Wausau Paper Announces Improved First-Quarter Earnings

MOSINEE, Wis.–(BUSINESS WIRE)–April 24, 2007–Wausau Paper (NYSE:WPP) today reported net earnings for the first quarter of $15.0 million, or $0.29 per share, compared with a net loss of $0.5 million, or $0.01 per share, in the previous year. Net sales rose 6 percent to a record first-quarter $299.4 million, and shipments increased 1 percent to a record 227,000 tons.

Included in current-year results were one-time state tax benefits of $12.0 million, or $0.24 per share, related to the January 1, 2007, restructuring of the company’s subsidiaries to realign them more closely with Wausau Paper’s current operating structure. The subsidiary realignment allows for the utilization of previously reserved state net operating loss and credit carryovers.

First-quarter results also included an after-tax gain of $0.4 million, or $0.01 per share, from the sale of timberlands and stock incentive credits of less than $0.01 per share. Prior-year first-quarter results included after-tax timberland sales gains of $1.0 million, or $0.02 per share, and stock incentive charges of $1.2 million, or $0.02 per share, including a cumulative effect charge of $0.4 million, or $0.01 per share, related to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payments.

“Record shipments and net sales, coupled with relentless efforts to improve operations in the face of historically high energy and rising fiber costs, produced solid gains in the first quarter compared with a year ago,” said Thomas J. Howatt, president and CEO. “Importantly, our growth continues to be driven by our core business strategies – pursuit of niche markets, product innovation, benchmark customer service and operating excellence. Innovative product solutions – such as the recent expansion of our ExperTec(R), EcoSelect(TM), and ProGard(R) lines of specialty products – have enabled us to consistently exceed our new product goals, increase sales in targeted niche markets and improve customer service by recognizing market trends and meeting specific product needs,” continued Mr. Howatt. “During the first quarter, nearly 30 percent of net sales came from products developed in the last three years, eclipsing our goal of 25 percent, while at the same time paper mill productivity gains again exceeded our corporate target of 1 percent.”

Specialty Products reported first-quarter operating profits of $2.7 million compared with $3.2 million last year, with the decrease primarily attributable to cost pressures, most notably market pulp. Net sales increased 2 percent while shipments declined 2 percent. “First-quarter profits improved substantially from the breakeven result reported in the fourth quarter and represent Specialty’s best performance since last year’s first quarter,” Mr. Howatt stated. “Despite competitive market conditions we were successful in expanding our line of environmentally preferable products, allowing us to further penetrate attractive niche markets. At the same time, strong operations and cost containment activities have allowed us to partially offset continuing cost pressures.”

Printing & Writing reported first-quarter operating losses of $1.8 million compared with losses of $6.8 million last year. Net sales and shipments increased 7 percent and 3 percent, respectively. “In contrast, the industry’s uncoated freesheet shipments declined approximately 6 percent in the same period, a clear indicator that we are gaining market share,” commented Mr. Howatt. “Moreover, industry consolidation and capacity closures are beginning to create pricing momentum in printing and writing grades. Year-over-year comparisons also reflect the enhanced productivity we’ve achieved as well as the reduction of market-related downtime taken in the first quarter of 2006.”

Towel & Tissue operating profits reached record first-quarter levels of $9.7 million compared with operating profits of $9.2 million last year. Net sales and shipments increased 11 percent and 6 percent, respectively. Mr. Howatt commented, “Selling price increases, mix improvements and volume gains offset increased wastepaper costs and helped drive a ninth consecutive quarterly profit record. Despite ‘away-from-home’ market growth of less than 2 percent, our Green Seal(R) certified and value-added product shipments each increased more than 20 percent. This above-market growth continues to be driven by strong placements of our innovative proprietary dispensers and the introduction of new products.”

Discussing the second-quarter outlook, Mr. Howatt said, “Energy costs remain at historically high levels while fiber costs continue their upward trend. At the same time, we are encouraged by signs of returning pricing leverage in many of our product areas. The initial influence of pricing leverage, and efforts to contain costs and improve efficiency are expected to drive profit improvement compared with year-ago levels. As a result, we expect second-quarter earnings in the range of $0.08 and $0.10 per share, including timberland sales gains of $0.02 per share.” Second-quarter 2006 results were $0.07 per share and included $0.02 per share in timberland sales gains.

Wausau Paper’s first-quarter conference call is scheduled for 11:00 a.m. (EDT) on Wednesday, April 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 May 2.

