Wausau Paper Announces Second-Quarter Earnings, Record Sales and Shipments

Wausau Paper (NYSE:WPP) today reported net earnings for the second quarter of $3.6 million or $0.07 per share, compared with a net loss of $2.7 million, or $0.05 per share, the year before. Net sales increased 8 percent to $297.3 million while shipments increased 4 percent to 232,000 tons, both records for any quarter.

Prior-year second-quarter results included after-tax charges of $0.12 per share related to the closure of Printing & Writing's sulfite pulp mill in Brokaw, Wisconsin. Second-quarter results for both years reflected after-tax stock incentive credits of $0.01 per share.

For the first half of 2006, Wausau Paper reported net earnings of $2.2 million, or $0.04 per share, compared with a net loss of $0.8 million, or $0.01 per share, during the comparable period last year. In addition to sulfite pulp mill closure charges of $0.12 per share, results for the first half of 2005 included stock incentive credits of $0.03 per share, compared with charges of $0.02 per share in 2006. Net sales increased 7 percent to $580.9 million while shipments increased 3 percent to 456,000 tons.

In discussing the year-over-year second-quarter comparison, Thomas J. Howatt, president and CEO, stated, "Revenues rose to record levels as two of our three business segments increased sales at double-digit rates. This performance was primarily attributable to strong towel and tissue markets, improved uncoated freesheet market conditions, and a continued focus on the strategic drivers of our long-term success - attractive niche markets, product innovation, benchmark customer service, and operational excellence. Continued progress was evident in several key measures. For instance, approximately 30 percent of revenues came from products developed in the last three years, comfortably exceeding our corporate goal of 25 percent, and paper mill productivity improved 2 percent year-over-year, continuing to build on consistent gains in recent years. These sales and efficiency gains helped offset year-over-year fiber and energy cost increases of $0.08 per share."

Specialty Products reported second-quarter operating profits of $1.3 million, compared with $3.9 million last year. Net sales and shipments declined 2 percent and 6 percent, respectively. "Selling price increases and product mix gains could only partially offset the impact of lower shipments and higher manufacturing costs, notably energy and fiber," Mr. Howatt said. "Despite continuing cost pressures and increasingly competitive market conditions, we remain focused on driving long-term profitability by leveraging product innovation and improving our operational efficiencies."

Printing & Writing reported second-quarter operating losses of $3.1 million, compared with losses of $13.3 million last year. Net sales and shipments increased 18 percent and 16 percent, respectively. Second-quarter results included pre-tax pulp mill closure charges of $0.2 million, compared with $9.5 million last year. "Although far from satisfied with second-quarter losses, we are encouraged by the pace of improvement at Printing & Writing in recent months," Mr. Howatt said. "Net sales and shipments reached record levels in the second quarter while efficiency improvement efforts yielded substantial benefits. These factors, combined with somewhat stronger market conditions and improved product pricing, have created positive momentum and enabled us to reduce losses by more than 50 percent from first-quarter levels of $7.1 million. Even so, recent improvements have allowed us to recover only a portion of the energy and fiber cost increases absorbed in recent years."

Towel & Tissue's second-quarter operating profits increased 13 percent to a record $11.2 million from $9.9 million last year. Net sales and shipments were up 11 percent and 7 percent, respectively. "Our Towel & Tissue segment continues to perform well by virtually every metric," pointed out Mr. Howatt. "Selling price increases, volume gains and product mix improvements offset increased energy and fiber costs. While 'away-from-home' towel and tissue markets have grown a steady 2 percent during the first half of 2006, our value-added and Green Seal(R) certified product shipments increased 14 percent and 24 percent, respectively. Accelerated growth in these higher-margin grades continues to be driven by differentiated products such as the OptiCore(TM) and OptiServ(TM) lines introduced in 2005."

Mr. Howatt also noted that the company sold approximately 550 acres of timberland in the second quarter for an after-tax gain of $0.8 million. Less than 100 acres were sold in the year-ago period at an after-tax gain of $0.1 million. "The pace of our timberland sales program is expected to increase in the third quarter as we continue to execute against our earlier-announced plans," said Mr. Howatt. Also during the second quarter the company repurchased approximately 160,000 shares of common stock, and has 1.7 million shares remaining under a previous board authorization.

