Wausau Paper Announces Fourth Quarter and Full-Year 2012 Results

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Wausau Paper Announces Fourth Quarter and Full-Year 2012 Results

Comments on Strategic Repositioning Initiatives

MOSINEE, Wis.--(BUSINESS WIRE)-- Wausau Paper (NYSE: WPP) today reported fourth-quarter and full-year results for 2012.


2012 EXECUTIVE SUMMARY

  • Achieved the safest year in the Company's history.
  • Full-year 2012 adjusted net earnings were $10.8 million versus $16.1 million a year ago.
  • Fourth-quarter 2012 adjusted net loss was $1.5 million compared to net earnings of $2.5 million for the prior year period.
  • On January 11, 2013, announced intent to strategically reposition the Company to focus on the Tissue business and explore alternatives for Paper segment.
  • Tissue Segment.
    • Grew Tissue case volume 3.3 percent, with 4.0 percent growth in the fourth quarter.
    • Invested $220 million in new tissue machine in Kentucky; started production in December; business poised to deliver significant returns in 2013.
  • Paper Segment.
    • Realized technical specialty full-year shipment growth of 4.5 percent in a deteriorating demand environment.
    • Experienced margin pressure in Paper segment due to operational challenges at Brainerd, Minnesota.
    • Exited the Print & Color business, including sale of premium brands and closure and sale of the Brokaw, Wisconsin, manufacturing site, delivering $52 million in cash versus the targeted $20 million.
  • Managed year-end debt to $196 million reflecting strong cash generation and balance sheet management.

STRATEGIC UPDATE

On January 11 the Company publicly announced its intent to focus its efforts and future capital investment on the continued growth of the highly successful Tissue business. The Company intends to:

  • Accelerate growth in Tissue through organic investment and adjacency expansion.
    • Initial $220 million investment in Tissue business positions the segment to significantly accelerate year-over-year growth and increase target EBITDA margin to 23-25 percent within five years.
    • Further establishes Company's "green leadership" in away-from-home tissue markets through improved product performance and the introduction of new-to-the-market premium recycled products.
  • Divest the technical specialty paper business in a way that delivers maximum value to all shareholders.
  • Reduce and realign selling and administrative costs by approximately $13 million.
  • Achieve near-term return on capital commitment of 15 percent by the end of 2014.

Henry C. Newell, president and CEO, stated, "Over the last 18 months we have focused on generating cash to fund our $220 million Tissue expansion, constructing a new tissue machine and upgrading our converting infrastructure while maintaining a conservative approach to working capital and the overall balance sheet. This investment is about to begin delivering significant value and our expectations are high as we build momentum and deliver new premium recycled tissue products later this year. We are also taking the appropriate actions in our Paper segment to explore alternatives for this business and to evaluate our near-term options for our Brainerd operations."

2012 FULL-YEAR AND FOURTH QUARTER RESULTS

Continuing Operations

The following full-year and fourth-quarter discussions include certain comparisons that contain non-GAAP measures. The Company believes that the presentation of certain non-GAAP measures provides a useful analysis of ongoing operating trends. Please refer to the Reconciliation of the Non-GAAP Financial Measures in the appendix.

Full-year 2012 net earnings, excluding special items, were $10.8 million, or $0.22 per share compared with adjusted net earnings of $16.1 million, or $0.33 per diluted share a year ago. On a reported basis, full-year net losses of $0.08 per share compared to prior-year net earnings of $0.72 per diluted share.

Fourth-quarter results, excluding special items, were a net loss of $1.5 million, or $0.03 per share. Prior-year fourth-quarter results, excluding special items, were net earnings of $2.5 million, or $0.05 per diluted share. On a reported basis, fourth-quarter net losses of $0.05 per share compared to net earnings of $0.50 per diluted share a year ago.

Tissue Segment

The Tissuesegment finished 2012 strong achieving 4.0 percent shipment growth, measured in cases, for the fourth quarter. Fourth-quarter adjusted operating profit was $10.2 million in 2012 compared to $10.4 million in 2011. In December 2012, the Tissue segment started production on the new tissue machine located in Harrodsburg. As a result of the successful startup and other Tissue expansion related costs, fourth-quarter adjusted operating results included approximately $2.3 million of unabsorbed manufacturing costs. Full-year adjusted operating profit in 2012 of $41.3 million, compared with $33.6 million last year, with Tissue's full-year adjusted EBITDA margin at 20.1 percent compared to 18.9 percent in the prior year.

For 2012, net sales increased 2.2 percent, as the volume of cases shipped grew 3.3 percent over the prior year and exceeded 16 million cases for the first time. By way of comparison, market demand for away-from-home towel and tissue products increased approximately 1.3 percent. Case shipments of Tissue's Green Seal™-certified products were up 8.5 percent as these products now represent 54 percent of total sales compared to 34 percent five years ago. Additionally, strategic value-added product sales in 2012, those related to proprietary dispensing system pull-through, increased 4.8 percent over the prior year and placement of such dispensers grew 8 percent.

Paper Segment

The Paper segment reported a fourth-quarter adjusted operating loss of $6.8 million, compared with a prior year adjusted operating profit of $0.7 million. For the full year, the Paper segment reported an adjusted operating loss of $1.4 million, compared with adjusted operating profit of $16.1 million in the prior year.

Fourth-quarter and full-year operating results reflect deteriorating second-half demand, addressed through market-related downtime, the fourth-quarter shutdown of converting operations at Brainerd as a result of the Paper segment's exit from the Print & Color business, and continued operational issues at Brainerd, which pressured fourth-quarter results. For the full year, combined shipments of technical specialty products in our Tape & Industrial, Food and Coated & Liner sectors increased 4.5 percent during 2012.

