Cellu Tissue Holdings, Inc. Announces Second Quarter Fiscal 2011 Results
ALPHARETTA, Ga., Oct. 6 /CNW/ -- Cellu Tissue Holdings, Inc. (NYSE: CLU), a North American producer of tissue products, today reported net sales of $136.6 million and a net loss of $3.8 million, or a loss of $0.19 per diluted share, for the fiscal 2011 second quarter ended August 27, 2010. As previously announced on September 16, 2010, we entered into a definitive merger agreement with Clearwater Paper Corporation ("Clearwater"), whereby Clearwater would acquire all of the outstanding common stock of the Company in an all-cash transaction, which values the company at approximately $502 million. Under the terms of the agreement, our stockholders will receive $12.00 per share in cash for each share of common stock they own.
Summarized consolidated fiscal 2011 second quarter results compared to fiscal 2010 second quarter results are as follows:
- Net sales for the fiscal 2011 second quarter were $136.6 million, down
0.8% compared to $137.8 million in the fiscal 2010 second quarter.
- Income from operations for the fiscal 2011 second quarter was $2.2
million compared to $16.2 million in the fiscal 2010 second quarter.
The fiscal 2011 second quarter includes $1.0 million of costs related
to the previously discussed merger with Clearwater.
- Adjusted EBITDA was $11.4 million in the fiscal 2011 second quarter
compared to $23.1 million in the fiscal 2010 second quarter.
- Interest expense for the fiscal 2011 second quarter was $7.8 million
compared to $12.3 million in the second quarter of fiscal 2010. The
second quarter of fiscal 2010 includes approximately $3.9 million of
non-recurring debt refinancing costs.
- Net loss for the fiscal 2011 second quarter was $3.8 million, or a
loss of $0.19 per diluted share, compared to net income of
$2.7 million, or earnings of $0.16 per diluted share for the fiscal
2010 second quarter.
"Our fiscal 2011 second quarter results reflect strong and improving
fundamentals within our business offset by the continued impact of 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. "We made good progress in installing and starting up two new
converting lines during the quarter, and made our first shipments out of our
new converting facility in Oklahoma City."
Fiscal 2011 Second Quarter Financial and Operating Results
Quarter ended
-------------
August 26, August 27,
2010 2009 Increase (Decrease)
----------- ----------- -------------------
Net sales $136.6 million $137.8 million $(1.2) million (0.8)%
Gross Profit $8.8 million $22.6 million $(13.8) million (61.0)%
Income from
operations $2.2 million $16.2 million $(14.1) million (86.7)%
Tons sold 82,204 89,328 (7,124) (8.0)%
Net selling price
per ton $1,647 $1,519 $128 8.4%
Net sales for the quarter decreased $1.2 million, or 0.8%
quarter-over-quarter, primarily as a result of an 8.0% decrease in tons sold,
partially offset by hardroll and away-from-home price increases. The decrease
in total tons sold primarily reflects a decrease in converted tons sold and
in-sourcing of an additional 1,781 tons of hardrolls for our converting
operations, which were purchased on the external hardroll market in the prior
year period. As a result, we 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 our strategy to increase the
vertical integration of our acquired operations and to improve quality control
and profitability. Additionally, during the comparable prior year period, we
shipped 3,009 tons of converted tissue to support two new substantial product
launches.
Net selling price per ton increased 8.4% to $1,647 during the current
period from $1,519 during the comparable prior year period. This increase in
price primarily reflects increases in hardroll and away-from-home selling
prices. Prices in the hardroll market increased in the second quarter of
fiscal 2011 but lagged price increases in the pulp market.
Gross profit as a percentage of net sales decreased to 6.5% in the fiscal
2011 second quarter from 16.4% in the fiscal 2010 second quarter. The decline
was primarily driven by higher pulp costs, partially offset by increases in
hardroll and away-from-home selling prices.
Income from operations for the fiscal 2011 second quarter was $2.2 million
compared with $16.2 million in the same period of the prior fiscal year. The
decrease was primarily attributable to the decline in gross profit.
