Wausau Paper Reports Third-Quarter Results, Expanded Timberland Sales Program

MOSINEE, Wis.–(BUSINESS WIRE)–Oct. 24, 2005–Wausau Paper (NYSE:WPP) today reported a net loss for the third quarter of $9.0 million, or $0.18 per diluted share, compared to net earnings of $8.1 million, or $0.16 per diluted share, last year. Net sales rose 9 percent to $285.6 million, and shipments increased 7 percent to 229,000 tons.

Third-quarter operating results included after-tax charges of $13.6 million, or $0.26 per diluted share, related to the previously announced closure of Printing & Writing’s sulfite pulp mill in Brokaw, Wisconsin, and an after-tax gain of $0.7 million, or $0.01 per diluted share, from the sale of timberlands.

For the first nine months, the Company reported a net loss of $9.7 million, or $0.19 per diluted share, compared with net earnings of $15.3 million, or $0.29 per diluted share, during the same period in 2004. In addition to sulfite pulp mill closure charges of $0.38 per diluted share, results for the first nine months included losses of $0.15 per diluted share at the Brainerd, Minnesota, paper mill; a gain on the sale of timberlands of $0.02 per diluted share, and stock incentive credits of $0.03 per diluted share. Prior-year results included stock incentive charges of $0.02 per diluted share. Net sales increased 6 percent to $828.7 million and shipments increased 3 percent to 672,000 tons.

“Net sales and shipments increased to record levels in the third quarter despite soft demand in printing and specialty paper markets,” said Thomas J. Howatt, president and CEO. “We continue to gain share in our target markets as recently introduced products – such as our new OptiServ(TM) brand hands-free towel dispensing system – build in popularity with customers. Our progress in improving production efficiencies has been masked by sharply higher energy-related costs – most notably natural gas, transportation and fuel oil. In total, the Company’s energy-related costs increased the equivalent of $0.03 per diluted share in September compared with August, in large part because of the production and supply disruptions caused by Hurricane Katrina. In the third quarter, energy-related prices were approximately $0.06 per diluted share higher than last year.”

Specialty Products reported third-quarter operating profits of $4.3 million, compared with $6.3 million last year. Current-quarter results included a $1.0 million gain from the sale of timberlands. Net sales increased 1 percent while shipments declined slightly. “Third-quarter revenues increased despite highly competitive specialty markets and a continued decline in paper mill packaging volumes,” commented Mr. Howatt. “Sales mix improvements, productivity gains and somewhat lower fiber prices only partially offset higher manufacturing costs, including energy and transportation.”

Printing & Writing reported third-quarter operating losses of $23.1 million, compared with operating profits of $4.0 million last year. Net sales and shipments increased 13 percent and 16 percent, respectively. Third-quarter results included pre-tax pulp mill closure charges of $20.8 million, consisting primarily of non-cash charges related to accelerated depreciation of long-lived assets. Results also included operating losses of $2.8 million at Brainerd, equal to $1.8 million, or $0.04 per diluted share on an after-tax basis, and a $0.2 million gain from the sale of timberlands. “Market conditions remain very weak with uncoated freesheet demand down 4 percent from a year ago. Chronically oversupplied markets continued to severely limit pricing leverage and our ability to pass through increased costs,” Mr. Howatt stated. “Despite these conditions, Printing & Writing increased third-quarter sales and upgraded its sales mix with the introduction of Exact Ice(TM) and Exact Digital(TM) brand products. We remain focused on improving the long-term profitability of this business and further penetrating attractive niche markets by leveraging our strong brands and broad manufacturing capabilities.”

During the third quarter, Printing & Writing reduced production by approximately 5,000 tons, taking four days of downtime at Brainerd and nearly one month of downtime on a 50,000 ton-per-year paper machine at Brokaw, with the latter remaining temporarily idled. “These moves allow Printing & Writing to more closely match production capacity with current demand and optimize production efficiencies and distribution costs,” said Mr. Howatt.

Towel & Tissue’s third-quarter operating profits increased 37 percent to a record $10.8 million from $7.9 million last year. Net sales and shipments also reached record levels, increasing 19 percent and 9 percent, respectively. “We are pleased with the continued growth – both revenue and operating profit – achieved by our Towel & Tissue business,” Mr. Howatt commented. “Selling price increases and product mix improvements are continuing to drive profitability, offsetting increased energy and transportation costs.”

Commenting on the fourth quarter, Mr. Howatt said, “As we enter the seasonally slower fourth quarter, underlying business conditions remain strong for our Towel & Tissue business but particularly challenging in Specialty Products and Printing & Writing. Despite unsettled markets and significant cost pressures, we are actively pursuing our core strategies – product leadership, niche market focus, customer service and operational excellence – to drive long-term success. In the short term, energy-related prices are expected to further pressure margins in the fourth quarter, increasing the equivalent of $0.10 per share compared with the third quarter. As a result, we expect near break-even results in the fourth quarter, excluding sulfite pulp mill charges and timberland sales gains.”

Discussing the Company’s timberland sales program, Mr. Howatt said, “Nearly one-third of the timberlands the Company holds would have been used for pulpwood at Brokaw’s sulfite pulp mill. With the fourth-quarter closure of that facility those lands are no longer strategic to our operations. As a result, we are expanding our previously announced timberland divestiture program to 42,000 acres from 12,000 acres, generating estimated after-tax earnings of $29 million, or $0.57 per share, over the next three to four years.”