Wausau Paper, with record revenues of $1.2 billion in fiscal 2006, 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. To learn more about Wausau Paper visit: 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 under “Information Concerning Forward-Looking Statements” in Item 7 and in Item 1A of the company’s Form 10-K for the year ended December 31, 2006. 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, 2007  (in thousands, except per share amounts) Condensed Consolidated Statements                  Three Months   of Operations (unaudited)                       Ended March 31,                                              -------------------------                                                  2007         2006                                              ------------ ------------ Net sales                                       $299,393     $283,663 Cost of sales                                    271,307      260,057                                              ------------ ------------ Gross profit                                      28,086       23,606 Selling & administrative expenses                 20,802       20,976 Restructuring                                          -          132                                              ------------ ------------ Operating profit                                   7,284        2,498 Interest expense                                  (2,807)      (2,713) Other income, net                                    206           42                                              ------------ ------------ Earnings (loss) before income taxes and  cumulative effect of a change in accounting  principle                                         4,683         (173) Credit for income taxes                          (10,282)         (64)                                              ------------ ------------ Earnings (loss) before cumulative effect of  a change in accounting principle                 14,965         (109) Cumulative effect of a change in accounting  principle (net of income taxes)                       -         (427)                                              ------------ ------------ Net earnings (loss)                              $14,965        $(536)                                              ============ ============  Earnings (loss) per share before cumulative  effect of a change in accounting principle  (basic and diluted)                               $0.29        $0.00 Cumulative effect of a change in accounting  principle (net of income taxes)                    0.00        (0.01)                                              ------------ ------------ Net earnings (loss) per share (basic and  diluted)                                          $0.29       $(0.01)                                              ============ ============ Weighted average shares outstanding-basic         50,746       51,041                                              ============ ============ Weighted average shares outstanding-diluted       51,100       51,041                                              ============ ============  Condensed Consolidated Balance Sheets (Note  1)                                           March 31,   December 31,                                                  2007         2006                                              ------------ ------------ Current assets                                  $298,190     $294,247 Property, plant & equipment, net                 462,793      468,372 Other assets                                      37,680       36,495                                              ------------ ------------     Total Assets                                $798,663     $799,114                                              ============ ============  Current liabilities                             $146,739     $155,182 Long-term debt                                   166,555      160,287 Other liabilities                                194,284      209,571 Stockholders' equity                             291,085      274,074                                              ------------ ------------     Total Liabilities and Stockholders'      Equity                                     $798,663     $799,114                                              ============ ============  Condensed Consolidated Statements                  Three Months   of Cash Flow (unaudited)                        Ended March 31,                                              -------------------------                                                  2007         2006                                              ------------ ------------ Net cash used in operating activities            $(6,355)    $(10,409)                                              ------------ ------------  Cash flows from investing activities:     Capital expenditures                          (5,986)      (4,912)     Proceeds from property, plant and      equipment disposals                             893        1,655                                              ------------ ------------ Net cash used in investing activities             (5,093)      (3,257)                                              ------------ ------------  Cash flows from financing activities:     Net issuances of commercial paper              6,500        9,500     Payments under capital lease obligation      and note payable                                (64)         (35)     Dividends paid                                (4,313)      (4,340)     Proceeds from stock option exercises               0        1,405     Excess tax benefits related to stock      options                                          35           94     Payments for purchase of company stock             0         (967)                                              ------------ ------------ Cash provided by financing activities              2,158        5,657                                              ------------ ------------      Net decrease in cash & cash equivalents      $(9,290)     $(8,009)                                              ============ ============ 
  Note 1. Balance sheet amounts at March 31, 2007, are unaudited.  The         December 31, 2006, amounts are derived from audited financial         statements. Note 2. Effective January 1, 2007, we adopted Financial Accounting         Standards Board ("FASB") Staff Position No. AUG AIR-1,         "Accounting for Planned Major Maintenance Activities."  This         FSP prohibits companies from recognizing planned major         maintenance costs under the "accrue-in-advance" method that         allowed the accrual of a liability over several reporting         periods before the maintenance is performed.  We have adopted         the direct expensing method, under which the costs of planned         major maintenance activities are expensed in the period in         which the costs are incurred.  The comparative financial         statements for 2006 have been adjusted to apply the new method         retrospectively, resulting in an increase in net earnings for         the three months ended March 31, 2006, of $0.8 million, or         $0.02 per basic and diluted share, an increase in net earnings         of $0.1 million for the three months ended June 30, 2006, a         decrease in net earnings of $0.3 million, or $0.01 per basic         and diluted share for the three months ended September 30,         2006, and a decrease of $0.6 million, or $0.01 per basic and         diluted share for the three months ended December 31, 2006. Note 3. On January 1, 2007, we adopted FASB Interpretation No. 48,         "Accounting for Income Tax Uncertainties" ("FIN 48").  