Interest Expense
Interest expense, net in the fiscal 2011 second quarter was $7.8 million
compared to $12.3 million in the fiscal 2010 second quarter. The fiscal 2010
second quarter includes the effect of extinguishing our Senior Secured Notes
due 2010 (the "2010 Notes") and the issuance of our Senior Secured Notes due
2014 (the "2014 Notes"). Non-recurring costs of extinguishing our 2010 Notes
includes both the write-off of deferred financing fees of $2.2 million as well
as 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.
Income Tax Benefit
Income tax benefit for the fiscal 2011 second quarter was $1.8 million
compared to income tax expense of $1.2 million for the fiscal 2010 second
quarter. Our effective tax rate for the second quarter of fiscal 2011 was 32%,
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 32%.
Segment Operating Results
Tissue
Quarter ended
-------------
August 26, August 27,
2010 2009 Increase (Decrease)
----------- ----------- -------------------
Net sales $105.9 million $107.8 million $(1.8) million (1.7)%
Income from
operations $4.4 million $15.4 million $(11.0) million (71.5)%
Tons sold:
Converted tissue
products 26,773 29,516 (2,743) (9.3)%
Hardrolls 34,939 36,795 (1,856) (5.0)%
------ ------ ------
Total 61,712 66,311 (4,599) (6.9)%
Overall net selling
price per ton $1,717 $1,625 $91 5.6%
Net sales for Tissue during the quarter decreased to $105.9 million, or
1.7% quarter-over-quarter, primarily as a result of a 6.9% decrease in tons
sold, partially offset by hardroll and away-from-home price increases. The
decrease in total tons sold is primarily attributable to 3,009 tons of
converted tissue shipments to support two new substantial product launches in
the comparable prior year period and in-sourcing of an additional 1,781 tons
of hardrolls for our converting operations, which were purchased on the
external hardroll market in the prior year period. The 5.6% increase in net
selling price per ton primarily reflects the increases in hardroll and
away-from-home selling prices. Income from operations was $4.4 million in the
fiscal 2011 second quarter compared to $15.4 million in the fiscal 2010 second
quarter. Income from operations in the fiscal 2011 second quarter reflects
rising pulp prices that were partially offset by hardroll price increases.
Machine-Glazed Tissue
Quarter ended
-------------
August 26, August 27, Increase
2010 2009 (Decrease)
----------- ----------- ----------
Net sales $29.5 million $27.9 million $1.5 million 5.5%
Income (loss)
from
operations $(1.4) million $1.3 million $(2.7) million (205.4)%
Tons sold:
Hardrolls 17,782 19,893 (2,111) (10.6)%
Converted tissue
products 2,710 3,124 (414) (13.3)%
----- ----- ----
Total 20,492 23,017 (2,525) (11.0)%
Overall net
selling price
per ton $1,438 $1,213 $225 18.5%
Net sales in Machine-Glazed Tissue increased to $29.5 million from $27.9
million in the fiscal 2010 second quarter as a result of higher net selling
prices, partially offset by lower sales volume. The operating loss for
Machine-Glazed Tissue was $1.4 million in the fiscal 2011 second quarter, down
compared to operating income of $1.3 million in the fiscal 2010 second quarter
primarily attributable to higher fiber costs and lower production volumes,
partially offset by higher selling prices.
Foam
Quarter ended
-------------
August 26, August 27,
2010 2009 Increase (Decrease)
----------- ----------- -------------------
Net sales $1.2 million $2.1 million $(0.9) million (40.8)%
Income from
operations $0.3 million $0.6 million $(0.3) million (56.9)%
Net sales in Foam were $1.2 million compared to $2.1 million in the prior fiscal year period due to reduced sales volumes.
Adjusted EBITDA
Earnings before interest, taxes, depreciation, amortization and special items (Adjusted EBITDA) for the second quarter ended August 26, 2010 totaled $11.4 million, compared to $23.1 million for the comparable period in the prior fiscal year.
