Wausau Paper Reports First-Quarter 2013 Results
April 29, 2013 - Wausau Paper (WPP) today reported results for the first quarter of 2013.
- Excluding special items, the Company reported a net loss for the first-quarter of $1.7 million, or $0.04 per share compared with first-quarter 2012 net earnings, excluding discontinued operations and special items, of $4.8 million, or $0.10 per share.
- On a reported basis, the first-quarter was a net loss of $0.60 per share, which includes a $0.57 per share charge related to the closure of the Brainerd, Minnesota, mill on March 29, compared to net earnings of $0.03 per share a year ago.
- Results reflect the impact of the startup of the $220 million Tissue expansion project in Harrodsburg, Kentucky, and the February scheduled outage to install and commission ATMOS technology on the new machine.
During the quarter, the Company:
- Announced strategic intent to focus on its Tissue business and explore alternatives for its technical specialty paper business.
- Announced closure of Brainerd, Minnesota facility, and on March 28 the site ceased manufacturing operations at the facility.
- Signed a non-binding letter of intent to sell the technical paper business based at the Mosinee and Rhinelander, Wisconsin, facilities to an affiliate of KPS Capital Partners.
- Qualified a family of new products based on ATMOS substrates to support the second-quarter launch of the DublNature® brand.
Henry C. Newell, president and CEO, commented, “We have made significant progress on repositioning the Company to focus on tissue. The recent investment in the Tissue business positions us for growth, with a long term return on capital goal of 18 percent and achievement of 15 percent return on capital by the end of 2014. The conversion of our new tissue machine from conventional to ATMOS production has been completed and we’re qualifying and producing products to support the launch of our new DublNature® brand in the second quarter. We remain committed to delivering six percent case shipment growth in our tissue business by the fourth quarter of 2013.
“We were also pleased to have announced during the quarter a letter of intent to divest our paper business to KPS Capital Partners in a manner that we believe will create value for our shareholders.”
2013 FIRST-QUARTER RESULTS
The following first-quarter discussion includes certain comparisons that contain non-GAAP measures. The Company believes that the presentation of select non-GAAP measures provides a useful analysis of ongoing operating trends. Please refer to the attached Reconciliation of Non-GAAP Financial Measures.
Excluding special items, the first quarter resulted in a net loss of $1.7 million, or $0.04 per share. Prior-year first-quarter results, excluding discontinued operations and special items, were net earnings of $4.8 million, or $0.10 per share. On a reported basis, the first quarter was a net loss of $0.60 per share compared to net earnings of $0.03 per share a year ago.
Due to the significant change with the investment in capital and resources connected with the Company’s Tissue Expansion Project, in addition to continued startup costs and outage costs related to the new machine that began production in December 2012 of approximately $3.0 million after-tax, or $0.06 per share, comparability of year-over-year results was impacted by the following items on an after-tax basis:
- Incremental depreciation of $1.7 million, or $0.03 per share;
- Increased interest expense of $0.9 million, or $0.02 per share, as a portion of interest had been capitalized in connection with capital spending in 2012;
- Increased legal and advisory services of $1.4 million, or $0.03 per share, related to work performed with the announced non-binding letter of intent to sell its technical specialty paper business and governance matters.
During the first quarter, the Tissue segment executed an outage to make the final installations and commission ATMOS technology on the new machine located in Harrodsburg. This outage was completed in February, and the qualification process for a new portfolio of 100% recycled products to support the launch of the DublNature® brand began. As anticipated, the outage, commercialization and startup curve of the new machine, as well as incremental depreciation and additional costs to support the expansion project, impacted first-quarter results and resulted in operating profit for the segment of $3.8 million in 2013 compared to prior year first quarter operating profit, excluding capital-related expenses, of $11.1 million. In the first quarters of 2013 and 2012, adjusted EBITDA was $12.8 million, or 16.4 percent margin, and $17.7 million, or 21.6 percent margin, respectively. The targeted adjusted EBITDA margin is 21 to 23 percent by the fourth quarter of 2013.
First-quarter case volume was relatively flat compared to the prior year. Volume in the support product categories was strong, increasing approximately 3 percent over the prior year’s first quarter; however, volume in strategic product categories was down from the prior year by approximately 3 percent as the distribution network began to prepare inventory levels for the introduction of DublNature® products in the second quarter of 2013. The Company expects this trend to continue into April and May, with significant shifts in growth as inventory is replenished and new products are introduced.
The Paper segment reported a first-quarter adjusted operating profit of $3.2 million, compared with an adjusted operating profit of $3.6 million in the prior year.
First-quarter results reflect excellent progress toward the targeted EBITDA improvement of $15 million for 2013. Net sales and shipments declined approximately 18 percent and 21 percent, respectively, on a year-over-year basis. Nearly all of the decline was a result of the exit of our participation in the uncoated freesheet print and color markets products previously manufactured and shipped from our Brainerd facility during 2012. From the second half of 2012, the overall demand fundamentals of the sectors of the technical specialty paper markets in which we participate have improved, but remain below first-half 2012 levels.
The closure of the Brainerd mill in March resulted in a first-quarter pre-tax charge in operating profit, on a reported basis, of $44.3 million, with $35.7 million of the charge related to accelerated depreciation on the long-lived assets.
During the first quarter of 2012, the Company completed the sale of its premium Print & Color brands, inventory and select equipment and ceased papermaking operations at its former Brokaw, Wisconsin manufacturing site. The discontinued operation is separately presented from continuing operations in all periods presented in the condensed consolidated statements of operations.
For the first quarter of 2013, discontinued operations resulted in earnings, net of tax, of less than $0.1 million compared to earnings of $8.2 million, net of tax, or $0.17 per share, for the first quarter of 2012. The prior year included a gain on the sale of the business of $7.7 million, net of tax, or $0.16 per share, and $0.5 million, or $0.01 per share from operations partially offset by closure-related costs.
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, and is listed on the NYSE under the symbol WPP. To learn more about Wausau Paper visit: www.wausaupaper.com.
SOURCE: Wausau Paper