Exhibit 99.1
FOR IMMEDIATE RELEASE
Cellu Tissue Holdings, Inc. Announces Fourth Quarter and Full Year 2006 Results
East Hartford, Conn. – May 8, 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 the fourth quarter and full year ended February 28, 2006.
Fourth Quarter 2006 Operating Results
Net sales totaled $83.7 million for the fourth quarter ended February 28, 2006, compared to $82.1 million in the fourth quarter of the prior fiscal year, an increase of $1.6 million, or 1.8%. For the quarter ended February 28, 2006, the Company sold an aggregate of 67,030 tons of tissue hard rolls, machine-glazed paper hard rolls and converted paper products. This is a slight increase of 418 tons or .6% from the comparable period in the prior year. Net sales within the Tissue Segment for the quarter ended February 28, 2006 totaled $59.1 million, an increase of 1.4% from $58.2 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 February 28, 2006 totaled $24.6 million, an increase of 2.8% from $23.9 million for the comparable period in the prior year. The increase for the Machine-Glazed Paper Segment is attributable to an increase in volume sold from the comparable period in the prior year.
For the quarter ended February 28, 2006, the Company reported gross profit of $6.4 million or 7.6% of net sales, compared to $9.6 million or 11.6% 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 offset partially by an increase in higher-margin converting business. The effect of the increases in natural gas and electricity prices accounted for a $3.8 million decrease in gross profit from the prior year. Income from operations for the fourth quarter ended February 28, 2006 was $3.0 million compared to $6.0 million for the comparable period in the prior year. Income from operations in the Tissue Segment for the quarter ended February 28, 2006 was $1.9 million compared to $4.2 million for the fourth quarter in the prior year. Income from operations in the Machine-Glazed Paper Segment was $1.1 million compared to $1.8 million for the fourth quarter in the prior year. The decreases are primarily attributable to the higher energy costs as discussed above.
For the quarter ended February 28, 2006, the Company reported a pretax loss of $1.5 million, compared to pretax income of $2.0 million for the comparable period in the prior year. For the quarter ended February 28, 2006, the Company experienced a net loss of
$.4 million, compared to net income of $1.0 million for the comparable period in the prior year. Included in the fourth quarter fiscal year 2006 net loss of $.4 million is $1.1 million of income tax benefit compared to $1.0 million income tax expense in the comparable period in the prior year. The increase in the benefit recorded in the fourth quarter fiscal year 2006 compared to the third quarter fiscal year 2006 was primarily related to a difference in our overall operating results for fiscal year 2006 as compared to anticipated results.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter ended February 28, 2006 totaled $6.1 million, compared to $10.1 million for the comparable period in the prior year.
Russell C. Taylor, President and Chief Executive Officer of Cellu Tissue, commented: “The current price for key commodities; natural gas, electricity, transportation, and petroleum based raw material and finishing supplies, continue to exert pressure on our cost structure. We remain committed to mitigate the impact of these costs through programs to minimize the cost of the commodities we consume.”
Fiscal Year 2006 Operating Results
Net sales totaled $328.8 million for the fiscal year ended February 28, 2006, compared to $332.9 million in the prior fiscal year, a decrease of $4.1 million, or 1.2%. For the year ended February 28, 2006, the Company reported gross profit of $27.7 million or 8.4% of net sales, compared to $40.8 million or 12.3% in the prior year. The decrease in gross profit is primarily attributable to significant market price increases for both natural gas and electricity experienced throughout the fiscal year ended February 28, 2006. The effect of the increase in energy prices during the fiscal year ended February 28, 2006 was $11.4 million. Excluding these price increases, gross margin for the fiscal year ended February 28, 2006 would have been 11.9% compared to 12.3% for the comparable period in the prior year. Income from operations for the year ended February 28, 2006 was $11.4 million compared to $22.0 million in the prior year. This decrease in income from operations is the result of the decrease in gross profit described above, $.8 million of costs due to the effects of Hurricane Katrina, $1.1 million of restructuring costs and $2.3 million of terminated merger-related transaction costs recorded in the third quarter of fiscal year 2006. 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 terminated 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 fiscal year ended February 28, 2006, the Company reported a net loss of $2.6 million compared to net income of $3.1 million in the prior year. EBITDA for the fiscal year ended February 28, 2006 totaled $26.1 million, compared to $35.4 million in the prior year.
