Wausau Paper Posts 3rd Quarter Results
Oct. 27, 2008 - Wausau Paper reported net earnings for the third quarter of $2.3 million, or $0.05 per share, compared with $6.1 million, or $0.12 per share, the previous year. Net sales declined 2 percent to $312.2 million and shipments decreased 16 percent to 197,000 tons due primarily to anticipated volume reductions resulting from the December 2007 closure of Printing & Writing’s Groveton, New Hampshire paper mill and the July 2008 closure of Specialty Products’ roll wrap operations.
This year’s third-quarter results included after-tax charges of $1.5 million, or $0.03 per share, related to closure of the Groveton mill and roll wrap operations in Columbus, Wisconsin and Jackson, Mississippi. In addition, results included after-tax charges of $2.4 million, or $0.05 per share, associated with the planned fourth-quarter 2008 shutdown of a paper machine at Specialty Products’ Jay, Maine mill; after-tax timberland sales gains of $1.4 million, or $0.03 per share; and one-time income tax benefits of $0.9 million, or $0.02 per share, related to the settlement of a Federal tax audit. Prior-year third-quarter results included after-tax timberland sales gains of $1.8 million, or $0.03 per share. Excluding these items, adjusted third-quarter 2008 net earnings were $3.9 million, or $0.08 per share, compared with $4.3 million, or $0.09 per share, last year. Adjusted net earnings per share is a non-GAAP measure.
Commenting on third-quarter results, Thomas J. Howatt, president and CEO, said, “Adjusted net earnings increased from the second quarter and approached year-ago levels despite deteriorating economic conditions and historically high input costs. Although far from satisfied with absolute earnings, we are pleased with our recent progress as sequential profitability improved for all three of our businesses while two of the three improved year-over-year.” Mr. Howatt continued, “Progress with Printing & Writing’s recovery plan along with sales mix and pricing initiatives within Specialty Products and Towel & Tissue has created a measure of earnings momentum. With recessionary business conditions likely to persist for several quarters, we remain focused on executing against these initiatives and completing strategic capital projects to drive long-term shareholder value. These projects include the $31 million towel machine rebuild at Towel & Tissue’s Middletown, Ohio mill to fuel growth in that segment and the $15 million fiber-handling project at Printing & Writing’s Brokaw, Wisconsin mill to improve manufacturing capabilities and further reduce costs.”
Printing & Writing’s third-quarter operating loss of $0.7 million included pre-tax Groveton mill closure charges of $2.4 million and compares favorably with an operating loss of $1.3 million last year. Net sales and shipments decreased 20 percent and 32 percent, respectively, due primarily to reduced volumes associated with the Groveton mill closure. Printing & Writing met the first of its profit recovery plan targets in the third quarter with operating profits approaching $1.7 million, exclusive of facility closure costs. As planned, reduced production capacity has substantially improved sales mix and helped return the business unit to a profitable position. Printing & Writing is now working toward the second of its recovery plan targets – to re-establish cost-of-capital returns by the end of 2009.
Specialty Products reported a third-quarter operating loss of $1.1 million (including pre-tax charges of $3.7 million related to the announced shutdown of a paper machine at its Jay facility) compared with operating profits of $2.2 million last year. Net sales increased 4 percent, while shipments declined 11 percent, due primarily to the elimination of roll wrap sales volumes. Excluding charges related to the paper machine shutdown, the business unit reported operating profits of $2.7 million, comparing favorably with prior-year profits of $2.2 million as well as second-quarter operating losses of $1.9 million. Pricing initiatives and mix enhancement offset demand weakness in key domestic markets such as housing and manufacturing, resulting in improved current-year profitability.
Towel & Tissue’s third-quarter operating profits of $9.3 million were substantially improved over second-quarter levels of $8.3 million, but lower than third-quarter profits of $11.1 million reported last year, reflecting year-over-year increases in fiber and energy costs. Compared with last year, net sales and shipments increased 15 percent and 8 percent, respectively. Despite flat demand in the “away-from-home” market, year-to-date shipments of value-add and Green Seal™-certified products increased 11 percent and 24 percent, respectively. The business unit’s towel machine rebuild is on schedule and expected to come on-line in the first quarter of 2009, adding 16,000 tons of production capacity to support growth of its Eco-Soft® Green Seal™ product line.
The company sold approximately 1,600 acres of timberlands in the third quarter, continuing progress on its program to sell 42,000 acres of non-strategic timberlands. A total of 17,800 acres remains in the program.
Recessionary conditions have spread across the economy while input costs, though moderating slightly, remain at elevated levels relative to paper-selling prices. The steps taken in recent quarters to better position our businesses and improve profitability will be beneficial as we face uncertain economic conditions. As a result, fourth-quarter earnings are expected in the range of $0.03 - $0.05 per share, excluding timberland sales gains and charges associated with facility closures and the machine shutdown at the Jay mill. Fourth-quarter 2007 losses were $0.05 per share excluding timberland sales gains, facility closure charges and one-time state tax benefits.
Wausau Paper produces and markets fine printing and writing papers, technical specialty papers, and "away-from-home" towel and tissue products.
SOURCE: Wausau Paper