Wausau Paper Posts Rise in 3rd Quarter Earnings
Oct. 28, 2009 - Wausau Paper reported third-quarter net earnings of $14.6 million, or $0.30 per share, compared with net earnings of $2.3 million, or $0.05 per share, in the prior year. Net sales decreased 12 percent to $273.4 million while shipments declined 6 percent to 185,000 tons, due to anticipated volume reductions resulting from facility closures and continuing demand weakness in several market categories.
Third-quarter results include after-tax facility closure charges of $0.7 million, or $0.01 per share, related primarily to the May closure of Specialty Products’ Jay, Maine, paper mill and the previously announced fourth-quarter closure of Printing & Writing’s Appleton, Wisconsin, converting facility; after-tax gains of $2.5 million, or $0.05 per share, related to a tax credit for the use of alternative fuel mixtures at Specialty Products’ Mosinee, Wisconsin, facility; and after-tax gains of $1.7 million, or $0.03 per share, related to the sale of Specialty Products' non-core yeast manufacturing business located in Rhinelander, Wisconsin.
Prior-year third-quarter results included after-tax charges of $3.9 million, or $0.08 per share, related to a paper machine shutdown and facility closures; 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. Excluding these items, adjusted third-quarter 2009 net earnings were $11.2 million, or $0.23 per share, compared with net earnings of $3.9 million, or $0.08 per share, last year. Adjusted net earnings are a non-GAAP measure and three-month and nine-month results are reconciled to GAAP earnings below.
“The strength of our third-quarter results reflects the success of the value-driven growth strategy of our Towel & Tissue business and the extensive restructuring initiatives undertaken in our paper businesses over the last two years in addition to a significantly favorable input cost environment," said Thomas J. Howatt, president and CEO.
"The recently announced combination of our Specialty Products and Printing & Writing businesses into a single operating segment at year-end essentially completes the restructuring of these businesses, achieving a cost-competitive, flexible operations platform, and narrowing the corporation to two core businesses. Coupled with aggressive cost reduction and cash conservation measures implemented early in the year, we have achieved a dramatic improvement in our balance sheet and overall financial performance, and are well positioned to take advantage of market opportunities when business conditions improve,” Howatt said.
BUSINESS UNIT RESULTS
Printing & Writing reported a third-quarter operating profit of $3.8 million compared with an operating loss of $0.7 million last year, while net sales declined 7 percent and shipments increased 2 percent. Current-quarter results include pre-tax facility closure charges of $0.5 million related primarily to the Appleton converting facility. Prior-year results included pre-tax Groveton mill closure charges of $2.4 million.
Exclusive of facility closure charges, Printing & Writing profits of $4.4 million were the strongest reported in nearly seven years and the resulting 13 percent return on capital employed exceeded the cost-of-capital return levels targeted over the second half of the year. With orders relatively stable and inventories at target levels, third-quarter market-related downtime was reduced to the equivalent of 2,400 tons, or approximately 3 percent, of production capacity as compared to 15,000 tons, or approximately 20 percent, of production capacity during the second quarter. With year-to-date demand for uncoated freesheet papers declining approximately 14 percent, Printing & Writing is focused on the fourth-quarter completion of its converting & distribution initiative and year-end integration with Specialty Products to further reduce costs and enhance its competitive position.
Specialty Products’ third-quarter operating profit of $11.7 million includes pre-tax charges of $0.6 million related primarily to the closure of the Jay mill, pre-tax gains of $4.0 million from an alternative fuel mixture tax credit, and pre-tax gains of $2.7 million associated with the sale of its yeast manufacturing business. Prior-year operating loss was $1.1 million and included charges of $3.7 million related to a permanent paper machine shutdown. Net sales and shipments declined 25 percent and 15 percent, respectively, due to facility closures and continued order weakness.
The third-quarter sale of a non-strategic yeast manufacturing operation — which represented less than 2 percent of Specialty Products’ 2008 net sales — has narrowed the business to core markets in which it has a competitive and cost-effective position. The business unit’s year-end combination with Printing & Writing is expected to provide more than $2 million of administrative cost reductions, enhance market access and create a business unit with the flexibility to effectively serve both mature print and growth-oriented specialty paper markets.
Towel & Tissue achieved record operating profits for a second consecutive quarter, reporting third-quarter operating profits of $15.9 million as compared with prior-year profits of $9.3 million and prior-quarter profits of $13.8 million. Net sales and shipments declined 1 percent and 2 percent, respectively. Operating margins increased to 18 percent for the quarter as higher-margin value-added product shipments increased 6 percent. Although year-to-date demand for “away-from-home” towel and tissue products declined 8 percent, the business unit has benefited from a year-over-year decline in fiber and energy costs as well as the initial savings associated with the rebuild of a towel machine at Middletown, Ohio. With three days of machine downtime planned in the fourth quarter to implement further improvements, full benefits of the $32.5 million rebuild are expected to be achieved early in 2010.
Commenting on the fourth-quarter outlook, Howatt said, “The successful execution of our restructuring initiatives, cash conservation measures and strategic capital program has allowed us to weather a severe economic recession while enhancing the long-term competitive position of our businesses. While the timing of a meaningful economic recovery remains uncertain at this time, we will continue our intense focus on executing the strategies that have delivered a substantial improvement in performance in 2009.
"Against a backdrop of weak market conditions, increasing fiber prices and scheduled maintenance downtime, we expect fourth-quarter adjusted net earnings in the range of $0.11 to $0.13 per share,” Howatt added. (Adjusted net earnings in the fourth quarter of 2008 were $0.03 per share.)
About Wausau Paper
Wausau Paper produces and markets fine printing and writing papers, technical specialty papers, and “away-from-home” towel and tissue products. The company had 2008 revenues of $1.2 billion.
SOURCE: Wausau Paper