SYS-CON MEDIA Authors: Sean Houghton, Glenn Rossman, Ignacio M. Llorente, Xenia von Wedel, Peter Silva

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Winpak Reports Second Quarter Earnings

WINNIPEG, MANITOBA -- (Marketwire) -- 07/21/10 -- Winpak Ltd. (WPK) (TSX: WPK) today reports consolidated results in US dollars for the second quarter of 2010, which ended on June 27, 2010.



                                                       June 27       June 28
Year-To-Date Ended                                        2010          2009
--------------------------------------------------------------  ------------

(thousands of US dollars, except per share
 amounts)

Sales                                                  278,456       245,260
                                                  ------------  ------------
                                                  ------------  ------------
Net earnings                                            26,565        21,557
                                                  ------------  ------------
                                                  ------------  ------------

Minority interest                                          741           875
Provision for income taxes                              12,520        10,992
Interest (income) expense                                 (44)             9
Depreciation and amortization                           13,399        12,492
                                                  ------------  ------------

EBITDA (1)                                              53,181        45,925
                                                  ------------  ------------
                                                  ------------  ------------
Basic and fully diluted net earnings per share
 (cents)                                                    41            33
                                                  ------------  ------------
                                                  ------------  ------------


                                                       June 27       June 28
Second Quarter Ended                                      2010          2009
--------------------------------------------------------------  ------------

(thousands of US dollars, except per share
 amounts)

Sales                                                  145,568       125,322
                                                  ------------  ------------
                                                  ------------  ------------

Net earnings                                            14,309        11,896
                                                  ------------  ------------
                                                  ------------  ------------

Minority interest                                          422           595
Provision for income taxes                               6,861         5,846
Interest income                                           (24)           (4)
Depreciation and amortization                            6,633         6,371
                                                  ------------  ------------

EBITDA (1)                                              28,201        24,704
                                                  ------------  ------------
                                                  ------------  ------------
Basic and fully diluted net earnings per share
 (cents)                                                    22            18
                                                  ------------  ------------
                                                  ------------  ------------

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 Canadian GAAP. Management believes that in addition to net earnings, 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 earnings, determined in accordance with GAAP, 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.

Management's Discussion and Analysis

(presented in US dollars)

Forward-looking statements: Certain statements made in the following Management's Discussion and Analysis 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.

Results of Operations

Net earnings for the second quarter of 2010 were $14.3 million or 22 cents per share compared to $11.9 million or 18 cents per share in the corresponding period of 2009, an increase of 20.2 percent. Volume growth improved net earnings per share by slightly more than 2 cents while the limited increase in operating expenses in relation to the higher sales volumes and a lower effective income tax rate elevated net earnings by a further 2 cents per share. The impact of foreign exchange on net earnings was favorable by approximately 2 cents per share which was fully offset by the effects of a contraction in gross profit margins due primarily to higher raw material costs.

For the six months ended June 27, 2010, net earnings improved to $26.6 million or 41 cents per share from $21.6 million or 33 cents per share recorded in the corresponding period of 2009, an increase of 23.1 percent. Strong volume growth generated half of the advancement in net earnings or 4 cents per share. When compared with higher sales volumes, operating expenses were held constant and contributed a further 5 cents in net earnings per share. A lower effective income tax rate supplemented net earnings by an additional 1 cent per share. This was offset in part by a reduction in gross profit margins due to higher raw material costs which decreased net earnings per share by just over 1 cent while foreign exchange negatively impacted results by a further 1 cent per share.

Sales

Sales in the second quarter of 2010 were $145.6 million, which represented an increase of $20.2 million or 16.2 percent when compared to the corresponding quarter in 2009. Volume growth was solid across all product lines, advancing in total by 10.7 percent. In particular, growth was especially robust in specialty films and biaxially oriented nylon, which advanced in excess of 20 percent and 35 percent respectively. These product groups were hardest hit by the economic recession in 2009 and have consequently rebounded the most from an improved economic environment in 2010. Sales of rigid containers were also strong in the quarter, increasing by over 13 percent, with growth evident in coffee and pet food markets. More moderate growth was experienced in lidding, modified atmosphere packaging, and packaging machinery sales which all experienced mid-single digit volume expansion. Higher overall selling prices, in response to raw material cost increases and changes in product mix, augmented sales by an additional 2.9 percent. The stronger Canadian dollar in the quarter increased reported sales by a further 2.6 percent in comparison to 2009.

On a year-to-date basis, sales improved by $33.2 million to $278.5 million, 13.5 percent higher than the first six months of 2009. Strong sales volumes had the greatest impact, contributing 11.6 percentage points. As with the quarterly results, both specialty films and biaxially oriented nylon sales led the advance, with increases in excess of 20 percent and 30 percent respectively. Lidding, due to a strong sales performance in the first quarter, added nearly 15 percent in volumes for the first six months of 2010. The remaining product groups of rigid containers, modified atmosphere packaging and packaging machinery sales grew between 7 and 8 percent in volume during this period. The stronger Canadian dollar progressed sales by a further 2.7 percent in comparison to 2009. This was offset in part by a marginal 0.8 percent reduction in sales due to a combination of selling prices and sales mix changes.

Gross profit margins

Gross profit margins declined to 29.0 percent of sales in the second quarter of 2010 from 31.7 percent of sales recorded in the same quarter of 2009. This rather significant decrease in gross profit margins is due almost exclusively to higher raw material costs, which have been increasing steadily for the past year. Although the Company attempts to match raw material increases with higher selling prices, there is a lag effect whereby margins are squeezed, at least temporarily, in periods of rising prices, particularly where formal indexing programs are in place. The decrease in margins would have been greater were it not for improvements in manufacturing performance in the quarter as a result of lower waste levels and enhanced productivity which offset the margin decline by approximately 2 percentage points.

