Wausau Paper 4th Quarter Loss Narrows
Feb. 10, 2009 (Press Release) - Wausau Paper today reported a fourth-quarter net loss of $1.8 million, or $0.04 per share, compared with a net loss of $27.6 million, or $0.55 per share, in the year-earlier period. Net sales decreased 9 percent to $275.7 million, while shipments declined 22 percent to 171,000 tons due to anticipated volume reductions resulting from the December 2007 closure of Printing & Writing’s Groveton, New Hampshire paper mill, the July 2008 closure of Specialty Products’ roll wrap operations, and the impact of fourth-quarter demand weakness.
Results for the 2008 fourth-quarter included after-tax charges of $3.7 million, or $0.08 per share, relating to a paper machine shutdown at Specialty Products’ Jay, Maine facility and after-tax timberland sales gains of $0.5 million, or $0.01 per share. Prior-year fourth-quarter results included an after-tax charge of $28.8 million, or $0.58 per share, relating to the closure of the Groveton mill; an after-tax gain of $0.4 million, or $0.01 per share, relating to the net impact of the closure of the roll wrap operations; timberland sales gains of $2.0 million, or $0.04 per share; and one-time state tax benefits of $1.2 million, or $0.02 per share. Excluding these items, adjusted fourth-quarter 2008 net earnings were $1.4 million, or $0.03 per share, compared with a net loss of $2.4 million, or $0.05 per share, last year. Adjusted net earnings per share is a non-GAAP measure and three-month and full-year results are reconciled to GAAP net earnings per share below.
For the full-year 2008, Wausau Paper reported a net loss of $15.8 million, or $0.32 per share, compared with a net loss of $1.8 million, or $0.04 per share, in 2007. Excluding the items listed in the table above, 2008 adjusted net earnings were $0.5 million, or $0.01 per share, compared to 2007 net earnings of $7.3 million, or $0.14 per share. Net sales decreased 4 percent to $1.19 billion, while shipments declined 15 percent to 782,000 tons due primarily to the closure of the Groveton mill and roll wrap operations.
Commenting on quarterly performance, Thomas J. Howatt, president and CEO, said, “Fourth-quarter adjusted net earnings increased from 2007 levels despite recessionary business conditions intensifying during the year. The weakening economy impacted orders for each of our three businesses and resulted in Specialty Products and Printing & Writing taking market-related downtime in the fourth quarter. Even so, Printing & Writing reported its strongest quarterly profit in more than four years — with results driven by the execution of the profit recovery plan announced in the fourth quarter of 2007.”
Turning to annual results, Mr. Howatt added, “Adjusted results were slightly above break-even levels for 2008 as we continued to implement plans to improve the future performance of each of our businesses. We permanently closed unprofitable capacity in our Specialty Products and Printing & Writing businesses while pursuing strategic capital projects aimed at driving long-term shareholder value.” Mr. Howatt continued, “Towel & Tissue’s $31 million towel machine rebuild is scheduled for completion in the first quarter of 2009, while Printing & Writing’s $15 million fiber-handling project at the Brokaw mill is expected to be completed by mid-year. Projects of this nature, combined with our focus on superior customer service, cost reduction, and operational excellence, position us to weather the current economic downturn while improving the competitive position of our businesses.”
Printing & Writing’s fourth-quarter operating profit of $2.8 million compared with a loss of $52.0 million last year while net sales and shipments declined 16 percent and 27 percent, respectively, due to reduced volumes associated with the Groveton mill closure. Year-ago fourth-quarter results included pre-tax Groveton closure charges of $45.9 million, consisting primarily of non-cash charges related to depreciation of long-lived assets. The completed elements of Printing & Writing’s profit recovery plan – which include a permanent 28 percent capacity reduction and renewed sales and marketing focus on core products and brands – have produced a degree of earnings momentum for the segment. This momentum continued into the fourth quarter despite an industry-wide decline in paper demand of 15 percent which led to market-related downtime equal to 10 percent of Printing & Writing’s fourth-quarter capacity. In addition, the fiber handling project and recently announced converting and distribution consolidation initiative are expected to provide meaningful benefits by the end of 2009, contributing to the Company’s pursuit of cost-of-capital level performance by this business.
Specialty Products reported a fourth-quarter operating loss of $8.3 million – including pre-tax charges of $5.8 million related to the paper machine shutdown at the Jay mill – compared with an operating loss of $2.7 million the year before. Net sales decreased 11 percent as shipments declined 25 percent, due primarily to the elimination of roll wrap sales and significant demand weakness in industrial and housing-related markets. In addition to the permanent shutdown of the Jay paper machine, Specialty Products reduced production by 10 percent during the quarter to balance production with demand and is focused on increasing volumes in less cyclical core markets such as liner and food packaging.
Towel & Tissue’s fourth-quarter operating profits of $9.1 million compare to profits of $10.9 million in the year-ago period. Net sales increased 2 percent while shipments decreased 7 percent. Although below prior-year levels, operating margins of 11 percent were the strongest reported for any quarter in 2008 and reflect the benefit of continued product mix gains. For the full year, shipments increased 2 percent and value-added product shipments were up 11 percent despite a flat demand trend in the “away-from-home” market. The full benefits of the first-quarter towel machine rebuild are expected to be achieved in the second half of 2009, improving operating margins by increasing operational efficiencies and adding 16,000 tons of production capacity. The additional production volume will displace product currently purchased from other towel and tissue manufacturers.
The Company sold approximately 750 acres of timberlands in the fourth quarter, continuing progress on its program to sell 42,000 acres of non-strategic timberlands. A total of 17,000 acres remains in the sales program.
Commenting on the outlook for the first quarter of 2009, Mr. Howatt said, “Uncertainty regarding the duration and severity of the economic recession bears significantly on our near-term outlook. With economic conditions unlikely to improve in the near-term, we have implemented initiatives intended to reduce costs and generate cash. Specifically, we have reduced our salaried workforce by approximately 7 percent, implemented a plan to reduce fixed manufacturing and administrative expenses by $6 million over the first half of the year, and are targeting a $15 million reduction in inventory by the end of the third quarter. In addition, we have scheduled appropriate levels of market-related downtime in our Printing & Writing and Specialty Products businesses.”
Mr. Howatt continued, “We expect first-quarter results to approximate breakeven levels excluding timberland sales gains and anticipated expenses of $0.05 per share associated with the towel machine rebuild and Printing & Writing’s converting and distribution project. Adjusted net losses in the first quarter of 2008 were $0.06 per share.
Wausau Paper produces and markets fine printing and writing papers, technical specialty papers, and "away-from-home" towel and tissue products.
SOURCE: Wausau Paper