Wausau Paper Swings to Third Quarter Profit

Oct. 24, 2006 (Press Release) - Wausau Paper today reported net earnings for the third quarter of $7.5 million or $0.15 per share, compared with a net loss of $9.0 million, or $0.18 per share, the year before. Net sales increased 7 percent to $306.7 million while shipments increased 2 percent to 234,000 tons, both records for any quarter.

Third-quarter results included an after-tax gain of $4.1 million, or $0.08 per share, from the sale of timberlands and stock incentive charges of $0.5 million, or $0.01 per share. Prior-year third-quarter results included after-tax charges of $13.6 million, or $0.26 per share, related to the closure of Printing & Writing's sulfite pulp mill in Brokaw, Wisconsin; timberland sales gains of $0.7 million, or $0.01 per share; and stock incentive charges of $0.2 million.

"Our third-quarter performance represented our strongest quarterly earnings in two years," said Thomas J. Howatt, president and CEO. "Record revenues, strong timberland sales gains and continued progress with our strategic initiatives - attractive niche markets, product innovation, benchmark customer service and operational excellence - drove much of the improvement in profitability. Approximately 30 percent of revenues came from products developed in the last three years, exceeding our corporate goal of 25 percent, while paper mill productivity improved 2 percent."

For the first nine months, Wausau Paper reported net earnings of $9.8 million, or $0.19 per share, compared with a net loss of $9.7 million, or $0.19 per share, the year before. In addition to after-tax timberland sales gains of $0.12 per share, results for the current year included stock incentive charges of $0.03 per share. Year-ago nine-month results included sulfite pulp mill closure charges of $0.38 per share, timberland sales gains of $0.02 per share and stock incentive credits of $0.03 per share.

Printing & Writing reported third-quarter operating profits of $1.2 million, versus losses of $23.3 million last year, which included pre-tax pulp mill closure charges of $20.8 million. Net sales and shipments increased 9 percent and 4 percent, respectively. "The third quarter was Printing & Writing's most profitable quarter in two years and represents substantial improvement from first- and second-quarter operating losses of $7.1 million and $3.1 million, respectively," Mr. Howatt said. "This sequential improvement reflected selling price increases, product mix gains and operational efficiency improvements. We are pleased with our progress in recent quarters and remain committed to achieving acceptable levels of profitability by leveraging our strong brands and superior service platform in new niche markets as well as continuing to strengthen existing relationships."

Specialty Products reported third-quarter operating profits of $0.1 million compared with $3.3 million last year. Net sales increased 3 percent while shipments declined 1 percent. "A 4 percent gain in average selling price could only partially offset the impact of higher fiber and energy costs," Mr. Howatt explained. "Highly competitive market conditions have limited our ability to increase product selling prices and slowed growth of our higher-margin, value-added grades. Even so, we remain confident in our ability to drive long-term profitability by pursuing new market opportunities, leveraging product innovation and improving operational efficiencies."

Towel & Tissue's third-quarter operating profits increased 7 percent to a record $11.5 million from $10.8 million last year. Net sales and shipments were up 12 percent and 6 percent, respectively. "Selling price increases and mix improvement continue to drive record profitability," Mr. Howatt stated. "While away-from-home towel and tissue markets have grown 2 percent in 2006, our value-added product shipments have increased 15 percent, demonstrating the success of our niche market strategy."

Mr. Howatt also noted that the company sold approximately 5,800 acres of timberland in the third quarter, a substantial increase from year-ago and second-quarter levels. "We are pleased with the pace of timberland sales in the third quarter and expect that sales of the 34,000 acres remaining in our program will be completed within the next three years," Mr. Howatt stated. Also during the third quarter the company repurchased 160,000 shares of common stock, and has approximately 1.6 million shares remaining under a previous board authorization.

Commenting on the fourth-quarter outlook, Mr. Howatt said, "Energy prices have moderated while fiber prices are continuing to increase even as we enter the seasonally slower fourth quarter. While underlying market conditions remain strong for our Towel & Tissue business, conditions remain less certain for Specialty Products and Printing & Writing. With continuing cost pressures and seasonally weak demand influencing results, we expect fourth-quarter earnings to fall in the range of $0.10 per share to $0.12 per share, including after-tax timberland sales gains comparable to the $0.08 per share reported in the third quarter." In the 2005 fourth quarter, Wausau Paper reported a net loss of $0.19 per share, which included a charge of $0.10 per share related to the closure of the Brokaw pulp mill and a gain of $0.01 from the sale of timberlands.

Wausau Paper produces fine printing and writing papers, technical specialty papers, and "away-from-home" towel and tissue products.


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