For the first two quarters of 2010, gross profit margins of 29.1 percent were 1.5 percentage points less than that achieved in the first half of 2009. As with the results for the second quarter, rising raw material costs negatively impacted margins in 2010 as the spread between those costs and selling prices narrowed.

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 28, 2009 to reflect the mix of the eight primary raw materials purchased in 2009.


----------------------------------------------------------------------------
Quarter and
 Year           2/08   3/08   4/08   1/09   2/09   3/09   4/09   1/10   2/10
----------------------------------------------------------------------------
Purchase
 Price Index   174.6  190.7  160.3  128.0  124.9  131.2  138.6  150.5  159.1
----------------------------------------------------------------------------

The index in the second quarter rose by 5.7 percent in the last three months and has risen by 27.4 percent since its most recent low point of a year ago. However, recent market activity suggests that raw material pricing may have stabilized and the outlook moving forward is more favorable than it has been in recent quarters from a purchasing standpoint. The Company will continue to work diligently in managing selling prices as raw material costs change.

Expenses and Other

Excluding the impact of foreign exchange, the Company was able to limit the escalation in operating expenses to just over 4 percent in the second quarter of 2010, when compared to the same period in 2009, while sales volumes rose by nearly 11 percent. The net result was an increase of just over 1 cent in net earnings per share. A lowering of the corporate income tax rate in Canada helped boost net earnings per share by just under 1 cent in the second quarter of 2010 in comparison to the corresponding quarter in 2009, after adjustment for foreign exchange effects on income taxes.

Despite an 11.6 percent increase in sales volumes, the Company was able to hold operating expenses steady for the first six months of 2010 in comparison to the same period in 2009. Firm cost control along with reductions in selling and credit-related expenses resulted in an increase in net earnings per share of approximately 5 cents. The reduction in the corporate income tax rate in Canada effective January 1, 2010, further bolstered net earnings per share by 1 cent.

Capital Resources, Cash Flow and Liquidity

During the second quarter of 2010, the Company augmented its cash and cash equivalents by $8.3 million to end at $68.0 million. The Company continued to generate strong cash flow from operating activities in the second quarter of $24.0 million, including $21.9 million from operations before changes in working capital and defined benefit pension payments. Reductions in working capital provided $2.3 million, in part due to higher payables for capital items. During the quarter, cash was also utilized for plant and equipment additions of $13.4 million, dividends of $1.9 million, and defined benefit pension payments of $0.2 million. There was also an unfavorable foreign exchange adjustment on cash and cash equivalents of $0.4 million.

For the first two quarters of 2010, the Company improved its cash position by $6.9 million. Cash flow generated from operating activities before changes in working capital totaled $41.6 million, an increase over the prior period in 2009 of $4.7 million or 12.8 percent. To support the significant growth in sales of nearly 14 percent as well as increases in material costs affecting inventory values, additional investments were made in working capital of $9.0 million. Cash was also used to fund plant and equipment additions of $20.0 million, dividend payments of $3.7 million, and defined benefit pension payments of $2.6 million. There was also a favorable foreign exchange adjustment on cash and cash equivalents of $0.6 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.


Summary of Quarterly      Thousands of US dollars, except per share amounts
 Results                                     (US cents)
------------------------

                                            Quarter Ended
                        ----------------------------------------------------
                             June 27    March 28   December 27  September 27
                                2010        2010          2009          2009
                        ----------------------------------------------------

Sales                        145,568     132,888       135,464       125,267
Net earnings                  14,309      12,256        11,445         9,889
EPS                               22          19            18            15
                        ----------------------------------------------------

Summary of Quarterly      Thousands of US dollars, except per share amounts
 Results                                     (US cents)
------------------------

                                            Quarter Ended
                        ----------------------------------------------------
                             June 28    March 29   December 28  September 28
                                2009        2009          2008          2008
                        ----------------------------------------------------

Sales                        125,322     119,938       129,690       131,419
Net earnings                  11,896       9,661         8,882         7,288
EPS                               18          15            14            11
                        ----------------------------------------------------

Looking Forward

The Company remains optimistic regarding the balance of the year and beyond, following three successive quarters of double-digit volume growth. Demand appears solid across all product groups and is expected to continue for the near future. Winpak continues to invest in organic growth opportunities to remain at the forefront of technology and provide a strong foundation for future success. First-half capital additions totaled $20 million and are expected to double by the end of the year. The second half will see the completion of the shrink bag facility expansion as well as the addition of new printing and extrusion capacity. Furthermore, a decision has been reached to add new building and equipment capacity for the rigid container side of the business. After a year of consistently rising raw material costs, it appears as though pricing has begun to level off and should remain stable, barring any unforeseen circumstances. As a result, gross profit margins should also stabilize and remain within one or two percentage points of current levels. During the second quarter, the Company was actively involved in analyzing several acquisition opportunities that would complement its core competencies in the areas of food and health care packaging. The Company will continue to pursue its goal to enhance long-term shareholder value in this regard by exploring additional opportunities and consummating a transaction when the right combination of organization fit and valuation are present.

Future Accounting Standards

International Financial Reporting Standards

In February 2008, the Canadian Accounting Standards Board confirmed that Publicly Accountable Enterprises will be required to adopt International Financial Reporting Standards ("IFRS") for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The transition from Canadian generally accepted accounting principles ("GAAP") to IFRS will be applicable for the Company's first quarter of 2011, at which time the Company will prepare both its fiscal 2011 and fiscal 2010 comparative financial information using IFRS. The Company expects the transition to IFRS to impact financial reporting, business processes, disclosure controls, internal controls over financial reporting and information systems.

