Wausau-Mosinee Paper Corporation Reports Higher Second-Quarter Earnings

MOSINEE, Wis.–(BUSINESS WIRE)–July 21, 2004–Wausau-Mosinee Paper Corporation (NYSE:WMO) today reported second-quarter earnings of $3.7 million, or $0.07 per share, compared with 2003 second-quarter earnings of $3.2 million, or $0.06 per share. Net sales rose 9 percent to $264.1 million from $242.8 million last year, while shipments increased 5 percent.

Net income for this year’s second quarter included an after-tax charge of $1.3 million, or $0.02 per share, related to the Company’s stock incentive plans, compared with a charge of $0.4 million, or $0.01 per share, for the same period last year. Second-quarter results also included after-tax costs of approximately $1 million, or $0.02 per share, associated with operational issues affecting Printing & Writing’s Brokaw pulp mill.

Net earnings for the first half of 2004 were $7.2 million, or $0.14 per share, compared with $4.6 million, or $0.09 per share, for the first half of 2003. Earnings included stock incentive charges of $0.03 per share in 2004 and $0.01 per share in 2003. Net sales increased 7 percent to $515.9 million, while shipments increased 3 percent.

“Market-share gains and product-mix enhancements drove strong top-line growth during the second quarter as each of our three businesses reported increased sales and shipments,” explained Thomas J. Howatt, president and CEO. “Particularly encouraging was the 9 percent sales gain, which represents the largest year-over-year improvement since the fourth quarter of 1999.

“While market conditions and product pricing improved modestly during the quarter, nearly half of our gain in average selling price was the result of product mix improvements,” Howatt said. “These mix improvements were achieved largely from our focused product and business development efforts,” Mr. Howatt said. “Revenues from products developed within the past three years approached 40 percent, handily exceeding our corporate goal of 25 percent.

“At the same time, market pulp and wastepaper costs increased by nearly $4 million, while energy costs continued at historically high levels. Despite these pressures, we remain focused on key elements of our business that will drive long-term improvement in profitability.”

Specialty Paper reported its eighth consecutive quarter of year- over-year improvement with operating profits of $3.4 million, compared with $0.1 million last year. Net sales and shipments increased 18 percent and 11 percent, respectively, with shipments of higher-priced core products up 13 percent over year-ago levels. “Select selling price increases, improved demand for industrial papers and market-share gains drove significant improvement in net sales and operating profit,” Mr. Howatt pointed out.

Printing & Writing reported second-quarter operating profits of $2.0 million, compared with $2.7 million last year. Current-year results include costs of approximately $1.7 million related to operational issues involving the Brokaw pulp mill’s recovery system and power boiler. “As part of the mill’s annual utilities outage in June, we identified significant issues with the recovery boiler and took an extended outage to make the necessary repairs that will optimize the long-term operation of the boiler,” said Mr. Howatt. “This work was completed during the quarter and we do not anticipate any continuing operational impact.”

Net sales and shipments were up slightly over year-earlier results, while premium paper shipments increased 12 percent. “Consumer product shipments increased nearly 20 percent compared with 2003, helping drive significant growth in higher-value premium products,” Mr. Howatt continued.

Towel & Tissue reported second-quarter operating profits of $8.1 million compared with $8.4 million last year. Prior-year results included pre-tax income of $4.2 million as a license fee in settlement of a patent infringement lawsuit. “On the strength of a selling price increase early in the quarter, average selling price improved 4 percent,” Mr. Howatt said. “This increase, combined with strong cost reduction results, offset higher wastepaper costs and enabled us to achieve substantial year-over-year profit improvement, excluding the impact of the patent infringement settlement.”

Looking to the third quarter, Mr. Howatt said, “Market conditions are steadily improving although higher fiber costs and historically high energy prices have somewhat offset the benefit of recent selling price increases. Our focus remains on those key drivers of our business that will ensure long-term success: product leadership, emphasis on niche markets, operational excellence and benchmark service to our customers. As a result, we expect our positive earnings trend to continue with third-quarter earnings comfortably exceeding prior-year results of $0.12 per share.”

