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Blue Ridge Paper Products Swings to Profit in 2nd Quarter

Aug. 11, 2006 (Press Release) - Blue Ridge Paper Products Inc. today reported a net income of $2.0 million for the second quarter ended June 30, 2006. This compared to a net loss of $2.9 million for the first quarter ended March 31, 2006 and a net loss of $4.4 million for the second quarter ended June 30, 2005. Total net sales for the second quarter ended June 30, 2006 were $144.9 million, an increase of 3.4 % and 15.7 %, respectively, when compared to net sales for the first quarter ended March 31, 2006 of $140.1 million and net sales of $125.2 million for the second quarter ended June 30, 2005.

Commenting on the quarter, Richard Lozyniak, Chief Executive Officer, stated, "Despite extremely high energy and transportation costs, we returned to profitability in the second quarter due to record productivity, improved pricing for our products and gains from our Six Sigma and Lean Manufacturing initiatives." Mr. Lozyniak added, "The ratification of our new three-year labor agreement gives our people a well-deserved raise and sends a strong signal to our customers, suppliers, lenders and the community of the dedication of the employees of Blue Ridge to its long-term success."

Key Business Highlights

  • The uncoated paper market continued to strengthen in the second quarter ended June 30, 2006. Average pricing in the second quarter ended June 30, 2006 increased 8.6% compared to the first quarter ended March 31, 2006 and 12.1% compared to the second quarter ended June 30, 2005. Increased pricing reflects the implementation of the March 27, 2006 price increase for white wove envelope, offset, reply card, multipurpose, envelope kraft and tablet grades.
  • Shipments in the Company's packaging segment for the quarter ended June 30, 2006 increased 5.2% or 3,541 tons when compared to the first quarter ended March 31, 2006 and 8.5% when compared to the second quarter ended June 30, 2005. The increase in packaging segment shipment volume was primarily due to increased shipments of coated board rolls. Pricing for the packaging segment for the second quarter ended June 30, 2006 decreased when compared to the first quarter ended March 31, 2006 due to a higher mix of coated rolls sales, which have a lower revenue realization than cartons.
  • The Canton mill conducted a planned pine pulp mill outage in the second quarter ended June 30, 2006. The planned outage had a negative impact on second quarter earnings of approximately $2.6 million. There was not a corresponding outage in the first quarter ended March 31, 2006. The Canton mill is scheduled to have a hardwood pulp mill outage in the third quarter ending September 30, 2006. Due to additional planned maintenance work, the costs of the third quarter outage are expected to exceed the costs of the second quarter outage.
  • Raw material costs improved in the second quarter ended June 30, 2006 compared to the first quarter ended March 31, 2006 by approximately $1.9 million. This reduction in costs was primarily due to a net decrease in the cost of low-density polyethylene of approximately 10% in the second quarter ended June 30, 2006 compared to the first quarter ended March 31, 2006. Both chemical and wood chip costs experienced slight decreases in costs in the second quarter ended June 30, 2006 compared to first quarter ended March 31, 2006.
  • On July 7, 2006, the United Steelworkers International Union (USW) ratified a new three-year labor agreement with the Company. The new contract provides for annual increases of 4%, 3% and 3% over the next three years, retroactive to May 14, 2006. Included in the package were additional cost-sharing measures in the Company's health and welfare programs. The new contract follows a seven-year agreement in which there were no general wage increases for the collective bargaining unit.

The Company defines EBITDA as net income before interest, taxes and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for certain unusual and non-cash items. EBITDA and Adjusted EBITDA are non-GAAP measures. The Company believes that EBITDA and Adjusted EBITDA can assist investors in analyzing and assessing its ability to service debt.

In addition, management focuses on EBITDA and Adjusted EBITDA, as defined, as measures of the Company's operating performance and as measures of the ability of the business to generate cash. These measures should not be considered in isolation or as an alternative to net income in measuring operating performance or as an alternative to cash flows from operations in measuring its liquidity. EBITDA and Adjusted EBITDA as the Company defines these terms may not be comparable to similarly titled financial performance measures presented by other companies.

SOURCE: Blue Ridge Paper Products Inc.




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