ALPHARETTA, Ga., July 7 /PRNewswire-FirstCall/ -- Cellu Tissue Holdings, Inc. , a North American producer of tissue products, today reported net sales of $132.1 million and a net loss of $1.3 million, or a loss of $0.07 per diluted share, for the fiscal 2011 first quarter ended May 27, 2010.
Summarized consolidated fiscal 2011 first quarter results compared to fiscal 2010 first quarter results are as follows:
-- Net sales for the fiscal 2011 first quarter were $132.1 million, up 11.1% compared to $118.9 million in the fiscal 2010 first quarter. -- Income from operations for the fiscal 2011 first quarter was $5.7 million compared to $13.3 million in the fiscal 2010 first quarter. -- Adjusted EBITDA was $12.9 million in the fiscal 2011 first quarter compared to $20.5 million in the fiscal 2010 first quarter. -- Interest expense for the fiscal 2011 first quarter was $7.5 million compared to $6.5 million in the first quarter of fiscal 2010, due to higher interest rates. -- Net loss for the fiscal 2011 first quarter was $1.3 million, or a loss of $0.07 per diluted share, compared to net income of $2.3 million, or earnings of $0.13 per diluted share for the fiscal 2010 first quarter.
"Our fiscal 2011 first quarter results reflect strong and improving fundamentals within our business offset by the continued impact of record high pulp prices and no retail market price increase in converted tissue products," said Russell C. Taylor, President and Chief Executive Officer of Cellu Tissue Holdings. "Our sales volumes and operating cost structure were in-line with our internal expectations. We have also taken the appropriate steps to combat continued high pulp costs by executing price increases in tissue hardrolls, machine-glazed products, and the away-from-home converted market as planned, and we will see these benefits beginning in the fiscal second quarter.
"We are maintaining our fiscal 2011 EBITDA guidance range of $77 million to $85 million. This guidance assumes that we continue to execute our strategy to grow converted tissue products and that pulp prices will begin trending down during the second half of our fiscal year, returning to historical levels by our fiscal year-end."
Fiscal 2011 First Quarter Financial and Operating Results Three months ended ------------------ May 27, 2010 May 28, 2009 Increase (Decrease) ------------ ------------ ------------------- Net sales $132.1 million $118.9 million $13.2 million 11.1% Gross Profit $12.2 million $19.8 million $(7.6) million (38.7)% Income from operations $5.7 million $13.3 million $(7.6) million (56.9)% Tons sold 82,494 78,009 4,485 5.7% Net selling price per ton $1,580 $1,501 $79 5.3%
Net sales for the quarter increased $13.2 million, or 11.1% quarter-over-quarter, primarily as a result of a 5.7% increase in tons sold, the continued mix shift to converted tissue products and the previously mentioned hardroll price increases. The increase in total tons sold reflects growth in converted tons sold, partially offset by in-sourcing an additional 3,400 tons of hardrolls for the Company's converting operations, which were purchased on the external hardroll market in the prior year period. As a result, Cellu Tissue reduced external hardroll shipments by a similar amount and improved the overall sales mix due to higher selling prices for converted tissue products, consistent with the Company's strategy to increase the vertical integration of its acquired operations and to improve quality control and profitability.
Net selling price per ton increased 5.3% primarily due to hardroll price increases completed in the first quarter of fiscal 2011 and by the favorable impact of increasing the mix of converted tissue products relative to hardrolls. Prices in the hardroll market increased in the first quarter of fiscal 2011 but lagged price increases in the pulp market.
Gross profit as a percentage of net sales decreased to 9.2% in the fiscal 2011 first quarter from 16.7% in the fiscal 2010 first quarter. The decline was primarily driven by higher pulp costs, partially offset by improved sales mix and increases in hardroll prices.
Income from operations for the fiscal 2011 first quarter was $5.7 million compared with $13.3 million in the same period of the prior fiscal year, which was primarily attributable to the decline in gross profit.
Income Tax Benefit
Income tax benefit for the fiscal 2011 first quarter was $0.6 million compared to income tax expense of $4.1 million for the fiscal 2010 first quarter. The Company's effective tax rate for the first quarter of fiscal 2011 was 31.9%, which includes the beneficial impacts of reductions in applicable foreign tax rates as well as the full phase-in of the tax benefits from the domestic production activities deduction. Management estimates the overall tax rate for fiscal 2011 will be approximately 34%.