The Company formally commenced its IFRS conversion project in the second quarter of 2008 and has engaged the services of an external advisor with IFRS expertise to work with management. Regular reporting is provided to the Company's senior management and Audit Committee of the Board of Directors. The Company's conversion project consists of three phases: diagnostic assessment, design and development, and implementation. To date, the diagnostic assessment phase of the project has been completed, the design and development phase is nearing completion, and an implementation plan has been devised. As of June 27, 2010, the project is on schedule in accordance with this plan. During the past quarter, significant efforts have been directed at modifications to the Company's information systems, primarily to accommodate a change in functional currency of the Canadian entities as well as allow for parallel reporting in 2010 under both IFRS and Canadian GAAP. These modifications are proceeding according to plan. Meetings have also been held with internal accounting personnel as well as the Board of Directors to provide education with respect to IFRS and its effects on the Company. Winpak will continue to invest in training and external advisor resources throughout the transition to facilitate a timely and successful conversion.

A detailed review of the major differences between Canadian GAAP and current IFRS has been undertaken and at this time, the Company has determined that the areas listed below are expected to have the greatest impact on the Company's Consolidated Financial Statements. The list and comments are intended to highlight only those areas believed to be the most significant and is not intended to be a complete and exhaustive list of all expected changes. In the period leading up to conversion, the International Accounting Standards Board will continue to issue new accounting standards and as a result, the final impact of IFRS on the Company's Consolidated Financial Statements can only be accurately measured once all the IFRS applicable at the conversion date of December 27, 2010 are known. Consequently, the analysis and policy decisions have been made based upon the Company's expectations regarding the accounting standards that the Company anticipates will be effective upon conversion to IFRS. Readers are cautioned that the disclosed impacts of IFRS on financial reporting are estimates and may be subject to change.

Initial Adoption - IFRS 1, First-Time Adoption of International Financial Reporting Standards, provides guidance for an entity's initial adoption of IFRS and generally requires the retrospective application of all IFRS effective at the end of its first IFRS reporting period. IFRS 1 however does include certain mandatory exceptions and allows certain limited optional exemptions from this general requirement of retrospective application. The Company expects to apply the following significant optional exemptions available under IFRS 1 on the opening transition date of December 28, 2009:


i.  Business combinations - None will be restated prior to the transition
    date.
ii. Fair value as deemed cost - The Company will not elect to revalue any
    property, plant and equipment to fair value.
iii.Borrowing costs - Capitalization will only be applied prospectively from
    the transition date.
iv. Actuarial gains/losses on employee benefits - The Company will recognize
    all unrecorded actuarial gains/losses in retained earnings upon
    transition. The current estimate of the charge to retained earnings is
    approximately $12 million, although the Company is currently awaiting
    the completion of actuarial valuations of several of the defined benefit
    plans which may result in a refinement of this amount.
v.  Cumulative translation differences - The Company will elect to
    reclassify all cumulative translation differences at the transition date
    from a separate component of equity to retained earnings. The estimated
    amount of the reclassification is an increase in retained earnings of
    $18.3 million.

Functional Currency - IAS 21, The Effects of Changes in Foreign Exchange Rates, requires that the functional currency of each entity in a consolidated group be determined separately based on the currency of the primary economic environment in which the entity operates. A list of primary and secondary indicators is used under IFRS in this determination and these differ in content and emphasis to a certain degree from those factors used under Canadian GAAP. The parent Company and all of its Canadian subsidiaries, with the exception of American Biaxis Inc., operate with the Canadian dollar as their functional currency under Canadian GAAP. However, it has been determined that under IFRS, these same entities will change to the US dollar as their functional currency such that all entities within the Winpak group will operate with the US dollar as their functional currency under IFRS. The net result going forward will be decreased earnings volatility due to foreign exchange fluctuations as the magnitude of net Canadian dollar monetary financial instrument exposure is significantly less than the net US dollar monetary financial instrument exposure within these entities. The estimated impact of this change in functional currency, as at December 28, 2009, is a decrease in financial statement items as follows: accumulated other comprehensive income - $39.6 million; property, plant and equipment - $18.8 million; future income tax liability - $5.5 million; goodwill - $1.1 million; inventory - $0.6 million; and intangible assets - $0.1 million. Retained earnings are estimated to increase by $24.5 million.

Borrowing Costs - International Accounting Standard (IAS) 23, Borrowing Costs, requires the capitalization of borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset to be included as part of the cost of that asset. Under Canadian GAAP, the Company's policy was to expense these costs as incurred. This change is not expected to have a significant impact on the Company's future financial results.

Hedging - Under IAS 39, Financial Instruments Recognition and Measurement, the requirements for designating hedges and hedge accounting differ from those under Canadian GAAP. The Company is reviewing whether to continue to apply hedge accounting to its foreign exchange contracts under IFRS. Currently under Canadian GAAP, the changes in the fair value of the foreign exchange contracts are recorded in the Company's comprehensive income until the contract matures at which time the result is then recorded within selling, general and administrative expenses in the income statement. If hedge accounting is not applied under IFRS, the changes in the fair value of the foreign exchange contracts will be recorded directly in the income statement in selling, general and administrative expenses in each period until maturity.

Impairment of Assets - IAS 36, Impairment of Assets, uses a one-step approach for both testing for and measurement of impairment, with asset carrying values compared directly with the higher of fair value less costs to sell and value in use, which is based on discounted future cash flows. Canadian GAAP, on the other hand, generally uses a two-step approach to impairment testing of long-lived assets and finite-life intangible assets by first comparing asset carrying values with undiscounted future cash flows to determine whether impairment exists. If it is determined that there is impairment under this basis, the impairment is then calculated by comparing asset carrying values with fair values in much the same manner as computed under IFRS. Additionally under IFRS, testing for impairment occurs at the level of cash generating units, which is the lowest level of assets that generate largely independent cash inflows. This lower level of grouping compared to Canadian GAAP along with the one-step approach to testing for impairment may increase the likelihood that the Company will realize an impairment of assets under IFRS. It should also be noted that under IAS 36, previous impairment losses, with the exception of goodwill, can be reversed when there are indications that circumstances have changed whereas Canadian GAAP prohibits reversal of non-financial asset impairment losses. The Company has determined that as of the opening transition date of December 28, 2009, an impairment of goodwill with regard to the specialty film business has taken place under IAS 36. This will result in a reduction of goodwill and retained earnings of $3.4 million as of that date.