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Notice Relating to the Use of Non-GAAP Measures
Attached to this press release are tables setting forth our fourth quarter and annual consolidated statements of operations, financial position and selected consolidated financial data, including information concerning our cash flow position, selected consolidated segment data, and a reconciliation 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 we believe that it is widely accepted that EBITDA provides useful information regarding a Company’s ability to service debt. Other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.
Cellu Tissue’s management invites you to listen to our conference call on May 9, 2006 at 10:30 a.m. ET regarding fourth quarter and full fiscal year 2006 financial results. The dial-in number is (800) 762-7308 or International (480) 629-9027; participant code 828678. A taped replay of the conference call will be available after 1:30 p.m. May 9, 2006 until May 23, 2006. The number to call for the taped replay is (800) 475-6701 or International (320) 365-3844, access code 828678.
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
(Dollars, in thousands)
| | Three Months Ended | | Year Ended | |
| | February 28
2006 | | February 28
2005 | | February 28
2006 | | February 28
2005 | |
| | (Unaudited) | | (Unaudited) | | | | | |
Net sales | | $ | 83,659 | | $ | 82,144 | | $ | 328,833 | | $ | 332,893 | |
Cost of goods sold | | 77,282 | | 72,592 | | 301,111 | | 292,051 | |
Gross profit | | 6,377 | | 9,552 | | 27,722 | | 40,842 | |
| | | | | | | | | |
Selling, general and administrative expenses | | 3,397 | | 3,483 | | 12,872 | | 14,939 | |
Restructuring costs | | 18 | | — | | 1,050 | | — | |
Terminated merger-related transaction costs | | (81 | ) | — | | 2,285 | | — | |
Compensation from redemption of stock options | | — | | — | | — | | 3,414 | |
Accelerated vesting of stock options-noncash | | 18 | | — | | 82 | | 534 | |
Income from operations | | 3,025 | | 6,069 | | 11,433 | | 21,955 | |
| | | | | | | | | |
Write-off of debt issuance costs and prepayment penalties | | — | | — | | — | | 3,318 | |
Interest expense, net | | 4,329 | | 4,358 | | 17,077 | | 17,428 | |
Foreign currency loss (gain) | | 125 | | (222 | ) | 503 | | 633 | |
Other expense (income) | | 51 | | (89 | ) | (3 | ) | (2,446 | ) |
(Loss) income before income tax (benefit) expense | | (1,480 | ) | 2,022 | | (6,144 | ) | 3,022 | |
Income tax (benefit) expense | | (1,107 | ) | 972 | | (3,575 | ) | (74 | ) |
Net (loss) income | | $ | (373 | ) | $ | 1,050 | | $ | (2,569 | ) | $ | 3,096 | |
| | | | | | | | | | | | | | | |
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CELLU TISSUE HOLDINGS, INC,
CONSOLIDATED BALANCE SHEETS
(Dollars, in thousands)
| | February 28
2006 | | February 28
2005 | |
| | | | | |
ASSETS | | | | | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | | $ | 22,824 | | $ | 26,959 | |
Receivables, net | | 35,054 | | 35,787 | |
Inventories | | 27,920 | | 24,601 | |
Prepaid expenses and other current assets | | 3,378 | | 3,805 | |
Income tax receivable | | 362 | | — | |
Deferred income taxes | | 2,932 | | 1,295 | |
TOTAL CURRENT ASSETS | | 92,470 | | 92,447 | |
PROPERTY, PLANT AND EQUIPMENT, NET | | 98,090 | | 97,314 | |
DEBT ISSUANCE COSTS | | 5,746 | | 7,168 | |
GOODWILL | | 13,724 | | 13,724 | |
OTHER ASSETS | | 202 | | 190 | |
TOTAL ASSETS | | $ | 210,232 | | $ | 210,843 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | | | | | |
CURRENT LIABILITIES: | | | | | |
Accounts payable | | $ | 18,649 | | $ | 18,974 | |
Accrued expenses | | 16,005 | | 15,463 | |
Accrued interest | | 7,232 | | 7,416 | |
Current portion of long-term debt | | 290 | | 270 | |
TOTAL CURRENT LIABILITIES | | 42,176 | | 42,123 | |
LONG-TERM DEBT, LESS CURRENT PORTION | | 160,790 | | 160,790 | |
DEFERRED INCOME TAXES | | 13,962 | | 15,280 | |
OTHER LIABILITIES | | 210 | | 236 | |
STOCKHOLDERS’ DEFICIENCY | | (6,906 | ) | (7,586 | ) |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | | $ | 210,232 | | $ | 210,843 | |
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CELLU TISSUE HOLDINGS, INC.