Segment Operating Results Tissue Quarter ended ------------- May 27, 2010 May 28, 2009 Increase (Decrease) ------------ ------------ ------------------- Net sales $103.0 million $93.5 million $9.5 million 10.2% Income from operations $6.5 million $12.4 million $(5.9) million (47.7)% Tons sold: Converted tissue products 28,074 24,360 3,714 15.2% Hardrolls 33,648 34,296 (648) (1.9)% ------ ------ ---- Total 61,722 58,656 3,066 5.2% Overall net selling price per ton $1,668 $1,593 $75 4.7%
Net sales for Tissue during the quarter increased to $103.0 million, or 10.2% quarter-over-quarter, primarily as a result a 5.2% increase in tons sold, the continued mix shift to converted tissue products and the hardroll price increases. The increase in total tons sold reflects growth in converted tons sold, which was partially offset by in-sourcing an additional 3,400 tons of hardrolls for the Company's converting operations, which were purchased on the external hardroll market in the prior year period. The 4.7% increase in net selling price per ton primarily reflects the continued mix shift to converted tissue products from tissue hardrolls. Income from operations was $6.5 million in the fiscal 2011 first quarter compared to $12.4 million in the fiscal 2010 first quarter. Income from operations in the fiscal 2011 first quarter reflects rising pulp prices that were partially offset by mix improvements and hardroll price increases.
Machine-Glazed Tissue Quarter ended ------------- May 27, 2010 May 28, 2009 Increase (Decrease) ------------ ------------ ------------------- Net sales $27.3 million $23.6 million $3.7 million 15.8% Income from operations $0.3 million $1.3 million $(1.0) million (74.7)% Tons sold: Hardrolls 18,302 17,332 970 5.6% Converted tissue products 2,470 2,021 449 22.2% ----- ----- --- Total 20,772 19,353 1,419 7.3% Overall net selling price per ton $1,316 $1,219 $97 8.0%
Net sales in Machine-Glazed Tissue increased to $27.3 million from $23.6 million in the fiscal 2010 first quarter as a result of increased sales volumes and higher net selling prices. Operating income in Machine-Glazed Tissue was $0.3 million in the fiscal 2011 fourth quarter, down compared to $1.3 million in the fiscal 2010 first quarter due to significantly higher pulp prices, partially offset by higher net selling prices.
Foam Quarter ended February 28, -------------------------- 2010 2009 Increase (Decrease) ---- ---- ------------------- Net sales $1.8 million $1.9 million $(0.1) million (3.8)% Income from operations $0.0 million $0.6 million $(0.6) million (106.0)%
Net sales in Foam were $1.8 million compared to $1.9 million in the prior fiscal year period. Income from operations decreased by $0.6 million in the current fiscal year period due to lower selling prices and higher resin costs, which is the primary raw material used to manufacture the Company's foam products.
Adjusted EBITDA
Earnings before interest, taxes, depreciation, amortization and special items (Adjusted EBITDA) for the first quarter ended May 27, 2010 totaled $12.9 million, compared to $20.5 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 first 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 represents earnings before interest expense, income taxes and depreciation and amortization. Adjusted EBITDA represents EBITDA adjusted to reflect the additions and eliminations described in the table below. EBITDA and Adjusted EBITDA are supplemental measures of operating performance that do not represent and should not be considered as alternatives to net income or cash flow from operations, as determined by U.S. generally accepted accounting principles, or U.S. GAAP, and our calculation thereof may not be comparable to that reported by other companies. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under U.S. GAAP. Some of the limitations are:
-- EBITDA and Adjusted EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; -- EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; -- EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; -- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and -- other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using EBITDA and Adjusted EBITDA only supplementally. We further believe that our presentation of these U.S. GAAP and non-GAAP financial measurements provide information that is useful to analysts and investors because they are important indicators of the strength of our operations and the performance of our core business.
Management uses EBITDA and Adjusted EBITDA: -- as measurements of operating performance because they assist us in comparing our operating performance on a consistent basis, as both remove the impact of items not directly resulting from our core operations; -- for planning purposes, including the preparation of our internal annual operating budget; -- to allocate resources to enhance the financial performance of our business; -- to evaluate the performance and effectiveness of our operational strategies; -- to evaluate our capacity to fund capital expenditures and expand our business; and -- to calculate incentive compensation for our employees.
In addition, these measurements are used by investors as supplemental measures to evaluate the overall operating performance of companies in our industry. Management believes that investors' understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations. Many investors are interested in understanding the performance of our business by comparing our results from ongoing operations from one period to the next and would ordinarily add back events that are not part of normal day-to-day operations of our business. By providing these non-GAAP financial measures, together with reconciliations, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing strategic initiatives.