Employee Benefit Plans - IAS 19, Employee Benefits, requires the past service cost element of defined benefit plans to be expensed on an accelerated basis, with vested past service costs being expensed immediately and unvested past service costs being recognized on a straight-line basis until the benefits become vested. This would result in a charge to retained earnings at December 28, 2009 of $1.3 million. Under Canadian GAAP, past service costs are generally amortized on a straight-line basis over the expected average remaining service period of active employees in the plan. In addition, IAS 19 requires an entity to make an accounting policy choice regarding the treatment of actuarial gains and losses. These choices include: (a) the corridor method which is similar to the method currently used by the Company under Canadian GAAP, (b) recording the actuarial gains and losses directly in income in the year incurred, and (c) recognizing the actuarial gains and losses directly in equity through comprehensive income. In April, 2010, the International Accounting Standards Board issued an exposure draft, Defined Benefit Plans: Proposed Amendments to IAS 19, which would essentially eliminate the choices regarding the treatment of actuarial gains and losses and require them to be recorded directly in equity through comprehensive income. The Company is currently evaluating its options in light of this recent development.

Business Combinations, Consolidated Financial Statements and Non-Controlling Interests

As more fully described in Note 2 to the Consolidated Financial Statements, the CICA has issued three new accounting standards in January 2009: Section 1582 Business Combinations, Section 1601 Consolidated Financial Statements, and Section 1602 Non-Controlling Interests, which apply commencing with the Company's 2011 fiscal year.

Controls and Procedures

Disclosure Controls

Management is responsible for establishing and maintaining disclosure controls and procedures in order to provide reasonable assurance that material information relating to the Company is made known to them in a timely manner and that information required to be disclosed is reported within time periods prescribed by applicable securities legislation. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on management's evaluation of the design of the Company's disclosure controls and procedures, the Company's Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are designed as of June 27, 2010 to provide reasonable assurance that the information being disclosed is recorded, summarized and reported as required.

Internal Controls Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian generally accepted accounting principles. Internal control systems, no matter how well designed, have inherent limitations and therefore can only provide reasonable assurance as to the effectiveness of internal controls over financial reporting, including the possibility of human error and the circumvention or overriding of the controls and procedures. Management used the Internal Control - Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as the control framework in designing its internal controls over financial reporting. Based on management's design of the Company's internal controls over financial reporting, the Company's Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are designed as of June 27, 2010 to provide reasonable assurance that the financial information being reported is materially accurate. During the second quarter ended June 27, 2010, there have been no changes in the design of the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.


Winpak Ltd.
Interim Consolidated Financial Statements
Second Quarter Ended: June 27, 2010

These interim consolidated financial statements have not been audited or
reviewed by the Company's independent external auditors,
PricewaterhouseCoopers LLP.


Winpak Ltd.
Consolidated Balance Sheets
(thousands of US dollars) (unaudited)

                                                   June 27       December 27
                                                      2010              2009
                                                  --------      ------------

Assets

Current Assets:
  Cash and cash equivalents                      $  68,027     $      61,164
  Accounts receivable (note 7)                      71,741            70,354
  Inventory (note 3)                                78,909            70,559
  Prepaid expenses                                   3,290             2,211
  Future income taxes                                2,829             2,310
                                                  --------      ------------
                                                   224,796           206,598

Property, plant and equipment (net)                247,946           239,017

Other assets                                        15,237            14,401

Intangible assets (net)                              4,922             5,896

Goodwill                                            17,353            17,235

                                                  --------      ------------
                                                 $ 510,254     $     483,147
                                                  --------      ------------
                                                  --------      ------------

Liabilities and Shareholders' Equity

Current Liabilities:
  Accounts payable and accrued liabilities       $  48,917     $      44,965
  Income taxes payable                               1,366             2,931
                                                  --------      ------------
                                                    50,283            47,896

Deferred credits                                    10,929            11,363

Future income taxes                                 31,768            32,459

Postretirement benefits                              1,676             1,673
                                                  --------      ------------
                                                    94,656            93,391

Minority interest                                   16,612            15,871

Shareholders' equity:
  Share capital                                     29,195            29,195

  Retained earnings                                308,757           285,973
  Accumulated other comprehensive income
   (note 4)                                         61,034            58,717
                                                  --------      ------------
                                                   369,791           344,690
                                                  --------      ------------
                                                   398,986           373,885
                                                  --------      ------------

                                                  --------      ------------
                                                 $ 510,254     $     483,147
                                                  --------      ------------
                                                  --------      ------------


See accompanying notes to consolidated financial statements.