FIN 48         defines the threshold for recognizing the benefits of tax         return positions in the financial statements as         "more-likely-than-not" to be sustained by the taxing         authority.  The literature provides guidance on the         derecognition, measurement and classification of income tax         uncertainties, along with any related interest and penalties.         FIN 48 also includes guidance concerning accounting for income         tax uncertainties in interim periods and increases the level         of disclosures associated with any income tax uncertainties.         The adoption of FIN 48 did not have a significant impact on         our financial statements. Note 4. Effective January 1, 2007, we reorganized the various         subsidiaries which comprised our operating segments to align         more closely with our operating structure.  Each segment is         now organized as a single member limited liability company and         operates as a direct subsidiary of Wausau Paper Corp.  The new         structure allowed us to utilize state net operating loss and         credit carryovers of certain subsidiaries for which full         valuation allowances had been previously established due to         the fact that separate state tax returns were filed under our         previous structure.  During the three months ended March 31,         2007, we recorded state tax benefits of $12.0 million, or         $0.24 per basic and diluted share, as a result of the release         of these valuation allowances.  No additional state tax         benefits resulting from the reorganization are anticipated. Note 5. Effective January 1, 2006, we adopted Statement of Financial         Accounting Standards No. 123 (revised 2004), "Share-Based         Payment" ("SFAS 123R"), using the modified prospective         application transition method. The modified prospective         application transition method requires that as of the         effective date, compensation cost related to share-based         payment transactions is recognized as an operating expense in         the statement of operations over the requisite service period         of the grant based on the grant-date fair value of the award.         Under SFAS 123R, share-based payment awards that are settled         in cash continue to be classified as a liability; however,         rather than remeasuring the award at the intrinsic value each         reporting period, the award is remeasured at its fair value         each reporting period until final settlement.  The difference         between the liability as previously computed (i.e., intrinsic         value) and the fair value of the liability award on January 1,         2006, was $0.4 million net of any related tax effects ($0.7         million pretax), and was recorded as a cumulative effect of a         change in accounting principle. Note 6. In July 2005, we announced plans to permanently close the         sulfite pulp mill at our Brokaw, Wisconsin, facility. The pulp         mill was closed in November 2005 and the related long-lived         assets were abandoned.  Pre-tax restructuring expense related         to certain assets disposed as a direct result of the closure         and other associated costs were $0.1 million for the three         months ended March 31, 2006.  No restructuring expense was         incurred for the three months ended March 31, 2007. Note 7. Interim Segment Information         We have reclassified certain prior-year interim segment         information to conform to the 2007 presentation. The         reclassifications are the result of a reporting change,         effective January 1, 2007, in accordance with FASB FSP AUG         AIR-1 (see Note 2), and as a result of restructuring the         assets, operating results, and depreciation, depletion and         amortization of one facility from the Corporate and         Unallocated segment to the Towel & Tissue segment (see Note         4).          Wausau Paper'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,                                                  2007         2006                                              ------------ ------------ Segment assets (Note 1)     Specialty Products                          $324,007     $319,387     Printing & Writing                           245,240      243,362     Towel & Tissue                               187,323      184,140     Corporate & Unallocated(a)                    42,093       52,225                                              ------------ ------------                                                 $798,663     $799,114                                              ============ ============                                                     Three Months                                                   Ended March 31,                                                  2007         2006                                              ------------ ------------ Net sales external customers (unaudited)     Specialty Products                          $123,955     $121,492     Printing & Writing                           105,914       99,318     Towel & Tissue                                69,524       62,853                                              ------------ ------------                                                 $299,393     $283,663                                              ============ ============  Operating profit (loss) (unaudited)     Specialty Products                            $2,673       $3,207     Printing & Writing                            (1,792)      (6,846)     Towel & Tissue                                 9,693        9,181     Corporate & Eliminations                      (3,290)      (3,044)                                              ------------ ------------                                                   $7,284       $2,498                                              ============ ============  Depreciation, depletion and amortization  (unaudited)     Specialty Products                            $5,661       $6,043     Printing & Writing                             3,071        3,078     Towel & Tissue                                 5,727        5,208     Corporate & Unallocated                          162          229                                              ------------ ------------                                                  $14,621      $14,558                                              ============ ============  Tons sold (unaudited)     Specialty Products                            99,919      102,287     Printing & Writing                            86,101       83,631     Towel & Tissue                                40,573       38,289                                              ------------ ------------                                                  226,593      224,207                                              ============ ============ 

(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              Investor and Media Contact:              Perry Grueber, Director Investor Relations, 715-692-2056              Fax: 715-692-2020      SOURCE: Wausau Paper