Wausau Paper Announces Second-Quarter 2005 Results
MOSINEE, Wis.–(BUSINESS WIRE)–July 25, 2005–Wausau Paper (NYSE:WPP) today reported a net loss for the second quarter of 2005 of $2.7 million, or $0.05 per share, compared to earnings of $3.7 million, or $0.07 per share, last year. Net sales rose 4 percent to $275.3 million, and shipments increased less than 1 percent to 222,000 tons.
Second-quarter operating results included after-tax charges of $6.0 million, or $0.12 per share, related to the previously announced closure of Printing & Writing’s sulfite pulp mill in Brokaw, Wisconsin, and after-tax losses of $2.4 million, or $0.05 per share, related to operation of its recently acquired paper mill in Brainerd, Minnesota. Also included in the current quarter were after-tax stock incentive credits of $0.5 million, or $0.01 per share, compared with charges of $1.3 million, or $0.02 per share last year.
For the first half of 2005, the Company reported a net loss of $0.8 million, or $0.01 per share, compared with net earnings of $7.2 million, or $0.14 per share, during the comparable period in 2004. In addition to sulfite pulp mill closure costs of $0.12 per share, results for the first half of 2005 included after-tax losses of $5.6 million, or $0.11 per share, for the Brainerd mill, and stock incentive credits of $0.03 per share, compared with charges of $0.03 per share last year. Net sales increased 5 percent to $543 million while shipments increased 2 percent to 443,000 tons.
In regard to second-quarter results, Thomas J. Howatt, president and CEO, stated, “Top-line growth was achieved despite challenging business conditions, demonstrating the value of our niche market strategy. Our focused product development efforts — and the continued introduction of new products such as Towel & Tissue’s OptiCore(TM) tissue and dispensing system and Printing & Writing’s Exact Ice(TM) high-brightness paper — resulted in revenues from products developed within the last three years exceeding our corporate target of 25 percent.”
Specialty Products reported second-quarter operating profits of $3.8 million, compared with $4.8 million last year. Net sales and shipments declined 4 percent and 8 percent, respectively. “Selling price increases and mix enhancement could only partially offset the impact of reduced sales volume and higher manufacturing costs — most notably market pulp and energy,” Mr. Howatt explained. He pointed out that 2004 shipments were a record for any quarter.
Printing & Writing reported second-quarter operating losses of $13.1 million, compared with operating profits of $0.6 million last year. Net sales and shipments increased 8 percent and 10 percent, respectively. Second-quarter results included pre-tax pulp mill closure charges of $9.5 million, consisting primarily of non-cash charges related to the write-down of inventory and accelerated depreciation of long-lived assets. In addition, second-quarter results included operating losses of $3.8 million at Brainerd. “Our Printing & Writing business continues to face weak market conditions as uncoated freesheet demand declined in each of the first six months of 2005,” Mr. Howatt commented. “Despite this weakness, we grew market share while increasing shipments by 10 percent, remaining focused on building the sales volume and product mix necessary to profitably position Brainerd. Success in developing new products and reducing costs are critical to improving Printing & Writing’s financial performance. We are actively pursuing both — as evidenced by the recent introduction of Exact Ice and the announced changes at Brokaw — to help achieve this improvement.”
Towel & Tissue’s second-quarter operating profits increased 22 percent to $9.9 million from $8.1 million last year. Net sales and shipments increased 16 percent and 7 percent, respectively. “Despite only modest market growth, our Towel & Tissue business posted impressive sales gains in the first half of 2005 including a 5 percent increase in total shipments and 9 percent gain in higher-margin value-add products,” Mr. Howatt said. “Together with improved selling prices, these gains more than offset higher purchased parent roll costs, helping drive operating profits to record second-quarter levels.”
Looking to the third quarter, Mr. Howatt noted, “Towel and tissue market conditions remain solid while demand for specialty products and printing papers has clearly softened. Uncoated freesheet markets remain the industry’s weakest segment with no sign of near-term improvement and, although market pulp costs have eased slightly, energy and chemical costs remain at elevated levels. We expect third-quarter earnings, assuming continued improvement at Brainerd, to only modestly exceed second-quarter levels of $0.06 per share, excluding sulfite pulp mill charges.”
Wausau Paper’s second-quarter conference call is scheduled for 11:00 a.m. (EDT) on Tuesday, July 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 August 2.
Wausau Paper produces fine printing and writing papers, technical specialty papers, and “away-from-home” towel and tissue products. To learn more about Wausau products go to www.wausaupaper.com.