Winpak Ltd.
Consolidated Statements of Earnings and Retained Earnings
(thousands of US dollars, except per share amounts) (unaudited)

                               Second Quarter Ended     Year-To-Date Ended
                              ----------------------  ----------------------
                              ----------------------  ----------------------
                                June 27     June 28     June 27     June 28
                                   2010        2009        2010        2009
                              ----------  ----------  ----------  ----------
Sales                        $  145,568  $  125,322  $  278,456  $  245,260
Cost of sales                   103,336      85,579     197,403     170,179
                              ----------  ----------  ----------  ----------
Gross profit                     42,232      39,743      81,053      75,081

Expenses
  Selling, general &
   administrative (note 5)       17,397      18,430      35,005      35,867
  Research and technical          3,244       2,980       6,199       5,718
  Pre-production                     23           -          67          63
                              ----------  ----------  ----------  ----------
Earnings from operations         21,568      18,333      39,782      33,433
Interest (income) expense           (24)         (4)        (44)          9
                              ----------  ----------  ----------  ----------
Earnings before income taxes
 and minority interest           21,592      18,337      39,826      33,424
Provision for income taxes        6,861       5,846      12,520      10,992
Minority interest                   422         595         741         875
                              ----------  ----------  ----------  ----------
Net earnings                 $   14,309  $   11,896  $   26,565  $   21,557
                              ----------  ----------  ----------  ----------
                              ----------  ----------  ----------  ----------

Retained earnings, beginning
 of period                      296,330     258,075     285,973     249,990
  Net earnings                   14,309      11,896      26,565      21,557
  Dividends declared             (1,882)     (1,689)     (3,781)     (3,265)
                              ----------  ----------  ----------  ----------
Retained earnings, end of
 period                      $  308,757  $  268,282  $  308,757  $  268,282
                              ----------  ----------  ----------  ----------
                              ----------  ----------  ----------  ----------

Earnings per share
Basic and fully diluted
 earnings per share (cents)          22          18          41          33
                              ----------  ----------  ----------  ----------
                              ----------  ----------  ----------  ----------

Average number of shares
 outstanding (000's)             65,000      65,000      65,000      65,000
                              ----------  ----------  ----------  ----------
                              ----------  ----------  ----------  ----------

Consolidated Statements of Comprehensive Income
(thousands of US dollars) (unaudited)

                               Second Quarter Ended     Year-To-Date Ended
                              ----------------------  ----------------------
                              ----------------------  ----------------------
                                 June 27     June 28     June 27     June 28
                                    2010        2009        2010        2009
                              ----------  ----------  ----------  ----------
Net earnings                 $    14,309 $    11,896 $    26,565 $    21,557


Unrealized (losses) gains on
 translation of financial
 statements of operations
 with CDN dollar functional
 currency to US dollar
 reporting currency              (2,118)      11,906       2,920       8,168
Unrealized (losses) gains on
 derivatives designated as
 cash flow hedges, net of
 income tax (2010 - $(41)
 and $84) (2009 - $340 and
 $283)                              (95)         739         257         614
Realized (gains) losses on
 derivatives designated as
 cash flow hedges in prior
 periods transferred to net
 earnings in the current
 period, net of income tax
 (2010 - $(99) and $(368))
 (2009 - $53 and $341)             (232)         115       (860)         637
                              ----------  ----------  ----------  ----------
Other comprehensive (loss)
 income - net of income tax
 (note 4)                        (2,445)      12,760       2,317       9,419
                              ----------  ----------  ----------  ----------
Comprehensive income         $    11,864 $    24,656 $    28,882 $    30,976
                              ----------  ----------  ----------  ----------
                              ----------  ----------  ----------  ----------

See accompanying notes to consolidated financial statements.

Winpak Ltd.
Consolidated Statements of Cash Flows
(thousands of US dollars) (unaudited)

                               Second Quarter Ended     Year-To-Date Ended
                              ----------------------  ----------------------
                              ----------------------  ----------------------
                                June 27     June 28     June 27     June 28
                                   2010        2009        2010        2009
                              ----------  ----------  ----------  ----------
Cash provided by (used in):

Operating activities:
Net earnings for the period  $   14,309  $   11,896  $   26,565  $   21,557
Items not involving cash:
  Depreciation                    6,081       5,773      12,290      11,305
  Amortization - intangible
   assets                           552         598       1,109       1,187
  Defined benefit plan costs      1,006         841       2,012       1,629
  Future income taxes              (479)       (214)     (1,125)        117
  Foreign exchange loss on
   long-term debt                     -           -           -         559
  Minority interest                 422         595         741         875
  Other                             (31)         66          43        (319)
                              ----------  ----------  ----------  ----------
    Cash flow from operating
     activities before the
     following                   21,860      19,555      41,635      36,910

Change in working capital:
  Accounts receivable            (1,815)      1,067      (2,036)      2,622
  Inventory                        (457)     (2,227)     (7,701)      1,048
  Prepaid expenses                 (653)       (443)     (1,066)       (697)
  Accounts payable and
   accrued liabilities            4,281       7,053       3,390       7,801
  Income taxes payable            1,025       1,107      (1,561)      1,097

Defined benefit plan
 payments                          (201)       (172)     (2,623)     (2,377)
                              ----------  ----------  ----------  ----------
                                 24,040      25,940      30,038      46,404
                              ----------  ----------  ----------  ----------
Investing activities:
  Acquisition of plant and
   equipment                    (13,395)     (3,462)    (19,852)     (5,499)
  Acquisition of intangible
   assets                           (65)       (113)       (120)       (217)
                              ----------  ----------  ----------  ----------
                                (13,460)     (3,575)    (19,972)     (5,716)
                              ----------  ----------  ----------  ----------

Financing activities:
  Repayments of long-term
   debt                               -           -           -     (17,000)
  Dividends paid                 (1,899)     (1,576)     (3,756)     (3,189)
                              ----------  ----------  ----------  ----------
                                 (1,899)     (1,576)     (3,756)    (20,189)
                              ----------  ----------  ----------  ----------

Foreign exchange translation
 adjustment-cash and cash
 equivalents                       (401)        863         553         600
                              ----------  ----------  ----------  ----------

Change in cash and cash
 equivalents                      8,280      21,652       6,863      21,099

Cash and cash equivalents,
 beginning of period             59,747      19,243      61,164      19,796
                              ----------  ----------  ----------  ----------

Cash and cash equivalents,
 end of period               $   68,027  $   40,895  $   68,027  $   40,895
                              ----------  ----------  ----------  ----------
                              ----------  ----------  ----------  ----------

Supplemental disclosure of cash flow information:
----------------------------

Cash paid during the period
 for:
  Interest expense           $        5  $       14  $        6  $       51
  Income tax expense              6,052       4,487      14,243       8,663

See accompanying notes to consolidated financial statements.


