Wausau Paper Reports 36 Percent Gain in Third-Quarter Earnings, Highest Profit in Five Years
MOSINEE, Wis.–(BUSINESS WIRE)–Oct. 19, 2004–Wausau Paper (NYSE:WPP) today reported third-quarter earnings rose 36 percent to $8.1 million, or $0.16 per diluted share, from $6.0 million, or $0.12 per diluted share, the year before, reflecting ongoing progress with its strategic initiatives. Third-quarter earnings included stock incentive credits of less than $0.01 per diluted share in 2004 and charges of $0.01 per diluted share in 2003. Net sales increased 5 percent to $262.4 million from $249.5 million last year, while shipments declined 1 percent.
Net earnings for the first nine months were $15.3 million, or $0.29 per diluted share, an increase of 45 percent over $10.5 million, or $0.20 per diluted share, during the same period last year. Earnings included stock incentive charges of $0.02 per diluted share in 2004 and $0.01 per diluted share in 2003. Net sales increased 6 percent to $778.4 million from $732.2 million. Shipments were up 2 percent.
“The third-quarter performance represented our strongest quarterly earnings in five years,” said Thomas J. Howatt, president and CEO. “This improvement was achieved despite fiber-related price increases of approximately $9 million, natural gas price increases of $1 million, and only modest improvement in market conditions. Average selling price increased 6 percent as compared to the third quarter of 2003 with nearly half of the improvement the result of sales mix enhancements.
“Much of the improvement in profitability can be attributed to the continued progress of our strategic initiatives,” Mr. Howatt said. “On a year-to-date basis, approximately 40 percent of net sales were generated by products developed within the last three years, far exceeding our corporate goal of 25 percent; productivity improved by more than our targeted 1 percent; and cost reduction results approached our corporate goal of 2 percent of prior-year cost of sales.”
Specialty Products reported its ninth consecutive quarter of year-over-year improvement with operating profits of $5.2 million, more than doubling the $2.4 million earned a year ago. Net sales and shipments rose 12 percent and 3 percent, respectively. “Demand for our specialty papers continued to improve through the third quarter,” commented Mr. Howatt. “Selling price gains, product mix enhancements, and increased production efficiencies offset higher market pulp and natural gas costs to generate the earnings improvement.”
Printing & Writing reported third-quarter operating profits of $5.1 million compared to $5.3 million last year. Net sales and shipments declined 1 percent and 5 percent, respectively. “Volume of our higher-margin premium printing and writing papers increased 9 percent and consumer product shipments increased 15 percent, reflecting the value of our niche market focus,” Mr. Howatt said. “Lower overall shipments were principally due to inconsistent demand and competitive market conditions for paper mill packaging products. In addition, uncoated freesheet markets have softened in recent months from the gains experienced earlier in the year.”
Towel & Tissue reported third-quarter operating profits of $7.9 million compared to $7.6 million last year. Net sales increased 6 percent while shipments improved slightly. “Selling price increases and record shipments of value-added products helped offset wastepaper and parent roll price increases of nearly $2 million, enabling Towel & Tissue to report a year-over-year profit improvement,” said Mr. Howatt.
Looking ahead, Mr. Howatt said, “We remain committed to putting Wausau Paper on a growth track by pursuing higher-margin niche and emerging markets, using innovative product development techniques that allow us to effectively partner with customers, and focusing on new customer service initiatives. The pending $9.6 million acquisition of the Brainerd, Minnesota, facility, fits well with that growth strategy. The 170,000-ton per year uncoated freesheet mill provides the capability and scale to expand our sales of higher-margin premium printing and writing papers, driving profitability and generating superior long-term growth.
“The fourth quarter is a seasonally weaker period for most of our businesses. While fiber costs are easing, they remain well above year-ago levels. In addition, energy, freight, and pulpwood costs are moving higher and uncoated paper market gains have yet to provide any meaningful pricing leverage. As a result, we expect fourth-quarter earnings to be in line with prior-year earnings of $0.10 per share, excluding the potential expense of the Brainerd mill start-up, which is estimated to be $0.02 per share.”
