Wausau Paper Announces First-Quarter Earnings, Share Buy-Back, and Timberland Sale Program

MOSINEE, Wis., Apr 25, 2005 (BUSINESS WIRE) — Wausau Paper (NYSE:WPP) today reported first-quarter earnings of $1.9 million, or $0.04 per share, compared to earnings of $3.5 million, or $0.07 per share, last year. Net sales rose 6 percent to $267.7 million, and shipments increased 3 percent to 221,000 tons.

Net earnings included after-tax losses of $3.2 million, or $0.06 per share, related to the operation of the Printing & Writing segment’s mill in Brainerd, Minnesota, acquired in October 2004. Results also included an after-tax credit of $1.2 million, or $0.02 per share, related to the company’s stock incentive plans, compared with a charge of $0.1 million last year.

The company also announced plans to reactivate its common stock buy-back program and to sell approximately 10 percent of its timberland holdings.

“First-quarter net sales increased in each of our three business segments despite challenging market conditions,” stated Thomas J. Howatt, president and CEO. “Continued focus on our key growth strategies – pursuit of attractive niche markets, new product development and superior customer service – together with operational effectiveness is allowing us to strengthen our base businesses,” Mr. Howatt continued. “Revenues from products developed in the last three years exceeded our corporate target of 25 percent, mill efficiencies improved by 3 percent compared with last year and cost-containment activities delivered meaningful benefits. While the November 2004 start-up and early operation of the long-idled Brainerd mill have been challenging, we remain confident of the contributions Brainerd will make to our growth in the premium paper market.”

Effective in the first quarter of 2005, the Specialty Products business segment includes results from the company’s laminated roll wrap business, previously reported in the Printing & Writing segment. The change affects converting locations in Columbus, Wisconsin, and Jackson, Mississippi. “This move allows us to consolidate our technical specialty and packaging businesses into a single business unit,” Mr. Howatt said. “Our management team at Specialty Products has extensive experience operating this type of business, making it a natural fit.”

Specialty Products reported first-quarter operating profits of $3.9 million, compared with $5.0 million last year. Net sales increased 4 percent while shipments declined 2 percent. “Selling price increases and mix improvements could only partially offset higher costs, including fiber, linerboard, and energy, which increased a combined $6 million,” said Mr. Howatt. “Despite seasonally soft market conditions and rising input costs, we increased sales while improving efficiencies at each of our three primary mills.”

In the first quarter, Printing & Writing reported operating losses of $4.6 million, compared with operating profits of $1.0 million last year. Net sales and shipments increased 7 percent and 10 percent, respectively. First-quarter results included operating losses of $5.1 million at the Brainerd mill, compared with losses of $1.9 million in the fourth quarter of 2004. “Results at Brainerd reflect the difficulties encountered with stabilizing operations at a mill that was idle for most of the previous three years,” Mr. Howatt explained. “The problems we’ve encountered have not allowed us to begin the process of mix upgrade at the mill. We believe the issues we face are solvable with minimal capital investment and we are focused on fixing them as soon as possible. Once stable operations are achieved we will introduce the value-added products that will displace commodity-oriented grades and improve results. While operating improvements have been slower-than-expected, our long-term expectations for the Brainerd mill have not changed.”

Towel & Tissue’s first-quarter operating profits increased nearly 50 percent to $7.9 million from $5.3 million a year ago. Net sales and shipments increased 12 percent and 2 percent, respectively, despite relatively modest first-quarter growth in the away-from-home tissue market. “Recent selling price increases, product mix improvements and strong operations have created strong earnings momentum in our Towel & Tissue business,” said Mr. Howatt. “Adding to that momentum are innovative products such as the OptiCore(TM) brand bath tissue introduced earlier this year and the continued strong market acceptance of our Green Seal(R) certified EcoSoft(TM) product line. Our focus on new products is continuing to pay dividends by driving sales of these higher-margin, value-added products.”

Looking to the second quarter, Mr. Howatt said, “While we expect a seasonal improvement in demand, market conditions remain inconsistent with uncoated freesheet demand quite sluggish. At the same time, fiber prices have risen and energy prices remain at historically high levels. Despite these factors, we expect second-quarter earnings to approximate prior-year results of $0.07 per share, assuming modest improvement at the Brainerd mill.”

Discussing the stock buy-back program, Mr. Howatt noted that a total of 2.6 million shares remain available for repurchase through earlier Board of Directors authorizations. Repurchases may be made from time to time in the open market or through privately negotiated transactions. “With stock prices moving lower in recent weeks we believe that active repurchase of our stock is an effective way of using our strong cash position to enhance shareholder value,” Mr. Howatt said.

Over the next three years, the company intends to sell approximately 12,000 acres of timberlands, generating estimated after-tax earnings of $16 million, or $0.31 per share. The timberlands identified for sale are in relatively small woodlots in the northern two-thirds of Wisconsin and are not considered strategic sources of supply for the company’s pulp mills.

Wausau Paper’s first-quarter conference call is scheduled for 11:00 a.m. (EDT) on Tuesday, April 26, and can be accessed through the company’s Web site at www.wausaupaper.com under “Investor Information.” A replay of the webcast will be available at the same site through May 3.

Wausau Paper produces fine printing and writing papers, technical specialty papers, and “away-from-home” towel and tissue products. Green Seal(R) is a registered trademark of Green Seal, Inc., in Washington D.C., and is used by permission.