Pending Merger; Discontinuing Financial Guidance
On September 15, 2010, we entered into an agreement and plan of merger with Clearwater Paper Corporation, pursuant to which a subsidiary of Clearwater will be merged with and into Cellu Tissue, with Cellu Tissue being the surviving corporation and continuing as a wholly-owned subsidiary of Clearwater. In light of the pending merger, we are discontinuing financial guidance for fiscal 2011.
Notice Relating to the Use of Non-GAAP Measures
Attached to this press release are tables setting forth our second quarter consolidated statements of operations, financial position and selected consolidated financial data, including information concerning our 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 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 October 7, 2010 at 9:00 a.m. ET regarding fiscal 2011 second quarter consolidated financial results. To participate in the conference call, you may either dial (800) 288-8967 or International (612) 332-0430, or join in listen-only mode to an audio webcast, accessible through the Investor Relations section at www.cellutissue.com. A taped replay of the conference call will be available after 11:00 a.m. on October 7, 2010 until October 21, 2010. The number to all for the taped replay is (800) 475-6701 or International (320) 365-3844, access code 173022. The taped replay information to access the call will also be available in the Investor Relations section of the Company's website at 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 www.cellutissue.com.
The statements contained in this release that are not purely historical, including information regarding our fiscal 2011 estimated tax rate, 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 Form 10-Q for the quarter ended May 27, 2010 and subsequent filings with the SEC.
CELLU TISSUE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the three months ended
--------------------------
August 26, 2010 August 27, 2009
--------------- ---------------
Net sales $136,632,083 $137,796,650
Cost of goods sold 127,802,664 115,154,471
----------- -----------
Gross profit 8,829,419 22,642,179
Selling, general and
administrative expenses 5,594,748 5,355,748
Amortization expense 1,080,163 1,079,268
--------- ---------
Income from operations 2,154,508 16,207,163
Interest expense, net 7,838,455 12,331,443
Foreign currency loss (gain) (142,308) 356,287
Other expense (income) 92,075 (355,871)
------ --------
Income (loss) before income tax
expense (5,633,714) 3,875,304
Income tax (benefit) expense (1,804,045) 1,157,830
Net (loss) income $(3,829,669) $2,717,474
------------ ------------
------------ ------------
Basic and diluted (loss)
earnings per share $(0.19) $0.16
Basic shares outstanding 20,184,054 17,477,971
Diluted shares outstanding 20,184,054 17,477,971
For the six months ended
------------------------
August 26, 2010 August 27, 2009
--------------- ---------------
Net sales $268,736,228 $256,724,872
Cost of goods sold 247,755,896 214,269,375
----------- -----------
Gross profit 20,980,332 42,455,497
Selling, general and
administrative expenses 10,987,101 10,856,909
Amortization expense 2,124,717 2,135,692
--------- ---------
Income from operations 7,868,514 29,462,896
Interest expense, net 15,319,149 18,837,994
Foreign currency loss 73,189 713,226
Other expense (income) 89,056 (372,445)
------ --------
Income (loss) before income tax
expense (7,612,880) 10,284,121
Income tax (benefit) expense (2,435,852) 5,255,782
Net (loss) income $(5,177,028) $5,028,339
------------ ------------
------------ ------------
Basic and diluted (loss)
earnings per share $(0.26) $0.29
Basic shares outstanding 20,176,732 17,477,971
Diluted shares outstanding 20,176,732 17,477,971
CELLU TISSUE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
August 26, February 28,
2010 2010
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $2,229,594 $3,299,033
Receivables, net 55,508,902 49,659,464
Inventories 55,881,584 56,586,982
Prepaid expenses and other
current assets 3,033,423 3,810,934
Income tax receivable 3,162,572 2,788,118
Deferred income taxes 1,368,255 1,180,866
--------- ---------
Total Current Assets 121,184,330 117,325,397
Property, plant and
equipment, net 314,433,569 307,635,021
Goodwill 41,020,138 41,020,138
Other intangibles 25,215,236 27,339,953
Other assets 8,622,698 9,385,877
--------- ---------
Total Assets $510,475,971 $502,706,386
------------ ------------
