Wausau Paper Reports Second Quarter 2013 Financial Results
July 29, 2013 - Wausau Paper today reported:
- The Company completed the sale of its specialty paper business on June 26, resulting in net cash proceeds, subject to certain post-closing adjustments, of approximately $105 million after settlement of transaction-related liabilities, transaction costs and taxes.
- Net transaction proceeds were immediately used to eliminate the then approximately $67 million outstanding balance on the Company’s revolving-credit facility.
- The Company launched its new Green SealTM DublNature® family of premium away-from-home towel and tissue products produced from its new ATMOS technology-enabled Harrodsburg, Kentucky, paper machine on May 20, with 16 new products in tissue, roll and folded towel available to the market during the second quarter.
- Due to the completed sale and the first-quarter closure of its former manufacturing facility in Brainerd, Minnesota, financial performance of the former Paper segment, including an after-tax impairment charge of approximately $40.1 million as a result of the second-quarter sale, is reported as discontinued operations.
- Including a loss of $0.81 per share from discontinued operations, net of tax, the 2013 second quarter net loss was $1.11 per share.
- On a reported basis, the second quarter 2013 results from continuing operations was a net loss of $0.30 per share.
- Results of continuing operations reflect the impact of the start-up of the new Harrodsburg manufacturing and converting capabilities, as well as manufacturing and inventory transition in support of the new products related to the $220 million Tissue expansion project.
Henry C. Newell, president and CEO, commented, "Completing the sale of the specialty paper business represents significant progress on our strategic repositioning efforts as a company focused on tissue. We launched a new family of towel and tissue products in the second quarter and will introduce a range of new ATMOS-based product additions over the coming quarters. We remain committed to our growth expectations, delivering six percent case shipment growth in our tissue business by the fourth quarter of 2013."
2013 SECOND-QUARTER AND SIX-MONTH RESULTS
The following second-quarter and six-month discussion contain comparisons of financial elements including adjusted EBITDA, adjusted EBITDA margin, adjusted net earnings and adjusted net loss. These presentations are not in accordance with generally accepted accounting principles (GAAP). The Company believes that the presentation of select non-GAAP measures provides a useful analysis of ongoing operating trends.
Excluding special items, the second quarter resulted in an adjusted net loss of $2.4 million, or $0.05 per share. Prior-year second-quarter performance, excluding special items, was adjusted net earnings of $2.7 million, or $0.05 per share. On a reported basis, the second quarter was a net loss of $0.30 per share compared to net earnings of $0.01 per share a year ago.
The first half of 2013, excluding special items, resulted in an adjusted net loss of $6.2 million, or $0.12 per share, compared to prior-year first half net earnings, excluding special items, of $5.5 million, or $0.11 per share.
Due to the significant investment of capital and resources connected with the Company’s Tissue expansion project, comparability of quarter-over-quarter and year-over-year after-tax net results, excluding special items, has been impacted by:
- Startup, outage and inventory transition costs
- Incremental depreciation/interest expense
On a continuing operations basis, adjusted EBITDA and EBITDA margin for the second quarters of 2013 and 2012 were $8.8 million, or a 10.1 percent, and $13.0 million, or a 14.7 percent, respectively. On a year-to-date basis, adjusted EBITDA and EBITDA margin was $14.8 million, or a 8.9 percent in 2013 compared to $25.2 million, or a 14.8 percent in 2012. The Company is targeting an adjusted EBITDA margin on a consolidated basis between 16 and 18 percent by the end of the fourth quarter of 2013. Previous adjusted EBITDA margin targets were presented for the Tissue business only and, on a pro forma basis, those targets are a range of 21 to 23 percent in the fourth quarter of 2013.
Second-quarter net sales for 2013 were $87.6 million, a decrease of approximately 1 percent compared to $88.6 million reported for the second quarter of 2012. On a year-to-date basis, net sales were down nearly 3 percent in 2013 at $165.8 million compared to $170.4 million in 2012. After a relatively flat first quarter, case shipment volume in the second quarter improved 2.4 percent over the prior-year period resulting in year-to-date growth of 1.3 percent. Volume in the support product categories continued to be strong, increasing approximately 4 percent over the prior-year’s second quarter and first half. Volume in strategic product categories was relatively flat over the prior-year second quarter after declining by approximately 3 percent in the first-quarter comparison. Overall, the Company is expecting case growth to improve as the full line of premium DublNature® products is available to the away-from-home market in the third quarter, with targeted fourth-quarter growth above 6 percent year-over-year.
The normalized effective income tax rate for the Company is expected to be approximately 37 percent. Due to the sale of the specialty paper business, additional income tax expense, net of federal tax benefit, of approximately $12.4 million was recognized in the second quarter primarily because approximately $12.0 million of certain state income tax credit carryforwards are not expected to be utilized in future years.
During the second quarter of 2013, the Company completed the sale of its specialty paper business, including its manufacturing facilities in Mosinee and Rhinelander, Wisconsin. This transaction, combined with the first-quarter closure of the technical specialty paper mill in Brainerd, Minnesota, results in the Company’s former Paper segment being reclassified as a discontinued operation and therefore is presented separately from continuing operations in all periods presented in the condensed consolidated statements of operations.
For the second quarter of 2013, discontinued operations resulted in a loss, net of tax, of $40.2 million, or $0.81 per share, compared to a loss of $1.6 million, net of tax, or $0.03 per share, for the second quarter of 2012. Included in the loss, net of tax, in the second quarter of 2013 is an after-tax impairment charge related to the disposition of assets of approximately $40.1 million, or $0.81 per share, and after-tax closure-related costs of $3.1 million, or $0.06 per share, offset by earnings from operations, net of tax, of $2.9 million, or $0.06 per share.
For the first half of 2013, discontinued operations, net of tax, resulted in a net loss of $66.1 million, or $1.34 per share. In addition to the impairment charge and closure-related costs recorded in the second quarter of 2013, the first-half results include $27.9 million, or $0.57 per share, in after-tax charges related to the closure of the Brainerd mill offset by after-tax results of operations of $5.0 million, or $0.10 per share. The prior-year six-months included a gain on the sale of the business of $7.7 million, net of tax, or $0.16 per share, and net earnings from operations of $0.8 million, net of tax, or $0.01 per share.
Wausau Paper produces and markets a complete line of away-from-home towel and tissue products, 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