Cellu Tissue's management invites you to listen to its conference call on July 8, 2010 at 9:00 a.m. ET regarding fiscal 2011 first quarter consolidated financial results. To participate in the conference call, you may either dial (800) 230-1951 or International (612) 332-0636, or join in listen-only mode to an audio webcast, accessible through the Investor Relations section at http://www.cellutissue.com/. A taped replay of the conference call will be available after 1:00 p.m. on July 8, 2010 until July 22, 2010. The number to all for the taped replay is (800) 475-6701 or International (320) 365-3844, access code 163364. The taped replay information to access the call will also be available in the Investor Relations section of the Company's website at http://www.cellutissue.com/.
About Cellu Tissue Holdings, Inc.
Cellu Tissue Holdings, Inc. is a North American producer of tissue products, with a focus on consumer-oriented private label products and a growing presence in the value retail tissue market.
For more information, contact Cellu Tissue Holdings, Inc. at http://www.cellutissue.com/.
The statements contained in this release that are not purely historical, including information regarding our future financial performance and future pulp pricing, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. 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 pulp costs, the growth of our converted tissue business changes in retail pricing levels and any other risks described in our Annual Report on Form 10-K for the fiscal year ended February 28, 2010 and subsequent filings with the SEC.
CELLU TISSUE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the three months ended -------------------------- May 27, 2010 May 28, 2009 ------------ ------------ Net sales $132,104,145 $118,928,222 Cost of goods sold 119,953,232 99,114,910 ----------- ---------- Gross profit 12,150,913 19,813,312 Selling, general and administrative expenses 5,392,353 5,501,154 Amortization expense 1,044,554 1,056,424 --------- --------- Income from operations 5,714,006 13,255,734 Interest expense, net 7,480,694 6,506,553 Foreign currency loss 215,497 356,941 Other income (3,019) (16,578) ------ ------- Income (loss) before income tax expense (1,979,166) 6,408,818 Income tax (benefit) expense (631,807) 4,097,953 Net (loss) income $(1,347,359) $2,310,865 =========== ========== Basic and diluted (loss) earnings per share $(0.07) $0.13 Basic shares outstanding 20,149,300 17,477,971 Diluted shares outstanding 20,149,300 17,477,971 CELLU TISSUE HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) February May 27, 28, 2010 2010 ---- ---- ASSETS Current Assets: Cash and cash equivalents $3,234,310 $3,299,033 Receivables, net 51,176,000 49,659,464 Inventories 58,702,210 56,586,982 Prepaid expenses and other current assets 3,374,041 3,810,934 Income tax receivable 2,351,846 2,788,118 Deferred income taxes 1,280,329 1,180,866 --------- --------- Total Current Assets 120,118,736 117,325,397 Property, plant and equipment, net 311,288,628 307,635,021 Goodwill 41,020,138 41,020,138 Other intangibles 26,295,399 27,339,953 Other assets 9,010,558 9,385,877 --------- --------- Total Assets $507,733,459 $502,706,386 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Revolving line of credit $8,000,000 $1,000,750 Accounts payable 28,739,041 34,275,598 Accrued expenses 27,010,769 27,820,255 Accrued interest 13,239,944 6,721,143 Other current liabilities 978,688 623,653 Current portion of long-term debt 760,000 760,000 ------- ------- Total Current Liabilities 78,728,442 71,201,399 Long-term debt, less current portion 242,500,875 242,538,125 Deferred income taxes 76,239,682 77,178,393 Other liabilities 889,443 956,444 Stockholders' Equity: Common stock, $.01 par value, 23,715,470 shares authorized, 20,145,176 shares issued and outstanding as of February 28, 2010 and common stock, $.01 par value, 18,245,459 shares authorized, 17,447,971 shares issued and outstanding as of February 28, 2009 201,671 201,452 Capital in excess of par value 103,302,236 103,076,890 Accumulated earnings 6,113,333 7,460,692 Accumulated other comprehensive income (loss) (242,223) 92,991 -------- ------ Total Stockholders' Equity 109,375,017 110,832,025 ----------- ----------- Total Liabilities and Stockholders' Equity $507,733,459 $502,706,386 ============ ============ CELLU TISSUE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended May 27, 2010 May 28, 2009 ------------ ------------ Cash flows from operating activities Net (loss) income $(1,347,359) $2,310,865 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 6,389,068 5,928,005 Amortization of intangibles 1,044,554 1,056,424 Amortization of debt issue costs 378,652 112,783 Accretion and write-off of debt discount 342,750 596,915 Stock-based compensation 287,000 231,220 Deferred income taxes (1,038,174) 2,287,630 Loss on disposal of fixed asset 60,171 - Changes in operating assets and liabilities: Receivables (1,489,805) 5,402,133 Inventories (2,136,197) (453,669) Prepaid expenses, other current assets and income tax receivable 936,872 (641,016) Other assets and liabilities (85,741) 52,314 Accounts payable, accrued expenses and accrued interest 71,120 (3,427,546) ---------- Total adjustments 4,760,270 11,145,193 --------- ---------- Net cash provided by operating activities 3,412,911 13,456,058 Cash flows from investing activities Capital expenditures (10,044,152) (6,262,050) ----------- ---------- Net cash used in investing activities (10,044,152) (6,262,050) Cash flows from financing activities Bank overdrafts - (3,285,420) Borrowings on revolving line of credit,net 13,056,893 21,714,271 Payments on revolving line of credit, net (6,057,643) (24,245,095) Payments on long-term debt (380,000) (380,000) Expenses from initial public offering (171,042) - Proceeds from stock options exercised 109,607 - ------- --- Net cash provided by (used in) financing activities 6,557,815 (6,196,244) Effect of foreign currency 8,703 11,186 ----- ------ Net (decrease) increase in cash and cash equivalents (64,723) 1,008,950 Cash and cash equivalents at beginning of period 3,299,033 361,035 --------- ------- Cash and cash equivalents at end of period $3,234,310 $1,369,985 ========== ========== CELLU TISSUE HOLDINGS, INC. CONSOLIDATED BUSINESS SEGMENT INFORMATION (Unaudited) BUSINESS SEGMENTS Three Months Ended May 27, May 28, 2010 2009 ---- ---- NET SALES: Tissue $102,976,159 $93,467,361 Machine-Glazed Tissue 27,332,813 23,594,065 Foam 1,795,173 1,866,796 --------- --------- Consolidated $132,104,145 $118,928,222 ============ ============ INCOME FROM OPERATIONS: Tissue $6,455,640 $12,354,854 Machine-Glazed Tissue 339,357 1,340,387 Foam (36,437) 616,917 ------- ------- Segment income from operations 6,758,560 14,312,158 Amortization expense (1,044,554) (1,056,424) ---------- Consolidated $5,714,006 $13,255,734 ========== =========== CELLU TISSUE HOLDINGS, INC. RECONCILIATION OF CONSOLIDATED NET INCOME (LOSS) TO EBITDA (Unaudited) Three Months Ended May 27, May 28, 2010 2009 ---- ---- NET INCOME (LOSS) $(1,347,359) $2,310,865 Add back: Depreciation 6,389,068 5,928,005 Amortization 1,044,554 1,056,424 Interest expense,net 7,480,694 6,506,553 Income tax benefit (631,807) 4,097,953 -------- --------- EBITDA $12,935,150 $19,899,800 =========== =========== CELLU TISSUE HOLDINGS, INC. RECONCILIATION OF CONSOLIDATED EBITDA TO CONSOLIDATED ADJUSTED EBITDA (Unaudited) $in thousands Three months ended May 27, May 28, 2010 2009 ---- ---- EBITDA (1) $12,935 $19,899 Adjustments: Natural Dam Fire (2) - 250 APF Transition and Related Costs (3): Facility consolidation - 353 ADJUSTED EBITDA $12,935 $20,502 ======= ======= (1) EBITDA includes stock-based compensation expense related to equity awards of $0.3 million and $0.2 million, for the three months ended May 27, 2010 and May 28, 2009, respectively. (2) Insurance deductible costs related to a fire at our Natural Dam mill at our Gouverneur, New York facility. (3) In fiscal year 2009, we acquired APF, which was a significant acquisition because of its size and complexity of operations. In connection with the APF acquisition, we determined that several initiatives, to be completed over a twelve-month period, would help achieve identified synergies. These initiatives included eliminating certain overhead functions and aligning those activities with our existing infrastructure as well as consolidating production and inventory storage facilities. Our consolidation of facilities included centralizing the acquired APF production facility and two APF inventory storage facilities located in Hauppauge, New York into one consolidated facility in Long Island, New York and moving machinery for a napkin line from our Neenah, Wisconsin location to the acquired APF Thomaston, Georgia facility.
Cellu Tissue Holdings, Inc.
CONTACT: Jeff Sprick, +1-678-631-4925
Web Site: http://www.cellutissue.com/