------------ ------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving line of credit $23,000,000 $1,000,750
Accounts payable 27,143,324 34,275,598
Accrued expenses 27,630,519 27,820,255
Accrued interest 6,502,332 6,721,143
Other current liabilities 1,514,095 623,653
Current portion of long-
term debt 760,000 760,000
------- -------
Total Current Liabilities 86,550,270 71,201,399
Long-term debt, less
current portion 242,854,431 242,538,125
Deferred income taxes 75,210,816 77,178,393
Other liabilities 821,809 956,444
Stockholders' Equity:
Common stock, $.01 par
value, 23,715,470 201,869 201,452
shares authorized,
20,186,892 and 20,145,176
issued respectively
Capital in excess of par
value 103,643,310 103,076,890
Accumulated earnings 2,283,664 7,460,692
Accumulated other
comprehensive income (loss) (1,090,198) 92,991
---------- ------
Total Stockholders' Equity 105,038,645 110,832,025
----------- -----------
Total Liabilities and
Stockholders' Equity $510,475,971 $502,706,386
------------ ------------
------------ ------------
CELLU TISSUE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
August 26, August 27,
2010 2009
----------- -----------
Cash flows from operating
activities
Net (loss) income $(5,177,028) $5,028,339
Adjustments to reconcile net
(loss) income to net cash
provided by operating
activities:
Depreciation 12,940,999 12,050,067
Amortization of intangibles 2,124,717 2,135,692
Amortization and write-off of
debt issue costs 769,290 779,510
Accretion and write-off of debt
discount 696,306 2,887,919
Stock-based compensation 513,000 422,480
Deferred income taxes (2,154,966) 2,393,930
Loss on disposal of fixed assets 220,601 147,241
Changes in operating assets and
liabilities:
Receivables (5,874,026) 4,287,654
Inventories 623,423 8,699,026
Prepaid expenses, other current
assets and income tax
receivable 263,424 (757,153)
Other assets and liabilities 17,703 368,092
Accounts payable, accrued
expenses and accrued interest (7,670,619) 2,429,452
---------- ---------
Total adjustments 2,469,852 35,843,910
--------- ----------
Net cash (used in) provided by
operating activities (2,707,176) 40,872,249
Cash flows from investing
activities
Capital expenditures (20,031,606) (11,162,014)
----------- -----------
Net cash used in investing
activities (20,031,606) (11,162,014)
Cash flows from financing
activities
Bank overdrafts - (3,285,420)
Borrowings on revolving line of
credit, net 36,245,609 22,350,147
Payments on revolving line of
credit, net (14,246,359) (40,880,971)
Payments on long-term debt (380,000) (380,000)
Retirement of long-term debt - (222,255,572)
Payment of deferred financing
fees - (9,346,462)
Net proceeds from bond offering - 245,738,400
Expenses from initial public
offering (171,042) -
Proceeds from stock options
exercised 224,880 -
------- ---
Net cash provided by (used in)
financing activities 21,673,088 (8,059,878)
Effect of foreign currency (3,745) 15,194
------ ------
Net (decrease) increase in cash
and cash equivalents (1,069,439) 21,665,551
Cash and cash equivalents at
beginning of period 3,299,033 361,035
--------- -------
Cash and cash equivalents at end
of period $2,229,594 $22,026,586
---------- -----------
---------- -----------
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION (Unaudited)
BUSINESS SEGMENTS
Three Months Ended
August 26, August 27,
2010 2009
---- ----
NET SALES:
Tissue $105,931,753 $107,781,026
Machine-Glazed Tissue 29,462,776 27,925,877
Foam 1,237,555 2,089,747
--------- ---------
Consolidated $136,632,084 $137,796,650
------------ ------------
------------ ------------
INCOME (LOSS) FROM
OPERATIONS:
Tissue $4,373,041 $15,356,477
Machine-Glazed Tissue (1,398,169) 1,326,573
Foam 259,802 603,381
------- -------
Segment income from
operations 3,234,674 17,286,431
Amortization expense (1,080,163) (1,079,268)
Consolidated $2,154,511 $16,207,163
------------ ------------
------------ ------------
Six Months Ended
August 26, August 27,
2010 2009
---- ----
NET SALES:
Tissue $208,907,911 $201,248,387
Machine-Glazed Tissue 56,795,589 51,519,942
Foam 3,032,728 3,956,543
--------- ---------
Consolidated $268,736,228 $256,724,872
------------ ------------
------------ ------------
INCOME (LOSS) FROM
OPERATIONS:
Tissue $10,828,681 $27,711,329
Machine-Glazed Tissue (1,058,812) 2,666,960
Foam 223,362 1,220,299
------- ---------
Segment income from
operations 9,993,231 31,598,588
Amortization expense (2,124,717) (2,135,692)
Consolidated $7,868,514 $29,462,896
---------- -----------
---------- -----------
CELLU TISSUE HOLDINGS, INC.
