Exhibit 99.1
FOR IMMEDIATE RELEASE
Cellu Tissue Holdings, Inc. Announces Third Quarter 2006 Results
East Hartford, Conn. – January 5, 2006—Cellu Tissue Holdings, Inc., an established leader in the manufacturing of high-quality business-to-business and consumer tissue grades used in health care and consumer products worldwide, today announced financial results for its third quarter ended November 24, 2005.
Third Quarter 2006 Operating Results
Net sales totaled $81.5 million for the quarter ended November 24, 2005, compared to $85.7 million in the third quarter of the prior fiscal year, a decrease of $4.2 million, or 4.9%. For the quarter ended November 24, 2005 the Company sold 63,988 tons of tissue hard rolls, machine-glazed paper hard rolls and converted paper products. This is a decrease of 3,229 tons or 4.8% over the comparable period in the prior year. Net sales within the Tissue Segment for the quarter ended November 24, 2005 totaled $56.8 million, an increase of ..4% from $56.6 million for the comparable period in the prior year. The increase for the Tissue Segment is attributable to growth in tissue converted product sales, partially offset by unfavorable tissue hard roll mix. Net sales within the Machine-Glazed Paper Segment for the quarter ended November 24, 2005 totaled $24.7 million, a decrease of 15.2% from $29.1 million for the comparable period in the prior year. The decrease for the Machine-Glazed Paper Segment is attributable to a decrease in volume sold and unfavorable price/mix from the prior year. Contributing to the decrease in volume sold for the quarter ended November 24, 2005 was the reduced operating schedule and ultimate shutdown of one of the machines at the Company’s Interlake facility, as previously announced and the reduction in volume sold in September 2005 due to the shutdown of the Company’s Mississippi mill resulting from Hurricane Katrina.
For the quarter ended November 24, 2005, Cellu Tissue reported gross profit of $6.7 million or 8.3% of net sales, compared to $11.2 million or 13.1% for the comparable period in the prior year. The decrease in gross profit is primarily attributable to significant market price increases for both natural gas and electricity. These increases accounted for $4.1 million of the $4.5 million decrease in gross profit from the prior year. Income from operations for the quarter ended November 24, 2005 was $.8 million compared to $7.5 million for the comparable period in the prior year. Income from operations in the Tissue Segment for the quarter ended November 24, 2005 was $1.1 million compared to $4.4 million for the third quarter in the prior year. Loss from operations in the Machine-Glazed Paper Segment for the quarter ended November 24, 2005 was $.3 million compared to income of $3.1 million for the third quarter in the prior year. These decreases are the result of the decrease in gross profit as noted above, $1.0 million of restructuring costs and $1.5 million of merger related transaction costs recorded in the third quarter of the current fiscal year. The restructuring costs relate to severance costs associated with the Company’s decision to indefinitely idle one of its
paper machines at its Interlake facility, as previously announced and severance costs associated with a change in the corporate organizational structure. The merger related transaction costs were incurred in connection with a previously announced proposed transaction which was terminated in October 2005 by the mutual consent of the parties.
For the quarter ended November 24, 2005, the Company reported a pretax loss of $3.5 million, compared to pretax income of $2.5 million for the comparable period in the prior year. For the quarter ended November 24, 2005, the Company experienced a net loss of $1.2 million, compared to a net loss of $.5 million for the comparable period in the prior year.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter ended November 24, 2005 totaled $4.4 million, compared to $10.7 million for the comparable period in the prior year. Included in current year EBITDA is $1.5 million in costs associated with the terminated transaction and $1.0 million related to restructuring costs as explained above.
Russell C. Taylor, President and Chief Executive Officer of Cellu Tissue,
commented: “During the third quarter of fiscal 2006 we continued to experience growth in our tissue converting business. Unfortunately this growth was offset by increases in energy prices. To lessen the impact of these energy increases, we have recently announced price increases.”
Notice Relating to the Use of Non-GAAP Measures
Attached to this press release are tables setting forth our unaudited consolidated statements of operations, financial position and selected consolidated financial data, including information concerning our cash flow position, selected consolidated segment data, and reconciliations of consolidated net income from operations to consolidated EBITDA. EBITDA is not a measure of performance under accounting principles generally accepted in the United States 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. We have presented EBITDA because this measure is used by investors, as well as our own management, to evaluate the operating performance of our business, including its ability to service debt.
Cellu Tissue’s management invites you to listen to our conference call on January 6, 2006 at 10 a.m. ET regarding third quarter fiscal 2006 financial results. The dial-in number is (877) 209-0397 or International (612) 332-0932; participant code 812339. A taped replay of the conference call will be available after 1:30 p.m. January 6, 2006 until January 20, 2006. The number to call for the taped replay is (800) 475-6701 or International (320) 365-3844, access code 812339.
