Exhibit 99.1
FOR IMMEDIATE RELEASE
Cellu Tissue Holdings, Inc. Announces Fourth Quarter and Full Fiscal Year 2007 Results
Alpharetta, GA — May 15, 2007—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 consolidated financial results for the fourth quarter and full fiscal year ended February 28, 2007.
As previously announced, Cellu Paper Holdings, Inc., our Parent Company, was acquired in the second quarter of fiscal year 2007 and as a result of this transaction (the “Merger”), purchase accounting was applied. Accordingly, the fourth quarter fiscal year 2007 results are impacted by the initial effects of purchase accounting as highlighted below. The Company expects to finalize all purchase accounting by the end of the second quarter of fiscal year 2008.
Fourth Quarter 2007 Operating Results
Net sales totaled $89.4 million for the fourth quarter ended February 28, 2007, compared to $83.7 million in the fourth quarter of the prior fiscal year, an increase of $5.7 million, or 6.9%. For the fourth quarter ended February 28, 2007, the Company sold an aggregate of 66,726 tons of tissue hard rolls, machine-glazed paper hard rolls and converted paper products. This is a slight decrease of 308 tons, or ..5%, from the comparable period in the prior year. The increase in net sales for the fourth quarter ended February 28, 2007 is attributable to an increase in net selling price per ton to $1,340 from $1,248 for the comparable period in the prior year. Net sales within the Tissue Segment for the quarter ended February 28, 2007 totaled $63.2 million, an increase of 7.0%, from $59.1 million for the comparable period in the prior year. Net sales within the Machine-Glazed Paper Segment for the quarter ended February 28, 2007 totaled $26.2 million, an increase of 6.5%, from $24.6 million for the comparable period in the prior fiscal year. These increases are primarily due to an increase in net selling price per ton, slightly offset by the decrease in tonnage sold as noted above.
For the fourth quarter ended February 28, 2007, the Company reported gross profit of $3.7 million, or 4.1%, of net sales, compared to $6.4 million, or 7.6%, of net sales for the comparable period in the prior fiscal year. Included in the fourth quarter ended February 28, 2007 is $2.0 million of additional depreciation expense, associated with the step-up in value recorded through purchase accounting for the Merger, included in cost of goods sold as compared to depreciation expense associated with our historical basis of accounting prior to the Merger. Loss from operations for the fourth quarter ended February 28, 2007 was $.5 million compared to income of $3.0 million for the
comparable period in the prior fiscal year. Income from operations in the Tissue Segment for the fourth quarter ended February 28, 2007 was $.3 million compared to $1.9 million for the fourth quarter in the prior fiscal year. Loss from operations in the Machine-Glazed Paper Segment for the fourth quarter ended February 28, 2007 was $.8 million compared to income of $1.1 million for the fourth quarter in the prior fiscal year. These decreases are reflective of the decrease in gross profit noted above. Furthermore, included in the 2007 fiscal year fourth quarter results is $.2 million of non-cash compensation expense related to the vesting of restricted stock awards granted after the Merger and $.1 million of other compensation expense related to the Merger. Also included in the 2007 fiscal year fourth quarter results is a $.5 million impairment charge related to the Company’s decision in the fourth quarter of the fiscal year ended February 28, 2007 to permanently shut down the machine-glazed machine at the Company’s Ontario facility, which ceased production in the third quarter of the fiscal year ended February 28, 2006.
For the fourth quarter ended February 28, 2007, the Company reported a pretax loss of $4.5 million, compared to a pretax loss of $1.5 million for the comparable period in the prior fiscal year. For the fourth quarter ended February 28, 2007, the Company experienced a net loss of $2.5 million, compared to a net loss of $.4 million for the comparable period in the prior fiscal year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter ended February 28, 2007 totaled $5.9 million, compared to $6.1 million for the comparable period in the prior fiscal year.
Russell C. Taylor, President and Chief Executive Officer of Cellu Tissue, commented: “I am pleased with the continued success of our sales strategy and our ability to increase net selling price per ton. Additionally, our team remains focused on offsetting the inflationary pressure on fiber and other raw material costs.”
Fiscal Year 2007 Operating Results
The combined periods from March 1, 2006 to June 12, 2006 (pre-acquisition) and from June 13, 2006 to February 28, 2007 (post-acquisition), referred to herein as fiscal year 2007, have been compared to the prior fiscal year in the following discussion.
