35,569 33,084 Net income attributable to non- controlling interests 132 297 425 158 -------- -------- -------- --------- Net income 19,538 17,392 35,994 33,242 -------- -------- -------- --------- -------- -------- -------- --------- Basic and diluted earnings per share (cents) 30 26 55 51 -------- -------- -------- --------- -------- -------- -------- ---------



Winpak Ltd. manufactures and distributes high-quality packaging materials and related packaging machines. The Company's products are used primarily for the packaging of perishable foods, beverages and in health-care applications.

(1) EBITDA is not a recognized measure under International Financial Reporting Standards (IFRS). Management believes that in addition to net income, this measure provides useful supplemental information to investors including an indication of cash available for distribution prior to debt service, capital expenditures and income taxes. Investors should be cautioned, however, that this measure should not be construed as an alternative to net income, determined in accordance with IFRS, as an indicator of the Company's performance. The Company's method of calculating this measure may differ from other companies, and accordingly, the results may not be comparable.

(presented in US dollars)

Forward-looking statements: Certain statements made in the following report contain forward-looking statements including, but not limited to, statements concerning possible or assumed future results of operations of the Company. Forward-looking statements represent the Company's intentions, plans, expectations and beliefs, and are not guarantees of future performance. Such forward-looking statements represent Winpak's current views based on information as at the date of this report. They involve risks, uncertainties and assumptions and the Company's actual results could differ, which in some cases may be material, from those anticipated in these forward-looking statements. Unless otherwise required by applicable securities law, we disclaim any intention or obligation to publicly update or revise this information, whether as a result of new information, future events or otherwise. The Company cautions investors not to place undue reliance upon forward-looking statements.

Financial Performance

Net income attributable to common shareholders for the second quarter of 2014 expanded to $19.4 million or 30 cents in earnings per share compared to $17.1 million or 26 cents per share in the corresponding quarter of 2013, an increase of 13.5 percent. Substantial organic revenue growth boosted earnings per share by 3.5 cents but the effects were muted by a reduction in gross profit margins which lowered earnings per share by 2.5 cents. Additional savings were generated by restricting operating expense growth, which contributed 2.0 cents in earnings per share, while foreign exchange positively impacted earnings per share in the quarter by 1.0 cent. A reduction in the proportion of earnings attributable to non-controlling interests in the second quarter of 2014 resulted in an addition of 0.5 cents to earnings per share but was offset by the negative impact on net income of a higher effective income tax rate.

For the six months ended June 29, 2014, net income attributable to common shareholders of $35.6 million or 55 cents surpassed the 2013 first-half result of $33.1 million or 51 cents by 7.5 percent. Greater sales volumes in 2014 enhanced earnings per share by 6.5 cents and was supplemented by controlled growth in operating expenses which added a further 3.0 cents to earnings per share. Foreign exchange also favorably complemented 2014 first-half earnings by 1.0 cent per share. On the other hand, a lower gross profit margin in the first six months of 2014 compared to the prior year corresponding period decreased earnings per share by 5.5 cents while a greater proportion of earnings attributable to non-controlling interests and a higher effective income tax rate negatively impacted earnings per share by 0.5 cents each.

Revenue

Revenue in the second quarter of 2014 rose to $199.4 million, a progression of $22.4 million or 12.6 percent over the same period in 2013 and represented the fifth consecutive three-month period of quarterly highs in revenue. Volume growth was strong at 12.7 percent and was widespread across many of the Company's product groups. The rigid container and lidding product groups experienced escalations in volumes in the second quarter of between 15 and 20 percent as business was robust in yogurt, condiment and specialty beverage containers and lids. Shipments were also up solidly at over 10 percent in modified atmosphere packaging with growth from the existing client base as well as new customer additions to the portfolio. Packaging machinery volumes continued to be brisk, advancing over 20 percent from the second quarter of 2013. Biaxially oriented nylon and specialty films were both challenged in the growth area with volumes remaining flat to slightly negative although the product mix of the latter was more favorable than the corresponding quarter of 2013 with increasing shrink bag sales. Selling price/mix changes had a favorable impact of 0.9 percent on revenues for the quarter while foreign exchange, due to a weakening in the Canadian dollar, decreased revenues in the quarter by 1.0 percent in comparison to the second quarter of 2013.

