Cellu Tissue Holdings, Inc. Announces Second Quarter Fiscal 2010 Results ALPHARETTA, GA -- October 7, 2009 -- Cellu Tissue Holdings, Inc. (the "Company" or "Cellu Tissue"), a leading North American producer of consumer-oriented private label tissue with a growing presence in the value retail tissue market, today reported net income of $2.7 million for the quarter ended August 27, 2009 compared to a loss of $0.2 million in the second quarter 2008. "The Company has continued to execute its strategy of leveraging our vertically integrated hardroll tissue manufacturing to grow our tissue converting operations," said Russell C. Taylor, President and Chief Executive Officer of Cellu Tissue Holdings. "As a result of continued improvement in the business, we believe we will exceed the high end of our previously communicated Adjusted EBITDA guidance of $75 million to $80 million for the current fiscal year." As previously announced, in the second quarter of fiscal year 2009, the Company completed its acquisition of the Long Island, New York and Thomaston, Georgia tissue converting operations of Atlantic Paper & Foil ("APF"). Accordingly, the results for the three and six months ended August 27, 2009 are impacted by the effects of APF's operating results, as highlighted below. Second Quarter 2010 Financial and Operating Results Net sales for the Fiscal 2010 three month period increased $4.8 million, or 3.6%, to $137.8 million from $133.0 million for the comparable prior year period. During the Fiscal 2010 three month period, we sold 89,328 tons of tissue hardrolls, machine-glazed tissue hardrolls and converted tissue products, an increase of 4,291 tons, or an increase of 5.0% over the comparable prior year period. During the quarter, we in-sourced an additional 6,046 tons of hardrolls for our converting operations that were previously purchased on the hardroll market in the prior year. This served to reduce external hardroll shipments by a similar amount and improved our overall sales mix due to higher selling prices for converted tissue products. This is consistent with our strategy to increase the vertical integration of the acquired operations, supporting improved quality control and profitability. Net selling price per ton decreased to $1,519 during the current period from $1,554 during the prior year period. This decrease in price primarily reflects the downward pricing pressure brought on by lower pulp prices, which was partially offset by the impact of mix improvements. Gross profit was $22.6 million for the Fiscal 2010 three month period, or an increase of $11.6 million from $11.0 million in the comparable prior year period. As a percentage of net sales, gross profit increased to 16.4% in the Fiscal 2010 three month period from 8.3% in the fiscal 2009 three month period. The improvement was primarily driven by the overall volume, mix and selling price changes as discussed above, as well as favorable improvements in pulp pricing and lower energy costs. Income from operations for the second quarter ended August 27, 2009 was $16.2 million compared to $5.7 million for the comparable period in the prior fiscal year. The overall increase is the result of the increase in gross profit as noted above, offset partially by higher selling, general and administrative expense in connection with increased incentive compensation expense. Debt Refinancing During the second quarter of Fiscal 2010 the Company refinanced its long-term debt, which resulted in higher overall interest rates and extended the overall maturity of the majority of long-term debt. The new 11-1/2% Senior Secured Notes due in 2014 ("2014 Notes") generated cash proceeds of $245.7 million. These proceeds were primarily used to retire all of the 9-3/4% Senior Secured Notes due in 2010 ("2010 Notes"). Interest expense for the current quarter was $12.3 million, compared to $6.1 million in the prior year period. The current quarter includes the effects of extinguishing our 2010 Notes and the issuance of our 2014 Notes. Non-recurring costs of the refinancing include both the write-off of deferred financing fees of $2.2 million and incremental interest expense of $1.7 million due to the period of time that elapsed between the issuance of the 2014 Notes and the extinguishment of the 2010 Notes. The remaining increase is primarily attributable to the higher interest rates and debt issuance costs related to the 2014 Notes. Segment Operating Results Tissue Net sales for our tissue segment were $107.8 million during the Fiscal 2010 three month period, an increase of $4.4 million, or 4.2% from $103.4 million in the comparable prior year period. The increase was due primarily to increased sale volumes, an improved mix with respect to converting tons sold, and moderate price improvement. Net selling price per ton increased to $1,625 for the Fiscal 2010 three month period from $1,605 for the Fiscal 2009 three month period. This increase in net selling price per ton was primarily the result of improvements in product mix as a result of higher converted tissue sales, and to a smaller extent, an increase in converted product selling prices, partially offset by downward pricing pressure brought on by lower pulp prices. The increase in converting tons sold reflects continued organic