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 June 30, 2005 (in thousands, except share amounts) Condensed Consolidated Statements of Operations (unaudited) Three Months Six Months Ended June 30, Ended June 30, 2005 2004 2005 2004 Net sales $ 275,291 $ 264,109 $ 543,032 $ 515,924 Cost of sales 258,445 235,973 503,051 461,090 Gross profit 16,846 28,136 39,981 54,834 Selling & administrative expense 18,376 19,754 35,903 38,638 Restructuring 177 0 177 0 Operating profit (loss) (1,707) 8,382 3,901 16,196 Interest expense (2,687) (2,550) (5,337) (5,077) Other income/ (expense), net 122 98 237 292 Earnings (loss) before income taxes (4,272) 5,930 (1,199) 11,411 Provision (credit) for income taxes (1,581) 2,193 (444) 4,222 Net earnings (loss) $ (2,691) $ 3,737 $ (755) $ 7,189 Net earnings (loss) per share-basic $ (0.05) $ 0.07 $ (0.01) $ 0.14 Net earnings (loss) per share-diluted $ (0.05) $ 0.07 $ (0.01) $ 0.14 Weighted average shares out-standing -basic 51,589,000 51,663,000 51,640,000 51,640,000 Weighted average shares out-standing -diluted 51,589,000 51,929,000 51,640,000 51,867,000 Condensed Consolidated Balance Sheets June 30, December 31, (Note 1) 2005 2004 Current assets $ 287,871 $ 287,292 Property, plant & equipment, net 536,347 551,160 Other assets 45,812 43,782 Total Assets $ 870,030 $ 882,234 Current liabilities $ 148,022 $ 147,750 Long-term debt 161,449 161,833 Other liabilities 215,604 215,559 Stockholders' equity 344,955 357,092 Total Liabilities & Stockholders' Equity $ 870,030 $ 882,234 Condensed Consolidated Statements Six Months of Cash Flow (unaudited) Ended June 30, 2005 2004 Net cash (used in) provided by operating activities $ (4,498) $ 40,085 Cash flows from investing activities: Capital expenditures (15,631) (9,471) Proceeds on property, plant & equipment disposals 222 12 Cash used in investing activities (15,409) (9,459) Cash flows from financing activities: Payments under capital lease obligation (47) (55) Dividends paid (8,787) (8,773) Payments for purchase of company stock (2,738) 0 Proceeds from stock option exercises 0 1,279 Cash used in financing activities (11,572) (7,549) Net (decrease) increase in cash & cash equivalents $ (31,479) $ 23,077 Note 1. Balance sheet amounts at June 30, 2005, are unaudited. The December 31, 2004, amounts are derived from audited financial statements. Note 2. Pulp Mill Closure In July 2005, the Company announced plans to permanently close the sulfite pulp mill at its Brokaw, Wisconsin, facility. The pulp mill closure is expected to be substantially completed by the end of 2005 and will result in the elimination of approximately 60 jobs, or 11 percent of the facility's workforce. The related long-lived assets will be abandoned. The cost of sales for the period ended June 30, 2005, as reflected in the Condensed Consolidated Statements of Operations, include $9.3 million in pre-tax charges for accelerated depreciation and an adjustment of pulp mill inventory to net realizable value. Restructuring expense for the period ended June 30, 2005, reflects a pre-tax charge of $0.2 million for certain assets disposed as a direct result of the closure. Additional pre-tax closure charges of approximately $35 million are expected to be recognized over the next 12 months, with $23 million in the third quarter of 2005, $11 million in the fourth quarter of 2005, and $1 million in the first half of 2006. Note 3. 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) June 30, December 31, 2005 2004 Segment assets (Note 1) Specialty Products $ 346,207 $ 342,724 Printing & Writing 290,909 281,378 Towel & Tissue 173,503 171,080 Corporate & Unallocated(a) 59,411 87,052 $ 870,030 $ 882,234 Three Months Six Months Ended June 30, Ended June 30, 2005 2004 2005 2004 Net sales external customers (unaudited) Specialty Products $113,981 $118,528 $232,345 $232,665 Printing & Writing 95,246 88,424 187,850 175,319 Towel & Tissue 66,064 57,157 122,837 107,940 $275,291 $264,109 $543,032 $515,924 Operating profit (loss) (unaudited) Specialty Products $ 3,829 $ 4,760 $ 7,769 $ 9,743 Printing & Writing (13,100) 586 (17,669) 1,605 Towel & Tissue 9,922 8,131 17,806 13,432 Corporate & Eliminations (2,358) (5,095) (4,005) (8,584) $ (1,707) $ 8,382 $ 3,901 $ 16,196 Depreciation, depletion and amortization (unaudited) Specialty Products $ 6,209 $ 6,266 $ 12,417 $ 12,584 Printing & Writing 7,376 3,883 11,424 7,766 Towel & Tissue 4,902 4,506 9,680 9,002 Corporate & Unallocated 284 285 571 570 $ 18,771 $ 14,940 $ 34,092 $ 29,922 Tons sold (unaudited) Specialty Products 100,404 109,704 205,192 216,339 Printing & Writing 80,411 72,903 160,571 146,093 Towel & Tissue 41,266 38,710 77,553 74,133 222,081 221,317 443,316 436,565 (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, Mosinee Scott P. Doescher, 715-693-4470 SOURCE: Wausau Paper