Exhibit 99.1
FOR IMMEDIATE RELEASE
Cellu Tissue Holdings, Inc. Announces Third Quarter 2008 Results
Alpharetta, GA. — January 10, 2008—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 third quarter ended November 29, 2007.
In the first quarter of the fiscal year ending February 29, 2008, or fiscal year 2008, the Company completed the acquisition of CityForest Corporation (“CityForest”). Accordingly, the third quarter fiscal year 2008 results are impacted by the effects of the purchase accounting related to this transaction and CityForest’s operating results.
Third Quarter 2008 Operating Results
Net sales for the third quarter ended November 29, 2007 totaled $109.2 million compared to $83.3 million for the comparable period in the prior year, an increase of $25.9 million, or 31.1%. For the third quarter ended November 29, 2007, the Company sold 79,541 tons of tissue hard rolls, machine-glazed paper hard rolls and converted paper products. This is an increase of 17,705 tons, or 28.6%, over the comparable period in the prior year. Also contributing to the increase in net sales from the comparable period in the prior year is an increase in net selling price per ton to $1,372 for the third quarter ended November 29, 2007 from $1,347 for the comparable period in the prior year. Net sales within the Tissue Segment for the third quarter ended November 29, 2007 totaled $82.0 million, an increase of 41.2%, from $58.0 million for the comparable period in the prior year. Net sales within the Machine-Glazed Paper Segment for the third quarter ended November 29, 2007 totaled $27.2 million, an increase of 7.7% from $25.3 million for the comparable period in the prior year. The increase experienced by the Tissue Segment is attributable to the acquisition of CityForest and an increase in tonnage sold, primarily in the converted business. The increase experienced by the Machine-Glazed Paper Segment is driven primarily by an increase in net selling price per ton over the comparable period in the prior year.
For the third quarter ended November 29, 2007, Cellu Tissue reported gross profit of $11.5 million, or 10.5%, of net sales, compared to $5.9 million, or 7.1%, for the comparable period in the prior year. The increase in gross profit is attributable to continued improvement in product mix, lower manufacturing cost and the strong market for tissue hard rolls, compared to the comparable period in the prior year.
Income from operations for the third quarter ended November 29, 2007 was $6.0 million compared to income from operations of $2.4 million for the comparable period in the prior year. Income from operations in the Tissue Segment for the third quarter ended
November 29, 2007 was $5.8 million compared to income from operations of $2.0 million for the third quarter in the prior year. Income from operations in the Machine-Glazed Paper Segment for the third quarter ended November 29, 2007 was $.2 million compared to income from operations of $.4 million for the third quarter in the prior year. The overall increase is the result of the increase in gross profit as noted above offset partially by an increase in selling, general and administrative expenses and stock and related compensation expense from the prior year. Included in selling, general and administrative expenses for the third quarter ended November 29, 2007 is $.4 million of ongoing CityForest administrative expenses, additional costs incurred in connection with being compliant with Sarbanes-Oxley and increases in incentive compensation expense associated with strong business performance. The increase in stock and related compensation expense is associated with a restricted stock grant during the current quarter.
For the third quarter ended November 29, 2007, the Company reported pretax income of $1.0 million, compared to a pretax loss of $1.6 million for the comparable period in the prior year. Despite experiencing pretax income for the third quarter ended November 29, 2007, the Company recorded a tax benefit of $.4 million for the period. Included in this amount, is a $.7 million benefit primarily related to the different book and tax treatment of deductions related to transaction costs. This benefit has been recorded in the current quarter upon completion of the Company’s 2007 tax return as the impact is considered discrete to this quarter. Without the effect of this benefit, the Company recorded tax expense of $.3 million or 29.2% for the quarter ended November 29, 2007. For the third quarter ended November 29, 2007, the Company experienced net income of $1.4 million, compared to a net loss of $1.1 million for the comparable period in the prior year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter ended November 29, 2007 totaled $11.2 million, compared to $8.1 million for the comparable period in the prior year.