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, 2004. 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 March 31, 2005  (in thousands, except share amounts) Condensed Consolidated Statements   of Operations (unaudited)                                                Three Months                                              Ended March 31,                                         ------------------------                                            2005          2004                                         ----------    ---------- Net sales                               $  267,741    $  251,815 Cost of sales                              244,606       225,117                                         ----------    ----------      Gross profit                           23,135        26,698 Selling & administrative                    17,527        18,884                                         ----------    ----------      Operating profit                        5,608         7,814 Interest expense                            (2,650)       (2,527) Other income/(expense), net                    115           194                                         ----------    ----------      Earnings before income taxes            3,073         5,481 Provision for income taxes                   1,137         2,029                                         ----------    ----------      Net earnings                       $    1,936    $    3,452                                         ==========    ==========       Net earnings per share-basic       $     0.04    $     0.07                                         ==========    ==========      Net earnings per share-diluted     $     0.04    $     0.07                                         ==========    ==========      Weighted average shares         outstanding-basic               51,690,000    51,617,000                                         ==========    ==========      Weighted average shares         outstanding-diluted             51,991,000    51,805,000                                         ==========    ==========   Condensed Consolidated Balance Sheets    March 31,    December 31,   (Note 1)                                 2005           2004                                         ----------    ----------- Current assets                          $  280,576    $  287,292 Property, plant & equipment, net           544,519       551,160 Other assets                                44,336        43,782                                         ----------    -----------      Total Assets                       $  869,431    $  882,234                                         ==========    ===========  Current liabilities                     $  127,433    $  147,750 Long-term debt                             161,630       161,833 Other liabilities                          221,322       215,559 Stockholders' equity                       359,046       357,092                                         ----------    -----------      Total Liabilities &       Stockholders' Equity              $  869,431    $  882,234                                         ==========    ===========  Condensed Consolidated Statements              Three Months  of Cash Flow (unaudited)                     Ended March 31,                                            2005           2004                                         ----------    ---------- Net cash (used in) provided by  operating activities                   $  (17,118)   $   14,031                                         ----------    ---------- Cash flows from investing activities:     Capital expenditures                    (8,633)       (3,937)                                         ----------    ---------- Cash flows from financing activities:     Payments under capital      lease obligation                          (28)          (28)     Dividends paid                          (4,394)       (4,382)     Proceeds from stock option      exercises                                   0         1,087                                         ----------    ---------- Cash used in financing activities:          (4,422)       (3,323)                                         ----------    ----------     Net increase (decrease) in cash      and cash equivalents               $  (30,173)   $    6,771                                         ==========    ==========  Note 1. Balance sheet amounts at March 31, 2005, are unaudited. The         December 31, 2004, amounts are derived from audited financial         statements.  Note 2. Interim Segment Information         The Company has reclassified certain prior-year interim         segment information to conform to the 2005 presentation. The         reclassification is the result of a reporting change,         effective January 1, 2005, for two converting facilities from         the Printing & Writing segment to the Specialty Products         segment.          The Company's operations are classified into three principal         reportable segments: Specialty Products, Printing & Writing,         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.          Specialty Products produces specialty papers at its         manufacturing facilities in Rhinelander, Wisconsin; Mosinee,         Wisconsin; and Jay, Maine. Specialty Products also includes         two converting facilities that produce laminated roll wrap and         related specialty finishing and packaging products. Printing &         Writing produces a broad line of premium printing and writing         grades at manufacturing facilities in Brokaw, Wisconsin;         Groveton, New Hampshire; and Brainerd, Minnesota. Printing &         Writing also includes a converting facility that converts         printing and writing grades. 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)          March 31,    December 31,                                            2005          2004                                         ----------    ----------- Segment assets (Note 1)   Specialty Products                    $  344,857    $  342,724   Printing & Writing                       292,290       281,378   Towel & Tissue                           172,023       171,080   Corporate & Unallocated(a)                60,261        87,052                                         ----------    -----------                                         $  869,431    $  882,234                                         ==========    ===========                                                Three Months                                              Ended March 31,                                            2005          2004                                         ----------    ---------- Net sales external customers (unaudited)   Specialty Products                    $  118,364    $  114,137   Printing & Writing                        92,604        86,895   Towel & Tissue                            56,773        50,783                                         ----------    ----------                                         $  267,741    $  251,815                                         ==========    ==========  Operating profit (loss) (unaudited)   Specialty Products                    $    3,940    $    4,983   Printing & Writing                        (4,569)        1,019   Towel & Tissue                             7,884         5,301   Corporate & Eliminations                  (1,647)       (3,489)                                         ----------    ----------                                         $    5,608    $    7,814                                         ==========    ==========  Depreciation, depletion and  amortization (unaudited)   Specialty Products                    $    6,208    $    6,318   Printing & Writing                         4,048         3,883   Towel & Tissue                             4,778         4,496   Corporate & Unallocated                      287           285                                         ----------    ----------                                         $   15,321    $   14,982                                         ==========    ==========  Tons sold (unaudited)   Specialty Products                       104,788       106,635   Printing & Writing                        80,160        73,190   Towel & Tissue                            36,287        35,423                                         ----------    ----------                                            221,235       215,248                                         ==========    ==========  (a) Segment assets do not include intersegment accounts receivable,     cash, deferred tax assets, and certain other assets which are not     identifiable with the segments. 

SOURCE: Wausau Paper

Wausau Paper, Mosinee Scott P. Doescher, 715-693-4470