Atlas First Quarter 2013 Review

Report for the Quarter Ended March 31, 2013

Our portfolio companies are continuing to show improvement, both in the critical Key Performance Indicators (“KPIs”) that we track daily as well as in financial performance.

In terms of new transactions, we executed a letter agreement to purchase a paper and wood products company through a complex deal that will require the sign-off of multiple constituencies, including labor unions, certain creditors and state and federal entities. We expect to complete and fund this transaction during the second quarter. Wood Resources announced the signing of a 25 year lease with the Colville Tribe to reopen and operate the idled plywood mill in Omak, WA. Given the tight supply of veneer in the Pacific Northwest and the highly underutilized timber resources accessible by the Tribe, this transaction represents an excellent strategic opportunity for Atlas. We also have several bolt-on transactions for our portfolio companies under negotiation and we are making good progress on a number of other initiatives which may lead to future transactions.

We continue to be modestly encouraged by trends in the broader economy. Despite the economic destimulus of the sequester in the United States, the continued flat-lining of economic conditions in Europe and sluggish growth in China, businesses which have focused on productivity enhancements and have been prudent in regard to capital expenditures and expansion continue to perform reasonably well. Capital is increasingly available and domestic monetary policy remains expansionary, sustaining historically low costs of debt. The construction sector in particular appears to be an increasingly significant driver of slow but steady growth in the United States. All-in-all, we believe we remain in an economy that will be supportive of the Atlas companies and will continue to generate acquisition opportunities.

At our companies, Detroit Renewable Energy LLC completed the scheduled overhaul of its turbine generator while ASG completed the sale of its tobacco packaging business to Amcor Ltd. Soundview Paper Holdings LLC showed significant progress over the prior year and benefitted from the addition of Putney Paper Company, which was “bolted on” to the Soundview platform on December 31, 2012. Wood Resources performed strongly in the quarter, benefitting from improved pricing on plywood products. Forest Resources also had a strong quarter, helped in part by favorable fiber costs and steady market demand. Phoenix Services reported its most profitable quarter in its history, a tremendous achievement and a reflection of the great work being done by the team there. At Pangborn, strength in the U.S. and China is offsetting weakness in the European markets. Erickson Framing Holdings LLC benefitted from the combination of improved pricing, operating cost reduction and the beginnings of a housing recovery in Erickson’s key markets.

We look forward to reporting to you on our second quarter performance. Until then, thank you for your interest and continued support.

Andrew Bursky
Managing Partner
To contact Andy by e-mail, please click here

Timothy Fazio
Managing Partner
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Mike Ukropina
Chief Executive Officer

ASG is a leading global creative services and packaging provider to the consumer products and electronic media industries. Atlas formed ASG by acquiring the AGI media packaging business of MeadWestvaco Corporation in September 2010 and combining it with the Shorewood Packaging business (“Shorewood”) purchased from International Paper Company in January 2012.

ASG achieved an aggregate RIR of 0.6 for the first quarter of 2013 and we are pleased that two of ASG’s business units had RIR’s of less than 1.0 during the quarter. ASG Asia led the way with a perfect 0.0 RIR and no lost time incidents. ASG North America also had no lost time incidents and an RIR of 0.6, while ASG Europe had 3 recordable incidents and an RIR of 1.0. ASG Mexico had no lost time incidents and an RIR of 1.2. While there is still room for improvement, the first quarter’s safety performance was a solid start to the year.

As discussed previously, in February 2013, ASG closed the sale of its tobacco packaging business in the United States, Mexico and Asia to Amcor Limited. In addition to being a compelling financial transaction, the divestiture was a strategic milestone for ASG as it enabled the company to exit the capital intensive, demanding tobacco packaging market and focus its energy on customers in its core North America and Europe specialty-packaging markets and on growing regions across Asia, Poland and Latin America.

The first quarter of 2013 saw improvements in revenue and profitability at ASG compared to the first quarter of 2012.

