Exhibit 99.1
FOR IMMEDIATE RELEASE
Cellu Tissue Holdings, Inc. Announces First Quarter 2010 Results
Alpharetta, GA — July 1, 2009—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 consumer and healthcare products worldwide, today announced consolidated financial results for the first quarter ended May 28, 2009.
As previously announced, in the second quarter of fiscal year 2009, the Company completed its acquisition of the Hauppauge, New York and Thomaston, Georgia tissue converting operations of Atlantic Paper & Foil (“APF”). Accordingly, the first quarter 2010 results are impacted by the effects of the purchase accounting related to this transaction and APF’s operating results, as highlighted below.
First Quarter 2010 Operating Results
Net sales for the first quarter ended May 28, 2009 totaled $118.9 million, compared to $114.5 million for the comparable period in the prior year, an increase of $4.4 million, or 3.8%. For the first quarter ended May 28, 2009, the Company sold an aggregate of 78,008 tons of tissue hard rolls, machine-glazed paper hard rolls and converted paper products. This is an increase of 559 tons, or approximately 1%, from the comparable period in the prior year. During the quarter, the Company in-sourced approximately 6,500 tons of hardrolls for our converting operations that we had previously purchased on the hardroll market, which served to reduce external shipments by a similar amount. This is consistent with our strategy to increase the vertical integration of the acquired operations, supporting improved quality control and profitability. Net selling price per ton increased to $1,501 for the first quarter ended May 28, 2009 from $1,479 for the comparable period in the prior year. This slight increase in price primarily reflects significant improvements in product mix associated with the acquisition of the APF converting operations. The impact of mix improvements is partially offset by downward pricing pressure associated with declines in pulp prices, particularly in machine-glazed and tissue hardrolls.
Net sales within the Tissue Segment for the first quarter ended May 28, 2009 totaled $93.5 million, an increase of 8.9%, from $85.8 million for the comparable period in the prior year. The increase experienced by the Tissue Segment is attributable to the acquisition of APF partially offset by downward pressure on prices as noted above. Net sales within the Machine-Glazed Paper Segment for the same period totaled $23.6 million, a decrease of 17.9%, from $28.7 million for the comparable period in the prior fiscal year. The decrease experienced by the Machine-Glazed Paper Segment is driven by both a decrease in tonnage sold and a decrease in net selling price per ton over the
comparable period in the prior year. Net sales within the Foam Segment, which was part of the APF acquisition, for the first quarter ended May 28, 2009 totaled $1.8 million.
For the first quarter ended May 28, 2009, the Company reported gross profit of $19.8 million, or 16.7% of net sales, compared to $11.8 million, or 10.2% of net sales for the comparable period in the prior fiscal year. The increase in gross profit is primarily attributable to the increase in net selling price per ton coupled with decreases in net pulp cost and net energy cost per ton.
Income from operations for the first quarter ended May 28, 2009 was $13.3 million compared to $6.5 million for the comparable period in the prior fiscal year. Income from operations in the Tissue Segment during this period was $12.4 million compared to $6.1 million for the first quarter in the prior fiscal year. Income from operations in the Machine-Glazed Paper Segment for the first quarter ended May 28, 2009 was $1.3 million compared to $0.4 million for the first quarter in the prior fiscal year. Income from operations in the Foam Segment for the first quarter ended May 28, 2009 was $0.6 million. The overall increase is the result of the increase in gross profit as noted above, offset partially by amortization expense during the quarter related to amortization of the intangible assets recorded in connection with the APF acquisition.
For the first quarter ended May 28, 2009, the Company reported pretax income of $6.4 million, compared to $1.6 million for the comparable period in the prior fiscal year. For the first quarter ended May 28, 2009, the Company reported net income of $2.3 million, compared to net income of $1.0 million for the comparable period in the prior fiscal year. Included in 2010 fiscal year first quarter net income is income tax expense of $1.8 million associated with a change in our federal effective tax rate from 34% to 35% which is expected to be incurred in the current fiscal year based on projected taxable income.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter ended May 28, 2009 totaled $19.9 million, compared to $12.4 million for the comparable period in the prior fiscal year.