Cellu Tissue Holdings, Inc. is a manufacturer of a variety of specialty tissue hard rolls and machine-glazed paper used in the manufacture of various end products, including diapers, facial and bath tissue, assorted paper towels and food wraps. In addition, the Company produces a variety of converted tissue products. Information about Cellu Tissue Holdings, Inc. is available on the Internet at www. cellutissue.com.
For further information, please contact Dianne Scheu, Chief Financial Officer of Cellu Tissue Holdings, Inc. @ 678-393-2651, Ext. 2164; scheud@cellutissue.com.
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CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars, in thousands)
| | Three Months Ended | | Nine Months Ended | |
| | November 24
2005 | | November 25
2004 | | November 24
2005 | | November 25
2004 | |
| | | | | | | | | |
Net sales | | $ | 81,512 | | $ | 85,689 | | $ | 245,174 | | $ | 250,749 | |
Cost of goods sold | | 74,784 | | 74,471 | | 223,829 | | 219,459 | |
Gross profit | | 6,728 | | 11,218 | | 21,345 | | 31,290 | |
| | | | | | | | | |
Selling, general and administrative expenses | | 3,317 | | 3,670 | | 9,475 | | 11,456 | |
Restructuring costs | | 1,032 | | — | | 1,032 | | — | |
Merger related transaction costs | | 1,477 | | — | | 2,366 | | — | |
Compensation from redemption of stock options | | — | | — | | — | | 3,414 | |
Accelerated vesting of stock options-noncash | | 64 | | — | | 64 | | 534 | |
Income from operations | | 838 | | 7,548 | | 8,408 | | 15,886 | |
| | | | | | | | | |
Write-off of debt issuance costs and prepayment penalties | | — | | — | | — | | 3,318 | |
Interest expense, net | | 4,300 | | 4,430 | | 12,748 | | 13,070 | |
Foreign currency loss | | 93 | | 658 | | 378 | | 855 | |
Other income | | (21 | ) | (1 | ) | (54 | ) | (2,357 | ) |
(Loss) income before income tax expense (benefit) | | (3,534 | ) | 2,461 | | (4,664 | ) | 1,000 | |
| | | | | | | | | |
Income tax expense (benefit) | | (2,304 | ) | 2,952 | | (2,468 | ) | (1,046 | ) |
Net (loss) income | | $ | (1,230 | ) | $ | (491 | ) | $ | (2,196 | ) | $ | 2,046 | |
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CELLU TISSUE HOLDINGS, INC,
CONSOLIDATED BALANCE SHEETS
(Dollars, in thousands)
| | November 24 | | February 28 | |
| | 2005 | | 2005 | |
| | (Unaudited) | | | |
ASSETS | | | | | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | | $ | 16,343 | | $ | 26,959 | |
Receivables, net | | 34,055 | | 35,787 | |
Inventories | | 29,466 | | 24,601 | |
Prepaid expenses and other current assets | | 4,266 | | 3,499 | |
Income tax receivable | | 2,129 | | — | |
Deferred income taxes | | 1,251 | | 1,295 | |
TOTAL CURRENT ASSETS | | 87,510 | | 92,141 | |
PROPERTY, PLANT AND EQUIPMENT, NET | | 97,665 | | 97,314 | |
DEBT ISSUANCE COSTS | | 6,120 | | 7,168 | |
GOODWILL | | 13,724 | | 13,724 | |
OTHER ASSETS | | 186 | | 190 | |
TOTAL ASSETS | | $ | 205,205 | | $ | 210,537 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | | | | | |
CURRENT LIABILITIES: | | | | | |
Accounts payable | | $ | 19,269 | | $ | 18,974 | |
Accrued expenses | | 14,825 | | 15,157 | |
Accrued interest | | 3,261 | | 7,416 | |
Current portion of long-term debt | | 290 | | 270 | |
TOTAL CURRENT LIABILITIES | | 37,645 | | 41,817 | |
LONG-TERM DEBT, LESS CURRENT PORTION | | 160,711 | | 160,790 | |
DEFERRED INCOME TAXES | | 13,726 | | 15,280 | |
OTHER LIABILITIES | | 217 | | 236 | |
STOCKHOLDERS’ EQUITY(DEFICIENCY) | | (7,094 | ) | (7,586 | ) |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIENCY) | | $ | 205,205 | | $ | 210,537 | |
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CELLU TISSUE HOLDINGS, INC.
