Exhibit 99.1
FOR IMMEDIATE RELEASE
Cellu Tissue Holdings, Inc. Announces Fourth Quarter and Full Fiscal Year 2008 Results
Alpharetta, GA – May 15, 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 consolidated financial results for the fourth quarter and full fiscal year ended February 29, 2008, or fiscal year 2008.
In the first quarter of fiscal year 2008, the Company completed the acquisition of CityForest Corporation (“CityForest”). Accordingly, the fourth quarter and full fiscal year 2008 results are impacted by the effects of the purchase accounting related to this transaction and CityForest’s operating results.
Fourth Quarter 2008 Operating Results
Net sales for the fourth quarter ended February 29, 2008 totaled $109.7 million, compared to $89.4 million for the comparable period in the prior year, an increase of $20.3 million, or 22.7%. For the fourth quarter ended February 29, 2008, the Company sold an aggregate of 79,163 tons of tissue hard rolls, machine-glazed paper hard rolls and converted paper products. This is an increase of 12,437 tons, or 18.6%, from the comparable period in the prior year. The increase in net sales for the fourth quarter ended February 29, 2008 is attributable to an increase in net selling price per ton to $1,385 from $1,340 for the comparable period in the prior year. Net sales within the Tissue Segment for the fourth quarter ended February 29, 2008 totaled $81.9 million, an increase of 29.5%, from $63.2 million for the comparable period in the prior year. Net sales within the Machine-Glazed Paper Segment for the fourth quarter ended February 29, 2008 totaled $27.8 million, an increase of 6.1%, from $26.2 million for the comparable period in the prior fiscal year. The increase experienced by the Tissue Segment is attributable to the acquisition of CityForest, an increase in tonnage sold and an increase in net selling price per ton over the comparable period in the prior year. The increase experienced by the Machine-Glazed Segment is driven primarily by an increase in net selling price per ton over the comparable period in the prior year.
For the fourth quarter ended February 29, 2008, the Company reported gross profit of $11.2 million, or 10.2%, of net sales, compared to $3.7 million, or 4.1%, of net sales for the comparable period in the prior fiscal year. The increase in gross profit is attributable to continued improvement in product mix and pricing partially offset by higher pulp costs per ton over the comparable period in the prior fiscal year.
Income from operations for the fourth quarter ended February 29, 2008 was $4.1 million compared to a loss of $.5 million for the comparable period in the prior fiscal year. Income from operations in the Tissue Segment for the fourth quarter ended February 29, 2008 was $4.3 million compared to $.3 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 29, 2008 was $.2 million compared to a loss of $.8 million for the fourth quarter in the prior fiscal 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. Included in selling, general and administrative expenses is $.4 million of ongoing CityForest administrative expense, additional costs incurred in connection with Sarbanes-Oxley compliance and increases in incentive compensation expense associated with strong business performance. Also included in the 2008 fiscal year fourth quarter results is $2.1 million related to costs incurred related to an acquisition that did not transpire. Included in the 2007 fiscal year fourth quarter results is $.1 million of other compensation expense related to the Merger (as defined below) and a $.5 million impairment charge related to the permanent shutdown of the machine-glazed machine at the Company’s Ontario facility.
For the fourth quarter ended February 29, 2008, the Company reported a pretax loss of $.8 million, compared to a pretax loss of $4.5 million for the comparable period in the prior fiscal year. For the fourth quarter ended February 29, 2008, the Company reported net income of $2.7 million, compared to a net loss of $2.5 million for the comparable period in the prior fiscal year. Included in 2008 fiscal year fourth quarter net income is an income tax benefit of $3.5 million. This tax benefit primarily resulted from benefit recorded associated with future changes in Canadian tax rates due to legislative changes and changes in our effective state tax rates, which are expected to be realized in the future.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter ended February 29, 2008 totaled $9.7 million, compared to $5.9 million for the comparable period in the prior fiscal year.