Russell C. Taylor, President and Chief Executive Officer of Cellu Tissue, commented: “During the third quarter we continued to make progress on our strategic objective of significantly increasing our sales of converted products and despite further increases in pulp costs, we experienced favorable financial results.”
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 for the nine months of the prior year with respect to the period from March 1, 2006 to June 12, 2006 (pre-merger) and the period from June 13, 2006 to November 23, 2006 (post-merger), selected consolidated segment data, and reconciliations of consolidated net income (loss) 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,
2
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 Friday, January 11, 2008 at 10 a.m. ET regarding third quarter fiscal year 2008 financial results. The dial-in number is (866) 254-5941 or International (612) 332-1025; participant code 904701. A taped replay of the conference call will be available after 12:00 p.m., January 11, 2008 until 11:59 p.m., January 25, 2008. The number to call for the taped replay is (800) 475-6701 or International (320) 365-3844, access code 904701.
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 ten customers belonging to the Fortune 150 group of companies.
For more information, contact Cellu Tissue Holdings, Inc. at www. cellutissue.com.
3
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars, in thousands)
|
| Three Months Ended |
| ||||
|
| November 29, 2007 |
| November 23, 2006 |
| ||
|
| (Post-Merger) |
| (Post-Merger) |
| ||
Net sales |
| $ | 109,162 |
| $ | 83,281 |
|
Cost of goods sold |
| 97,646 |
| 77,390 |
| ||
Gross profit |
| 11,516 |
| 5,891 |
| ||
|
|
|
|
|
| ||
Selling, general and administrative expenses |
| 4,835 |
| 3,241 |
| ||
Stock and related compensation expense |
| 715 |
| 170 |
| ||
Merger-related transaction costs |
| — |
| 53 |
| ||
Income from operations |
| 5,966 |
| 2,427 |
| ||
|
|
|
|
|
| ||
Interest expense, net |
| 4,844 |
| 4,066 |
| ||
Foreign currency loss (gain) |
| 220 |
| (79 | ) | ||
Other income |
| (104 | ) | (3 | ) | ||
Income (loss) before income tax benefit |
| 1,006 |
| (1,557 | ) | ||
|
|
|
|
|
| ||
Income tax benefit |
| (370 | ) | (482 | ) | ||
Net income (loss) |
| $ | 1,376 |
| ($1,075 | ) | |
4
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars, in thousands)
|
| For the Periods |
| |||||||
|
| Post-Merger |
| Pre-Merger |
| |||||
|
| March 1, 2007- |
| June 13, 2006- |
| March 1, 2006 |
| |||
|
| November 29, 2007 |
| November 23, 2006 |
| June 12, 2006 |
| |||
Net sales |
| $ | 321,363 |
| $ | 151,843 |
| $ | 94,242 |
|
Cost of goods sold |
| 289,789 |
| 142,608 |
| 86,054 |
| |||
Gross profit |
| 31,574 |
| 9,235 |
| 8,188 |
| |||
|
|
|
|
|
|
|
| |||
Selling, general and administrative expenses |