Net sales totaled $335.5 million for fiscal year 2007, compared to $328.8 million in the prior fiscal year, an increase of $6.7 million, or 2.0%. For fiscal year 2007, the Company reported gross profit of $21.1 million, or 6.3% of net sales, compared to $27.7 million, or 8.4%, in the prior fiscal year. Included in fiscal year 2007 results is $5.4 million of additional depreciation expense, associated with the step-up in value recorded through purchase accounting for the Merger included in cost of goods sold as compared to our historical basis of accounting prior to the Merger. Also, included in fiscal year 2007 results is a non-cash charge to cost of goods sold reflecting $.9 million of purchase price allocated to inventory.
2
Income from operations for fiscal year 2007 was a loss of $2.3 million compared to income of $11.4 million in the prior fiscal year. Included in income from operations for fiscal year 2007 are the depreciation and inventory charges in cost of goods sold as noted above, $6.1 million of merger-related transaction costs, $.2 million of restructuring costs and $4.7 million of non-cash compensation charges. The compensation charges relate to restricted stock awards granted prior to the Merger that vested immediately upon the Merger, normal vesting of restricted stock awards granted after the Merger, payments of taxes associated with such awards and other compensation expense related to the Merger. Also, included in income from operations for fiscal year 2007 is a $.5 million impairment charge related to the Company’s decision in the fourth quarter 2007 to permanently shut down the machine-glazed machine at the Company’s Ontario facility, which ceased production in the third quarter of the fiscal year ended February 28, 2006. Included in fiscal year 2006 income from operations is $1.1 million related to restructuring activities and $2.3 million of terminated merger-related transaction costs. For fiscal year 2007, the Company reported a net loss of $12.7 million compared to a net loss of $2.6 million in the prior fiscal year.
EBITDA for the fiscal year 2007 totaled $18.5 million, compared to $26.1 million in the prior year.
Notice Relating to the Use of Non-GAAP Measures
Attached to this press release are tables setting forth the Company’s fiscal fourth quarter and annual consolidated statements of operations, financial position and selected consolidated financial data, including information concerning the Company’s cash flow position, combined consolidated statements of operations with respect to the period from March 1, 2006 to June 12, 2006 (pre-acquisition) and the period from June 13, 2006 to February 28, 2007 (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 U.S. 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. The Company has presented EBITDA because it believes that it is widely accepted that EBITDA provides useful information regarding a company’s ability to service debt.
Cellu Tissue’s management invites you to listen to its conference call on May 16, 2007 at 10:00 a.m. ET regarding fiscal fourth quarter and full fiscal year 2007 consolidated financial results. The dial-in number is (800) 230-1085 or International (612) 332-1210; participant code 873471. A taped replay of the conference call will be available after 1:30 p.m. May 16, 2007 until May 30, 2007. The number to call for the taped replay is (800) 475-6701 or International (320) 365-3844, access code 873471.
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
3
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.
4
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars, in thousands)
|
| Three Months Ended |
| ||||
|
| February 28, 2007 |
| February 28, 2006 |
| ||
|
| (Post-Acquisition) |
| (Pre-Acquisition) |
| ||
|
|
|
|
|
| ||
Net sales |
| $ | 89,393 |
| $ | 83,659 |