Russell C. Taylor, President and Chief Executive Officer of Cellu Tissue, commented:
“We are very pleased with our first quarter results and continue to be confident in our full year guidance of $75.0 to $80.0 million of ADJUSTED EBITDA.”
Notice Relating to the Use of Non-GAAP Measures
Attached to this press release are tables setting forth the Company’s fiscal first quarter consolidated statements of operations, financial position and selected consolidated financial data, including information concerning the Company’s cash flow position, selected consolidated segment data, reconciliations of consolidated net income from operations to consolidated EBITDA and reconciliation of consolidated EBITDA to consolidated ADJUSTED EBITDA. EBITDA and ADJUSTED EBITDA are not measures 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
2
prepared in accordance with generally accepted accounting principles. The Company has presented EBITDA and ADJUSTED EBITDA because it believes that it is widely accepted that EBITDA and ADJUSTED EBITDA provide useful information regarding a company’s ability to service debt. ADJUSTED EBITDA is defined as EBITDA adjusted for items which are either non-cash in nature or expenses that are considered outside the normal operations of the business.
Cellu Tissue’s management invites you to listen to its conference call on July 2, 2009 at 10:00 a.m. EST regarding fiscal first quarter 2010 consolidated financial results. The dial-in number is (800) 553-0327 or International (612) 332-0530; participant code 106367. A taped replay of the conference call will be available after 12:30 p.m. July 2, 2009 until July 16, 2009. The number to call for the taped replay is (800) 475-6701 or International (320) 365-3844, access code 106367.
Cellu Tissue Holdings, Inc. is a manufacturer of converted tissue products, 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. Cellu Tissue’s customers include leading consumer retailers and away-from-home distributors of tissue products, vertically integrated manufacturers and third-party converters serving the tissue and machine-glazed segments.
For more information, contact Cellu Tissue Holdings, Inc. at www. cellutissue.com.
The statements contained in this release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended including but not limited to statements regarding the Company’s future financial performance. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements. All forward-looking statements included in this document are based upon information available to Cellu Tissue as of the date hereof, and Cellu Tissue assumes no obligation to update any such forward-looking statement. Such statements and any other forward-looking statements are subject to risks, assumptions and uncertainties that may cause the statements to be inaccurate and readers are cautioned not to place undue reliance on such statements, including risks related to energy and fiber costs, the growth of our converted tissue business and synergies relating to the APF Acquisition and any other risks described in our Annual Report on Form 10-K for the fiscal year ended February 28, 2009 and subsequent filings with the SEC.
3
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars, in thousands)
|
| Three Months Ended |
| ||||
|
| May 28 |
| May 29 |
| ||
|
| 2009 |
| 2008 |
| ||
|
|
|
|
|
| ||
Net sales |
| $ | 118,928 |
| $ | 114,528 |
|
Cost of goods sold |
| 99,115 |
| 102,740 |
| ||
Gross profit |
| 19,813 |
| 11,788 |
| ||
|
|
|
|
|
| ||
Selling, general and administrative expenses |
| 5,270 |
| 4,960 |
| ||
Terminated acquisition-related transaction costs |
| — |
| 75 |
| ||