ASG North America had a strong first quarter, driven by the cost and capacity reduction initiatives and the increase in operating efficiencies that were the main focus of the management team during 2012. This progress continued in the first quarter of 2013 with the addition of a full time Continuous Improvement team and significant talent upgrades across the platform. ASG North America continues to face a challenging and competitive marketplace in which to reestablish top- line growth, but the sales team began to gain momentum in the first quarter.

ASG Mexico also had a strong first quarter. ASG Mexico’s improved results were driven primarily by growing revenue and excellent operational execution. These strong results for ASG Mexico are all the more impressive in light of the fact that they were achieved while the Mexico leadership team executed the complicated separation and divestiture of the tobacco packaging portion of the business as part of the Amcor transaction.

ASG Asia performed well in the quarter. Consumer product sales during the quarter were ahead of 2012, reflective of solid traction with both domestic and overseas customers in both of ASG Asia’s plants, in Guangzhou and Kunshan, China. CI/Lean initiatives in Asia continued to yield results.

ASG Europe continued to struggle in light of slack consumer demand as well as continued incursions of digital downloaded content as a replacement for ASG Europe packaged physical media. ASG Europe will remain focused on rationalizing its cost structure, improving its operating efficiency through the expansion of its Continuous Improvement initiatives and migrating business from its higher cost locations to its lower cost operations.



James Toya

Kyle Burdick

Bridgewell supplies a variety of construction products, utility supplies, wood products, food ingredients and crop inputs, together with logistics services, to suppliers and customers globally. Bridgewell commenced operations on March 1, 2010, when it acquired certain assets of the Trading Division of North Pacific Group Inc. out of a Federal receivership.

During the first quarter of 2013, the company sustained its world-class safety standard of 0.0 Recordable Incident Rate (“RIR”), a record that the company has maintained since formation.

Bridgewell experienced gross margin compression largely as the result of factors that impacted two of Bridgewell’s divisions, Mat Products (“Mats”) and Contractor Direct (“CD”). While margins declined due to pricing action taken to ensure market share retention, the Mats division was able to exceed its sales plan for the quarter, with no discernible account losses, and management anticipates margins returning to historical levels over the remainder of the year.

The CD division experienced a dramatic increase in raw material prices throughout 2012 that continued into the first quarter of 2013. Division and corporate management are focused on developing the appropriate balance of managed risk and working capital, in response to various market conditions, to allow the CD division to deliver sustainably attractive risk-adjusted returns on capital employed.

Bridgewell continues to make strides in several Key Performance Indicators (“KPI”) that we use to track the business. Among other things, these KPIs show improved sales and working capital efficiency.

Bridgewell will continue to make significant investments to grow its business, both in the form of new traders and expansion into new geographic and product markets. We have also begun to explore strategic bolt- on acquisitions as a means of leveraging the company’s infrastructure and capabilities, accelerating growth and further diversifying Bridgewell’s end markets. We remain excited by the potential of Bridgewell and believe the company is well-positioned to take advantage of the growth prospects available to it in both domestic and international markets.



Steve White
Chairman and Chief Executive Officer

Detroit Renewable Energy (“DRE”) owns a group of infrastructure assets providing the City of Detroit and surrounding municipalities with safe, reliable and cost- effective solutions for clean energy and waste disposal.

On the employee safety front, we experienced one recordable incident during the first quarter of 2013 across the DRE business units. On an LTM basis, we posted a 1.7 RIR, which is in line with industry standards but nonetheless, is disappointing and in need of improvement. Our managers continue to emphasize the Atlas safety culture and are committed to driving further improvement in 2013.

This year’s first quarter financial performance was impacted by scheduled downtime to overhaul DRP’s turbine generator, a critical component of our preventive maintenance program generally performed once every seven years. The outage reduced electricity production and sales for the majority of the quarter. Typically, DRE’s operating results are strongest in the first and fourth quarters, benefiting from the impact of the winter heating season when DT steam demand enables DRP to sell a richer mix of energy.