Russell C. Taylor, President and Chief Executive Officer of Cellu Tissue, commented: “We are pleased with our results for the fourth quarter and full year. During the year we completed the CityForest acquisition, fully integrated it into our operations and are realizing the anticipated benefits. We also continue to execute our strategy of significantly increasing converted products sales and, despite further increases in pulp costs, have experienced favorable financial results.”
Fiscal Year 2008 Operating Results
As previously announced, Cellu Paper Holdings, Inc., our Parent Company, was acquired in the second quarter of the prior year, or fiscal year 2007 and, as a result of this transaction (the “Merger”), purchase accounting was applied. Accordingly, the following discussion relative to the prior year combines our operating results for the period March
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1, 2006 to June 12, 2006 (pre-merger) and from June 13, 2006 to February 28, 2007 (post-merger).
Net sales totaled $431.0 million for fiscal year 2008, compared to $335.5 million in the prior fiscal year, an increase of $95.5 million, or 28.5%. For fiscal year 2008, the Company reported gross profit of $42.8 million, or 9.9% of net sales, compared to $21.1 million, or 6.3%, in the prior fiscal year. The increase in gross profit is attributable to the CityForest acquisition, continued improvement in product mix and the strong market for tissue hard rolls, compared to the prior fiscal year.
Income from operations for fiscal year 2008 was $20.7 million compared to a loss of $2.3 million in the prior fiscal year. Included in income from operations for fiscal year 2008 is $2.1 million related to costs incurred related to an acquisition that did not transpire. Included in loss from operations for fiscal year 2007 are $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 permanent shut down of the machine-glazed machine at the Company’s Ontario facility.
For fiscal year 2008, the Company reported a pretax income of $.3 million compared to a pretax loss of $18.6 million in the prior fiscal year. Despite experiencing pretax income for fiscal year 2008, the Company recorded a tax benefit of $3.7 million. This tax benefit primarily resulted from benefit recorded associated with future changes in Canadian tax rates due to legislative changes and changes in our effective state tax rates, which are expected to be realized in the future. For fiscal year 2008, the company experienced net income of $4.0 million compared to a net loss of $12.7 in the prior fiscal year.
EBITDA for the fiscal year 2008 totaled $43.4 million, compared to $18.5 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 for 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 February 28, 2007 (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, net income, net cash provided by operating activities, or other operating or cash flow data prepared in accordance with generally accepted accounting
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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, 2008 at 10:00 a.m. ET regarding fiscal fourth quarter and full fiscal year 2008 consolidated financial results. The dial-in number is (800) 288-8961 or International (612) 332-0228; participant code 922299. A taped replay of the conference call will be available after 12:00 p.m. May 16, 2008 until May 30, 2008. The number to call for the taped replay is (800) 475-6701 or International (320) 365-3844, access code 922299.
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
(Dollars, in thousands)
| | Three Months Ended | |
| | February 29, 2008 | | February 28, 2007 | |
| | | | | |
Net sales | | $ | 109,659 | | $ | 89,393 | |
