Wausau Paper Reports Second Quarter 2014 Results
Aug. 7, 2014 - Wausau Paper (WPP) announced:
Second-quarter adjusted EBITDA from continuing operations in 2014 was $9.9 million compared to adjusted EBITDA of $8.8 million in 2013. Wausau’s second quarter 2014 EBITDA guidance was a range of $9 to $10 million. Second quarter 2014 adjusted EBITDA excludes one-time adjustments of $3.1 million for costs associated with leadership transitions.
On a reported basis, second-quarter results from continuing operations were a net loss of $0.07 per share compared to a prior-year second-quarter net loss of $0.30 per share. Excluding the after-tax impact of leadership transitions, the adjusted second quarter 2014 after-tax net loss per share was $0.04. Excluding the after-tax impacts of non-recurring items, the adjusted second quarter 2013 after-tax net loss was $0.05 per share.
Case Volume Growth of More than Three Percent
Second-quarter case shipment volume increased 3.1 percent in 2014 compared to the same period in 2013, resulting in a Company second-quarter shipment record of approximately 4.34 million cases.
Strategic product shipments; that is, those products sold in conjunction with proprietary dispensing systems or produced from premium substrates, comprised approximately 49 percent of the Company’s sales mix compared to approximately 47 percent of the Company’s sales mix in the second quarter of 2013.
New Product Launches
Shipments of the Artisan™ premium Green Seal™-certified towel line, produced from 100 percent recycled fiber and ATMOS papermaking technology, began May 13.
The innovative Dubl-Serv® High-Capacity OptiCore® bath tissue dispenser was launched during the second quarter to positive distributor response. Alliance™, a high-capacity, dual 1,000 foot roll, premium towel dispenser is expected to be available in the market later this summer.
Major Debt Refinancing
In early July, the Company received initial senior debt ratings of B2 and B- from Moody’s and Standard & Poors, respectively.
On July 30, the Company entered into a $175 million term loan agreement that will expire in July 2020, and a $50 million secured revolving credit facility that will expire in July 2019. Net proceeds of the term loan were used to retire the outstanding $150 million private placement senior notes, as well as, accrued interest and make-whole payments of $14.4 million, and approximately $3.4 million of transaction-related expenses. The remainder of the net proceeds will be used for general corporate purposes. At the time of replacement, the Company’s previous revolving credit facility was undrawn.
Michael C. Burandt, CEO, commented, “Our results in the second quarter reflect market demand for our new premium DublNature® and Artisan™ product lines and the continued improvement of operating efficiencies at our Harrodsburg papermaking and converting operations. Each of the step-wise initiatives underway is a process, designed to drive improvement and the business toward the required higher level of earnings performance. We are very pleased with the growth of our new products and expect the recently introduced dispensing technologies to be positive game changers in this process, for both us and our distributor partners.”
In the second quarter, shipments grew above the market rate of growth with strategic products improving nearly 9 percent over last year’s second quarter. Additionally, our announced price increase became effective on July 1 and is expected to provide an increasing benefit to results in the second half of the year; however, the supply-side dynamics of excess parent role capacity continues to exert unfavorable pressure on commodity-oriented product pricing. During the quarter, we completed our longest production run utilizing the new ATMOS technology to date and set several new production records on the new machine.
Mr. Burandt, said, “Our focus remains on the incremental improvement of operating performance in the second half of the year. We are pleased with the initial launch of our Artisan premium towel products and improvement to our strategic mix. During the third quarter, we will have a maintenance outage at our Middletown, Ohio, facility that will impact operating results approximately $1.5 million. Including the cost of the outage and excluding approximately $1.2 million in third-quarter proxy settlement costs, we expect adjusted EBITDA for the third quarter of between $10 and $11 million.”
2014 SECOND-QUARTER AND SIX-MONTH RESULTS
The following second-quarter and six-month 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.
Second-quarter net sales for 2014 were $89.2 million, an increase of approximately 2 percent compared to $87.6 million reported for the second quarter of 2013. On a year-to-date basis, net sales rose approximately 1 percent to $166.7 million compared to $165.8 million in 2013.
Case shipment volume in the second quarter improved 3.1 percent over the prior-year period, resulting in year-to-date growth of 2.7 percent. Quarterly volume of strategic product case shipments grew nearly 9 percent over the prior year second quarter while shipments of support products were down nearly 2 percent. Overall, the Company is expecting case growth to remain above market rates of growth and the mix of strategic product shipments to improve given the Company’s recent introduction of new premium products and proprietary dispensing systems to the away-from-home market.
On a continuing operations basis, adjusted EBITDA and adjusted EBITDA margin for the second quarters of 2014 and 2013 were $9.9 million, or 11.1 percent, and $8.8 million, or 10.1 percent, respectively. While case volume shipments increased, strategic mix improved and efficiencies were gained in operations quarter-over-quarter, a portion of the benefit was offset by continued pressure on product pricing. On a year-to-date basis, adjusted EBITDA and adjusted EBITDA margin was $15.5 million, or 9.3 percent, compared to $14.8 million, or 8.9 percent, in 2013.
Excluding special items, the second quarter resulted in an adjusted net loss of $1.8 million, or $0.04 per share. Prior-year second-quarter performance, excluding special items, was an adjusted net loss of $2.4 million, or $0.05 per share. On a reported basis, the second quarter was a net loss of $0.07 per share compared to a net loss of $0.30 per share a year ago.
The first half of 2014 and 2013, excluding special items, resulted in adjusted net losses of $6.2 million, or $0.12 per share, for both comparative periods. On a reported basis, the first half of 2014 was a net loss of $0.16 per share compared to a net loss of $0.37 per share for the first six months of 2013.
During 2013, the Company completed the sale of its specialty paper business and the closure of a related mill in Brainerd, Minnesota, together constituting its former Paper segment. Reclassified as a discontinued operation, the results of this former segment are presented separately from continuing operations in all periods presented in the condensed consolidated statements of operations.
For the quarter and year-to-date periods of 2014, the after-tax net loss of $0.1 million and $0.6 million, respectively, include charges associated with closure and severance-related items. For the second quarter of 2013, discontinued operations resulted in a loss, net of tax, of $40.2 million, or $0.81 per share. 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.
Wausau Paper produces and markets a complete line of away-from-home towel and tissue products, as well as soap and dispensing systems. To learn more about Wausau Paper visit: www.wausaupaper.com.
SOURCE: Wausau Paper