SUMMARY OF CONSOLIDATED CASH FLOW ACTIVITY
(Dollars, in thousands)
| | Three Months Ended | | Year Ended | |
| | February 28
2006 | | February 28
2005 | | February 28
2006 | | February 28
2005 | |
| | (Unaudited) | | (Unaudited) | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net (loss) income | | $ | (373 | ) | $ | 1,050 | | $ | (2,569 | ) | $ | 3,096 | |
Write-off of debt issuance costs-noncash | | — | | — | | — | | 2,895 | |
Accelerated vesting of stock options-noncash | | 18 | | — | | 82 | | 534 | |
Deferred income taxes | | (1,444 | ) | (762 | ) | (2,955 | ) | 1,431 | |
Accretion of debt discount | | 79 | | 68 | | 300 | | 290 | |
Depreciation and amortization | | 3,555 | | 4,085 | | 16,277 | | 16,264 | |
Loss (gain) on sale of property, plant & equipment | | 3 | | 9 | | (9 | ) | (2,365 | ) |
Unearned compensation | | — | | — | | — | | 389 | |
Changes in working capital | | 7,710 | | 5,769 | | (2,526 | ) | 9,701 | |
Net cash provided by operating activities | | 9,548 | | 10,219 | | 8,600 | | 32,235 | |
| | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | |
Proceeds for sale of property, plant and equipment, net | | — | | — | | — | | 4,004 | |
Capital expenditures | | (3,300 | ) | (3,743 | ) | (13,050 | ) | (11,419 | ) |
Net cash used in investing activities | | (3,300 | ) | (3,743 | ) | (13,050 | ) | (7,415 | ) |
| | | | | | | | | |
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 | | — | | (74 | ) | (2 | ) | (6,733 | ) |
Net cash (used in) provided by financing activities | | — | | (74 | ) | (282 | ) | 1,437 | |
| | | | | | | | | |
Effect of foreign currency | | 233 | | 26 | | 597 | | 702 | |
| | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | 6,481 | | 6,428 | | (4,135 | ) | 26,959 | |
Cash and cash equivalents at beginning of period | | 16,343 | | 20,531 | | 26,959 | | — | |
Cash and cash equivalents at end of period | | $ | 22,824 | | $ | 26,959 | | $ | 22,824 | | $ | 26,959 | |
| | | | | | | | | | | | | | | |
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CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION (Unaudited)
(Dollars, in thousands)
BUSINESS SEGMENTS
| | Three Months Ended | | Year Ended | |
| | February 28
2006 | | February 28
2005 | | February 28
2006 | | February 28
2005 | |
NET SALES: | | | | | | | | | |
Tissue | | $ | 59,090 | | $ | 58,250 | | $ | 232,865 | | $ | 230,370 | |
Machine-Glazed Paper | | 24,569 | | 23,894 | | 95,968 | | 102,523 | |
Consolidated | | $ | 83,659 | | $ | 82,144 | | $ | 328,833 | | $ | 332,893 | |
| | | | | | | | | |
INCOME FROM OPERATIONS: | | | | | | | | | |
Tissue | | $ | 1,932 | | $ | 4,249 | | $ | 8,373 | | $ | 14,657 | |
Machine-Glazed Paper | | 1,093 | | 1,820 | | 3,060 | | 7,298 | |
Consolidated | | $ | 3,025 | | $ | 6,069 | | $ | 11,433 | | $ | 21,955 | |
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CELLU TISSUE HOLDINGS, INC.
RECONCILIATION OF CONSOLIDATED NET (LOSS) INCOME TO EBITDA
(Unaudited) (Dollars, in thousands)
| | Three Months Ended | | Year Ended | |
| | February 28
2006 | | February 28
2005 | | February 28
2006 | | February 28
2005 | |
| | | | | | | | | |
NET(LOSS) INCOME | | $ | (373 | ) | $ | 1,050 | | $ | (2,569 | ) | $ | 3,096 | |
Add back: | | | | | | | | | |
Depreciation | | 3,181 | | 3,718 | | 14,854 | | 14,858 | |
Interest expense | | 4,428 | | 4,404 | | 17,367 | | 17,507 | |
Income tax(benefit) expense | | (1,107 | ) | 972 | | (3,575 | ) | (74 | ) |
EBITDA | | $ | 6,129 | | $ | 10,144 | | $ | 26,077 | | $ | 35,387 | |
| | | | | | | | | | | | | | | |
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