Cost of goods sold | | 98,470 | | 85,710 | |
Gross profit | | 11,189 | | 3,683 | |
| | | | | |
Selling, general and administrative expenses | | 4,788 | | 3,389 | |
Merger-related transaction costs | | — | | 114 | |
Terminated acquisition-related transaction costs | | 2,078 | | — | |
Vesting of stock option/restricted stock grants | | 261 | | 191 | |
Impairment of fixed assets | | — | | 488 | |
Income (loss) from operations | | 4,062 | | (499 | ) |
| | | | | |
Interest expense, net | | 4,904 | | 4,250 | |
Foreign currency gain | | (76 | ) | (213 | ) |
Other expense | | 54 | | 6 | |
Loss before income tax benefit | | (820 | ) | (4,542 | ) |
| | | | | |
Income tax benefit | | (3,477 | ) | (2,045 | ) |
Net income (loss) | | $ | 2,657 | | $ | (2,497 | ) |
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CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars, in thousands)
| | | | For the Periods | |
| | Fiscal Year Ended | | June 13, 2006- | | March 1, 2006 | |
| | February 29, 2008 | | February 28, 2007 | | June 12, 2006 | |
| | (Post-Merger) | | (Post-Merger) | | (Pre-Merger) | |
| | | | | | | |
Net sales | | $ | 431,022 | | $ | 241,236 | | $ | 94,242 | |
Cost of goods sold | | 388,258 | | 228,318 | | 86,054 | |
Gross profit | | 42,764 | | 12,918 | | 8,188 | |
| | | | | | | |
Selling, general and administrative expenses | | 18,662 | | 7,207 | | 4,661 | |
Restructuring costs | | — | | 240 | | — | |
Merger-related transaction costs | | — | | 142 | | 5,933 | |
Terminated acquisition-related transaction costs | | 2,078 | | — | | — | |
Stock and related compensation expense | | 551 | | 3,329 | | — | |
Vesting of stock option/restricted stock grants | | 808 | | 497 | | 924 | |
Impairment of fixed assets | | — | | 488 | | — | |
Income (loss) from operations | | 20,665 | | 1,015 | | (3,330 | ) |
| | | | | | | |
Interest expense, net | | 19,870 | | 11,469 | | 4,896 | |
Foreign currency loss (gain) | | 664 | | (359 | ) | 289 | |
Other income | | 133 | | 15 | | 27 | |
Income (loss) before income tax benefit | | 264 | | (10,080 | ) | (8,488 | ) |
| | | | | | | |
Income tax benefit | | (3,729 | ) | (3,888 | ) | (1,953 | ) |
Net income (loss) | | $ | 3,993 | | $ | (6,192 | ) | $ | (6,535 | ) |
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CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars, in thousands)
| | February 29 | | February 28 | |
| | 2008 | | 2007 | |
ASSETS | | | | | |
CURRENT ASSETS: | | | | | |
Cash and cash equivalents | | $ | 883 | | $ | 16,261 | |
Receivables, net | | 44,543 | | 34,141 | |
Inventories | | 33,997 | | 28,715 | |
Prepaid expenses and other current assets | | 3,746 | | 3,697 | |
Income tax receivable | | 177 | | 330 | |
Deferred income taxes | | 7,157 | | 6,498 | |
TOTAL CURRENT ASSETS | | 90,503 | | 89,642 | |
PROPERTY, PLANT AND EQUIPMENT, NET | | 296,598 | | 228,852 | |
GOODWILL | | 6,970 | | — | |
TRADEMARKS | | 8,750 | | 6,550 | |
OTHER ASSETS | | 1,491 | | 224 | |
TOTAL ASSETS | | $ | 404,312 | | $ | 325,268 | |
| | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | |
CURRENT LIABILITIES: | | | | | |
Revolving line of credit | | $ | 9,800 | | $ | — | |
Accounts payable | | 24,056 | | 16,524 | |
Accrued expenses | | 18,860 | | 16,315 | |
Accrued interest | | 8,254 | | 7,227 | |
Other current liabilities | | 15,000 | | — | |
Current portion of long-term debt | | 760 | | — | |
TOTAL CURRENT LIABILITIES | | 76,730 | | 40,066 | |
LONG-TERM DEBT, LESS CURRENT PORTION | | 198,087 | | 160,355 | |
DEFERRED INCOME TAXES | | 62,008 | | 50,677 | |
OTHER LIABILITIES | | 20,149 | | 35,179 | |
STOCKHOLDERS’ EQUITY | | 47,338 | | 38,991 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 404,312 | | $ | 325,268 | |
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CELLU TISSUE HOLDINGS, INC.