RECONCILIATION OF CONSOLIDATED NET INCOME (LOSS) TO EBITDA
(Unaudited)
Three Months Ended
August 26, August 27,
2010 2009
---- ----
NET (LOSS) INCOME $(3,829,669) $2,717,474
Add back:
Depreciation 6,551,931 6,122,062
Amortization 1,080,163 1,079,268
Interest expense,
net 7,838,455 12,331,443
Income tax
(benefit) expense (1,804,045) 1,157,830
---------- ---------
EBITDA $9,836,835 $23,408,077
---------- ---------
---------- ---------
Six Months Ended
August 26, August 27,
2010 2009
---- ----
NET (LOSS) INCOME $(5,177,028) $5,028,339
Add back:
Depreciation 12,940,999 12,050,067
Amortization 2,124,717 2,135,692
Interest expense,
net 15,319,149 18,837,994
Income tax
(benefit) expense (2,435,852) 5,255,782
---------- ---------
EBITDA $22,771,985 $43,307,874
---------- ---------
---------- ---------
CELLU TISSUE HOLDINGS, INC.
RECONCILIATION OF CONSOLIDATED EBITDA TO CONSOLIDATED ADJUSTED EBITDA
(Unaudited)
$in thousands
Three months ended
August 26, August 27,
2010 2009
---- ----
EBITDA (1) $9,836 $23,408
Adjustments:
APF transition and
related costs (3) - 20
Insurance claim for
wrapper damage (4) - (346)
Clearwater
transaction costs
(5) 953 -
Oklahoma City start-
up costs (6) 629 -
ADJUSTED EBITDA $11,418 $23,082
------- -------
------- -------
Six months ended
August 26, August 27,
2010 2009
---- ----
EBITDA (1) $22,772 $43,308
Adjustments:
Natural Dam fire (2) - 250
APF transition and
related costs (3) - 373
Insurance claim for
wrapper damage (4) - (346)
Clearwater
transaction costs
(5) 953 -
Oklahoma City start-
up costs (6) 629 -
ADJUSTED EBITDA $24,354 $43,585
------- -------
------- -------
(1) EBITDA includes stock-based compensation expense related to
equity awards of $0.2 million and $0.2 million, for the three months
ended August 26, 2010 and August 27, 2009, respectively and $0.5
million and $0.4 million for the six months ended August 26, 2010
and August 27, 2010, 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.
(4) Reflects insurance proceeds exceeding the book value for damaged
packaging equipment (damaged in transit).
(5) Represents legal, accounting and related costs incurred in
connection with the announced acquisition of the Company by
Clearwater Paper Corporation.
(6) Represents start-up costs for the Company's new facility in
Oklahoma City, Oklahoma.
For further information: Cellu Tissue Holdings, Inc., +1-678-393-2651, Web Site: http://www.cellutissue.com
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