Stock and related compensation expense |
| 231 |
| 219 |
| ||
Amortization expense |
| 1,056 |
| — |
| ||
Income from operations |
| 13,256 |
| 6,534 |
| ||
|
|
|
|
|
| ||
Interest expense, net |
| 6,507 |
| 4,980 |
| ||
Foreign currency loss (gain) |
| 357 |
| (43 | ) | ||
Other (income) expense |
| (17 | ) | 29 |
| ||
Income before income tax |
| 6,409 |
| 1,568 |
| ||
|
|
|
|
|
| ||
Income tax expense |
| 4,098 |
| 576 |
| ||
Net income |
| $ | 2,311 |
| $ | 992 |
|
4
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars, in thousands)
|
| May 28 |
| February 28 |
| ||
|
| 2009 |
| 2009 |
| ||
|
| (Unaudited) |
|
|
| ||
ASSETS |
|
|
|
|
| ||
CURRENT ASSETS: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 1,370 |
| $ | 361 |
|
Receivables, net |
| 49,360 |
| 54,066 |
| ||
Inventories |
| 48,288 |
| 47,216 |
| ||
Prepaid expenses and other current assets |
| 2,847 |
| 2,086 |
| ||
Income tax receivable |
| 114 |
| 174 |
| ||
Deferred income taxes |
| 3,515 |
| 3,515 |
| ||
TOTAL CURRENT ASSETS |
| 105,494 |
| 107,418 |
| ||
PROPERTY, PLANT AND EQUIPMENT, NET |
| 305,305 |
| 301,988 |
| ||
GOODWILL |
| 41,020 |
| 41,020 |
| ||
OTHER INTANGIBLES, NET |
| 30,616 |
| 31,673 |
| ||
OTHER ASSETS |
| 1,827 |
| 1,948 |
| ||
TOTAL ASSETS |
| $ | 484,262 |
| $ | 484,047 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
| ||
CURRENT LIABILITIES: |
|
|
|
|
| ||
Bank overdrafts |
| $ | — |
| $ | 3,285 |
|
Revolving line of credit |
| 16,000 |
| 18,531 |
| ||
Accounts payable |
| 17,964 |
| 16,726 |
| ||
Accrued expenses |
| 27,763 |
| 26,549 |
| ||
Accrued interest |
| 4,607 |
| 10,160 |
| ||
Other current liabilities |
| 16,963 |
| 17,449 |
| ||
Current portion of long-term debt |
| 760 |
| 760 |
| ||
TOTAL CURRENT LIABILITIES |
| 84,057 |
| 93,460 |
| ||
LONG-TERM DEBT, LESS CURRENT PORTION |
| 242,579 |
| 242,362 |
| ||
DEFERRED INCOME TAXES |
| 77,398 |
| 75,110 |
| ||
OTHER LIABILITIES |
| 5,379 |
| 5,378 |
| ||
STOCKHOLDERS’ EQUITY |
| 74,849 |
| 67,737 |
| ||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | 484,262 |
| $ | 484,047 |
|
5
CELLU TISSUE HOLDINGS, INC.
SUMMARY OF CONSOLIDATED CASH FLOW ACTIVITY (Unaudited)
(Dollars, in thousands)
|
| Three Months Ended |
| ||||
|
| May 28 |
| May 29 |
| ||
|
| 2009 |
| 2008 |
| ||
|
|
|
|
|
| ||
OPERATING ACTIVITIES |
|
|
|
|
| ||
Net income |
| $ | 2,311 |
| $ | 992 |
|
Stock based compensation |
| 231 |
| 219 |
| ||
Deferred income taxes |
| 2,288 |
| 67 |
| ||
Accretion of debt discount |
| 597 |
| 155 |
| ||
Amortization of intangibles and debt issuance costs |
| 1,169 |
| — |
| ||
Derivative loss |
| — |
| 120 |
| ||
Depreciation |
| 5,928 |
| 5,854 |
| ||
Changes in working capital |
| 932 |
| (12,034 | ) | ||
Net cash provided by (used in) operating activities |
| 13,456 |
| (4,627 | ) | ||
|
|
|
|
|
| ||
INVESTING ACTIVITIES |
|
|
|
|
| ||
Capital expenditures |
| (6,262 | ) | (2,475 | ) | ||
Net cash used in investing activities |
| (6,262 | ) | (2,475 | ) | ||
|
|
|
|
|
| ||
FINANCING ACTIVITIES |
|
|
|
|
| ||
Bank overdrafts |
| (3,285 | ) | — |
| ||
Payments of long-term debt |
| (380 | ) | (380 | ) | ||
Repayments on revolving line of credit |
| (24,245 | ) | (18,300 | ) | ||
Borrowings on revolving line of credit |
| 21,714 |
| 26,500 |
| ||
Net cash (used in) provided by financing activities |
| (6,196 | ) | 7,820 |
| ||
|
|
|
|
|
| ||
Effect of foreign currency |
| 11 |
| 24 |
| ||
|
|
|
|
|
| ||
Net increase in cash and cash equivalents |
| 1,009 |
| 742 |
| ||
Cash and cash equivalents at beginning of period |
| 361 |
| 883 |
| ||
Cash and cash equivalents at end of period |
| $ | 1,370 |
| $ | 1,625 |
|
6
CELLU TISSUE HOLDINGS, INC.