Commenting on third-quarter outlook, Mr. Howatt pointed out, "Significant cost pressures continue unabated with fiber prices reaching decade highs as we entered the quarter and energy prices sustaining historically high levels. While the supply/demand balance at Towel & Tissue remains favorable and we expect bottom-line improvement at Printing & Writing from second-quarter levels, pricing at Specialty Products remains under considerable pressure. At the same time we expect an acceleration of our timberland sales program, which is projected to contribute approximately $0.06 per share to third-quarter results, to drive substantial improvement over second-quarter levels." In the 2005 third quarter, Wausau Paper reported a net loss of $0.18 per share, which included a charge of $0.26 per share related to the closure of the Brokaw pulp mill and a gain of $0.01 from the sale of timberlands.

Wausau Paper's second-quarter conference call is scheduled for 9:30 a.m. (EDT) on Wednesday, 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 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 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, 2005. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

(tables attached)


                             Wausau Paper
             Interim Report - Quarter Ended June 30, 2006

(in thousands, except per share amounts)
Condensed Consolidated Statements
  of Operations (unaudited)

                             Three Months             Six Months
                            Ended June 30,          Ended June 30,
                       ----------------------- -----------------------
                           2006        2005        2006       2005
                       ----------- ----------- ----------- -----------
Net sales              $  297,286  $  275,291  $  580,949  $  543,032
Cost of sales             268,946     258,445     530,284     503,051
                       ----------- ----------- ----------- -----------
Gross profit               28,340      16,846      50,665      39,981
Selling and
 administrative
 expense                   19,735      18,376      40,711      35,903
Restructuring                  77         177         209         177
                       ----------- ----------- ----------- -----------
Operating profit (loss)     8,528      (1,707)      9,745       3,901
Interest expense           (2,879)     (2,687)     (5,592)     (5,337)
Other income/(expense),
 net                           47         122          89         237
                       ----------- ----------- ----------- -----------
Earnings (loss) before
 income taxes and
 cumulative effect
 of a change in
 accounting principle       5,696      (4,272)      4,242      (1,199)
Provision (credit) for
 income taxes               2,108      (1,581)      1,570        (444)
                       ----------- ----------- ----------- -----------
Earnings (loss) before
 cumulative effect
 of a change in
 accounting principle       3,588      (2,691)      2,672        (755)

Cumulative effect of
 a change in accounting
 principle (net of
 income taxes)                  0           0        (427)          0
                       ----------- ----------- ----------- -----------
Net earnings (loss)    $    3,588  $   (2,691)   $  2,245  $     (755)
                       =========== =========== =========== ===========

Earnings (loss)
 per share before
 cumulative effect
 of a change in
 accounting principle
 (basic and diluted)   $     0.07  $    (0.05)  $    0.05   $   (0.01)

Cumulative effect of
 a change in accounting
 principle (net of
 income taxes)                  0           0       (0.01)          0
                       ----------- ----------- ----------- -----------
Net earnings (loss)
 per share (basic
 and diluted)          $     0.07  $    (0.05)  $    0.04   $   (0.01)
                       =========== =========== =========== ===========
Weighted average
 shares outstanding-
 basic                     51,041      51,589      51,041      51,640
                       =========== =========== =========== ===========
Weighted average
 shares outstanding-
 diluted                   51,358      51,589      51,342      51,640
                       =========== =========== =========== ===========

Condensed Consolidated Balance Sheets       June 30,    December 31,
(Note 1)                                      2006           2005
                                           -----------  ------------
Current assets                             $  288,623    $  279,684
Property, plant and equipment, net            480,429       494,228
Other assets                                   48,550        46,601
                                           -----------  ------------
  Total Assets                             $  817,602    $  820,513
                                           ===========  ============

Current liabilities                        $  153,898    $  148,965
Long-term debt                                163,748       161,011
Other liabilities                             197,713       200,318
Stockholders' equity                          302,243       310,219
                                           -----------  ------------
  Total Liabilities and Stockholders'
   Equity                                  $  817,602    $  820,513
                                           ===========  ============

Condensed Consolidated Statements                  Six Months
 of Cash Flow (unaudited)                        Ended June 30,
                                           -------------------------
                                               2006         2005
                                           -----------  ------------
Net cash provided by (used in)
 operating activities                      $   5,191     $   (4,498)
                                           -----------  ------------

Cash flows from investing activities:
  Capital expenditures                       (11,779)       (15,631)
  Proceeds from property, plant and
   equipment disposals                         3,205            222
                                           -----------  ------------
Net cash used in investing activities         (8,574)       (15,409)
                                           -----------  ------------

Cash flows from financing activities:
  Net issuances/payments of commercial
   paper                                       3,000              0
  Payments under capital lease obligation
   and note payable                             (115)           (47)
  Dividends paid                              (8,685)        (8,787)
  Proceeds from stock option
   exercises                                   1,437              0
  Excess tax benefits related to stock
   incentive plans                                99              0
  Payments for purchase of
   company stock                              (3,244)        (2,738)
                                           -----------  ------------
Cash used in financing activities             (7,508)       (11,572)
                                           -----------  ------------

  Net decrease in cash and cash
   equivalents                             $ (10,891)    $  (31,479)
                                           ===========  ============

Note 1. Balance sheet amounts at June 30, 2006, are unaudited. The
        December 31, 2005, amounts are derived from audited financial
        statements.

