Cellu Tissue Holdings, Inc. Announces First Quarter Fiscal 2011 Results
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<p>ALPHARETTA, Ga., <span class="xn-chron">July 7</span> /CNW/ -- Cellu Tissue Holdings, Inc. (NYSE: CLU), a North American producer of tissue products, today reported net sales of <span class="xn-money">$132.1 million</span> and a net loss of <span class="xn-money">$1.3 million</span>, or a loss of <span class="xn-money">$0.07</span> per diluted share, for the fiscal 2011 first quarter ended <span class="xn-chron">May 27, 2010</span>.</p>
<p/>
<p>Summarized consolidated fiscal 2011 first quarter results compared to fiscal 2010 first quarter results are as follows:</p>
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-- 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.
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<p>"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.</p>
<p/>
<p>"We are maintaining our fiscal 2011 EBITDA guidance range of <span class="xn-money">$77 million to $85 million</span>. 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."</p>
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Fiscal 2011 First Quarter Financial and Operating Results
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<p> </p>
<p> </p>
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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%
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<p>Net sales for the quarter increased <span class="xn-money">$13.2 million</span>, 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.</p>
<p/>
<p>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.</p>
<p/>
<p>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.</p>
<p/>
<p>Income from operations for the fiscal 2011 first quarter was <span class="xn-money">$5.7 million</span> compared with <span class="xn-money">$13.3 million</span> in the same period of the prior fiscal year, which was primarily attributable to the decline in gross profit.</p>
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Income Tax Benefit
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<p>Income tax benefit for the fiscal 2011 first quarter was <span class="xn-money">$0.6 million</span> compared to income tax expense of <span class="xn-money">$4.1 million</span> 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%.</p>
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Segment Operating Results
Tissue
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Quarter ended
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May 27, 2010 May 28, 2009 Increase (Decrease)
------------ ------------ -------------------
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<p> </p>
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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%
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<p>Net sales for Tissue during the quarter increased to <span class="xn-money">$103.0 million</span>, 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 <span class="xn-money">$6.5 million</span> in the fiscal 2011 first quarter compared to <span class="xn-money">$12.4 million</span> 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.</p>
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Machine-Glazed Tissue
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<p> </p>
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Quarter ended
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May 27, 2010 May 28, 2009 Increase (Decrease)
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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%
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<p>Net sales in Machine-Glazed Tissue increased to <span class="xn-money">$27.3 million</span> from <span class="xn-money">$23.6 million</span> 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 <span class="xn-money">$0.3 million</span> in the fiscal 2011 fourth quarter, down compared to <span class="xn-money">$1.3 million</span> in the fiscal 2010 first quarter due to significantly higher pulp prices, partially offset by higher net selling prices.</p>
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Foam
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<p> </p>
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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)%
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<p>Net sales in Foam were <span class="xn-money">$1.8 million</span> compared to <span class="xn-money">$1.9 million</span> in the prior fiscal year period. Income from operations decreased by <span class="xn-money">$0.6 million</span> 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.</p>
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Adjusted EBITDA
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<p>Earnings before interest, taxes, depreciation, amortization and special items (Adjusted EBITDA) for the first quarter ended <span class="xn-chron">May 27, 2010</span> totaled <span class="xn-money">$12.9 million</span>, compared to <span class="xn-money">$20.5 million</span> for the comparable period in the prior fiscal year.</p>
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Notice Relating to the Use of Non-GAAP Measures
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<p>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.</p>
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<p>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:</p>
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-- 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.
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<p>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.</p>
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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.
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<p>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.</p>
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<p>Cellu Tissue's management invites you to listen to its conference call on <span class="xn-chron">July 8, 2010</span> at <span class="xn-chron">9:00 a.m. ET</span> 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 <a href="http://www.cellutissue.com">www.cellutissue.com</a>. A taped replay of the conference call will be available after <span class="xn-chron">1:00 p.m.</span> on <span class="xn-chron">July 8, 2010</span> until <span class="xn-chron">July 22, 2010</span>. 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 <a href="http://www.cellutissue.com">www.cellutissue.com</a>.</p>
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About Cellu Tissue Holdings, Inc.
