Wausau Paper Reports First Quarter Loss Despite Jump in Shipments
Unfavorable impacts were somewhat offset by continued momentum gain of the new DublNature® premium products.
May 9, 2014 - Wausau Paper (WPP) reported:
- Results of continuing operations in the first quarter impacted by weather-related market and cost factors, competitive support product pricing, and unfavorable Canadian currency exchange rate trends. These unfavorable impacts were somewhat offset by continued momentum gain of the new DublNature® premium products, with shipment volumes improving approximately 40 percent over the prior-year first quarter.
- Record overall first-quarter shipments and shipment growth of 2.2 percent achieved as first quarter industry demand declined approximately 1.0 percent.
- Net sales relatively flat at $77.5 million in the first quarter compared to $78.2 million in the first quarter of 2013.
- On a reported basis, first-quarter results from continuing operations were a net loss of $0.09 per share compared to a prior year first-quarter net loss of $0.08 per share.
- First-quarter adjusted EBITDA was $5.6 million in 2014 compared to adjusted EBITDA of $5.9 million in the same period of 2013.
Case Volume Growth of more than 2 percent
- First-quarter case shipment volume increased 2.2 percent in 2014 compared to the same period in 2013, and represented a first-quarter Company shipment record with approximately 3,854,000 cases.
- Strategic product shipments, that is, those products sold in conjunction with proprietary dispensing systems or produced from premium substrates, were up 3.9 percent in the first quarter compared to the same quarter in 2013.
New Products to Be Launched in Second Quarter
- The Artisan™ premium towel line, featuring new substrates made with ATMOS papermaking technology and Green Seal™-certified, will be available to the market on May 13, 2014.
- Two innovative dispensers will also be launched during the second quarter.
Michael C. Burandt, CEO, commented, “Our results for the first quarter were clearly not satisfactory and while some impacts were not within the Company’s control, we need to execute better on our strategy. We remain confident in our longer term growth, particularly with the strong performance of our DublNature premium product and the potential of the new Artisan product line, which will be launched in the second quarter.”
It is unlikely that anticipated shipments in the quarter lost due to weather-related factors will be recovered during the balance of 2014. As a result, the Company is modifying its overall growth expectation of 6 percent for full-year 2014 case shipment growth to a range of 4 to 5 percent.
Supply-side dynamics in the market including capacity utilization, elevated parent roll availability and low wastepaper prices continue to exert unfavorable pressure on pricing as it relates to more commodity-oriented products, including those products in our support category. While broad-based tissue industry pricing actions have been recently announced, the Company does not expect to realize a benefit in the second quarter. The Company also expects proxy and advisory costs to now exceed the original expectation for the second quarter.
Commenting on the Company’s outlook, Mr. Burandt, said, “Our focus now is on continuing to analyze the business to improve operating performance in the current quarter. We are also looking forward to launching our Artisan premium towel products. Given this near-term focus, we are comfortable providing EBITDA guidance for the second quarter of between $9 and $10 million, but we are withdrawing previous fourth quarter and full year guidance. Second-quarter 2014 guidance represents sequential and year-on-year improvement and we expect the quarterly improvement trend to continue as we move through the year. We remain committed to our goal of creating value for our shareholders by generating returns above our cost of capital, growing free cash flow and returning cash to our shareholders.”
2014 FIRST-QUARTER RESULTS
The following first-quarter discussion, as well as the financial highlights and other information summarized in the preceding discussion, contain comparisons of financial elements including EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net earnings (loss) and adjusted net earnings (loss) per share. 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. Please refer to the attached Reconciliation of Non-GAAP Financial Measures.
The first quarter resulted in a reported net loss of $4.4 million, or $0.09 per share. Prior-year first-quarter performance was a reported net loss of $3.7 million, or $0.08 per share. The fourth quarter of 2013 was a reported net loss of $7.8 million, or $0.16 per share. Excluding special items, the fourth quarter of 2013 was an adjusted net loss of $0.3 million, or $0.00 per share.
On a continuing operations basis, EBITDA and EBITDA margin for the first quarters of 2014 and 2013 were $5.6 million, or 7.3 percent, and $5.9 million, or 7.6 percent, respectively. EBITDA and EBITDA margin on an adjusted basis in the fourth quarter of 2013 was $11.6 million, or 12.7 percent.
First-quarter net sales were relatively flat year-over-year at $77.5 million reported in 2014 compared to $78.2 million reported for the first quarter of 2013. The first quarter of the year is historically the weakest quarter from a net sales and shipment perspective due to the seasonality of the away-from-home market. Net sales in the fourth quarter of 2013 were $91.1 million.
While market demand in the sectors of the away-from-home market in which we compete was down approximately 1.0 percent, our case shipment volume was a first-quarter shipment record and increased 2.2 percent quarter-over-quarter, driven by strong gains in our premium DublNatureproducts and continued strong performance of our EcoSoft® branded products. First-quarter volume in strategic product categories improved nearly 4 percent over the prior-year first quarter and volume in our support product categories grew nearly 1 percent over the same quarter in 2013.
Despite the case shipment growth and an improved strategic mix in the first quarter of 2014 compared to the first quarter of 2013, competitive pricing pressure in support product categories combined with a slightly weaker volume of products sold through proprietary dispensing systems and an unfavorable impact from Canadian currency exchange rates, impacted revenue growth in the first quarter comparisons.
As we trial and introduce new products, we continue to progress along the startup curve established for the Harrodsburg paper machine and related converting operations. While the first quarter was negatively impacted by trials related to the new Artisan product line, in March 2014, a new production record was established on the paper machine and a record number of finished goods cases were produced on our converting assets. Weather-related items also unfavorably impacted EBITDA by approximately $0.6 million, excluding impacts on shipment volume or freight costs.
The reorganization and salaried staffing reduction efforts implemented following the sale of the technical specialty business in mid-2013 impacted several areas of our organization and are reflected in our results, particularly in the area of selling, general and administrative expenses. Comparing to the first quarter of 2013, selling, general and administrative costs have been reduced approximately $2.2 million in the first quarter of 2014.
During the second quarter of 2013, the Company completed the sale of its specialty paper business. This transaction, combined with the first quarter 2013 closure of a 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 first quarter of 2014, discontinued operations resulted in a loss, net of tax, of $0.5 million, or $0.01 per share, compared to a loss of $25.9 million, net of tax, or $0.52 per share, for the first quarter of 2013. Included in the loss, net of tax, in the first quarter of 2014 are after-tax closure-related costs of $0.4 million, or $0.01 per share.
Wausau Paper produces and markets a complete line of away-from-home towel and tissue products. The company is headquartered in Mosinee, Wisconsin. To learn more about Wausau Paper visit: www.wausaupaper.com.
SOURCE: Wausau Paper