With the completion of the rehabilitation of DRP’s three boilers, the cold iron outage last fall and the successful execution of DRP’s turbine outage, we have now concluded the major activities to address key deferred maintenance items. DRP now has the capacity to perform at the levels of reliability necessary for improved performance. We are confident that DRP’s ability to use three boilers to ensure that two are always available, “three to make two”, is the pathway to the consistent level of system-wide operational reliability that drives profitability.

In terms of our other growth initiatives, we are pleased to announce that during the quarter, DRE signed a long- term contract with a major Detroit-based manufacturer to replace its aging, coal-based boilers with environmentally sound and lower cost steam through a significant expansion of DT’s pipeline, while leveraging much of the infrastructure of DRE.



Erickson is a leading construction services and pre- fabricated building products company that provides turn-key framing services, framing packages, trusses and other products to builders and developers. Erickson’s primary geographic markets include Arizona, Northern California and the greater Reno, NV area. Atlas formed Erickson by acquiring Erickson’s core assets from Masco Corporation in October 2012.

Erickson reported an RIR of 9.8 in the first quarter of 2013. While this result falls short of our expectations for Erickson, it represents a material improvement over pre-acquisition performance and masks exceptional performance in Erickson’s Arizona Framing division (“AZ Framing”), which finished the quarter incident free. This is the first time in over four years that AZ Framing has recorded an incident-free quarter. Management has spent significant time in new employee evaluation, hiring and training and expects improved company-wide safety results relative to prior years.

While Erickson’s first quarter represents a sizeable improvement over prior performance, we remain focused on the Erickson Turnaround Plan to achieve near-term profitability.

The market winds should be at Erickson’s back in the second and third quarters as Erickson enters its busy season. AZ Framing continues to outperform its plan. An uptick in volume, coupled with strengthening prices, drove a level of unit profitability consistent with our expectations. As a result of significant improvement in the market and in managerial discipline regarding pricing, we expect substantially improved results in future quarters.

Erickson’s California/Reno operation (“CA Framing”) continues to improve, albeit more slowly than in Arizona. Importantly, CA Framing has returned to positive unit contribution margin in the first quarter.

We remain focused on the touchstones of the Erickson Turnaround Plan: operating safely, focusing on profitable work instead of market share and driving operational efficiency through training and incentives.



Joseph Raccuia
President and Chief Executive Officer

Finch, located in upstate New York, is a leading producer of premium uncoated printing papers. Finch operates an integrated paper mill utilizing on-site sustainable energy resources, including biomass and hydroelectric power and also manages more than 160,000 acres of Adirondack forests for the Nature Conservancy.

In safety, our recordable incident rate (RIR) for Q1 2013 was 1.92 as compared to a year-end rate of 1.84 in 2012. Our lost time incident rate (LTIR) for Q1 was also comparable to year end 2012 with a 0.48 versus 0.46 respectively. We are now in year 4 of our original 5 year safety plan to move to world class. We are encouraged to see our LTIR remain below 0.5 over the past year but we continue our efforts in employee engagement to reduce injuries and exceed our goals in 2013.

Finch’s segment of the printing and writing paper industry, uncoated freesheet, continues to be adversely impacted by overcapacity, driven by a secular demand decline as a result of electronic substitution. In Q1 2013, continued weak domestic demand has been exacerbated by increased imports, resulting in downward pricing pressure on the market.

Though none have been announced, major capacity closures are needed in the second half of 2013 in order to stabilize the market. Market wide uncoated freesheet sales were down by 8% as compared to Q1 2012 and market pricing is soft with a decline of 3% on sheets and 5% on rolls. While Finch continues to focus on higher value products that carry higher margins, our volumes and selling prices were not immune to this market pressure. Our focus on managing costs has partially mitigated these headwinds, as we continue to stay vigilant on our labor, maintenance, and outside contractor expenses.

On the production front, the pulp mill ran well during the quarter. Paper production performed strongly during the quarter.

In a challenging market environment, management remains keenly focused on managing what we can control, utilizing our key performance metrics, and driving our continuous improvement initiatives.