For the first half of 2014, revenue of $387.5 million advanced by $40.5 million or 11.7 percent from the 2013 comparable period. Volumes rose by a sizable 11.8 percent versus the first half of the prior year. Rigid container volumes outpaced all of the other product groups, bettering the 2013 year-to-date results by nearly 20 percent, followed closely behind by lidding shipments, primarily on the strength of yogurt and specialty beverage offerings. Modified atmosphere packaging, biaxially oriented nylon film and packaging machinery first-half volumes all exceeded the prior year corresponding shipments by approximately 10 percent. Only specialty film quantities lagged behind the previous year-to-date demand, albeit at a more favorable product mix. Selling price/mix changes had an overall positive effect on revenue of 0.9 percent while foreign exchange negatively impacted top-line growth in comparison to the first half of 2013 by 1.0 percent.

Gross profit margins

Gross profit margins for the second quarter of 2014 fell 1.2 percentage points to 27.8 percent of revenue from the 29.0 percent recorded in the same quarter of 2013. However, this was an improvement of 0.6 percentage points from the gross profit margin realized in the first quarter of this year. A narrowing of the spread between raw material costs and selling prices along with higher manufacturing costs were responsible for a reduction in earnings per share of 2.5 cents compared to the second quarter of 2013. Manufacturing variances, although unfavorable in relation to the second quarter of last year, showed improvement from the first three months of 2014 as recently added capacity was more fully utilized and familiarity with new products and processes was attained.

For the first six months of 2014, gross profit margins of 27.5 percent of revenue fell short of 2013 year-to-date levels of 28.9 percent by 1.4 percentage points. This translated into a decrease in earnings per share of 5.5 cents. Product mix and a response to competitive conditions at a few selected accounts were primarily responsible for a compression in the difference between selling prices and raw material costs.

Manufacturing performance, although showing signs of improvement in the past quarter, has nonetheless lagged behind the achievement from the first two quarters of 2013 due to higher waste levels in 2014 encountered on new processes and under-utilized capacity of recent capital expenditures.

For reference, the following presents the weighted indexed purchased cost of Winpak's eight primary raw materials in the reported quarter and each of the preceding eight quarters, where base year 2001 = 100. The index was rebalanced as of December 30, 2013 to reflect the mix of the eight primary raw materials purchased in 2013.

---------------------------------------------------------------------------- Quarter and Year 2/14 1/14 4/13 3/13 2/13 1/13 4/12 3/12 2/12 ---------------------------------------------------------------------------- Purchase Price Index 178.1 178.7 175.0 173.2 173.5 176.5 170.6 167.3 174.5 ----------------------------------------------------------------------------



The purchase price index in the second quarter of 2014 was virtually unchanged from the previous quarter, declining by a mere 0.3 percent. While certain items within the index declined and others rose, no one component changed by more than 4 percent in the quarter. Stability was definitely the feature on an overall basis and has been so for the past year, with the index fluctuating within a narrow 3 percent band during this time.