| 13,874 |
| 7,019 |
| 5,585 |
| |||
Stock and related compensation expense |
| 1,098 |
| 306 |
| — |
| |||
Restructuring costs |
| — |
| 240 |
| — |
| |||
Merger-related transaction costs |
| — |
| 156 |
| 5,933 |
| |||
Income (loss) from operations |
| 16,602 |
| 1,514 |
| (3,330 | ) | |||
|
|
|
|
|
|
|
| |||
Interest expense, net |
| 14,966 |
| 7,218 |
| 4,896 |
| |||
Foreign currency loss (gain) |
| 740 |
| (146 | ) | 289 |
| |||
Other income |
| (187 | ) | (21 | ) | (27 | ) | |||
Income (loss) before income tax benefit |
| 1,083 |
| (5,537 | ) | (8,488 | ) | |||
|
|
|
|
|
|
|
| |||
Income tax benefit |
| (252 | ) | (1,843 | ) | (1,953 | ) | |||
Net income (loss) |
| $ | 1,335 |
| ($3,694 | ) | ($6,535 | ) | ||
5
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars, in thousands)
|
| November 29 |
| February 28 |
| ||
|
| 2007 |
| 2007 |
| ||
|
| (Unaudited) |
|
|
| ||
ASSETS |
|
|
|
|
| ||
CURRENT ASSETS: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 1,681 |
| $ | 16,261 |
|
Receivables, net |
| 43,524 |
| 34,141 |
| ||
Inventories |
| 30,899 |
| 29,604 |
| ||
Prepaid expenses and other current assets |
| 6,574 |
| 2,809 |
| ||
Income tax receivable |
| 327 |
| 329 |
| ||
Deferred income taxes |
| 6,263 |
| 6,498 |
| ||
TOTAL CURRENT ASSETS |
| 89,268 |
| 89,642 |
| ||
PROPERTY, PLANT AND EQUIPMENT, NET |
| 292,178 |
| 228,852 |
| ||
TRADEMARKS |
| 8,750 |
| 6,550 |
| ||
GOODWILL |
| 6,944 |
| - |
| ||
OTHER ASSETS |
| 1,532 |
| 224 |
| ||
TOTAL ASSETS |
| $ | 398,672 |
| $ | 325,268 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
| ||
CURRENT LIABILITIES: |
|
|
|
|
| ||
Bank overdrafts |
| $ | 2,213 |
| $ | — |
|
Revolving line of credit |
| 3,500 |
| — |
| ||
Accounts payable |
| 23,095 |
| 16,523 |
| ||
Accrued expenses |
| 23,272 |
| 16,315 |
| ||
Accrued interest |
| 3,746 |
| 7,227 |
| ||
Current portion of long-term debt |
| 760 |
| — |
| ||
TOTAL CURRENT LIABILITIES |
| 56,586 |
| 40,065 |
| ||
LONG-TERM DEBT, LESS CURRENT PORTION |
| 197,929 |
| 160,356 |
| ||
DEFERRED INCOME TAXES |
| 64,593 |
| 50,677 |
| ||
OTHER LIABILITIES |
| 35,154 |
| 35,179 |
| ||
STOCKHOLDERS’ EQUITY |
| 44,410 |
| 38,991 |
| ||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | 398,672 |
| $ | 325,268 |
|
6
CELLU TISSUE HOLDINGS, INC.
SUMMARY OF CONSOLIDATED CASH FLOW ACTIVITY (Unaudited)
(Dollars, in thousands)
|
|
|
| For the Periods |
|
|
| |||
|
| Post-Merger |
| Pre-Merger |
| |||||
|
| March 1, 2007- |
| June 13, 2006- |
| March 1, 2006- |
| |||
|
| November 29, 2007 |
| November 23, 2006 |
| June 12, 2006 |
| |||
OPERATING ACTIVITIES |
|
|
|
|
|
|
| |||
Net income (loss) |
| $ | 1,335 |
| ($3,694 | ) | ($6,535 | ) | ||
Noncash inventory charge |
| — |
| 909 |
| — |
| |||
Stock-based compensation |
| 595 |
| 306 |
| 924 |
| |||
Deferred income taxes |
| (3,088 | ) | (1,760 | ) | (396 | ) | |||