Larry Richard
President and Chief Executive Officer

Forest Resources LLC (“Forest”) had no lost time incidents and two total recordable incidents during Q1 2013. The DART (Days Away/Restricted/Transferred) rate for Q1 2013 was .3 compared to the 1.8 industry average. Forest’s TRR (Total Recordable Rate) for Q1 2013 was 1.3 compared to the 3.2 industry average.

Financial performance at Forest remains strong, aided by favorable fiber prices. Hartford City Paper maintained a high production level while orders and pricing remain strong in HCP’s end markets. Ivex Specialty Paper (“Peoria”) saw strong sales increases over Q1 2012 for its primary product, crepe paper for the sewn bag industry, despite market pressure from product substitution. Peoria continues to focus on product development with the expanded product capabilities of the new calendar stack installed during Q1 2013.

Shillington Box volumes increased in Q1 2013 over Q1 2012 while selling prices remain under pressure in the competitive St. Louis area box market. Reduced manufacturing costs, driven by the use of lighter weight purchased corrugated sheets and improved operating efficiency, mitigated a portion of the selling price pressure.

The North American folding carton market strengthened in the first quarter of 2013 over a very soft 2012. Strathcona Paper’s production and sales volumes were down in Q1 2013 compared to Q1 2012 due to unscheduled mechanical downtime. Q1 sales volumes and net revenues at Boehmer Box are up year-over- year. The first quarter has seen a high level of quoting and customer development at Boehmer, which should result in new business as 2013 progresses.

Containerboard markets remain stable and fiber prices are expected to seasonally rise during the second quarter. The waste paper export market remains soft due to China’s uncertain demand. New containerboard capacity coming in summer 2013 is likely to impact waste paper pricing in the northeast market impacting Strathcona Paper. Both the containerboard and folding carton/CRB markets are expected to slowly improve in the second quarter. Price increases have been announced for paper and board in both sectors.

While it is premature to predict successful implementation of these increases, the announcements are an indication of strengthening markets generally.



Henrik Krabsen Jensen
President and Chief Executive Officer

The Pangborn Group designs and markets shotblast surface preparation equipment and provides aftermarket replacement parts and services internationally. The Pangborn Group had zero lost time injuries in Q1 2013 and we implemented additional safety follow-up procedures and near miss reporting metrics. We continued safety training with updated internal and governmental requirements and we passed various official safety inspections.

The implementation of Continuous Improvement/Lean projects gained further traction in Q1 2013. Our biggest Lean project is taking place in our Italian facility with the restructuring of the entire parts business processes. The restructuring is now almost finalized and we are beginning to see improvements in delivery performance and lower cost. The CI/Lean projects at the other sites are on-track with measurable improvements.

Q1 2013 developed as we had expected with higher equipment sales but lower aftermarket sales. Based upon our backlog, we expect higher sales and improved financial performance in the second half of the year.

Market conditions in North America and China are still favorable with strong order intake, but we experienced a significant weakening in the European market with postponed equipment projects and lower spare part orders. Our opportunities in the BRIC countries, especially in China and Russia, continue to be strong and we expect this trend to continue. Our activities with our new subsidiary in China are on schedule and we expect that our new manufacturing facility in Beijing will be operational by the latter part of 2013. In Russia, our representative has increased his Pangborn focused sales force significantly which is resulting in an increasing number of inquiries.

In order to expand our future market opportunities and improve general competitiveness, we have initiated a number of product portfolio and market development projects. The projects include portfolio expansion activities through potential acquisitions and re-engineering of potential high volume standard equipment. In terms of market development projects, we have hired resources to focus on specific segments and we are implementing plans for new geographical markets.



R. Douglas Lane
President and Chief Executive Officer

Phoenix Services International LLC (“Phoenix Services” or the “Company”) reported an OSHA recordable rate of 2.4 for the quarter ended March 31, 2013, which compares to the quarter ended March 31, 2012 rate of 2.1 and the national slag industry standard of 5.0.