                                  Notes to Consolidated Financial Statements
                       For the periods ended June 27, 2010 and June 28, 2009
                                        (thousands of US dollars)(Unaudited)


1. Basis of Presentation

The unaudited interim consolidated financial statements have been prepared by the Company in accordance with Canadian Generally Accepted Accounting Principles (GAAP) and have been prepared on a basis consistent with the same accounting policies and methods of application as disclosed in the Company's audited consolidated financial statements for the year ended December 27, 2009.

These unaudited interim consolidated financial statements do not include all of the information and notes to the financial statements required by GAAP for annual financial statements and therefore should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report for the year ended December 27, 2009.

The preparation of the interim consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect: the reported amounts of assets and liabilities; the disclosure of contingent assets and liabilities at the date of the consolidated financial statements; and the reported amounts of revenue and expenses in the reporting period. Management believes that the estimates and assumptions used in preparing its interim consolidated financial statements are reasonable and prudent, however, actual results could differ from these estimates.

2. Future Accounting Standards

In January 2009, the CICA issued three new accounting standards which all apply commencing with the Company's 2011 fiscal year.

(a) Business Combinations:

Section 1582 replaces Section 1581 Business Combinations and provides clarification as to what an acquirer must measure when it controls a business, the basis of valuation and the date at which the valuation should be determined. Section 1582 provides the CDN GAAP equivalent to IFRS 3 Business Combinations. This section outlines a variety of changes, including, but not limited to: an expanded definition of a business, measuring all business combinations and non-controlling interest at fair value, recognizing future income tax assets and liabilities and recording all acquisition related costs as expenses of the period except for costs incurred to issue debt or share capital. This new standard is applicable for acquisitions completed on or after November 1, 2011 although early adoption is permitted in 2010 to facilitate the transition to IFRS in 2011.

(b) Consolidations and Non-controlling Interests:

Sections 1601 and 1602 replace former Section 1600 - Consolidated Financial Statements. Section 1601 establishes standards for the preparation of consolidated financial statements after the acquisition date. Section 1602, which converges with the requirements of International Accounting Standard 27 (IAS 27) - Consolidated and Separate Financial Statements, establishes standards for the accounting and presentation of non-controlling interest in a subsidiary subsequent to a business combination.

(c) International Financial Reporting Standards:

The CICA Accounting Standards Board (ASB) has confirmed that the accounting standards for Publicly Accountable Enterprises will be required to converge with International Financial Reporting Standards (IFRS) for fiscal years beginning on or after January 1, 2011 with comparable figures presented for 2010.

3. Inventory


                                                 June 27       December 27
                                                    2010              2009
--------------------------------------------------------------------------

Raw materials                                     22,335            23,759
Work-in-process                                   12,938             9,697
Finished goods                                    39,745            33,492
Spare parts                                        3,891             3,611
                                         ---------------   ---------------
                                                  78,909            70,559
                                         ---------------   ---------------
                                         ---------------   ---------------

During the second quarter of 2010, the Company recorded inventory write-downs for slow-moving and obsolete inventory of $857 (2009- $1,773) and reversals of previously written-down items that were sold to customers of $263 (2009- $326). For the first six months of 2010, the Company recorded inventory write-downs to net realizable value of $2,526 (2009- $3,275) and reversals of previously written-down items of $1,123 (2009- $700).

4. Accumulated Other Comprehensive Income

Accumulated other comprehensive income represents the net changes due to foreign exchange rate fluctuations in the net investment in the CDN dollar functional currency operations and the unrealized gains (losses) on derivatives designated as cash flow hedges.


                                  Second Quarter Ended  Year-To-Date Ended
                                  -------------------- -------------------
                                  -------------------- -------------------
                                    June 27    June 28   June 27   June 28
                                       2010       2009      2010      2009
                                  ---------- --------- --------- ---------

Balance, beginning of period         63,479     27,231    58,717    30,572
  Other comprehensive (loss)
   income                            (2,445)    12,760     2,317     9,419
                                  ---------- --------- --------- ---------
Balance, end of period               61,034     39,991    61,034    39,991
                                  ---------- --------- --------- ---------
                                  ---------- --------- --------- ---------

The accumulated balances for each
 component of other comprehensive
 income, net of income taxes, are
 comprised of the following:
---------------------------------

Unrealized gains on translation
 of financial statements of
 subsidiaries with Canadian
 dollar functional currency to US
 dollar reporting currency                                60,827    39,362
Unrealized gains on derivatives
 designated as cash flow hedges                              207       629
                                                       --------- ---------
Balance, end of period                                    61,034    39,991
                                                       --------- ---------
                                                       --------- ---------

5.Selling, General and Administrative
Included within selling, general & administrative expenses are the following
amounts:

                                   Second Quarter Ended  Year-To-Date Ended
                                   -------------------- --------------------
                                   -------------------- --------------------
                                     June 27    June 28   June 27    June 28
                                        2010       2009      2010       2009
                                   ---------- --------- ---------- ---------

Foreign exchange translation
 (gain) loss                          (1,226)     1,757      (801)     2,138
Defined benefit plan costs             1,006        841     2,012      1,629

Foreign exchange translation (gains) losses represent the realized and unrealized foreign exchange differences recognized upon translation of monetary assets and liabilities, including long-term debt. The amounts include realized foreign exchange losses (gains) on cash flow hedges arising from transfers of these amounts from other comprehensive income to net earnings.

