Exhibit 99.1
FOR IMMEDIATE RELEASE
Cellu Tissue Holdings, Inc. Announces First Quarter 2007 Results
East Hartford, Conn.—July 7, 2006—Cellu Tissue Holdings, Inc. (“Cellu Tissue”), 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 first quarter ended May 25, 2006.
First Quarter 2007 Operating Results
Net sales totaled $78.6 million for the quarter ended May 25, 2006, compared to $77.6 million in the first quarter of the prior fiscal year, an increase of $1.0 million, or 1.3%. The increase in net sales is attributable to an increase in selling price per ton in the quarter ended May 25, 2006 despite a decrease in volume sold from the comparable period in the prior fiscal year. For the quarter ended May 25, 2006, the Company sold 61,359 tons of tissue hard rolls, machine-glazed paper hard rolls and converted paper products. This is a decrease of 443 tons or 0.7% from the comparable period in the prior fiscal year. Included in this decrease is the effect of the shutdown of the machine-glazed machine at the Company’s Ontario facility, which occurred in the third quarter of fiscal 2006 and represents a decrease of 1,804 tons in the quarter ended May 25, 2006 over the first quarter of the prior fiscal year. Net of the effect of this, tons sold increased 1,361 or 2.3% for the quarter ended May 25, 2006 over the comparable period in the prior fiscal year.
Net sales within the Tissue Segment for the quarter ended May 25, 2006 totaled $55.3 million, a decrease of 1.3% from $56.0 million for the comparable period in the prior fiscal year. The decrease for the Tissue Segment is attributable to a decrease in tons sold from the comparable period in the prior fiscal year which was partially offset by an increase in net selling price per ton. Net sales within the Machine-Glazed Paper Segment for the quarter ended May 25, 2006 totaled $23.3 million, an increase of 8.1% from $21.6 million for the comparable period in the prior fiscal year. Despite the effect of the machine shutdown, as discussed above, this increase is attributable to an increase in tonnage sold. The increase in tonnage sold is the result of the net sales for the first quarter of fiscal 2006 being unusually low due to one of the Company’s top machine-glazed customers buying fewer tons during that period.
For the quarter ended May 25, 2006, Cellu Tissue reported gross profit of $6.9 million or 8.7% of net sales, compared to $7.0 million or 9.0% of net sales for the comparable period in the prior fiscal year. The decrease in gross profit for the quarter ended May 25, 2006 was primarily attributable to an increase in energy costs per ton over the comparable period in the prior fiscal year. The effect of the increase in energy prices for the quarter ended May 25, 2006 was $1.2 million. Absent these energy price increases,
gross profit for the quarter ended May 25, 2006 would have been 10.2% compared to 9.0% for the comparable period in the prior fiscal year. The increase in the quarter ended May 25, 2006, after adjusting for the effect of the increase in energy prices, is attributable to an increase in selling price per ton over the comparable period in the prior fiscal year. Income from operations for the quarter ended May 25, 2006 was $3.6 million compared to $3.9 million for the comparable period in the prior fiscal year. Income from operations in the Tissue Segment for the quarter ended May 25, 2006 was $2.9 million compared to $2.6 million for the first quarter in the prior fiscal year. Income from operations in the Machine-Glazed Paper Segment was $.7 million compared to $1.3 million for the first quarter in the prior fiscal year.
Foreign currency losses were $.2 million for the quarter ended May 25, 2006 compared to a gain of $.1 million for the first quarter in the prior fiscal year. For the quarter ended May 25, 2006, the Company reported a pretax loss of $.7 million, compared to a pretax loss of $.2 million for the comparable period in the prior fiscal year. For the quarter ended May 25, 2006, the Company experienced a net loss of $.5 million, compared to a net loss of $.1 million for the comparable period in the prior fiscal year.
Earnings before interest expense, income taxes, depreciation, and amortization (EBITDA) for the quarter ended May 25, 2006 totaled $7.0 million, compared to $8.0 million for the comparable period in the prior fiscal year.
Russell C. Taylor, President and Chief Executive Officer of Cellu Tissue, commented: “Despite continued margin pressures from raw material and energy cost increases, Cellu Tissue was able to improve overall first quarter fiscal 2007 gross margins sequentially versus fourth quarter fiscal 2006 by continuing our focus on the tissue converting business.”
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 United States generally accepted accounting principles 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 July 10, 2006 at 10:00 a.m. ET regarding first quarter fiscal 2007 financial results. The dial-in number is (888) 428-4479 or International (651) 291-5254; participant code 835529.
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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. Cellu Tissue’s customers include major North American producers of branded and unbranded disposable consumer absorbent and tissue products for the personal and health care markets; consumer and away-from-home tissue products companies; national and regional tissue products distributors; and third-party converters who sell their products to food, bakery and confections companies. Cellu Tissue services a diverse group of high-quality customers, with three of its top 10 customers belonging to the Fortune 150 group of companies. For more information, contact Cellu Tissue Holdings, Inc. at www. cellutissue.com.