|
Cost of goods sold |
| 85,710 |
| 77,282 |
| ||
Gross profit |
| 3,683 |
| 6,377 |
| ||
|
|
|
|
|
| ||
Selling, general and administrative expenses |
| 3,389 |
| 3,397 |
| ||
Restructuring costs |
| — |
| 18 |
| ||
Merger-related transaction costs |
| (14 | ) | (81 | ) | ||
Stock and related compensation expense |
| 128 |
| — |
| ||
Vesting of stock option/restricted stock grants |
| 191 |
| 18 |
| ||
Impairment of fixed assets |
| 488 |
| — |
| ||
(Loss) income from operations |
| (499 | ) | 3,025 |
| ||
|
|
|
|
|
| ||
Interest expense, net |
| 4,250 |
| 4,329 |
| ||
Foreign currency (gain) loss |
| (213 | ) | 125 |
| ||
Other expense |
| 6 |
| 51 |
| ||
Loss before income tax benefit |
| (4,542 | ) | (1,480 | ) | ||
|
|
|
|
|
| ||
Income tax benefit |
| (2,045 | ) | (1,107 | ) | ||
Net loss |
| $ | (2,497 | ) | $ | (373 | ) |
|
|
|
|
|
|
5
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars, in thousands)
|
| For the Periods |
| |||||||
|
| June 13, 2006- |
| March 1, 2006 |
| Year Ended |
| |||
|
| February 28, 2007 |
| June 12, 2006 |
| February 28, 2006 |
| |||
|
| (Post-Acquisition) |
| (Pre-Acquisition) |
| |||||
|
|
|
|
|
|
|
| |||
Net sales |
| $ | 241,236 |
| $ | 94,242 |
| $ | 328,833 |
|
Cost of goods sold |
| 228,318 |
| 86,054 |
| 301,111 |
| |||
Gross profit |
| 12,918 |
| 8,188 |
| 27,722 |
| |||
|
|
|
|
|
|
|
| |||
Selling, general and administrative expenses |
| 7,207 |
| 4,661 |
| 12,872 |
| |||
Restructuring costs |
| 240 |
| — |
| 1,050 |
| |||
Merger-related transaction costs |
| 142 |
| 5,933 |
| 2,285 |
| |||
Stock and related compensation expense |
| 3,329 |
| — |
| — |
| |||
Vesting of stock option/restricted stock grants |
| 497 |
| 924 |
| 82 |
| |||
Impairment of fixed assets |
| 488 |
| — |
| — |
| |||
Income (loss) from operations |
| 1,015 |
| (3,330 | ) | 11,433 |
| |||
|
|
|
|
|
|
|
| |||
Interest expense, net |
| 11,469 |
| 4,896 |
| 17,077 |
| |||
Foreign currency (gain) loss |
| (359 | ) | 289 |
| 503 |
| |||
Other income |
| 15 |
| 27 |
| 3 |
| |||
Loss before income tax benefit |
| (10,080 | ) | (8,488 | ) | (6,144 | ) | |||
|
|
|
|
|
|
|
| |||
Income tax benefit |
| (3,888 | ) | (1,953 | ) | (3,575 | ) | |||
Net loss |
| $ | (6,192 | ) | $ | (6,535 | ) | $ | (2,569 | ) |
6
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars, in thousands)
|
| February 28 |
| February 28 |
| ||
|
| 2007 |
| 2006 |
| ||
|
| (Post-Acquisition) |
| (Pre-Acquisition) |
| ||
ASSETS |
|
|
|
|
| ||
CURRENT ASSETS: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 16,261 |
| $ | 22,824 |
|
Receivables, net |
| 34,141 |
| 35,054 |
| ||
Inventories |
| 28,715 |
| 27,920 |
| ||
Prepaid expenses and other current assets |
| 3,697 |
| 3,378 |
| ||
Income tax receivable |
| 330 |
| 362 |
| ||
Deferred income taxes |
| 6,498 |
| 2,932 |
| ||
TOTAL CURRENT ASSETS |
| 89,642 |
| 92,470 |
| ||
PROPERTY, PLANT AND EQUIPMENT, NET |
| 228,852 |
| 98,090 |
| ||
DEBT ISSUANCE COSTS |
| — |
| 5,746 |
| ||
GOODWILL |
| — |
| 13,724 |
| ||
TRADEMARKS |
| 6,550 |
| — |
| ||
OTHER ASSETS |
| 224 |
| 202 |
| ||
TOTAL ASSETS |
| $ | 325,268 |
| $ | 210,232 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) |
|
|
|
|
| ||
CURRENT LIABILITIES: |
|
|
|
|
| ||
Accounts payable |
| $ | 16,524 |
| $ | 18,648 |
|
Accrued expenses |
| 16,315 |
| 16,005 |
| ||
Accrued interest |
| 7,227 |
| 7,232 |
| ||
Current portion of long-term debt |
| — |
| 290 |
| ||
TOTAL CURRENT LIABILITIES |
| 40,066 |
| 42,175 |
| ||
LONG-TERM DEBT, LESS CURRENT PORTION |
| 160,355 |
| 160,790 |
| ||
DEFERRED INCOME TAXES |
| 50,677 |
| 13,962 |
| ||
OTHER LIABILITIES |
| 35,179 |
| 210 |
| ||
STOCKHOLDERS’ EQUITY(DEFICIENCY) |
| 38,991 |
| (6,905 | ) | ||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIENCY) |
| $ | 325,268 |
| $ | 210,232 |
|
7
CELLU TISSUE HOLDINGS, INC.