The Company reported its most profitable quarter in its 6 year history, besting its record for both sales and profitability for the second consecutive quarter.

In Q4 2012, the Company was awarded contracts at sites in Romania, Belgium, Poland and South Africa. Slag processing plants have been ordered for each of these facilities and the plants are expected to be operational in June 2013. In addition, Phoenix Services was awarded the blast furnace slag contract at two new facilities.

Phoenix Services’ sites are running well and continue to benefit from positive macro-economic trends in the steel sector. According to the World Steel Association, global steel production for the first two months of 2013 was up 3.3% relative to the first two months of 2012. While it is worth noting that the Company’s results are not strictly correlated to the fortunes of the steel industry, these statistics are consistent with our experience. The Company continues to focus on operational excellence and attractive growth opportunities and has the  capitalization  needed to execute its plans. The Company is actively bidding work and we remain extremely optimistic about the prospective performance and growth at Phoenix Services.



Kurt Liebich
President and Chief Executive Officer

RedBuilt is a leading national provider of structural roof and floor system solutions for commercial buildings and an innovator of patented engineered wood products.

Our recordable incident rate for the quarter was 2.6, which is higher than our historical average of < 2.0. Safety continues to be our top priority and the safety culture that we are striving to build will yield benefits in our broader continuous improvement efforts.

RedBuilt’s market opportunity and financial performance was consistent with the comments that we made in our Q4 2012 letter to investors. In our Q4 letter, we commented that “the housing recovery has clearly started, and generally speaking, light commercial construction activity should benefit from this positive trend.” Additionally, we said that “profitability will be a challenge in Q1, because of the lag in realizing the benefit of higher prices, however, through the course of the year, profitability will continue to improve.” Both of these comments played out in the first quarter of 2013, and our expectations for the year remain positive.

The housing recovery has clearly taken hold and the level of commercial activity is following this trend. YTD core commercial quoting activity has increased over last year, and bookings have increased year over year. Our current order file heading into Q2 is ahead of the order file at the same time last year.

Our biggest current challenge is pushing pricing structure to mitigate the highly volatile raw material markets that we are experiencing.

As we look forward to the remainder of 2013, we believe we will continue to experience an improvement in the overall level of construction activity. Typically, commercial activity lags improvement in the residential market by 18 months. From an overall sales activity perspective, we believe we will continue to see gradual improvement over the next several years.

We remain optimistic about the opportunities in 2013. Business activity is improving, and our recent price increases were accepted by the market, positioning us well as the year progresses.



George Wurtz
President and Chief Executive Officer

Soundview Paper Company LLC (“Soundview”), headquartered in Elmwood Park, New Jersey, manufactures and distributes bath tissue, towel, napkin and facial products made from recycled and virgin fiber to retailers such as grocery stores, drug stores, office supply and dollar store chains, as well as to wholesale distributors, food service and janitorial supply companies. Soundview commenced operations in April 2012 when it acquired Marcal Paper Mills, LLC.

In the first quarter of 2013, the company experienced an RIR of 1.4, an improvement over the 2012 RIR of 1.8.

Management has focused on a number of initiatives to improve safety performance, including a Safe Employee Work Development Program, a STOP Program to create safety training and a lock out and confined space audit program. The company has also recently hired a new Safety Manager with extensive tissue mill safety experience.

On December 31, 2012, Soundview purchased the operating assets of Putney Paper Company, Inc. (“Putney”). Putney was a family-owned, regional manufacturer of recycled tissue paper serving the Away From Home market. Soundview Vermont LLC (“Soundview Vermont”), as Putney is now known, has already proven to be a strong, complementary asset for the Soundview family.

Consistent with the rapid transformation that management was able to achieve in New Jersey after the acquisition of Marcal, immediately following initial introductions and meetings in Vermont, our Rapid Transformation Team (“RT Team”) began transitioning the facility. Daily reporting was quickly developed, mill housekeeping was improved and a set of Safety SOP’s was put in place. In addition, the RT Team began to solicit feedback from our new hourly workers regarding opportunities for process improvement. Employee suggestions led to immediate gains in converting efficiency.

