Exhibit 99.1
FOR IMMEDIATE RELEASE
Cellu Tissue Holdings, Inc. Announces Second Quarter 2007 Results
East Hartford, Conn. — October 5, 2006—Cellu Tissue Holdings, Inc. (the “Company” or “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 second quarter ended August 24, 2006.
On June 12, 2006, Cellu Paper Holdings, Inc., the Company’s parent company, was acquired by Cellu Parent Corporation, a corporation controlled by Weston Presidio V.L.P., and certain members of the Company’s management in accordance with the Agreement and Plan of Merger by and among Cellu Paper Holdings, Inc., Cellu Parent Corporation and Cellu Acquisition Corporation, a wholly owned subsidiary of Cellu Parent Corporation (the “Merger”). Pursuant to the agreement, on June 12, 2006, Cellu Acquisition Corporation was merged with and into Cellu Paper Holdings, Inc. with Cellu Paper Holdings, Inc. surviving.
The 2007 second quarter results presented below include the period from May 26, 2006 to June 12, 2006 (pre-acquisition) and the period June 13, 2006 to August 24, 2006 (post-acquisition).
Second Quarter 2007 Operating Results
Net sales for the period May 26, 2006 to June 12, 2006 and the period June 13, 2006 to August 24, 2006 were $15.6 million and $68.6 million, respectively. Gross profit for the period May 26, 2006 to June 12, 2006 and the period June 13, 2006 to August 24, 2006 was $1.3 million and $3.4 million, respectively. Operating loss for the period May 26, 2006 to June 12, 2006 and the period June 13, 2006 to August 24, 2006 was $6.9 million and $.9 million, respectively. EBITDA for the period May 26, 2006 to June 12, 2006 and the period June 13, 2006 to August 24, 2006 was $6.3 million (loss) and $3.8 million, respectively.
Net sales for the second quarter ended August 24, 2006 totaled $84.2 million compared to $86.0 million for the comparable period in the prior year, a decrease of $1.8 million, or 2.2%. For the second quarter ended August 24, 2006 the Company sold 64,840 tons of tissue hard rolls, machine-glazed paper hard rolls and converted paper products. This is a decrease of 3,523 tons, or 5.2%, over the comparable period in the prior 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 the fiscal year ended February 28, 2006 and represents a decrease of 1,999 tons in the second quarter ended August 24, 2006, compared to the second quarter of the prior fiscal year. Net of the effect of this, tons sold decreased 1,524, or 2.2%, for the second quarter ended August
24, 2006 over the comparable period in the prior year. Partially offsetting the decrease in volume sold for the second quarter ended August 24, 2006 was an increase in net selling price per ton to $1,298 for the second quarter ended August 24, 2006 from $1,258 for the comparable period in the prior year. Net sales within the Tissue Segment for the second quarter ended August 24, 2006 totaled $60.9 million consistent with the comparable period in the prior year. Net sales within the Machine-Glazed Paper Segment for the second quarter ended August 24, 2006 totaled $23.3 million, a decrease of 7.5% from $25.1 million for the comparable period in the prior year. This decrease is driven by the decrease in tonnage sold as noted above, partially offset by an increase in net selling price per ton.
For the second quarter ended August 24, 2006, Cellu Tissue reported gross profit of $4.7 million, or 5.6%, of net sales, compared to $7.6 million, or 8.9%, for the comparable period in the prior year. Included in the second quarter ended August 24, 2006 is a noncash charge to cost of goods sold reflecting $.9 million of excess purchase price allocated to inventory and $1.5 million of additional depreciation expense in cost of goods sold as compared to our historical basis of accounting prior to the Merger. Loss from operations for the second quarter ended August 24, 2006 was $7.8 million compared to income of $3.7 million for the comparable period in the prior year. Loss from operations in the Tissue Segment for the second quarter ended August 24, 2006 was $4.3 million compared to income of $2.8 million for the second quarter in the prior year. Loss from operations in the Machine-Glazed Paper Segment for the second quarter ended August 24, 2006 was $3.5 million compared to income of $.9 million for the second quarter in the prior year. These decreases are the result of the decrease in gross profit as noted above, $5.9 million of merger related transaction costs and $.2 million of restructuring costs incurred in the second quarter ended August 24, 2006 and an increase in selling, general and administrative expenses from the prior year. Included in selling, general and administrative expenses for the second quarter ended August 24, 2006 is $1.0 million of non-cash compensation expense related to the vesting of restricted stock awards, $1.5 million of other compensation expense related to tax payments associated with such awards and $.6 million of other compensation expense related to the Merger.
For the second quarter ended August 24, 2006, the Company reported a pretax loss of $11.8 million, compared to a pretax loss of $1.0 million for the comparable period in the prior year. For the second quarter ended August 24, 2006, the Company experienced a net loss of $8.7 million, compared to a net loss of $.9 million for the comparable period in the prior year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter ended August 24, 2006 totaled $2.5 million (loss), compared to $7.5 million for the comparable period in the prior year.
Russell C. Taylor, President and Chief Executive Officer of Cellu Tissue, commented: “After adjusting for all the 2007 merger expenses, our business results remain slightly behind last year. This is being driven primarily by the MG business results, which traditionally are more greatly impacted by the pulp cycle. Our tissue
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business continues to deliver year over year improvement and remains our key strategic focus.”
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, selected consolidated financial data including information concerning our cash flow position, combined consolidated statements of operations with respect to the period from May 26, 2006 to June 12, 2006 (pre-acquisition) and the period from June 13, 2006 to August 24, 2006 (post-acquisition), 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 October 6, 2006 at 10 a.m. ET regarding second quarter fiscal 2007 financial results. The dial-in number is (800) 230-1766 or International (612) 332-0932; participant code 843635.
A taped replay of the conference call will be available after 1:30 p.m. October 6, 2006 until October 20, 2006. The number to call for the taped replay is (800) 475-6701 or International (320) 365-3844, access code 843635.
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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