Note 2. Effective January 1, 2006, Wausau Paper adopted Statement of
        Financial Accounting Standard No. 123 (revised 2004), "Share-
        Based Payment." This accounting standard requires compensation
        cost relating to share-based payment transactions be
        recognized in the financial statements. We elected the
        modified prospective transition method to implement this new
        standard. 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. The difference between the liability as
        previously computed (i.e., intrinsic value) and the fair
        value of the liability award on the date of adoption, net of
        any related tax effects, is recorded as a cumulative effect
        of a change in accounting principle.

Note 3. In July 2005, Wausau Paper 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. 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. The
        cost of sales for the three and six-month periods ended June
        30, 2006, include pre-tax pulp mill closure charges of $0.1
        million. Restructuring expense for the period ended June 30,
        2005, reflects a pre-tax charge of $0.2 million for certain
        assets disposed as a result of the closure. Restructuring
        expense for the three and six-month periods ended June 30,
        2006, reflect pre-tax charges of $0.1 million and $0.2
        million, respectively, for other associated closure costs.

Note 4. Interim Segment Information

        Wausau Paper has reclassified certain prior-year interim
        segment information to conform to the 2006 presentation. The
        reclassification is the result of a reporting change,
        effective January 1, 2006, for timberland assets held for sale
        from the operating segments to corporate.

        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)               June 30,   December 31,
                                                2006         2005
                                            -----------  ------------
Segment assets (Note 1)
  Specialty Products                        $  335,644    $  333,482
  Printing & Writing                           254,983       254,528
  Towel & Tissue                               180,694       175,134
  Corporate & Unallocated(a)                    46,281        57,369
                                            -----------  ------------
                                            $  817,602    $  820,513
                                            ===========  ============

                                Three Months            Six Months
                                Ended June 30,        Ended June 30,
                               2006       2005       2006      2005
                             --------   --------   --------  --------
Net sales external
 customers (unaudited)
  Specialty Products         $111,937   $113,981   $233,429  $232,345
  Printing & Writing          112,033     95,246    211,351   187,850
  Towel & Tissue               73,316     66,064    136,169   122,837
                             --------   --------   --------  --------
                             $297,286   $275,291   $580,949  $543,032
                             ========   ========   ========  ========

Operating profit (loss)
 (unaudited)
  Specialty Products         $  1,259   $  3,857   $  3,609  $  7,797
  Printing & Writing           (3,052)   (13,289)   (10,157)  (17,858)
  Towel & Tissue               11,207      9,922     20,223    17,806
  Corporate & Eliminations       (886)    (2,197)    (3,930)   (3,844)
                             --------   --------   --------  --------
                             $  8,528   $ (1,707)  $  9,745  $  3,901
                             ========   ========   ========  ========

                                Three Months            Six Months
                                Ended June 30,        Ended June 30,
                               2006       2005       2006       2005
                             --------   --------   --------  --------

Depreciation, depletion and
 amortization (unaudited)
  Specialty Products         $  5,696   $  6,209   $ 11,739  $ 12,417
  Printing & Writing            3,108      7,376      6,186    11,424
  Towel & Tissue                5,231      4,902     10,365     9,680
  Corporate & Unallocated         311        284        614       571
                             --------   --------   --------  --------
                             $ 14,346   $ 18,771   $ 28,904  $ 34,092
                             ========   ========   ========  ========
Tons sold (unaudited)
  Specialty Products           94,720    100,404    197,007   205,192
  Printing & Writing           93,311     80,411    176,942   160,571
  Towel & Tissue               43,974     41,266     82,263    77,553
                             --------   --------   --------  --------
                              232,005    222,081    456,212   443,316
                             ========   ========   ========  ========

(a) Segment assets do not include intersegment accounts receivable,
    cash, deferred tax assets, and certain other assets which are not
    identifiable with the segments.

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