SUMMARY OF CONSOLIDATED CASH FLOW ACTIVITY (Unaudited)
(Dollars, in thousands)
| | Three Months Ended | | NIne Months Ended | |
| | November 24 | | November 25 | | November 24 | | November 25 | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net (loss) income | | $ | (1,230 | ) | $ | (491 | ) | $ | (2,196 | ) | $ | 2,046 | |
Write-off of debt issuance costs-noncash | | — | | — | | — | | 2,895 | |
Accelerated vesting of stock options-noncash | | 64 | | — | | 64 | | 534 | |
Deferred income taxes | | (918 | ) | 2,193 | | (1,511 | ) | 2,193 | |
Accretion of debt discount | | 75 | | 74 | | 221 | | 222 | |
Depreciation and amortization | | 3,957 | | 4,177 | | 12,722 | | 12,179 | |
Gain on sale of property, plant & equipment | | 13 | | 7 | | (12 | ) | (2,374 | ) |
Unearned compensation | | — | | 92 | | — | | 389 | |
Changes in working capital | | (5,653 | ) | 6,577 | | (10,236 | ) | 3,932 | |
Net cash (used in) provided by operating activities | | (3,692 | ) | 12,629 | | (948 | ) | 22,016 | |
| | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | |
Proceeds for sale of property, plant and equipment, net | | — | | — | | — | | 4,004 | |
Capital expenditures | | (2,338 | ) | (4,493 | ) | (9,750 | ) | (7,676 | ) |
Net cash used in investing activities | | (2,338 | ) | (4,493 | ) | (9,750 | ) | (3,672 | ) |
| | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | |
(Payments) borrowings of debt, net | | — | | — | | (280 | ) | 116,337 | |
Payments on revolving line of credit, net | | — | | — | | — | | (10,954 | ) |
Cash dividends | | — | | — | | — | | (96,789 | ) |
Prepayment penalties | | — | | — | | — | | (424 | ) |
Debt issuance costs | | — | | (340 | ) | (2 | ) | (6,659 | ) |
Net cash (used in) provided by financing activities | | — | | (340 | ) | (282 | ) | 1,511 | |
| | | | | | | | | |
Effect of foreign currency | | 131 | | 569 | | 364 | | 676 | |
| | | | | | | | | |
Net (decrease) increase in cash and cash equivalents | | (5,899 | ) | 8,365 | | (10,616 | ) | 20,531 | |
Cash and cash equivalents at beginning of period | | 22,242 | | 12,166 | | 26,959 | | — | |
Cash and cash equivalents at end of period | | $ | 16,343 | | $ | 20,531 | | $ | 16,343 | | $ | 20,531 | |
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CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION (Unaudited)
(Dollars, in thousands)
BUSINESS SEGMENTS
| | Three Months Ended | | Nine Months Ended | |
| | November 24 | | November 25 | | November 24 | | November 25 | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
NET SALES: | | | | | | | | | |
Tissue | | $ | 56,845 | | $ | 56,606 | | $ | 173,775 | | $ | 172,120 | |
Machine-Glazed Paper | | 24,667 | | 29,083 | | 71,399 | | 78,629 | |
Consolidated | | $ | 81,512 | | $ | 85,689 | | $ | 245,174 | | $ | 250,749 | |
| | | | | | | | | |
INCOME FROM OPERATIONS: | | | | | | | | | |
Tissue | | $ | 1,096 | | $ | 4,391 | | $ | 6,441 | | $ | 10,408 | |
Machine-Glazed Paper | | (258 | ) | 3,157 | | 1,967 | | 5,478 | |
Consolidated | | $ | 838 | | $ | 7,548 | | $ | 8,408 | | $ | 15,886 | |
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CELLU TISSUE HOLDINGS, INC.
RECONCILIATION OF CONSOLIDATED NET (LOSS) INCOME TO EBITDA
(Unaudited) (Dollars, in thousands)
| | Three Months Ended | | Nine Months Ended | |
| | November 24 | | November 25 | | November 24 | | Novwmber 25 | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
NET (LOSS) INCOME | | $ | (1,230 | ) | $ | (491 | ) | $ | (2,196 | ) | $ | 2,046 | |
Add back: | | | | | | | | | |
Depreciation | | 3,601 | | 3,831 | | 11,673 | | 11,140 | |
Interest expense | | 4,376 | | 4,453 | | 12,939 | | 13,102 | |
Income tax (benefit) expense | | (2,304 | ) | 2,952 | | (2,468 | ) | (1,046 | ) |
EBITDA | | $ | 4,443 | | $ | 10,745 | | $ | 19,948 | | $ | 25,242 | |
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