SUMMARY OF CONSOLIDATED CASH FLOW ACTIVITY
(Dollars, in thousands)
| | | | Post-Merger | | Pre-Merger | |
| | Post-Merger | | For the Periods | |
| | Fiscal Year Ended | | June 13, 2006- | | March 1, 2006- | |
| | February 29, 2008 | | February 28, 2007 | | June 12, 2006 | |
OPERATING ACTIVITIES | | | | | | | |
Net income (loss) | | $ | 3,993 | | $ | (6,192 | ) | $ | (6,535 | ) |
Non-cash inventory charge | | — | | 909 | | — | |
Stock-based compensation | | 808 | | 497 | | 924 | |
Deferred income taxes | | (6,567 | ) | (6,651 | ) | (396 | ) |
Accretion of debt discount | | 616 | | 381 | | 85 | |
Amortization of intangibles | | — | | — | | 406 | |
Depreciation | | 23,106 | | 16,133 | | 4,227 | |
Impairment of fixed assets | | — | | 488 | | — | |
Changes in working capital | | (2,723 | ) | 4,574 | | (5,250 | ) |
Net cash provided by (used in) operating activities | | 19,233 | | 10,139 | | (6,539 | ) |
| | | | | | | |
INVESTING ACTIVITIES | | | | | | | |
Equity investment by Weston Presidio/Other Stockholders | | (32 | ) | 45,762 | | — | |
Cash paid for acquisition, net of cash received | | (43,663 | ) | — | | — | |
Capital expenditures | | (20,478 | ) | (7,677 | ) | (1,938 | ) |
Net cash (used in) provided by investing activities | | (64,173 | ) | 38,085 | | (1,938 | ) |
| | | | | | | |
FINANCING ACTIVITIES | | | | | | | |
Merger consideration paid to former shareholders | | — | | (45,762 | ) | — | |
Payments of long-term debt | | (575 | ) | — | | (290 | ) |
Borrowings on revolving credit facility, net | | 9,800 | | — | | — | |
Proceeds from note offering | | 20,000 | | — | | — | |
Net cash provided by (used in) financing activities | | 29,225 | | (45,762 | ) | (290 | ) |
| | | | | | | |
Effect of foreign currency | | 337 | | (620 | ) | 362 | |
| | | | | | | |
Net (decrease) increase in cash and cash equivalents | | (15,378 | ) | 1,842 | | (8,405 | ) |
Cash and cash equivalents at beginning of period | | 16,261 | | 14,419 | | 22,824 | |
Cash and cash equivalents at end of period | | $ | 883 | | $ | 16,261 | | $ | 14,419 | |
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CELLU TISSUE HOLDINGS, INC.
COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars, in thousands)
| | Post-Merger | | Combined | | Post-Merger | | Pre-Merger | |
| | Year Ended | | Year Ended | | June 13, 2006- | | March 1, 2006- | |
| | February 29, 2008 | | February 28, 2007 | | February 28, 2007 | | June 12, 2006 | |
| | | | | | | | | |
Net sales | | $ | 431,022 | | $ | 335,478 | | $ | 241,236 | | $ | 94,242 | |
Cost of goods sold | | 388,258 | | 314,372 | | 228,318 | | 86,054 | |
Gross profit | | 42,764 | | 21,106 | | 12,918 | | 8,188 | |
| | | | | | | | | |
Selling, general and administrative expenses | | 18,662 | | 11,868 | | 7,207 | | 4,661 | |
Restructuring costs | | — | | 240 | | 240 | | — | |
Merger-related transaction costs | | — | | 6,075 | | 142 | | 5,933 | |
Terminated acquisition-related transaction costs | | 2,078 | | — | | — | | — | |
Stock and related compensation expense | | 551 | | 3,329 | | 3,329 | | — | |
Vesting of stock option/restricted stock grants | | 808 | | 1,421 | | 497 | | 924 | |
Impairment of fixed assets | | — | | 488 | | 488 | | — | |