SUMMARY OF CONSOLIDATED CASH FLOW ACTIVITY
(Dollars, in thousands)
|
| For the Periods |
| |||||||
|
| Post-Acquisition |
| Pre-Acquisition |
| |||||
|
| June 13, 2006- |
| March 1, 2006- |
| Year Ended |
| |||
|
| February 28, 2007 |
| June 12, 2006 |
| February 28, 2006 |
| |||
|
|
|
|
|
|
|
| |||
OPERATING ACTIVITIES |
|
|
|
|
|
|
| |||
Net loss |
| $ | (6,192 | ) | $ | (6,535 | ) | $ | (2,569 | ) |
Noncash inventory charge |
| 909 |
| — |
| — |
| |||
Stock-based compensation |
| 497 |
| 924 |
| 82 |
| |||
Deferred income taxes |
| (6,651 | ) | (396 | ) | (2,955 | ) | |||
Accretion of debt discount |
| 381 |
| 85 |
| 300 |
| |||
Amortization of intangibles |
| — |
| 406 |
| 1,423 |
| |||
Depreciation |
| 16,133 |
| 4,227 |
| 14,854 |
| |||
Impairment of fixed assets |
| 488 |
| — |
| — |
| |||
Gain on sale of property, plant & equipment |
| — |
| — |
| (9 | ) | |||
Changes in working capital |
| 4,574 |
| (5,250 | ) | (2,526 | ) | |||
Net cash provided by (used in) operating activities |
| 10,139 |
| (6,539 | ) | 8,600 |
| |||
|
|
|
|
|
|
|
| |||
INVESTING ACTIVITIES |
|
|
|
|
|
|
| |||
Equity investment by Weston Presidio |
| 45,762 |
| — |
| — |
| |||
Capital expenditures |
| (7,677 | ) | (1,938 | ) | (13,050 | ) | |||
Net cash provided by (used in) investing activities |
| 38,085 |
| (1,938 | ) | (13,050 | ) | |||
|
|
|
|
|
|
|
| |||
FINANCING ACTIVITIES |
|
|
|
|
|
|
| |||
Merger consideration paid to former shareholders |
| (45,762 | ) | — |
| — |
| |||
Payments on debt |
| — |
| (290 | ) | (280 | ) | |||
Debt issuance costs |
| — |
| — |
| (2 | ) | |||
Net cash used in financing activities |
| (45,762 | ) | (290 | ) | (282 | ) | |||
|
|
|
|
|
|
|
| |||
Effect of foreign currency |
| (620 | ) | 362 |
| 597 |
| |||
|
|
|
|
|
|
|
| |||
Net increase (decrease) in cash and cash equivalents |
| 1,842 |
| (8,405 | ) | (4,135 | ) | |||
Cash and cash equivalents at beginning of period |
| 14,419 |
| 22,824 |
| 26,959 |
| |||
Cash and cash equivalents at end of period |
| $ | 16,261 |
| $ | 14,419 |
| $ | 22,824 |
|
8
CELLU TISSUE HOLDINGS, INC.
COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars, in thousands)
|
| Post-Acquisition |
| Pre-Acquisition |
| Combined |
| Pre-Acquisition |
| ||||
|
| June 13, 2006- |
| March 1, 2006- |
| Year Ended |
| Year Ended |
| ||||
|
| February 28, 2007 |
| June 12, 2006 |
| February 28, 2007 |
| February 28, 2006 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net sales |
| $ | 241,236 |
| $ | 94,242 |
| $ | 335,478 |
| $ | 328,833 |
|
Cost of goods sold |
| 228,318 |
| 86,054 |
| 314,372 |
| 301,111 |
| ||||
Gross profit |
| 12,918 |
| 8,188 |
| 21,106 |
| 27,722 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Selling, general and administrative expenses |
| 7,207 |
| 4,661 |
| 11,868 |
| 12,872 |
| ||||
Restructuring costs |
| 240 |
| — |
| 240 |
| 1,050 |
| ||||
Merger-related transaction costs |
| 142 |
| 5,933 |
| 6,075 |
| 2,285 |
| ||||
Stock and related compensation expense |
| 3,329 |
| — |
| 3,329 |
| — |
| ||||
Vesting of stock option/restricted stock grants |
| 497 |
| 924 |
| 1,421 |
| 82 |
| ||||
Impairment of fixed assets |
| 488 |
| — |
| 488 |
| — |
| ||||
Income (loss) from operations |
| 1,015 |