Wausau-Mosinee’s second-quarter conference call is scheduled for 11:00 a.m. (EDT) on Thursday, July 22, and can be accessed through the Company’s web site at www.wausaumosinee.com under “Investor Information.” A replay of the webcast will be available at the same site through July 29.

Wausau-Mosinee Paper Corporation produces fine printing and writing papers, technical specialty papers, and “away-from-home” towel and tissue products.

Safe Harbor under the Private Securities Litigation Reform Act of 1995: The matters discussed in this news release concerning the Company’s future performance or anticipated financial results are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Reform Act of 1995. Such statements involve risks and uncertainties which may cause results to differ materially from those set forth in these statements. Among other things, these risks and uncertainties include the strength of the economy and demand for paper products, increases in raw material and energy prices, manufacturing problems at Company facilities, and other risks and assumptions described in Item 1 of the Company’s Form 10-K for the year ended December 31, 2003. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

                     WAUSAU-MOSINEE PAPER CORPORATION               Interim Report - Quarter-Ended June 30, 2004  (in thousands, except  share amounts) Condensed Consolidated  Statements of Operations     Three Months             Six Months  (unaudited)                 Ended June 30,          Ended June 30,                             2004        2003        2004        2003 Net Sales                $264,109    $242,833    $515,924    $482,659 Cost of Sales             235,973     217,737     461,090     436,684   Gross Profit             28,136      25,096      54,834      45,975 Selling & Administrative  Expense                   19,754      17,419      38,638      33,663   Operating Profit          8,382       7,677      16,196      12,312 Interest Expense           (2,550)     (2,570)     (5,077)     (5,071) Other Income/(Expense),  Net                           98          15         292           1   Earnings Before Income    Taxes                    5,930       5,122      11,411       7,242 Provision for Income Taxes  2,193       1,894       4,222       2,679   Net Earnings             $3,737      $3,228      $7,189      $4,563    Net Earnings Per Share    (Basic & Diluted)        $0.07       $0.06       $0.14       $0.09   Weighted Average Shares    Outstanding (Basic) 51,663,152  51,550,078  51,640,274  51,543,521  Condensed Consolidated  Balance Sheets (Note 1)                        June 30,  December 31,                                                    2004        2003 Current Assets                                   $285,938    $251,418 Property, Plant & Equipment, Net                  548,218     565,722 Other Assets                                       41,363      40,960   Total Assets                                   $875,519    $858,100  Current Liabilities                              $133,299    $115,004 Long-term Debt                                    161,754     162,174 Other Liabilities                                 230,258     230,606 Stockholders' Equity                              350,208     350,316   Total Liabilities & Stockholders' Equity       $875,519    $858,100  Condensed Consolidated Statements                      Six Months   of Cash Flow (unaudited)                           Ended June 30,                                                     2004        2003 Net Cash Provided by Operating Activities         $40,085     $27,965  Cash Provided by (Used in) Investing Activities:   Capital Expenditures                             (9,471)     (9,975)   Acquisition of Business                               0      (8,413)   Proceeds on Sale of Property, Plant & Equipment      12           6                                                    (9,459)    (18,382)  Cash Provided by (Used in) Financing Activities:   Payments Under Capital Lease Obligation             (55)        (34)   Dividends Paid                                   (8,773)     (8,763)   Proceeds from Stock-Option Exercises              1,279         135                                                    (7,549)     (8,662)    Net Increase in Cash                            $23,077        $921   Note 1 - Balance sheet amounts at June 30, 2004, are unaudited. The          December 31, 2003, amounts are derived from audited financial          statements. Note 2 - Effective March 3, 2003, the Company acquired certain assets          of a laminated papers producer. The acquisition was accounted          for as a purchase business combination and, accordingly, the          purchase price has been allocated using the fair values of          the acquired receivables, inventory, machinery