Wausau Paper Posts 2nd Quarter Profit
July 26, 2010 - Wausau Paper today reported that during the second quarter:
- Net earnings were $0.11 per share compared to a loss of $0.04 per share a year ago.
- Excluding special items, adjusted quarterly earnings were $0.07 per share compared to $0.15 per share last year.
- Both Tissue and Paper segments posted solid results in the face of year-over-year fiber cost increases equivalent to $0.28 per share.
- The company completed refinancing plans by replacing its revolving credit facility with a four-year $125 million agreement.
The company reported second-quarter net earnings of $5.6 million, or $0.11 per share, compared with a net loss of $1.9 million, or $0.04 per share, in the prior year. Net sales increased 1 percent to $265.6 million, as shipments declined 5 percent to 168,000 tons due primarily to anticipated volume reductions associated with the May 2009 closure of a paper mill in Jay, Maine.
Second-quarter results include after-tax gains of $2.3 million, or $0.05 per share, from the sale of timberlands. Prior-year results included after-tax charges of $13.4 million, or $0.27 per share, related to facility closures; after-tax gains of $3.6 million, or $0.07 per share, related to a tax credit for the use of alternative fuel mixtures; and after-tax gains of $0.4 million, or $0.01 per share, related to the sale of timberlands. Excluding these items, adjusted second-quarter net earnings were $3.3 million, or $0.07 per share, compared with net earnings of $7.5 million, or $0.15 per share, last year. Adjusted net earnings for the first six months of 2010 were $7.4 million, or $0.15 per share, compared with prior-year earnings of $10.9 million, or $0.22 per share. Adjusted net earnings is a non-GAAP measure and three-month and six-month results are reconciled to GAAP earnings below.
Commenting on second-quarter results, Thomas J. Howatt, president and CEO, said, “Our businesses remain on track despite facing weak economic conditions with Tissue posting solid product mix gains and Paper benefiting from recent capital investments and the repositioning of capacity in growth-oriented technical markets. The actions we’ve taken in recent years have positioned us to achieve a measure of earning stability through a period of rapidly escalating record-high market pulp prices.” Mr. Howatt continued, “Pulp prices are expected to moderate over the second half of 2010. While this will benefit near-term results, we remain focused on driving long-term earnings growth through continued execution of our core market strategies. At the same time, stable cash flows, modest debt levels and recently completed financing arrangements have positioned us to invest strategically in our businesses to drive increased shareholder value.”
The Tissue segment posted second-quarter operating profit of $10.5 million compared with record second-quarter profit of $13.8 million last year. Scheduled maintenance at the segment’s Middletown, Ohio, paper mill and increased fiber costs account for most of the year-over-year decline in profitability. Net sales increased 3 percent on steady shipments while demand remained nearly flat in the away-from-home towel and tissue market. The segment continues to make meaningful product mix improvement, strategically growing the company’s environmentally preferable Green Seal™-certified product line, shipments of which increased 9 percent in the quarter.
The Paper segment reported a second-quarter operating profit of $1.4 million compared with an operating loss of $9.8 million last year, which included pre-tax charges of $21.4 million related to facility closures and pre-tax gains of $5.7 million from an alternative fuel mixture tax credit. Excluding these items, adjusted prior-year second-quarter operating profit was $5.9 million. Significant gains in product mix and price partially offset $19 million of fiber cost increases and scheduled maintenance at the Rhinelander, Wisconsin, paper mill. Net sales increased 1 percent while shipments declined 7 percent, reflecting anticipated volume reductions associated with the May 2009 closure of the Jay mill. With product pricing initiatives implemented and market pulp prices likely to moderate, profitability is expected to improve over the second half of the year. The previously announced $27 million paper machine rebuild at Brainerd, Minnesota, remains on-schedule for a first-quarter 2011 completion, providing the manufacturing flexibility to leverage profitable growth in the global tape market while continuing to serve the print and color sector.
The company sold 2,200 acres of timberlands in the second quarter for an after-tax gain of $2.3 million. Approximately 10,000 acres of non-strategic timberlands remain in the sales program.
On June 23, 2010, the company entered into a $125 million revolving credit agreement, retiring a $165 million facility scheduled to expire in July 2011. The new agreement carries an initial annual facility fee of 42.5 basis points as well as an initial interest rate of LIBOR plus 195 basis points on borrowed funds. In conjunction with the $50 million senior note and $125 million private shelf agreement completed earlier this year, the new facility provides the credit capacity necessary to meet operational needs and the flexibility to pursue strategic growth alternatives.
Commenting on the third-quarter outlook, Mr. Howatt said, “We continue to make progress in our efforts to enhance the long-term competitiveness and profitability of our businesses and expect substantial margin expansion at Paper and continued solid returns from Tissue in the third quarter. At the same time, sluggish economic conditions and high market pulp prices will remain a factor.” Mr. Howatt continued, “As a result, we estimate third-quarter 2010 net earnings in the range of $0.13 to $0.15 per share, exclusive of timberland sales gains.” Adjusted for restructuring charges, tax credits and gain on the sale of a non-core yeast business, third quarter 2009 earnings were $0.23 per share.
SOURCE: Wausau Paper