growth in our converting business and results from the APF Acquisition for the full three month period in Fiscal 2010, compared to only two months of ownership in the Fiscal 2009 three month period. For the Fiscal 2010 three month period, we sold 66,312 tons of tissue compared to 64,416 tons in the Fiscal 2009 three month period. Operating income was $15.4 million compared to $6.1 million, driven by the factors discussed above, and was also due to reduced fiber and energy prices and increased sales of our converted tissue products, which leveraged our ability to incrementally use more internally manufactured hardrolls. Machine-Glazed Tissue Net sales for our machine-glazed tissue segment for the Fiscal 2010 three month period were $27.9 million, a decrease of $0.8 million or 2.8%, compared to $28.7 million in the comparable prior year period. Tons sold during the fiscal 2010 period increased 11.6%, but this increase was offset by a decline in selling prices associated with lower pulp prices. Net selling price per ton was $1,213 for the Fiscal 2010 three month period compared to $1,393 per ton for the Fiscal 2009 three month period. For the Fiscal 2010 three month period, we sold 23,016 tons of machine-glazed tissue compared to 20,621 tons in the Fiscal 2009 three month period. Operating income was $1.3 million in the current quarter compared to $0.3 million in the Fiscal 2009 period. The improvement was primarily attributable to lower pulp and energy prices, along with favorable machine productivity. Foam Net sales and operating income for our foam segment was $2.1 million and $0.6 million in the fiscal 2010 period, respectively, compared to $0.9 million and $0.2 million in the prior year period. The increase was primarily due to the timing of the APF Acquisition and lower resin prices, the primary raw material used to manufacture our foam products. Adjusted EBITDA Earnings before interest, taxes, depreciation, amortization and special items (Adjusted EBITDA) for the second quarter ended August 27, 2009 totaled $23.3 million, compared to $13.2 million for the comparable period in the prior fiscal year. Notice Relating to the Use of Non-GAAP Measures Attached to this press release are tables setting forth the Company's fiscal second quarter consolidated statements of operations, financial position and selected consolidated financial data, including information concerning the Company's cash flow position, selected consolidated segment data, reconciliations of consolidated net income to consolidated EBITDA and reconciliations of consolidated EBITDA to consolidated Adjusted EBITDA. EBITDA and Adjusted EBITDA are not measures of performance under U.S. generally accepted accounting principles and should not be considered in isolation or used as a substitute for income from operations, net income, net cash provided by operating activities or other operating or cash flow data prepared in accordance with generally accepted accounting principles. The Company believes EBITDA and Adjusted EBITDA are useful to investors because they are used by management to evaluate the Company's financial performance. Adjusted EBITDA is defined as EBITDA adjusted for items which are expenses that are considered outside the normal operations of the business. Cellu Tissue's management invites you to listen to its conference call on October 8, 2009 at 10:00 a.m. EST regarding fiscal second quarter 2010 consolidated financial results. The dial-in number is (800) 230-1074 or International (612) 288-0337; participant code 118371. A taped replay of the conference call will be available after 12:30 p.m. October 8, 2009 until October 22, 2009. The number to call for the taped replay is (800) 475-6701 or International (320) 365-3844, access code 118371. Cellu Tissue Holdings, Inc. is a leading North American producer of consumer-oriented private label tissue products with a growing presence in the value retail tissue market. For more information, contact Cellu Tissue Holdings, Inc. at www.cellutissue.com. The statements contained in this release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements regarding the Company's future financial performance. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements. All forward-looking statements included in this document are based upon information available to Cellu Tissue as of the date hereof, and Cellu Tissue assumes no obligation to update any such forward-looking statements. Such statements and any other forward-looking statements are subject to risks, assumptions and uncertainties that may cause the statements to be inaccurate and readers are cautioned not to place undue reliance on such statements, including risks related to energy and fiber costs, the growth of our converted tissue business and synergies relating to the APF Acquisition and any other risks described in our Annual Report on Form 10-K for the fiscal year ended February 28, 2009 and subsequent filings with the SEC. Click here to view Cellu Tissue 2nd Quarter 2010 Statements. You must be a registered subscriber in order to view this Article. To learn more about becoming a subscriber, please visit our Subscription Services page.   Date Posted: 10/26/2009   Return An error has occurred. Error: Unable to load the Article Details page.