Expenses and Other

Operating expenses in the second quarter of 2014, adjusted for foreign exchange, increased by almost 7 percent while volumes progressed by over 12 percent when referenced to the applicable period in 2013. The increase in operating expenses was only 1.6 percent when freight and distribution costs, which tend to vary directly with volume, are excluded. The net result was an advancement in earnings per share of approximately 2.0 cents. A lesser proportion of earnings attributable to non-controlling interests further supplemented earnings per share by 0.5 cents in the second quarter which was offset by greater income taxes as a result of more earnings being realized in higher income tax rate jurisdictions. Foreign exchange had a favorable impact on earnings per share of approximately 1.0 cent. The weaker Canadian dollar in the second quarter of 2014 versus the comparative period in 2013 had a positive impact on earnings as expenses exceeded revenues in that currency. In addition, although on average the Canadian currency was weaker in the second quarter of 2014 than the same period in 2013, the Canadian dollar strengthened from the start to the end of the quarter versus its US counterpart and resulted in foreign exchange gains on the translation of Canadian net monetary assets; the opposite was true in the second quarter of 2013.

On a year-to-date basis, operating expenses, excluding foreign exchange, increased at a much lower rate than the growth in sales volumes, resulting in an addition to earnings per share of 3.0 cents. Freight and distribution costs, which are variable in nature, accounted for the entire rise in operating expenses; all other expenses in aggregate were flat. Costs related to additional head count to foster sales growth were offset by a reduction in pre-production expenses in 2014. A greater proportion of year-to-date earnings attributable to non-controlling interests and a higher effective income tax rate in 2014 each resulted in a decrease in earnings per share of approximately 0.5 cents. In comparison to the first half of 2013, foreign exchange had a positive effect on earnings per share of 1.0 cent primarily due to the lower average value of the Canadian dollar in 2014 in relation to the US currency and the resulting impact from converting the Company's net Canadian dollar expenses into US funds.

Summary of Quarterly Results Thousands of US dollars, except per share amounts (US cents) ------------------------------------ Q2 Q1 Q4 Q3 2014 2014 2013 2013 ------------------------------------ Revenue 199,426 188,077 187,964 179,926 Net income attributable to equity holders of the Company 19,406 16,163 20,951 17,362 EPS 30 25 32 27 ------------------------------------ ------------------------------------ Q2 Q1 Q4 Q3 2013 2013 2012(i) 2012(i) ------------------------------------ Revenue 177,032 169,949 173,226 165,399 Net income attributable to equity holders of the Company 17,095 15,989 22,071 16,783 EPS 26 25 34 26 ------------------------------------



(i)Amounts have been restated to reflect the retrospective impact of amended IAS 19 "Employee Benefits", which included an increase in net finance expense due to the reduction in the expected return on defined benefit pension plan assets and an increase in general and administrative expenses following the reclassification of certain plan administration costs.

Capital Resources, Cash Flow and Liquidity

The Company's cash and cash equivalents balance ended the second quarter of 2014 at $114.2 million, a rise of $1.3 million from the end of the first quarter. Cash flow from operating activities before changes in working capital of $34.9 million outpaced the prior year quarter by $2.8 million on the strength of higher net income production. Working capital additions consumed $11.9 million, primarily in trade and other receivables and inventories, in concert with the revenue growth in the quarter. In addition, cash was utilized for plant and equipment additions of $9.5 million, income tax payments of $9.5 million, dividends to common shareholders of $1.8 million, and other items totalling $0.9 million.

For the first six months of 2014, the cash and cash equivalents balance declined by $46.9 million, primarily due to the payment of a special dividend of $58.5 million ($65.0 million Canadian) in the first quarter of the year. Winpak continued to generate strong cash flows from operating activities before changes in working capital of $65.3 million, an increment of $4.1 million from the first half of 2013. Cash was employed for working capital additions of $11.9 million, mainly to foster growth in sales volumes. Furthermore, cash was utilized for plant and equipment expenditures of $21.7 million, income tax payments of $12.6 million, regular quarterly dividends of $3.6 million, employee defined benefit plan payments of $3.1 million and other items totaling $0.8 million. The Company remains debt-free and has unutilized operating lines of $38 million, with the ability to increase borrowing capacity further should the need arise.