Wausau Paper 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 Paper Interim Report - Quarter-Ended September 30, 2004 (in thousands, except share amounts) Condensed Consolidated Statements of Operations (unaudited) Three Months Nine Months Ended Ended September 30, September 30, 2004 2003 2004 2003 Net Sales $262,428 $249,529 $778,352 $732,188 Cost of Sales 229,983 221,090 691,073 657,774 Gross Profit 32,445 28,439 87,279 74,414 Selling & Administrative Expense 17,158 16,426 55,796 50,089 Operating Profit 15,287 12,013 31,483 24,325 Interest Expense (2,608) (2,537) (7,685) (7,608) Other Income / (Expense), Net 191 18 483 19 Earnings Before Income Taxes 12,870 9,494 24,281 16,736 Provision for Income Taxes 4,762 3,513 8,984 6,192 Net Earnings $ 8,108 $ 5,981 $15,297 $10,544 Net Earnings Per Share- Basic $ 0.16 $ 0.12 $ 0.30 $ 0.20 Net Earnings Per Share- Diluted $ 0.16 $ 0.12 $ 0.29 $ 0.20 Weighted Average Shares Outstanding-Basic 51,680,686 51,552,250 51,653,843 51,546,462 Weighted Average Shares Outstanding-Diluted 51,980,190 51,664,539 51,904,856 51,639,898 Condensed Consolidated Balance Sheets (Note 1) September 30, December 31, 2004 2003 Current Assets $285,610 $251,418 Property, Plant & Equipment, Net 541,528 565,722 Other Assets 41,917 40,960 Total Assets $869,055 $858,100 Current Liabilities $123,718 $115,004 Long-term Debt 161,544 162,174 Other Liabilities 225,247 230,606 Stockholders' Equity 358,546 350,316 Total Liabilities & Stockholders' Equity $869,055 $858,100 Condensed Consolidated Statements Nine Months of Cash Flow (unaudited) Ended September 30, 2004 2003 Net Cash Provided by Operating Activities $ 47,102 $ 27,864 Cash Provided by (Used in) Investing Activities: Capital Expenditures (16,579) (16,794) Acquisition of Business 0 (8,511) Proceeds on Sale of Property, Plant & Equipment 43 11 (16,536) (25,294) Cash Provided by (Used in) Financing Activities: Payments Under Capital Lease Obligation (83) (71) Dividends Paid (13,166) (13,144) Proceeds from Stock-Option Exercises 1,413 167 (11,836) (13,048) Net Increase/(Decrease) in Cash $ 18,730 $ (10,478) Note 1. Balance sheet amounts at September 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. On October 1, 2004, the Company announced that it had agreed to acquire the assets of Missota Paper Company, LLC, including its Brainerd, Minnesota, paper mill, for approximately $9.6 million. The assets will become part of the Company's Printing & Writing Group. Note 5. Interim Segment Information The Company's operations are classified into three principal reportable segments: Printing & Writing, Specialty Products, and Towel & Tissue, 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 Products 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) September 30, December 31 2004 2003 Segment Assets (Note 1) Printing & Writing $281,032 $283,711 Specialty Products 328,160 334,079 Towel & Tissue 165,639 165,199 Corporate & Unallocated (a) 94,224 75,111 $869,055 $858,100 Three Months Nine Months Ended September 30, Ended September 30, 2004 2003 2004 2003 Net Sales External Customers (unaudited) Printing & Writing $102,590 $104,105 $303,872 $301,940 Specialty Products 101,351 90,191 308,053 272,350 Towel & Tissue 58,487 55,233 166,427 157,898 $262,428 $249,529 $778,352 $732,188 Operating Profit (unaudited) Printing & Writing $ 5,124 $ 5,265 $ 9,646 $ 9,455 Specialty Products 5,204 2,444 12,030 4,020 Towel & Tissue 7,855 7,619 21,287 20,022 Total Reportable Segment Operating Profit 18,183 15,328 42,963 33,497 Corporate & Eliminations (2,896) (3,315) (11,480) (9,172) Interest Expense (2,608) (2,537) (7,685) (7,608) Other Income/(Expense), Net 191 18 483 19 Earnings Before Income Taxes $ 12,870 $ 9,494 $ 24,281 $ 16,736 Three Months Nine Months Ended September 30, Ended September 30, 2004 2003 2004 2003 Depreciation, Depletion and Amortization (unaudited) Printing & Writing $ 4,120 $ 4,299 $ 12,468 $ 12,956 Specialty Products 5,953 6,108 17,955 18,527 Towel & Tissue 4,548 4,533 13,550 13,644 Corporate & Unallocated 309 195 879 566 $ 14,930 $ 15,135 $ 44,852 $ 45,693 Tons Sold (unaudited) Printing & Writing 90,030 95,164 273,151 274,567 Specialty Products 83,804 80,988 263,115 251,314 Towel & Tissue 39,459 39,278 113,592 111,719 213,293 215,430 649,858 637,600 (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 Paper Scott P. Doescher, 715-693-4470 fax: 715-692-2082 SOURCE: Wausau Paper