Accretion of debt discount |
| 459 |
| 239 |
| 85 |
| |||
Amortization of intangibles |
| — |
| — |
| 406 |
| |||
Depreciation |
| 17,568 |
| 10,042 |
| 4,227 |
| |||
Changes in working capital |
| (3,012 | ) | (3,722 | ) | (5,250 | ) | |||
Net cash provided by (used in) operating activities |
| 13,857 |
| 2,320 |
| (6,539 | ) | |||
|
|
|
|
|
|
|
| |||
INVESTING ACTIVITIES |
|
|
|
|
|
|
| |||
Cash paid for acquisiton, net of cash received |
| (43,638 | ) | — |
| — |
| |||
Equity investment by Weston Presidio |
| — |
| 45,762 |
| — |
| |||
Capital expenditures |
| (10,965 | ) | (3,995 | ) | (1,938 | ) | |||
Net cash (used in) provided by investing activities |
| (54,603 | ) | 41,767 |
| (1,938 | ) | |||
|
|
|
|
|
|
|
| |||
FINANCING ACTIVITIES |
|
|
|
|
|
|
| |||
Bank overdrafts |
| 2,213 |
| — |
| — |
| |||
Merger consideration paid to former shareholders |
| — |
| (45,762 | ) | — |
| |||
Payments of long-term debt |
| (575 | ) | — |
| (290 | ) | |||
Borrowings on revolving line of credit, net |
| 3,500 |
| — |
| — |
| |||
Proceeds from bond offering |
| 20,000 |
| — |
| — |
| |||
Net cash provided by (used in) financing activities |
| 25,138 |
| (45,762 | ) | (290 | ) | |||
|
|
|
|
|
|
|
| |||
Effect of foreign currency |
| 1,028 |
| (407 | ) | 362 |
| |||
|
|
|
|
|
|
|
| |||
Net decrease in cash and cash equivalents |
| (14,580 | ) | (2,082 | ) | (8,405 | ) | |||
Cash and cash equivalents at beginning of period |
| 16,261 |
| 14,419 |
| 22,824 |
| |||
Cash and cash equivalents at end of period |
| $ | 1,681 |
| $ | 12,337 |
| $ | 14,419 |
|
7
CELLU TISSUE HOLDINGS, INC.
COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars, in thousands)
|
| Post-Merger |
| Post-Merger |
| Pre-Merger |
| Combined |
| ||||
|
| Nine Months Ended |
| June 13, 2006- |
| March 1, 2006- |
| Nine Months Ended |
| ||||
|
| November 29, 2007 |
| November 23, 2006 |
| June 12, 2006 |
| November 23, 2006 |
| ||||
Net sales |
| $ | 321,363 |
| $ | 151,843 |
| $ | 94,242 |
| $ | 246,085 |
|
Cost of goods sold |
| 289,789 |
| 142,608 |
| 86,054 |
| 228,662 |
| ||||
Gross profit |
| 31,574 |
| 9,235 |
| 8,188 |
| 17,423 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Selling, general and administrative expenses |
| 13,874 |
| 7,019 |
| 5,585 |
| 12,604 |
| ||||
Stock and related compensation expense |
| 1,098 |
| 306 |
| — |
| 306 |
| ||||
Restructuring costs |
| — |
| 240 |
| — |
| 240 |
| ||||
Merger-related transaction costs |
| — |
| 156 |
| 5,933 |
| 6,089 |
| ||||
Income (loss) from operations |
| 16,602 |
| 1,514 |
| (3,330 | ) | (1,816 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
| 14,966 |
| 7,218 |
| 4,896 |
| 12,114 |
| ||||
Foreign currency loss (gain) |
| 740 |
| (146 | ) | 289 |
| 143 |
| ||||
Other income |
| (187 | ) | (21 | ) | (27 | ) | (48 | ) | ||||