Wausau Paper’s third-quarter conference call is scheduled for 11:00 a.m. (EDT) on Tuesday, October 25, 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 November 3.

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 September 30, 2005  (in thousands, except share amounts) Condensed Consolidated Statements   of Operations (unaudited)                              Three Months              Nine Months                            Ended September 30,    Ended September 30,                            2005        2004        2005        2004    Net sales           $  285,624  $  262,428  $  828,656  $  778,352    Cost of sales          277,482     229,983     780,533     691,073         Gross profit        8,142      32,445      48,123      87,279    Selling &      administrative      expense               19,108      17,158      55,011      55,796    Restructuring              226           0         403           0         Operating (loss)           profit          (11,192)     15,287      (7,291)     31,483    Interest expense        (2,718)     (2,608)     (8,055)     (7,685)    Other income/      (expense), net           124         191         361         483         (Loss) earnings           before income           taxes           (13,786)     12,870    (14,985)      24,281    (Credit) provision      for income taxes      (4,794)      4,762     (5,238)       8,984         Net (loss)           earnings     $   (8,992) $    8,108  $  (9,747)  $   15,297          Net (loss)           earnings per           share-basic  $    (0.18) $     0.16  $   (0.19)  $     0.30         Net (loss)           earnings           per share-           diluted      $    (0.18) $     0.16  $   (0.19)  $     0.29         Weighted           average           shares           outstanding-           basic        51,369,000  51,681,000 51,548,000   51,654,000         Weighted           average           shares           outstanding-           diluted      51,369,000  51,980,000 51,548,000   51,905,000      Condensed Consolidated Balance         September 30,  December 31,       Sheets (Note 1)                          2005           2004     Current assets                          $  277,538    $  287,292     Property, plant & equipment, net           510,225       551,160     Other assets                                46,278        43,782          Total Assets                       $  834,041    $  882,234      Current liabilities                     $  133,703    $  147,750     Long-term debt                             161,268       161,833     Other liabilities                          205,297       215,559     Stockholders' equity                       333,773       357,092         Total Liabilities &           Stockholders' Equity              $  834,041    $  882,234      Condensed Consolidated Statements              Nine Months      of Cash Flow (unaudited)                  Ended September 30,                                                 2005          2004     Net cash provided by       operating activities                  $    3,708    $   47,102      Cash flows from investing activities:         Capital expenditures                  (26,606)       (16,579)         Proceeds on property, plant &           equipment disposals                   1,490             43     Cash used in investing activities         (25,116)       (16,536)      Cash flows from financing activities:         Payments under capital           lease obligation                        (76)           (83)         Dividends paid                        (13,162)       (13,166)         Payments for purchase of           company stock                        (4,983)             0         Proceeds from stock option          exercises                                  0          1,413     Cash used in financing activities         (18,221)       (11,836)          Net (decrease) increase in cash          & cash equivalents                 $ (39,629)    $   18,730  Note 1. Balance sheet amounts at September 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 three months and nine months ended         September 30, 2005, as reflected in the Condensed Consolidated         Statements of Operations, include $20.6 million and $29.9         million, respectively, in pre-tax charges for accelerated         depreciation and an adjustment of pulp mill inventory to net         realizable value. Pre-tax restructuring expense related to         certain assets disposed as a direct result of the closure and         other associated costs were $0.2 million and $0.4 million for         the three months and nine months ended September 30, 2005,         respectively. Additional pre-tax closure charges of         approximately $12.1 million are expected to be recognized over         the next three quarters, with $11.5 million in the fourth         quarter of 2005, and $0.6 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 (loss) profit, and asset information by         segment is as follows:     (in thousands, except ton data)       September 30,    December 31,                                                2005          2004     Segment assets (Note 1)       Specialty Products                    $  337,423    $  342,724       Printing & Writing                       271,496       281,378       Towel & Tissue                           174,852       171,080       Corporate & Unallocated(a)                50,270        87,052                                             $  834,041    $  882,234                                 Three Months            Nine Months                             Ended September 30,    Ended September 30,                                2005       2004       2005       2004    Net sales external      customers (unaudited)      Specialty Products     $115,461   $114,580   $347,806   $347,245      Printing & Writing      100,549     89,361    288,399    264,680      Towel & Tissue           69,614     58,487    192,451    166,427                             $285,624   $262,428   $828,656   $778,352     Operating (loss) profit      (unaudited)      Specialty Products     $  4,260   $  6,330   $ 12,029   $ 16,073      Printing & Writing      (23,103)     3,998    (40,772)     5,603      Towel & Tissue           10,776      7,855     28,582     21,287      Corporate &        Eliminations           (3,125)    (2,896)    (7,130)   (11,480)                             $(11,192)  $ 15,287   $ (7,291)  $ 31,483     Depreciation, depletion and     amortization (unaudited)      Specialty Products     $  6,164   $  6,240   $ 18,581   $ 18,824      Printing & Writing       24,752      3,834     36,176     11,600      Towel & Tissue            4,939      4,548     14,619     13,550      Corporate & Unallocated     296        308        867        878                             $ 36,151   $ 14,930   $ 70,243   $ 44,852     Tons sold (unaudited)      Specialty Products      101,385    101,547    306,577    317,886      Printing & Writing       84,194     72,287    244,765    218,380      Towel & Tissue           43,196     39,459    120,749    113,592                              228,775    213,293    672,091    649,858  (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