Wausau Paper Swings to First Quarter Profit
April 26, 2010 - Wausau Paper today reported that during the first quarter:
- Net earnings were $0.06 per share compared to a loss of $0.03 per share a year ago.
- Excluding special items, adjusted net earnings were $0.08 per share compared to $0.07 per share last year.
- The Tissue segment achieved record first-quarter operating profit of $11.1 million and the Paper segment reported year-over-year improvement.
- The Paper segment solidified its leadership position in the growing tape market by committing to a $27 million paper machine rebuild.
- The company increased its credit capacity and financing flexibility through a $50 million senior note and $125 million private shelf agreement.
The company reported first-quarter net earnings of $2.9 million, or $0.06 per share, compared with a net loss of $1.4 million, or $0.03 per share, in the prior year. Net sales increased 7 percent to $256 million, as shipments rose 9 percent to 168,000 tons.
First-quarter results include tax charges of $1.2 million, or $0.02 per share, related to the passage of the “Patient Protection and Affordable Care” and “Health Care and Education Reconciliation” Acts of March 2010. Prior-year first-quarter results included after-tax charges of $2.8 million, or $0.06 per share, related primarily to the 2009 closure of the paper mill in Jay, Maine, and a converting facility in Appleton, Wisconsin; and after-tax expenses of $1.9 million, or $0.04 per share, related to the rebuild of the towel machine at the Tissue segment’s Middletown, Ohio, mill and start-up of the Paper segment’s distribution center in Bedford Park, Illinois. Excluding these items, first-quarter adjusted net earnings were $4.1 million, or $0.08 per share, compared with earnings of $3.4 million, or $0.07 per share last year. Adjusted net earnings per share is a non-GAAP measure and three-month results are reconciled to GAAP earnings per share below:
“First-quarter earnings improved from year-ago levels despite a $12 million increase in fiber costs and only modest demand improvement in most market categories,” commented Thomas J. Howatt, president and CEO.
“Our results reflect the continued growth of our highly profitable Tissue business and benefits associated with the recently completed restructuring of our Paper segment. With economic conditions slow to improve and fiber costs nearing record high levels, we remain focused on further penetrating core market categories and containing costs to drive near-term results. At the same time, we are committed to the strategic growth of our businesses to increase long-term profitability and shareholder value.”
The Tissue segment reported record first-quarter operating profit of $11.1 million compared with a prior-year profit of $7.3 million, which included one-time expenses of $2.5 million related to the 2009 towel machine rebuild at the Middletown mill. Although overall demand in the away-from-home towel and tissue market remained relatively flat, net sales and shipments increased 8 percent and 7 percent, respectively. Operational efficiency increases, volume gains and mix improvement offset fiber cost increases and helped Tissue to achieve a fifth consecutive quarter of year-over-year profit improvement.
The Paper segment reported first-quarter operating profit of $2.0 million compared with an operating loss of $3.2 million last year, while net sales and shipments increased 7 percent and 9 percent, respectively. Prior-year losses included pre-tax charges of $5.1 million primarily related to closure of the Jay mill and Appleton converting facilities. Sales price, mix and volume gains combined with lower energy costs more than offset an 18 percent increase in market pulp costs, resulting in year-over-year profit improvement. During the quarter, the Board of Directors approved a $27 million capital project to rebuild a paper machine in Brainerd, Minnesota, to add tape-backing paper production capabilities. Scheduled for completion in the first-quarter of 2011, the rebuilt machine will provide a wide range of unsaturated tape-backing paper while retaining the flexibility to produce premium printing and writing products. The investment is expected to improve the overall cost-efficiency and manufacturing flexibility of the Paper segment’s operations.
On April 9, 2010, the company sold $50 million of Series A senior notes due in 2017, having an interest rate of 5.69 percent. Proceeds were used to pay down revolving debt and prepare the company to meet debt obligations maturing in 2011. In addition, the company entered into an agreement which establishes a three-year private shelf facility under which up to $125 million of additional promissory notes may be issued under terms agreed upon by the parties at the time of issuance. The financing agreements increase the company’s credit capacity and position it to pursue strategic growth opportunities.
Commenting on the outlook for the second quarter, Mr. Howatt said, “We remain focused on driving long-term profitability by accelerating growth in our highly successful Tissue business while continuing to enhance the competitive position of our Paper segment in each of its core markets. Market conditions have been slow to improve and fiber costs have risen to near-record levels. In addition, we intend to execute annual maintenance outages at several of our manufacturing facilities during the second quarter. Even so, we expect second-quarter results to improve modestly from first-quarter adjusted earnings of $0.08 per share.”
Adjusted for one-time restructuring charges, timberland sales and tax credits, earnings in the second quarter of 2009 were $0.15 per share.
Wausau Paper produces and markets fine printing and writing and technical specialty papers and "away-from-home" towel and tissue products.
SOURCE: Wausau Paper