CONSOLIDATED BUSINESS SEGMENT INFORMATION (Unaudited)
(Dollars, in thousands)
BUSINESS SEGMENTS
|
| Three Months Ended |
| ||||
|
| May 28 |
| May 29 |
| ||
|
| 2009 |
| 2008 |
| ||
NET SALES: |
|
|
|
|
| ||
Tissue |
| $ | 93,467 |
| $ | 85,797 |
|
Machine-Glazed Paper |
| 23,594 |
| 28,731 |
| ||
Foam |
| 1,867 |
| — |
| ||
Consolidated |
| $ | 118,928 |
| $ | 114,528 |
|
|
|
|
|
|
| ||
INCOME FROM OPERATIONS: |
|
|
|
|
| ||
Tissue |
| $ | 12,355 |
| $ | 6,052 |
|
Machine-Glazed Paper |
| 1,340 |
| 482 |
| ||
Foam |
| 617 |
| — |
| ||
Segment income from operations |
| 14,312 |
| 6,534 |
| ||
Amortization expense |
| (1,056 | ) | — |
| ||
Consolidated |
| $ | 13,256 |
| $ | 6,534 |
|
7
CELLU TISSUE HOLDINGS, INC,
RECONCILIATION OF CONSOLIDATED NET INCOME TO EBITDA
(Unaudited) (Dollars, in thousands)
|
| Three Months Ended |
| ||||
|
| May 28 |
| May 29 |
| ||
|
| 2009 |
| 2008 |
| ||
|
|
|
|
|
| ||
NET INCOME |
| $ | 2,311 |
| $ | 992 |
|
Add back: |
|
|
|
|
| ||
Depreciation |
| 5,928 |
| 5,854 |
| ||
Amortization |
| 1,056 |
| — |
| ||
Interest expense |
| 6,509 |
| 4,994 |
| ||
Income tax expense |
| 4,098 |
| 576 |
| ||
EBITDA |
| $ | 19,902 |
| $ | 12,416 |
|
8
CELLU TISSUE HOLDINGS, INC.
RECONCILIATION OF CONSOLIDATED EBITDA TO CONSOLIDATED ADJUSTED EBITDA
FIRST QUARTER FISCAL YEAR 2010
(Unaudited) (Dollars, in thousands)
|
| Three Months Ended |
| |
|
| May 28, 2009 |
| |
|
|
|
| |
EBITDA |
| $ | 19,902 |
|
Add back (A) : |
|
|
| |
Mill Fire (1) |
| 250 |
| |
Equipment/facility moves (2) |
| 353 |
| |
Stock compensation (3) |
| 231 |
| |
ADJUSTED EBITDA |
| $ | 20,736 |
|
(A) | Add backs represent adjustments to EBITDA for items which are either noncash in nature or expenses that are considered outside the normal operations of the business as more fully explained below: |
(1) | Costs incurred with respect to fire damage at one of our mills. |
(2) | Costs incurred to move Hauppauge operations to Central Islip. |
(3) | Non cash compensation expense related to the vesting of restricted stock awards and stock option awards. |
9