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CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars, in thousands)
| | Three Months Ended | |
| | May 25 | | May 26 | |
| | 2006 | | 2005 | |
| | | | | |
Net sales | | $ | 78,642 | | $ | 77,644 | |
Cost of goods sold | | 71,791 | | 70,650 | |
Gross profit | | 6,851 | | 6,994 | |
| | | | | |
Selling, general and administrative expenses | | 3,147 | | 2,999 | |
Merger-related transaction costs | | 127 | | 127 | |
Income from operations | | 3,577 | | 3,868 | |
| | | | | |
Interest expense, net | | 4,053 | | 4,133 | |
Foreign currency loss (gain) | | 206 | | (100 | ) |
Other (income) expense | | (25 | ) | 4 | |
Loss before income tax benefit | | (657 | ) | (169 | ) |
| | | | | |
Income tax benefit | | (181 | ) | (59 | ) |
Net loss | | ($476 | ) | ($110 | ) |
| | | | | | | |
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CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars, in thousands)
| | May 25 | | February 28 | |
| | 2006 | | 2006 | |
| | (Unaudited) | | | |
ASSETS | | | | | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | | $ | 15,708 | | $ | 22,824 | |
Receivables, net | | 37,669 | | 35,054 | |
Inventories | | 29,652 | | 27,920 | |
Prepaid expenses and other current assets | | 3,456 | | 3,378 | |
Income tax receivable | | 363 | | 362 | |
Deferred income taxes | | 3,019 | | 2,932 | |
TOTAL CURRENT ASSETS | | 89,867 | | 92,470 | |
PROPERTY, PLANT AND EQUIPMENT, NET | | 96,394 | | 98,090 | |
DEBT ISSUANCE COSTS | | 5,411 | | 5,746 | |
GOODWILL | | 13,724 | | 13,724 | |
OTHER ASSETS | | 202 | | 202 | |
TOTAL ASSETS | | $ | 205,598 | | $ | 210,232 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | | | | | |
CURRENT LIABILITIES: | | | | | |
Accounts payable | | $ | 18,067 | | $ | 18,648 | |
Accrued expenses | | 16,612 | | 16,005 | |
Accrued interest | | 3,051 | | 7,232 | |
Current portion of long-term debt | | — | | 290 | |
TOTAL CURRENT LIABILITIES | | 37,730 | | 42,175 | |
LONG-TERM DEBT, LESS CURRENT PORTION | | 160,861 | | 160,790 | |
DEFERRED INCOME TAXES | | 13,653 | | 13,962 | |
OTHER LIABILITIES | | 206 | | 210 | |
STOCKHOLDERS’ DEFICIENCY | | (6,852 | ) | (6,905 | ) |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | | $ | 205,598 | | $ | 210,232 | |
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CELLU TISSUE HOLDINGS, INC.
SUMMARY OF CONSOLIDATED CASH FLOW ACTIVITY (Unaudited)
(Dollars, in thousands)
| | Three Months Ended | |
| | May 25 | | May 26 | |
| | 2006 | | 2005 | |
| | | | | |
OPERATING ACTIVITIES | | | | | |
Net loss | | ($476 | ) | ($110 | ) |
Stock based compensation | | 53 | | — | |
Deferred income taxes | | (396 | ) | (191 | ) |
Accretion of debt discount | | 71 | | 72 | |
Depreciation and amortization | | 3,870 | | 4,348 | |
Changes in working capital | | (8,586 | ) | (9,745 | ) |
Net cash used in operating activities | | ($5,464 | ) | (5,626 | ) |
| | | | | |
INVESTING ACTIVITIES | | | | | |
Capital expenditures | | (1,683 | ) | (4,003 | ) |
Net cash used in investing activities | | (1,683 | ) | (4,003 | ) |
| | | | | |
FINANCING ACTIVITIES | | | | | |
Payments of long-term debt | | (290 | ) | (280 | ) |
Debt issuance costs | | — | | (2 | ) |
Net cash used in financing activities | | (290 | ) | (282 | ) |
| | | | | |
Effect of foreign currency | | 321 | | (162 | ) |
| | | | | |
Net decrease in cash and cash equivalents | | (7,116 | ) | (10,073 | ) |
Cash and cash equivalents at beginning of period | | 22,824 | | 26,959 | |
Cash and cash equivalents at end of period | | $ | 15,708 | | $ | 16,886 | |
| | | | | | | |
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CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION (Unaudited)
(Dollars, in thousands)
BUSINESS SEGMENTS
| | Three Months Ended | |
| | May 25 | | May 26 | |
| | 2006 | | 2005 | |
NET SALES: | | | | | |
Tissue | | $ | 55,329 | | $ | 56,072 | |
Machine-Glazed Paper | | 23,313 | | 21,572 | |
Consolidated | | $ | 78,642 | | $ | 77,644 | |
| | | | | |
INCOME FROM OPERATIONS: | | | | | |
Tissue | | $ | 2,940 | | $ | 2,579 | |
Machine-Glazed Paper | | 637 | | 1,289 | |
Consolidated | | $ | 3,577 | | $ | 3,868 | |
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CELLU TISSUE HOLDINGS, INC,
RECONCILIATION OF CONSOLIDATED NET LOSS TO EBITDA
(Unaudited) (Dollars, in thousands)
| | Three Months Ended | |
| | May 25 | | May 26 | |
| | 2006 | | 2005 | |
| | | | | |
NET LOSS | | ($476 | ) | ($110 | ) |
Add back: | | | | | |
Depreciation | | 3,534 | | 4,009 | |
Interest expense | | 4,136 | | 4,186 | |
Income tax benefit | | (181 | ) | (59 | ) |
EBITDA | | $ | 7,013 | | $ | 8,026 | |
| | | | | | | |
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