Looking Forward

After a solid start to the first half of the year where volumes grew by close to 12 percent, the Company continues to remain optimistic for the remainder of 2014 with regard to new revenue generation. A number of significant opportunities remain in the sales pipeline and have the potential to result in meaningful future revenue growth; however, the timing for conversion of these into new business for Winpak remains uncertain as customers' protocols for new supply govern the process. In the near term, raw material costs are expected to tilt slightly upward for most materials with the exception of resins dependent on benzene such as nylon and polystyrene, where the price escalation is expected to be more pronounced. Manufacturing performance has been a prime focus for the organization in 2014 and should continue to improve as the year progresses as capacity utilization expands and production of new products becomes more refined. Capital spending is expected to accelerate in the second half of the year to finish in the $55 to $65 million range for 2014 to address growth prospects and areas where existing capacity is currently constrained. The Company remains committed to organic growth through capital investment and will continue to pursue acquisition opportunities in Winpak's core competencies in sophisticated food and health-care packaging but will remain patient in executing a transaction only when the proper fit and price are present to add long-term value to the Company's shareholders.

Winpak Ltd. Interim Condensed Consolidated Financial Statements Second Quarter Ended: June 29, 2014



These interim condensed consolidated financial statements have not been audited or reviewed by the Company's independent external auditor, KPMG LLP. For a complete set of notes to the condensed consolidated financial statements, refer to www.sedar.com or the Company's website, www.winpak.com.

Winpak Ltd. Condensed Consolidated Balance Sheets (thousands of US dollars) (unaudited) June 29 December 29 2014 2013 ---------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents 114,171 161,090 Trade and other receivables 107,799 98,408 Income taxes receivable 6,721 3,580 Inventories 99,728 92,304 Prepaid expenses 5,028 3,074 Derivative financial instruments 239 - ---------- ------------ 333,686 358,456 Non-current assets: Property, plant and equipment 337,909 329,714 Intangible assets 15,070 14,960 Employee benefit plan assets 9,084 7,131 Deferred tax assets 2,610 2,943 ---------- ------------ 364,673 354,748 ---------- ------------ Total assets 698,359 713,204 ---------- ------------ Equity and Liabilities Current liabilities: Trade payables and other liabilities 70,009 63,182 Provisions 427 427 Income taxes payable 2,871 2,048 Derivative financial instruments 51 903 ---------- ------------ 73,358 66,560 Non-current liabilities: Employee benefit plan liabilities 3,971 3,365 Deferred income 15,476 14,490 Provisions 6,585 6,524 Deferred tax liabilities 32,016 29,652 ---------- ------------ 58,048 54,031 ---------- ------------ Total liabilities 131,406 120,591 ---------- ------------ Equity: Share capital 29,195 29,195 Reserves 138 (661) Retained earnings 521,351 547,891 ---------- ------------ Total equity attributable to equity holders of the Company 550,684 576,425 Non-controlling interests 16,269 16,188 ---------- ------------ Total equity 566,953 592,613 ---------- ------------ Total equity and liabilities 698,359 713,204 ---------- ------------ Winpak Ltd. Condensed Consolidated Statements of