6. Financial Instruments

The following sets out the classification and the carrying value and fair value of financial instruments and non-financial derivatives as at June 27, 2010:


                                                          Carrying /
                                                                Fair    Fair
Assets (Liabilities)                     Classification        Value   Value
----------------------------------------------------------------------------

Cash and cash equivalents              Held for trading       68,027
Accounts receivable               Loans and receivables       71,446
Accounts payable and
 accrued liabilities        Other financial liabilities      (48,917)
Cash flow hedging             Derivatives designated as
 derivative                            effective hedges                  295
----------------------------------------------------------------------------

The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying value because of the short-term maturity of these instruments. The fair value of foreign currency forward and expandable option contracts, designated as a cash flow hedge, have been determined by valuing those contracts to market against prevailing forward foreign exchange rates as at the reporting date. The inputs used for fair value measurements, including their classification within the required three levels of the fair value hierarchy that prioritizes the inputs used for fair value measurement are as follows:

Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 - inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

Level 3 - inputs that are not based on observable market data.

The following table presents the classification of financial instruments within the fair value hierarchy as at June 27, 2010:


Financial Assets                       Level 1   Level 2   Level 3     Total
----------------------------------------------------------------------------

Cash and cash equivalents               68,027         -         -    68,027
Foreign currency forward and
 expandable option contracts                 -       295         -       295
                                     --------- --------- --------- ---------
Total                                   68,027       295         -    68,322
                                     --------- --------- --------- ---------
                                     --------- --------- --------- ---------

7. Financial Risk Management

In the normal course of business, the Company has risk exposures consisting primarily of foreign exchange risk, interest rate risk, commodity price risk, credit risk and liquidity risk. The Company manages its risks and risk exposures through a combination of derivative financial instruments, insurance, a system of internal and disclosure controls and sound business practices. The Company does not purchase any derivative financial instruments for speculative purposes.

Risk management is primarily the responsibility of the Company's corporate finance function. Significant risks are regularly monitored and actions are taken, when appropriate, according to the Company's approved policies, established for that purpose. In addition, as required, these risks are reviewed with the Company's Board of Directors.

Foreign Exchange Risk

The Company operates primarily in Canada and the Unites States. The functional currency of the parent company is CDN dollars and the reporting currency is US dollars. All operations in the United States and American Biaxis Inc. operate with the US dollar as the functional currency, while all Canadian operations, excluding American Biaxis Inc., operate with the CDN dollar as the functional currency. Most of the Company's business is conducted in US dollars. However, approximately 17 percent of sales are invoiced in CDN dollars and approximately 28 percent of costs are incurred in the same currency, resulting in a net outflow of costs in CDN dollars. Consequently, the Company records foreign currency differences on transactions.

In addition, translation differences arise when foreign currency monetary assets and liabilities are translated at foreign exchange rates that change over time. These foreign exchange gains and losses are recorded in selling, general & administrative expenses. As a result of the Company's US dollar net asset monetary position within the CDN dollar functional currency operations as at June 27, 2010, a one-cent change in the period end foreign exchange rate from 1.0359 to 1.0259 (US to CDN dollars) would have decreased net earnings by $368 for the second quarter of 2010. Conversely, a one-cent change in the period end foreign exchange rate from 1.0359 to 1.0459 (US to CDN dollars) would have increased net earnings by $368 for the second quarter of 2010.

The Company's Foreign Exchange Policy requires that between 50 and 80 percent of the Company's net requirement of CDN dollars for the ensuing 9 to 15 months will be hedged at all times with a combination of cash and cash equivalents and forward or zero-cost option foreign currency contracts. Transactions are only conducted with certain approved Schedule I Canadian financial institutions. All foreign currency contracts are designated as cash flow hedges. Certain foreign currency contracts matured during the second quarter of 2010 and the Company realized pre-tax foreign exchange gains of $331 (year-to-date - realized pre-tax foreign exchange gains of $1,228). These foreign exchange gains were recorded in selling, general & administrative expenses.

As at June 27, 2010, the Company had foreign currency forward contracts outstanding with a notional amount of $18.0 million US at an average exchange rate of 1.0528 (US to CDN dollars), maturing between July 2010 and May 2011 and the fair value of these financial instruments was an unrealized gain of $0.239 million US. In addition, the Company had foreign currency expandable option contracts outstanding with a notional amount of $4.0 million US at an average exchange rate of 1.04 (US to CDN dollars) which may be expanded to $6.0 million US if foreign exchange rates on their respective maturity date exceeds, on average, 1.1111 (US to CDN dollars) maturing between July 2010 and February 2011. The fair value of these financial instruments was an unrealized gain of $0.056 million. The aforementioned unrealized gains have been recorded in other comprehensive income.

An unrealized foreign exchange loss during the quarter of $136 (pre-tax) (year-to-date - unrealized foreign exchange gain of $341 (pre-tax)) was recorded in other comprehensive income.

Interest Rate Risk

The Company's interest rate risk arises from interest rate fluctuations on the interest income that it earns on its cash invested in money market accounts and short-term deposits. In 2009, the Company developed and implemented an investment policy, which was approved by the Company's Board of Directors, with the primary objective to preserve capital, minimize risk and provide liquidity. Regarding the June 27, 2010 cash and cash equivalents balance of $68.0 million, a 1.0% increase/decrease in interest rate fluctuations would increase/decrease earnings before tax by $680 annually.

Commodity Price Risk

The Company's manufacturing costs are affected by the price of raw materials, namely petroleum-based and natural gas-based plastic resins and aluminum. In order to manage its risk, the Company has entered into selling price-indexing programs with certain customers. Changes in raw material prices for these customers are reflected in selling price adjustments but there is a slight time lag. For the three months ended June 27, 2010, 56% (year-to-date - 54%) of sales were to customers with selling price-indexing programs. For all other customers, the Company's preferred practice is to match raw material cost changes with selling price adjustments, albeit with a slight time lag. This matching is not always possible as customers react to selling price pressures related to raw material cost fluctuations according to conditions pertaining to their markets.