At the New Jersey facility, Soundview maintained its lean staffing levels while improving productivity. The company has continued its strategy of prudent growth, maintaining pricing  discipline  to  avoid  market disruptions. Soundview’s Private Label offering continued to experience success. Away From Home sales got off to a slow start in 2013 in Soundview New Jersey; however, at Soundview Vermont, Away From Home showed solid growth, particularly in towel products. At Home began 2013 with a solid start and favorable trade spending. While Soundview continues to operate in an environment in which energy and raw material costs remain at relatively low levels, management has begun work to prepare for less favorable cost environments.

We remain excited by the continued growth and operational improvements taking place at Soundview as well as the long-term prospects for the company. With our team of experienced management partners leading a group of motivated employees, the company is well-positioned to take further advantage of its strengthening market position. The addition of Soundview Vermont bolsters our standing as one of the key suppliers to the most densely populated market in North America.



Richard Yarbrough

Kurt Liebich
President and Chief Executive Officer

Wood Resources LLC’s (the “Company”) safety performance during the first quarter improved significantly over the same period last year. The recordable  incident  rate  (RIR) for  Q1  2013  was 1.3 compared to a RIR of 3.0 during the same period in 2012.

First quarter 2013 financial results were significantly improved from the same period last year, with revenues and profitability increasing. These improved results were primarily driven by improved pricing on commodity products as well as increased production and sales volumes.

Both Carolina mills had their best quarter under Wood Resources’ ownership, beating all previous quarterly results in terms of revenue, sales volume, production volume and profitability. Chester Wood Products’ plywood and veneer production in Q1 2013 was higher and panel prices were improved over the same period in 2012. Moncure Plywood showed an increase in plywood and veneer production, better sales return from furniture and specialty pine products and improved labor utilization.

Olympic Panel Products’ operations continued to improve as management focused on reducing costs through increased capacity utilization. Production of commodity products has been expanded while increased production of veneer has provided the opportunity to sell veneer into the open market and reduce the purchases of outside veneer. As a result of these changes, Olympic’s turnaround is well underway and in Q1 2013, Olympic returned to profitability.

Looking toward the second quarter, we expect product demand to continue to improve and pressure current industry capacity. As a result, we expect prices and profit margins will remain strong.



Tara Russell
Founder and CEO

Create Common Good (CCG) uses food to change lives. We provide job training and employment to refugees and other at-risk populations by offering healthy food products and services. Create Common Good is a social enterprise. We differ from other nonprofits in that our goal is to build a sustainable business model over the next five years that does not rely solely on grants and donations.

CCG experienced no recordable incidents during the quarter.

In the first quarter of 2013, we began construction of our new CCG operations and production kitchen facility. Renovation began mid-February, and we’ll be moving into our new home in early May 2013. In other first quarter news, The Blue Cross Foundation made a significant gift towards our facility and CCG was chosen as the 2014 FUNDSY recipient, a prestigious, high dollar community award specifically for capital expenses. This gift will help pay down a good chunk of debt for the new CCG facility. Furthermore, Stoltz Marketing Group brought CCG on as a pro bono client, providing marketing communication strategy and food packaging expertise.

In our expanded production kitchen facility, we plan to build our pipeline with additional regular volume pre- cut and prepared food customers. The bulk of CCG’s food production moving forward will be food for business and community institutions such as schools, hospitals, corporate cafeterias, restaurants and other food service locations.

CCG’s typical menu of offerings will be pre-cut produce, prepared salads and soups, prepared meals and some pastry product. As we scale further and determine where our sweet spot lies, our production will likely become more narrowly focused.

Thus far in 2013, CCG has placed 100% of our job- training graduates into jobs. We continue to push towards higher quality jobs for our graduates as well as securing job upgrades for past graduates.

CCG’s food production includes the operation of two small farms. First harvests will be mid-May and production volumes at the farms will significantly increase throughout the season until late October/early November when the outdoor growing season will end.