Income (thousands of US dollars, except per share amounts) (unaudited) Quarter Ended Year-To-Date Ended -------------------- -------------------- -------------------- -------------------- June 29 June 30 June 29 June 30 2014 2013 2014 2013 ------------------------------------------------------ -------------------- ------------------------------------------------------ -------------------- Revenue 199,426 177,032 387,503 346,981 Cost of sales (144,072) (125,754) (280,941) (246,832) --------- ---------- --------- ---------- Gross profit 55,354 51,278 106,562 100,149 Sales, marketing and distribution expenses (15,889) (14,464) (31,155) (28,559) General and administrative expenses (5,875) (6,428) (13,521) (14,251) Research and technical expenses (4,004) (3,539) (7,356) (6,923) Pre-production expenses (251) (1,074) (251) (1,600) Other expenses (323) (226) (1,639) (452) --------- ---------- --------- ---------- Income from operations 29,012 25,547 52,640 48,364 Finance income 113 94 264 199 Finance expense (220) (208) (308) (418) --------- ---------- --------- ---------- Income before income taxes 28,905 25,433 52,596 48,145 Income tax expense (9,367) (8,041) (16,602) (14,903) --------- ---------- --------- ---------- Net income for the period 19,538 17,392 35,994 33,242 --------- ---------- --------- ---------- --------- ---------- --------- ---------- Attributable to: Equity holders of the Company 19,406 17,095 35,569 33,084 Non-controlling interests 132 297 425 158 --------- ---------- --------- ---------- 19,538 17,392 35,994 33,242 --------- ---------- --------- ---------- Basic and diluted earnings per share - cents 30 26 55 51 --------- ---------- --------- ---------- Condensed Consolidated Statements of Comprehensive Income (thousands of US dollars) (unaudited) Quarter Ended Year-To-Date Ended -------------------- -------------------- -------------------- -------------------- June 29 June 30 June 29 June 30 2014 2013 2014 2013 ------------------------------------------------------ -------------------- ------------------------------------------------------ -------------------- Net income for the period 19,538 17,392 35,994 33,242 --------- ---------- --------- ---------- --------- ---------- --------- ---------- Items that will not be reclassified to the statements of income: ------------------------------- Cash flow hedge gains (losses) recognized - 8 - (94) Cash flow hedge gains transferred to property, plant and equipment - (17) - (50) Income tax effect - - - - --------- ---------- ---------- - (9) - (144) --------- ---------- ---------- Items that are or may be reclassified subsequently to the statements of income: ------------------------------- Cash flow hedge gains (losses) recognized 709 (982) (178) (1,418) Cash flow hedge losses transferred to the statements of income 587 88 1,269 67 Income tax effect (346) 239 (292) 361 --------- ---------- --------- ---------- 950 (655) 799 (990) --------- ---------- --------- ---------- Other comprehensive income (loss) for the period - net of income tax 950 (664) 799 (1,134) --------- ---------- --------- ---------- Comprehensive income for the period 20,488 16,728 36,793 32,108 --------- ---------- --------- ---------- Attributable to: Equity holders of the Company 20,356 16,431 36,368 31,950 Non-controlling interests 132 297 425 158 --------- ---------- --------- ---------- 20,488 16,728 36,793 32,108 --------- ---------- --------- ---------- Winpak Ltd. Condensed Consolidated Statements of Changes in Equity (thousands of US dollars) (unaudited)