Income (loss) before income tax benefit |
| 1,083 |
| (5,537 | ) | (8,488 | ) | (14,025 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax benefit |
| (252 | ) | (1,843 | ) | (1,953 | ) | (3,796 | ) | ||||
Net income (loss) |
| $ | 1,335 |
| ($3,694 | ) | ($6,535 | ) | ($10,229 | ) | |||
|
|
|
|
|
|
|
|
|
| ||||
8
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION (Unaudited)
(Dollars, in thousands)
BUSINESS SEGMENTS
|
| (Post-Merger) |
| ||||
|
| Three Months Ended |
| ||||
|
| November 29, 2007 |
| November 23, 2006 |
| ||
NET SALES: |
|
|
|
|
| ||
Tissue |
| $ | 81,999 |
| $ | 58,060 |
|
Machine-Glazed Paper |
| 27,163 |
| 25,221 |
| ||
Consolidated |
| $ | 109,162 |
| $ | 83,281 |
|
|
|
|
|
|
| ||
INCOME FROM OPERATIONS: |
|
|
|
|
| ||
Tissue |
| $ | 5,777 |
| $ | 1,963 |
|
Machine-Glazed Paper |
| 189 |
| 464 |
| ||
Consolidated |
| $ | 5,966 |
| $ | 2,427 |
|
|
| Post-Merger |
| Post-Merger |
| Pre-Merger |
| Combined Nine |
| ||||
|
| Nine Months Ended |
| June 13, 2006- |
| March 1, 2006- |
| Months Ended |
| ||||
|
| November 29, 2007 |
| November 23, 2006 |
| June 12, 2006 |
| November 23, 2006 |
| ||||
NET SALES: |
|
|
|
|
|
|
|
|
| ||||
Tissue |
| $ | 243,129 |
| $ | 107,084 |
| $ | 67,200 |
| $ | 174,284 |
|
Machine-Glazed Paper |
| 78,234 |
| 44,759 |
| 27,042 |
| 71,801 |
| ||||
Consolidated |
| $ | 321,363 |
| $ | 151,843 |
| $ | 94,242 |
| $ | 246,085 |
|
|
|
|
|
|
|
|
|
|
| ||||
INCOME (LOSS) FROM OPERATIONS: |
|
|
|
|
|
|
|
|
| ||||
Tissue |
| $ | 16,244 |
| $ | 1,843 |
| ($1,210 | ) | $ | 633 |
| |
Machine-Glazed Paper |
| 358 |
| (329 | ) | (2,120 | ) | (2,449 | ) | ||||
Consolidated |
| $ | 16,602 |
| $ | 1,514 |
| ($3,330 | ) | ($1,816 | ) |
9
CELLU TISSUE HOLDINGS, INC.
RECONCILIATION OF CONSOLIDATED NET INCOME (LOSS) TO EBITDA
(Unaudited) (Dollars, in thousands)
|
| Three Months Ended |
| ||||
|
| November 29, 2007 |
| November 23, 2006 |
| ||
NET INCOME (LOSS) |
| $ | 1,376 |
| ($1,075 | ) | |
Add back: |
|
|
|
|
| ||
Depreciation |
| 5,374 |
| 5,526 |
| ||
Interest expense |
| 4,856 |
| 4,122 |
| ||
Income tax benefit |
| (370 | ) | (482 | ) | ||
EBITDA |
| $ | 11,236 |
| $ | 8,091 |
|
|
| Post-Merger |
| Post-Merger |
| Pre-Merger |
| Combined Nine |
| ||||
|
| Nine Months Ended |
| June 13, 2006- |
| March 1, 2006- |
| Months Ended |
| ||||
|
| November 29, 2007 |
| November 23, 2006 |
| June 12, 2006 |
| November 23, 2006 |
| ||||
NET INCOME (LOSS) |
| $ | 1,335 |
| ($3,694 | ) | ($6,535 | ) | ($10,229 | ) | |||
Add back: |
|
|
|
|
|
|
|
|
| ||||
Depreciation |
| 17,568 |
| 10,042 |
| 4,227 |
| 14,269 |
| ||||
Amortization |
| — |
| — |
| 406 |
| 406 |
| ||||
Interest expense |
| 15,041 |
| 7,346 |
| 4,595 |
| 11,941 |
| ||||
Income tax benefit |
| (252 | ) | (1,843 | ) | (1,953 | ) | (3,796 | ) | ||||
EBITDA |
| $ | 33,692 |
| $ | 11,851 |
| $ | 740 |
| $ | 12,591 |
|
10