Wausau Paper Posts Lower 3Q Earnings on Capacity Reductions
Oct. 27, 2010 - Wausau Paper reported that:
- Third-quarter net earnings were $0.27 per share compared to earnings of $0.30 per share a year ago.
- Excluding special items, adjusted quarterly earnings were $0.20 per share compared to $0.23 per share last year.
- Its balance sheet remains solid with a debt-to-capital ratio of 31 percent at September 30.
- At its October meeting, the Board of Directors declared a regular quarterly dividend of $0.03 per common share, payable November 30, to shareholders of record at the close of business November 15.
The company reported third-quarter net earnings of $13.2 million, or $0.27 per share, compared with net earnings of $14.6 million, or $0.30 per share, in the prior year. Net sales of $274 million were even with last year, as shipments declined 9 percent to 169,000 tons due to a paper mill closure and targeted inventory reduction efforts in the prior year.
This year’s third-quarter results included after-tax gains of $2.6 million, or $0.05 per share, from the sale of timberlands; and after-tax gains of $0.8 million, or $0.02 per share, as a result of Internal Revenue Service guidance regarding calculation of a 2009 alternative fuel mixtures tax credit. Prior-year results included after-tax charges of $0.7 million, or $0.01 per share, related to facility closures; after-tax gains of $2.5 million, or $0.05 per share, related to the alternative fuel mixtures tax credit; and after-tax gains of $1.7 million, or $0.03 per share, related to the sale of a non-core yeast manufacturing business. Excluding these items, adjusted third-quarter net earnings were $9.8 million, or $0.20 per share, compared with net earnings of $11.2 million, or $0.23 per share, last year.
Adjusted net earnings for the first nine months of 2010 were $17.2 million, or $0.35 per share, compared with prior-year earnings of $22.0 million, or $0.45 per share. Adjusted net earnings is a non-GAAP measure and three-month and nine-month results are reconciled to GAAP earnings below.
THIRD QUARTER COMMENTS
Commenting on third-quarter results and the fourth-quarter dividend, Thomas J. Howatt, president and CEO, said, “Earnings increased to their highest level of the year and surpassed our earlier expectations due to a particularly strong sales mix and full realization of recent selling price increases. With inconsistent market demand and year-over-year fiber costs increasing $21 million, we continued to manage costs closely while achieving growth in value-added tissue and select paper categories."
Mr. Howatt continued, “The reinstatement of a regular quarterly dividend reflects the earnings and balance sheet improvements achieved since suspending the dividend in early 2009. We appreciate the support and patience of shareholders as we repositioned the business for profitable growth and met the challenges posed by a difficult economy.”
FOURTH QUARTER OUTLOOK
Looking to the fourth quarter, Mr. Howatt remarked, “While input cost volatility and sluggish demand have resulted in a degree of earnings variability over the last several quarters, we remain focused on long-term growth in core markets to drive profitability and enhance shareholder value. Customer order patterns have slowed early in the fourth quarter, reflecting both seasonal weakness and a decelerating economy, while fiber prices remain at elevated levels. In addition, equipment repairs completed early in the fourth quarter at Tissue’s Middletown mill are expected to impact earnings by approximately $0.02 per share. As a result, we expect fourth-quarter earnings in the range of $0.06 - $0.09 per share, excluding timberland sales gains.” Adjusted fourth-quarter earnings were $0.14 per share last year.
The Tissue segment posted third-quarter operating profit of $13.5 million compared with record profit of $15.9 million last year, primarily reflecting higher fiber costs. Net sales decreased 1 percent and shipments declined 4 percent as away-from-home market demand declined an estimated 2 percent. Higher-margin value-added product shipments reached record levels in the third quarter, increasing to nearly 50 percent of the product mix, partially offsetting year-over-year fiber cost increases of approximately $5 million. Value-added product growth continues to be driven by Tissue’s environmentally preferable Green Seal™-certified product category, with shipments in this product category up 10 percent through the first nine months of the year.
The Paper segment’s third-quarter operating profit of $9.6 million included a pre-tax gain of $1.3 million related to the 2009 alternative fuel mixtures tax credit. Prior-year operating profit of $15.5 million included pre-tax charges of $1.1 million related to facility closures, pre-tax gains of $4.0 million from the alternative fuel mixtures tax credit, and pre-tax gains of $2.7 million associated with the sale of a yeast manufacturing business. Excluding these items, adjusted third-quarter operating profit was $8.3 million compared to $9.9 million last year. Net sales increased 1 percent while shipments declined 11 percent, reflecting a paper mill closure and inventory reduction efforts in the prior 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 4,400 acres of timberlands in the third quarter for an after-tax gain of $2.6 million. Approximately 8,000 acres of non-strategic timberlands remain in the sales program. The company will continue to own and manage 77,000 acres of strategic timberland at the completion of the sales program.
Wausau Paper produces and markets specialty papers for industrial, commercial and consumer end markets as well as a complete line of away-from-home towel and tissue products. The company is headquartered in Mosinee, Wisconsin.
SOURCE: Wausau Paper