Liquidity and Capital Resources

The Company concluded 2012 with long-term debt at $196.2 million compared to $127.6 million at the end of prior year. In both years, cash provided by operating activities combined with the sales of the premium Print & Color business and certain assets favorably contributed to the funding of the Tissue expansion project and overall level of long-term debt. Total capital spend for 2012 was $149.4 million compared to $78.1 million in 2011, with $130.9 million and $45.1 million in 2012 and 2011, respectively, related to the Tissue expansion project.

Discontinued Operations

During 2012, the Company completed the sale of its premium Print & Color brands, inventory and select equipment, and the permanent closure and sale of its Brokaw manufacturing site. The discontinued operation is separately presented from continuing operations for all periods presented in the condensed consolidated statements of operations.

For the fourth quarter of 2012, loss from discontinued operations, net of tax, was $0.1 million, compared to a net loss of $53.6 million, or $1.08 per diluted share in the prior year. The prior year included an after-tax charge of $52.9 million, or $1.07 per diluted share for the planned closure of the Brokaw manufacturing facility.

For the full year of 2012, income from discontinued operations, net of tax, was $4.5 million, or $0.09 per share, compared to a net loss of $57.0 million, or $1.15 per diluted share in 2011. Both full-year periods include charges with respect to the discontinuance of paper making and closure of the facility.

CONFERENCE CALL

Wausau Paper will hold an analyst and investors conference call at 11:00 a.m. (EST) today, Monday, February 11. This call can be accessed through the Company's website at www.wausaupaper.com under "Investors." A replay of the webcast will be available at the same site through February 18.

About Wausau Paper:

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.

Safe Harbor under the Private Securities Litigation Reform Act of 1995: The matters discussed in this news release concerning the company's future performance or anticipated financial results are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties which may cause results to differ materially from those set forth in these statements. Among other things, these risks and uncertainties include the strength of the economy and demand for paper products, increases in raw material and energy prices, manufacturing problems at company facilities, and other risks and assumptions described under "Information Concerning Forward-Looking Statements" in Item 7 and in Item 1A of the company's Form 10-K for the year ended December 31, 2011. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 
Wausau Paper Corp.
Quarter and Year Ended December 31, 2012
        
(in thousands, except per share amounts)
Condensed Consolidated StatementsThree MonthsTwelve Months
of Operations (Unaudited) (Note 1)Ended December 31,Ended December 31,
2012201120122011
Net sales$190,866$203,034$822,169$823,089
Cost of sales 173,756  144,529  731,335  692,603 
Gross profit17,11058,50590,834130,486
Selling & administrative expenses (Note 3) 20,135  18,233  94,972  68,278 
Operating (loss) profit(3,025)40,272(4,138)62,208
Interest expense(972)(1,435)(3,360)(6,850)
Loss on early extinguishment of debt---(666)
Other income (expense), net 5  (4) (12) (61)
(Loss) earnings from continuing operations before income taxes(3,992)38,833(7,510)54,631
(Credit) provision for income taxes (1,659) 13,914  (3,665) 19,287 
(Loss) earnings from continuing operations(2,333)24,919(3,845)35,344
(Loss) earnings from discontinued operations, net of taxes (Note 2) (125) (53,637) 4,521  (57,042)
Net (loss) earnings$(2,458)$(28,718)$676 $(21,698)
 
Net (loss) earnings per share - basic:
Continuing operations$(0.05)$0.51$(0.08)$0.72
Discontinued operations (0.00) (1.09) 0.09  (1.16)
Net (loss) earnings per share - basic *$(0.05)$(0.58)$0.01 $(0.44)
 
Net (loss) earnings per share - diluted:
Continuing operations$(0.05)$0.50$(0.08)$0.72
Discontinued operations (0.00) (1.08) 0.09  (1.15)
Net (loss) earnings per share - diluted *$(0.05)$(0.58)$0.01 $(0.44)
 
Weighted average shares outstanding-basic 49,323  49,175  49,312  49,160 
Weighted average shares outstanding-diluted 49,323  49,493  49,312  49,413 
 
* Totals may not foot due to rounding differences.
 
Condensed Consolidated Balance Sheets (Unaudited) (Note 1)December 31,December 31,
20122011
Current assets$166,856$226,334
Property, plant, and equipment, net460,656369,836
Other assets 73,203  82,660 
Total Assets$700,715 $678,830 
 
Current liabilities$98,186$155,295
Long-term debt196,200127,650
Other liabilities199,995199,641
Liabilities of discontinued operations (Note 2)833-
Stockholders' equity 205,501  196,244 
Total Liabilities and Stockholders' Equity$700,715 $678,830 
 
Condensed Consolidated StatementsTwelve Months
of Cash Flows (Note 1)Ended December 31,
2012 (Unaudited)2011
Cash flows from operating activities:
Net earnings (loss)$676$(21,698)
Provision for depreciation, depletion, and amortization47,64255,815
Gain on sale of business(12,515)-
Gain on sale of assets(960)(36,202)
Impairment of long-lived assets2,07558,837
Non-cash inventory, spare parts and other writedowns-13,093
Other non-cash items(222)(20,454)
Loss on early extinguishment of debt-666
Changes in operating assets and liabilities:
Receivables21,7266,432
Inventories18,23518,965
Other (40,729) (10,970)
Net cash provided by operating activities 35,928  64,484 
 
Cash flows from investing activities:
Capital expenditures(149,424)(78,063)
Grants received for capital expenditures236610
Proceeds from sale of business20,817-
Proceeds from sale of assets 7,194  43,830 
Net ca
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