Attributable to equity holders of the Company -------------------------------------- -------------------------------------- Share Retained capital Reserves earnings ------------------------------------------------------------------- Balance at December 31, 2012 29,195 250 470,925 ----------------------------- Comprehensive (loss) income for the period Cash flow hedge losses, net of tax - (1,133) - Cash flow hedge losses transferred to the statements of income, net of tax - 49 - Cash flow hedge gains transferred to property, plant and equipment - (50) - ----------------------------- Other comprehensive loss - (1,134) - Net income for the period - - 33,084 ----------------------------- Comprehensive (loss) income for the period - (1,134) 33,084 ----------------------------- Dividends - - (3,773) ----------------------------- Balance at June 30, 2013 29,195 (884) 500,236 ----------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- Balance at December 30, 2013 29,195 (661) 547,891 ----------------------------- Comprehensive income for the period Cash flow hedge losses, net of tax - (130) - Cash flow hedge losses transferred to the statements of income, net of tax - 929 - ----------------------------- Other comprehensive income - 799 - Net income for the period - - 35,569 ----------------------------- Comprehensive income for the period - 799 35,569 ----------------------------- Dividends - - (62,109) ----------------------------- Balance at June 29, 2014 29,195 138 521,351 ----------------------------- Non- controlling Total Total interests equity ------------------------------------------------------------------ Balance at December 31, 2012 500,370 15,718 516,088 ------------------------------ Comprehensive (loss) income for the period Cash flow hedge losses, net of tax (1,133) - (1,133) Cash flow hedge losses transferred to the statements of income, net of tax 49 - 49 Cash flow hedge gains transferred to property, plant and equipment (50) - (50) ------------------------------ Other comprehensive loss (1,134) - (1,134) Net income for the period 33,084 158 33,242 ------------------------------ Comprehensive (loss) income for the period 31,950 158 32,108 ------------------------------ Dividends (3,773) (218) (3,991) ------------------------------ Balance at June 30, 2013 528,547 15,658 544,205 ------------------------------ ------------------------------------------------------------------ ------------------------------------------------------------------ Balance at December 30, 2013 576,425 16,188 592,613 ------------------------------ Comprehensive income for the period Cash flow hedge losses, net of tax (130) - (130) Cash flow hedge losses transferred to the statements of income, net of tax 929 - 929 ------------------------------ Other comprehensive income 799 - 799 Net income for the period 35,569 425 35,994 ------------------------------ Comprehensive income for the period 36,368 425 36,793 ------------------------------ Dividends (62,109) (344) (62,453) ------------------------------ Balance at June 29, 2014 550,684 16,269 566,953 ------------------------------ Winpak Ltd. Condensed Consolidated Statements of Cash Flows (thousands of US dollars) (unaudited) Quarter Ended Year-To-Date Ended ------------------ ------------------- ------------------ ------------------- June 29 June 30 June 29 June 30 2014 2013 2014 2013 -------------------------------------------------------- ------------------- -------------------------------------------------------- ------------------- Cash provided by (used in): Operating activities: Net income for the period 19,538 17,392 35,994 33,242 Items not involving cash: Depreciation 7,742 6,456 15,332 13,215 Amortization - deferred income (520) (308) (879) (602) Amortization - intangible assets 129 112 263 218 Employee defined benefit plan expenses 938 1,066 1,833 2,103 Net finance expense 107 114 44 219 Income tax expense 9,367 8,041 16,602 14,903 Other (2,411) (762) (3,892) (2,081) -------- --------- --------- --------- Cash flow from operating activities before the following 34,890 32,111 65,297 61,217 Change in working capital: Trade and other receivables (5,038) (2,894) (9,391) (6,767) Inventories (7,931) (2,592) (7,424) (4,638) Prepaid expenses (26) (306) (1,954) (1,044) Trade payables and other liabilities 1,118 668 6,837 1,031 Provisions (1) (430) (25) (616) Employee defined benefit plan payments (317) (511) (3,141) (2,383) Income tax paid (9,458) (9,612) (12,609) (17,280) Interest received 42 129 129 204 Interest paid (135) (3) (138) (8) -------- --------- --------- --------- Net cash from operating activities 13,144 16,560 37,581 29,716 -------- --------- --------- --------- Investing activities: Acquisition of property, plant and equipment - net (9,527) (10,165) (21,692) (25,161) Acquisition of intangible assets (175) (38) (362) (296) -------- --------- --------- --------- (9,702) (10,203) (22,054) (25,457) -------- --------- --------- --------- Financing activities: Dividends paid (1,763) (1,919) (62,102) (3,876) Dividend paid to non-controlling interests in subsidiary (344) (218) (344) (218) -------- --------- --------- --------- (2,107) (2,137) (62,446) (4,094) -------- --------- --------- --------- Change in cash and cash equivalents 1,335 4,220 (46,919) 165 Cash and cash equivalents, beginning of period 112,836 129,248 161,090 133,303 -------- --------- --------- --------- Cash and cash equivalents, end of period 114,171 133,468 114,171 133,468 -------- --------- --------- --------- FOR FURTHER INFORMATION PLEASE CONTACT: Winpak Ltd.K.P. Kuchma Vice President and CFO (204) 831-2254 Winpak Ltd.B.J. Berry President and CEO (204) 831-2216 Source: Winpak Ltd.


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