Wausau Paper Posts Improved 2nd Quarter Earnings
July 25, 2006 (Press Release) - Wausau Paper 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 SealŪ 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.
SOURCE: Wausau Paper