and equipment,          and identifiable intangible assets. No goodwill was recorded          as a result of this acquisition. Note 3 - During the second quarter of 2003, the Company's Towel &          Tissue Group reached a settlement of all claims of the          parties in its previously announced patent litigation. As a          result of the settlement, the Company recognized $4.2 million          in pre-tax income as a fee for licensing certain patented          dispenser technologies. Note 4 - Interim Segment Information          The Company's operations are classified into three principal          reportable segments: the Printing & Writing Group, the          Specialty Paper Group, and the Towel & Tissue Group, each          providing different products. Separate management of each          segment is required because each business unit is subject to          different marketing, production and technology strategies.           Printing & Writing produces a broad line of premium printing          and writing grades at manufacturing facilities in Brokaw,          Wisconsin; and Groveton, New Hampshire. Printing & Writing          also includes two converting facilities that produce          laminated roll wrap and related specialty finishing and          packaging products, and a converting facility that converts          printing and writing grades. Specialty Paper produces          specialty papers at its manufacturing facilities in          Rhinelander, Wisconsin; Mosinee, Wisconsin; and Jay, Maine.          Towel & Tissue produces a complete line of towel and tissue          products that are marketed along with soap and dispensing          systems for the "away-from-home" market. Towel & Tissue          operates a paper mill in Middletown, Ohio, and a converting          facility in Harrodsburg, Kentucky.      Sales, operating profit, and asset information by segment is as follows:  (in thousands, except ton data)                 June 30,  December 31,                                                    2004        2003 Segment Assets  (Note 1)   Printing & Writing                             $282,836    $283,711   Specialty Paper                                 330,944     334,079   Towel & Tissue                                  163,514     165,199   Corporate & Unallocated(a)                       98,225      75,111                                                  $875,519    $858,100                                     Three Months         Six Months                                   Ended June 30,      Ended June 30,                                   2004      2003      2004      2003 Net Sales External Customers  (unaudited)   Printing & Writing           $101,181   $99,458  $201,282  $197,835   Specialty Paper               105,771    89,701   206,702   182,159   Towel & Tissue                 57,157    53,674   107,940   102,665                                $264,109  $242,833  $515,924  $482,659  Operating Profit (unaudited)   Printing & Writing             $1,971    $2,704    $4,522    $4,190   Specialty Paper                 3,375        64     6,826     1,576   Towel & Tissue                  8,131     8,372    13,432    12,403 Total Reportable Segment  Operating Profit                13,477    11,140    24,780    18,169   Corporate & Eliminations       (5,095)   (3,463)   (8,584)   (5,857)   Interest Expense               (2,550)   (2,570)   (5,077)   (5,071)   Other Income/(Expense), Net        98        15       292         1     Earnings Before Income Taxes $5,930    $5,122   $11,411    $7,242                                      Three Months        Six Months                                    Ended June 30,      Ended June 30,                                    2004      2003      2004      2003 Depreciation, Depletion and  Amortization (unaudited)   Printing & Writing             $4,172    $4,499    $8,348    $8,657   Specialty Paper                 5,977     6,297    12,002    12,419   Towel & Tissue                  4,506     4,529     9,002     9,111   Corporate & Unallocated           285       188       570       371                                 $14,940   $15,513   $29,922   $30,558  Tons Sold (unaudited)   Printing & Writing             90,881    90,672   183,121   179,403   Specialty Paper                91,726    82,651   179,311   170,326   Towel & Tissue                 38,710    38,091    74,133    72,441                                 221,317   211,414   436,565   422,170  (a)Segment assets do not include intersegment accounts receivable, cash, deferred tax assets and certain other assets which are not identifiable with the segments. 
      CONTACT: Wausau-Mosinee Paper Corporation, Mosinee              Scott P. Doescher, 715-693-4470              www.wausaumosinee.com      SOURCE: Wausau-Mosinee Paper Corporation