Credit Risk

The Company is exposed to credit risk from its cash and cash equivalents held with banks and financial institutions, derivative financial instruments (foreign currency forward and expandable option contracts), as well as credit exposure to customers with outstanding accounts receivable balances.

The following table details the maximum exposure to the Company's counterparty credit risk which represents the carrying value of the financial asset:


                                                      June 27    December 27
                                                         2010           2009
----------------------------------------------------------------------------

Cash and cash equivalents                              68,027         61,164
Accounts receivable                                    71,446         69,172
Foreign currency forward and expandable option
 contracts                                                295          1,182
                                               -------------- --------------
                                                      139,768        131,518
                                               -------------- --------------
                                               -------------- --------------

Credit risk on cash and cash equivalents and financial instruments arises in the event of non-performance by the counterparties when the Company is entitled to receive payment from the counterparty who fails to perform. The Company has established an investment policy to manage its cash. The policy requires that the Company manage its risk by investing its excess cash on hand on a short-term basis, up to a maximum of six months, with several financial institutions and/or governmental bodies that must be 'AA' rated or higher by a recognized international credit rating agency or insured 100% by a 'AAA' rated CDN or US government. The Company manages its counterparty risk on its financial instruments by only dealing with CDN Schedule I financial institutions.

In the normal course of business, the Company is exposed to credit risk on its accounts receivable from customers. The Company's current credit exposure is higher in the weakened North American economic environment. To mitigate such risk, the Company performs ongoing customer credit evaluations and assesses their credit quality by taking into account their financial position, past experience and other pertinent factors. Management regularly monitors customer credit limits, performs credit reviews and, in certain cases insures accounts receivable against credit losses.

As at June 27, 2010, the Company believes that the credit risk for accounts receivable is mitigated due to the following: a) a broad customer base which is dispersed across varying market sectors and geographic locations, b) 97% of gross accounts receivable balances are outstanding for less than 60 days, c) 14% of the accounts receivable balance are insured against credit losses, and d) the Company's exposure to individual customers is limited and the ten largest customers, on aggregate, accounted for 31% of the total accounts receivable balance.

The carrying amount of accounts receivable is reduced through the use of an allowance account and the amount of the loss is recognized in the earnings statement within selling, general, & administrative expenses. When a receivable balance is considered uncollectible, it is written off against the allowance for accounts receivable. Subsequent recoveries of amounts previously written off are credited against selling, general, and administrative expenses in the earnings statement. The following table sets out the aging details of the Company's accounts receivable balances outstanding based on the status of the receivable in relation to when the receivable was due and payable and related allowance for doubtful accounts:


                                                    June 27     December 27
                                                       2010            2009
----------------------------------------------------------------------------

Current - neither impaired nor past due              53,471          53,224
Not impaired but past the due date:
-------------------------------------------
  Within 30 days                                     17,335          16,725
  31 - 60 days                                        1,032           1,271
  Over 60 days                                        1,224             895
                                             --------------- ---------------
                                                     73,062          72,115
  Less: Allowance for doubtful accounts              (1,321)         (1,761)
                                             --------------- ---------------
  Total accounts receivable, net                     71,741          70,354
                                             --------------- ---------------
                                             --------------- ---------------

Liquidity Risk

Liquidity risk is the risk that the Company would not be able to meet its financial obligations as they come due. Management believes that the liquidity risk is low due to the strong financial condition of the Company. This risk assessment is based on the following: a) cash and cash equivalents amounts of $68.0 million, b) no outstanding long-term debt, c) unused credit facilities comprised of unsecured operating lines of $38 million, d) the ability to obtain term-loan financing to fund an acquisition, if needed, e) an informal investment grade credit rating, and f) the Company's ability to generate positive cash flows from ongoing operations. Management believes that the Company's cash flows are more than sufficient to cover its operating costs, working capital requirements, capital expenditures and dividend payments in 2010. The Company's accounts payable and accrued liabilities are all due within 6 months.

8. Capital Management

The Company's objectives in managing capital are to ensure the Company will continue as a going concern and have sufficient liquidity to pursue its strategy of organic growth combined with strategic acquisitions and to deploy capital to provide an appropriate return on investment to its shareholders. The Company also strives to maintain an optimal capital structure to reduce the overall cost of capital.

In the management of capital, the Company includes bank indebtedness, long-term debt and shareholders' equity. The Board of Directors has established quantitative return on capital criteria for management and year-over-year sustainable earnings growth targets. The Board of Directors also reviews, on a regular basis, the level of dividends paid to the Company's shareholders.

The Company has externally imposed capital requirements as governed through its bank operating line credit facilities. The Company monitors capital on the basis of funded debt to EBITDA (earnings before interest, income taxes, depreciation and amortization) and debt service coverage. Funded debt is defined as the sum of long-term debt and bank indebtedness less cash and cash equivalents. The funded debt to EBITDA is calculated as funded debt, as at the financial reporting date, over the twelve-month rolling EBITDA. This ratio is to be maintained under 3.00:1. As at June 27, 2010, the ratio was 0.00:1. Debt service coverage is calculated as a twelve-month rolling earnings from operations over debt service. Debt service is calculated as the sum of one-sixth long-term debt outstanding plus annualized interest expense and dividends. This ratio is to be maintained over 1.50:1. As at June 27, 2010, the ratio was 10.23:1.

There were no changes in the Company's approach to capital management during the current period.

9. Seasonality

The Company experiences seasonal variation in sales, with sales typically being the highest in the second and fourth quarters, and lowest in the first quarter.

Contacts:
Winpak Ltd.
K.P. Kuchma
Vice President and CFO
(204) 831-2254

Winpak Ltd.
B.J. Berry
President and CEO
(204) 831-2216

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