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<p>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.</p>
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<p>For more information, contact Cellu Tissue Holdings, Inc. at <a href="http://www.cellutissue.com">www.cellutissue.com</a>.</p>
<p/>
<p>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 <span class="xn-chron">February 28, 2010</span> and subsequent filings with the SEC.</p>
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CELLU TISSUE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
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<p> </p>
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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
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Gross profit 12,150,913 19,813,312
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<p> </p>
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Selling, general and
administrative expenses 5,392,353 5,501,154
Amortization expense 1,044,554 1,056,424
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Income from operations 5,714,006 13,255,734
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<p> </p>
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Interest expense, net 7,480,694 6,506,553
Foreign currency loss 215,497 356,941
Other income (3,019) (16,578)
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Income (loss) before income tax
expense (1,979,166) 6,408,818
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<p> </p>
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Income tax (benefit) expense (631,807) 4,097,953
Net (loss) income $(1,347,359) $2,310,865
=========== ==========
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<p> </p>
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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
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<p> </p>
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CELLU TISSUE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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<p> </p>
<p> </p>
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February
May 27, 28,
2010 2010
---- ----
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<p> </p>
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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
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Total Current Assets 120,118,736 117,325,397
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<p> </p>
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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
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Total Assets $507,733,459 $502,706,386
============ ============
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<p> </p>
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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
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Total Current Liabilities 78,728,442 71,201,399
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<p> </p>
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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
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<p> </p>
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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
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Total Stockholders' Equity 109,375,017 110,832,025
----------- -----------
Total Liabilities and Stockholders' Equity $507,733,459 $502,706,386
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CELLU TISSUE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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<p> </p>
<p> </p>
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Three Months Ended
May 27, 2010 May 28, 2009
------------ ------------
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<p> </p>
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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
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Net cash provided by operating
activities 3,412,911 13,456,058
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<p> </p>
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Cash flows from investing
activities
Capital expenditures (10,044,152) (6,262,050)
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Net cash used in investing
activities (10,044,152) (6,262,050)
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<p> </p>
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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 -
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Net cash provided by (used in)
financing activities 6,557,815 (6,196,244)
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<p> </p>
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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
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Cash and cash equivalents at end
of period $3,234,310 $1,369,985
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<p> </p>
<p> </p>
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CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION (Unaudited)
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<p> </p>
<p> </p>
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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
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Consolidated $132,104,145 $118,928,222
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<p> </p>
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INCOME FROM OPERATIONS:
Tissue $6,455,640 $12,354,854
Machine-Glazed Tissue 339,357 1,340,387
Foam (36,437) 616,917
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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
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<p> </p>
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CELLU TISSUE HOLDINGS, INC.
RECONCILIATION OF CONSOLIDATED NET INCOME (LOSS) TO EBITDA
(Unaudited)
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<p> </p>
<p> Three Months Ended</p>
<p> </p>
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May 27, May 28,
2010 2009
---- ----
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<p> </p>
<pre>
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
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EBITDA $12,935,150 $19,899,800
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<p> </p>
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CELLU TISSUE HOLDINGS, INC.
RECONCILIATION OF CONSOLIDATED EBITDA TO CONSOLIDATED ADJUSTED
EBITDA
(Unaudited)
$in thousands
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<p> </p>
<p> </p>
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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
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<p> </p>
<pre>
(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.
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<p> </p>
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(2) Insurance deductible costs related to a fire at our Natural Dam
mill at our Gouverneur, New York facility.
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<p> </p>
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(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.
For further information: Jeff Sprick, +1-678-631-4925 Web Site: http://www.cellutissue.com
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