Income (loss) from operations | | 20,665 | | (2,315 | ) | 1,015 | | (3,330 | ) |
| | | | | | | | | |
Interest expense, net | | 19,870 | | 16,365 | | 11,469 | | 4,896 | |
Foreign currency loss (gain) | | 664 | | (70 | ) | (359 | ) | 289 | |
Other income | | 133 | | 42 | | 15 | | 27 | |
Income (loss) before income tax benefit | | 264 | | (18,568 | ) | (10,080 | ) | (8,488 | ) |
| | | | | | | | | |
Income tax benefit | | (3,729 | ) | (5,841 | ) | (3,888 | ) | (1,953 | ) |
Net income (loss) | | $ | 3,993 | | $ | (12,727 | ) | $ | (6,192 | ) | $ | (6,535 | ) |
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CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION (Unaudited)
(Dollars, in thousands)
BUSINESS SEGMENTS
| | Three Months Ended | |
| | February 29, 2008 | | February 28, 2007 | |
NET SALES: | | | | | |
Tissue | | $ | 81,901 | | $ | 63,226 | |
Machine-Glazed Paper | | 27,758 | | 26,167 | |
Consolidated | | $ | 109,659 | | $ | 89,393 | |
| | | | | |
INCOME (LOSS) FROM OPERATIONS: | | | | | |
Tissue | | $ | 4,305 | | $ | 322 | |
Machine-Glazed Paper | | (243 | ) | (821 | ) |
Consolidated | | $ | 4,062 | | $ | (499 | ) |
| | Post-Merger | | Combined | | Post-Merger | | Pre-Merger | |
| | Year Ended | | Year Ended | | June 13, 2006- | | March 1, 2006- | |
| | February 29, 2008 | | February 28, 2007 | | February 28, 2007 | | June 12, 2006 | |
NET SALES: | | | | | | | | | |
Tissue | | $ | 325,030 | | $ | 237,510 | | $ | 170,310 | | $ | 67,200 | |
Machine-Glazed Paper | | 105,992 | | 97,968 | | 70,926 | | 27,042 | |
Consolidated | | $ | 431,022 | | $ | 335,478 | | $ | 241,236 | | $ | 94,242 | |
| | | | | | | | | |
INCOME (LOSS) FROM OPERATIONS: | | | | | | | | | |
Tissue | | $ | 20,550 | | $ | 955 | | $ | 2,165 | | $ | (1,210 | ) |
Machine-Glazed Paper | | 115 | | (3,270 | ) | (1,150 | ) | (2,120 | ) |
Consolidated | | $ | 20,665 | | $ | (2,315 | ) | $ | 1,015 | | $ | (3,330 | ) |
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CELLU TISSUE HOLDINGS, INC.
RECONCILIATION OF CONSOLIDATED NET INCOME (LOSS) TO EBITDA
(Unaudited) (Dollars, in thousands)
| | Three Months Ended | |
| | February 29, 2008 | | February 28, 2007 | |
| | | | | |
NET INCOME (LOSS) | | $ | 2,657 | | $ | (2,497 | ) |
Add back: | | | | | |
Depreciation | | 5,538 | | 6,091 | |
Interest expense | | 5,016 | | 4,339 | |
Income tax benefit | | (3,477 | ) | (2,045 | ) |
EBITDA | | $ | 9,734 | | $ | 5,888 | |
| | Post-Merger | | Combined | | Post-Merger | | Pre-Merger | |
| | Year Ended | | Year Ended | | June 13, 2006- | | March 1, 2006- | |
| | February 29, 2008 | | February 28, 2007 | | February 28, 2007 | | June 12, 2006 | |
| | | | | | | | | |
NET INCOME (LOSS) | | $ | 3,993 | | $ | (12,727 | ) | $ | (6,192 | ) | $ | (6,535 | ) |
Add back: | | | | | | | | | |
Depreciation | | 23,106 | | 20,360 | | 16,133 | | 4,227 | |
Amortization | | — | | 406 | | — | | 406 | |
Interest expense | | 20,057 | | 16,280 | | 11,685 | | 4,595 | |
Income tax benefit | | (3,729 | ) | (5,841 | ) | (3,888 | ) | (1,953 | ) |
EBITDA | | $ | 43,427 | | $ | 18,478 | | $ | 17,738 | | $ | 740 | |
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