| (3,330 | ) | (2,315 | ) | 11,433 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
| 11,469 |
| 4,896 |
| 16,365 |
| 17,077 |
| ||||
Foreign currency (gain) loss |
| (359 | ) | 289 |
| (70 | ) | 503 |
| ||||
Other income |
| 15 |
| 27 |
| 42 |
| 3 |
| ||||
Loss before income tax benefit |
| (10,080 | ) | (8,488 | ) | (18,568 | ) | (6,144 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax benefit |
| (3,888 | ) | (1,953 | ) | (5,841 | ) | (3,575 | ) | ||||
Net loss |
| $ | (6,192 | ) | $ | (6,535 | ) | $ | (12,727 | ) | $ | (2,569 | ) |
|
|
|
|
|
|
|
|
|
|
9
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION (Unaudited)
(Dollars, in thousands)
BUSINESS SEGMENTS
|
| Three Months Ended |
| ||||
|
| February 28, 2007 |
| February 28, 2006 |
| ||
|
| (Post-Acquisition) |
| (Pre-Acquisition) |
| ||
NET SALES: |
|
|
|
|
| ||
Tissue |
| $ | 63,226 |
| $ | 59,090 |
|
Machine-Glazed Paper |
| 26,167 |
| 24,569 |
| ||
Consolidated |
| $ | 89,393 |
| $ | 83,659 |
|
|
|
|
|
|
| ||
INCOME (LOSS) FROM OPERATIONS: |
|
|
|
|
| ||
Tissue |
| $ | 322 |
| $ | 1,932 |
|
Machine-Glazed Paper |
| (821 | ) | 1,093 |
| ||
Consolidated |
| $ | (499 | ) | $ | 3,025 |
|
|
| Post-Acquisition |
| Pre-Acquisition |
| Combined |
| Pre-Acquisition |
| ||||
|
| June 13, 2006- |
| March 1, 2006- |
| Year Ended |
| Year Ended |
| ||||
|
| February 28, 2007 |
| June 12, 2006 |
| February 28, 2007 |
| February 28, 2006 |
| ||||
NET SALES: |
|
|
|
|
|
|
|
|
| ||||
Tissue |
| $ | 170,310 |
| $ | 67,200 |
| $ | 237,510 |
| $ | 232,865 |
|
Machine-Glazed Paper |
| 70,926 |
| 27,042 |
| 97,968 |
| 95,968 |
| ||||
Consolidated |
| $ | 241,236 |
| $ | 94,242 |
| $ | 335,478 |
| $ | 328,833 |
|
|
|
|
|
|
|
|
|
|
| ||||
INCOME (LOSS) FROM OPERATIONS: |
|
|
|
|
|
|
|
|
| ||||
Tissue |
| $ | 2,165 |
| $ | (1,210 | ) | $ | 955 |
| $ | 8,373 |
|
Machine-Glazed Paper |
| (1,150 | ) | (2,120 | ) | (3,270 | ) | 3,060 |
| ||||
Consolidated |
| $ | 1,015 |
| $ | (3,330 | ) | $ | (2,315 | ) | $ | 11,433 |
|
10
CELLU TISSUE HOLDINGS, INC.
RECONCILIATION OF CONSOLIDATED NET LOSS TO EBITDA
(Unaudited) (Dollars, in thousands)
|
| Three Months Ended |
| ||||
|
| February 28, 2007 |
| February 28, 2006 |
| ||
|
| (Post-Acquisition) |
| (Pre-Acquisition) |
| ||
|
|
|
|
|
| ||
NET LOSS |
| $ | (2,497 | ) | $ | (373 | ) |
Add back: |
|
|
|
|
| ||
Depreciation |
| 6,091 |
| 3,181 |
| ||
Amortization |
| — |
| 374 |
| ||
Interest expense |
| 4,339 |
| 4,054 |
| ||
Income tax benefit |
| (2,045 | ) | (1,107 | ) | ||
EBITDA |
| $ | 5,888 |
| $ | 6,129 |
|
|
| Post-Acquisition |
| Pre-Acquisition |
| Combined |
| Pre-Acquisition |
| ||||
|
| June 13, 2006- |
| March 1, 2006- |
| Year Ended |
| Year Ended |
| ||||
|
| February 28, 2007 |
| June 12, 2006 |
| February 28, 2007 |
| February 28, 2006 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
NET LOSS |
| $ | (6,192 | ) | $ | (6,535 | ) | $ | (12,727 | ) | $ | (2,569 | ) |
Add back: |
|
|
|
|
|
|
|
|
| ||||
Depreciation |
| 16,133 |
| 4,227 |
| 20,360 |
| 14,854 |
| ||||
Amortization |
| — |
| 406 |
| 406 |
| 1,049 |
| ||||
Interest expense |
| 11,685 |
| 4,595 |
| 16,280 |
| 16,318 |
| ||||
Income tax benefit |
| (3,888 | ) | (1,953 | ) | (5,841 | ) | (3,575 | ) | ||||
EBITDA |
| $ | 17,738 |
| $ | 740 |
| $ | 18,478 |
| $ | 26,077 |
|
11