Wausau Paper Announces 6.8M loss for First Quarter
Press release from the issuing company
MOSINEE, Wis. April 28, 2008--Wausau Paper today reported a net loss for the first quarter of $6.8 million, or $0.14 per share, compared with net earnings of $15.0 million, or $0.29 per share, in the previous year. Net sales declined less than 1 percent to $298.7 million, as shipments decreased 8 percent to 208,000 tons due primarily to reduced Printing & Writing volumes associated with the December 2007 closure of its Groveton, NH paper mill.
First-quarter results include after-tax charges of $5.0 million, or $0.10 per share, related to the closure of the Groveton mill and Specialty Products' roll wrap operations in Columbus, WI and Jackson, MS; and timberland sales gains of $1.3 million, or $0.03 per share. Prior-year first-quarter results included one-time state tax benefits of $12.0 million, or $0.24 per share, related to the January 1, 2007, restructuring of the company's subsidiaries; and after-tax timberland sales gains of $0.4 million, or $0.01 per share. Excluding these items, adjusted first-quarter 2008 operating losses were $0.06 per share compared with earnings of $0.05 per share last year. Adjusted first-quarter operating earnings are a non-GAAP measure and are reconciled to GAAP earnings below.
GAAP Net (Loss) Earnings Per Share ($0.14) $ 0.29
Gain on Sale of Timberlands (0.03) (0.01)
Facility Closure Costs 0.10 --
Tax Restructuring Benefits -- (0.24)
Adjusted Operating (Loss) Earnings Per Share ($0.06) $ 0.05
Note: Adjusted operating EPS may not foot due to rounding differences.
"The general economic weakness that began late in 2007 continued into the first quarter with demand decline extending into several of our markets," said Thomas J. Howatt, president and CEO. "At the same time, fiber and energy costs increased a combined $17 million as compared to last year while selling price gains were limited by highly competitive markets. Against this backdrop, a continued focus on strategic markets in each of our businesses has positioned us for improved results in the quarters ahead. Our decision to reduce non-strategic Printing & Writing production capacity and exit Specialty Products' unprofitable roll wrap business is allowing us to focus on markets where we can create competitive advantage and ultimately achieve targeted profitability. In addition, our emphasis on environmentally preferred Towel & Tissue products is continuing to deliver meaningful progress as evidenced by a 16 percent increase in Green Seal(TM)-certified product shipments."
Specialty Products reported a first-quarter operating loss of $0.4 million compared with an operating profit of $2.7 million last year. Net sales increased 2 percent while shipments declined 5 percent with nearly half of the volume difference the result of reduced roll wrap shipments. First-quarter results included $0.3 million of pre-tax facility closure charges related to the fourth-quarter sale of the roll wrap business. "Although well below prior-year levels, first-quarter results improved significantly from a fourth-quarter loss of $2.7 million," Mr. Howatt pointed out. "This sequential improvement was achieved despite fiber and energy cost increases as well as continuing weakness in demand for products sold into the housing and industrial sectors of the U.S. economy. Despite these factors, we remain focused on driving long-term profitability by increasing our share of strategic markets such as growing food service/packaging markets and leveraging our technical expertise to develop unique products such as our MicroBrite(TM) line of non-charring food packaging papers developed for use in microwave, convection, and conventional ovens."
Printing & Writing reported a first-quarter operating loss of $12.5 million compared with a loss of $1.8 million last year while net sales and shipments declined 8 percent and 16 percent, respectively, due primarily to the Groveton closure. First-quarter results included pre-tax Groveton mill closure charges of $7.6 million, consisting primarily of non-cash charges related to depreciation of long-lived assets. "We are pleased with the progress made against our profit recovery plan and remain on pace to return Printing & Writing to profitable levels in the third quarter," Mr. Howatt said. "The transition from a three-mill to a two-mill manufacturing system has gone smoothly with the opening of an East Coast distribution center occurring in the first quarter and the completion of remaining grade transfers expected by the end of the second quarter. In addition, our renewed focus on core products and brands is gaining traction while several cost reduction and capability enhancement capital investment opportunities are under evaluation."
Towel & Tissue reported first-quarter operating profits of $6.1 million compared with operating profits of $9.7 million last year. Net sales and shipments increased 7 percent and 2 percent, respectively. "Although input costs have risen sharply and operating profits narrowed from record first-quarter levels in 2007, the fundamentals of our Towel & Tissue business remain strong," Mr. Howatt said. "Shipments of higher-margin, value-added products increased 9 percent despite 'away-from-home' demand growth of just 1 percent. And while fiber and energy cost increases of more than $4 million reduced margins from year-ago levels, the selling price increases implemented late in the first quarter are expected to substantially improve margins in the second quarter. In addition, the $31 million towel machine rebuild at our Middletown mill remains on schedule and is expected to be complete in the first quarter of 2009. The rebuilt machine will provide 16,000 tons per year of incremental production capacity while reducing overall manufacturing cost, further enhancing margins in our most profitable business segment."
The company sold approximately 1,300 acres of timberlands in the first quarter, continuing progress on its program to sell 42,000 acres of non-strategic timberlands. A total of 20,300 acres remains in the sales program. Also during the first quarter the company repurchased 553,000 shares of common stock at a cost of $4.5 million, and has approximately 2.5 million shares remaining under a February 12, 2008 board authorization.
Discussing the second-quarter outlook, Mr. Howatt said, "The deteriorating economy is injecting a degree of uncertainty to our expectations for the coming quarter. Historically high energy costs - particularly natural gas and transportation - show no signs of abating while fiber costs remain at their highest levels in more than a decade. In addition, several of our annual mill maintenance outages fall in the second quarter making the comparison to first quarter more difficult. Even so, we are encouraged by progress made with Printing & Writing's recovery plan and mix initiatives within Specialty Products and Towel & Tissue. We expect second-quarter results to improve to breakeven levels from a first-quarter loss excluding timberland sales gains and charges related to the Groveton mill closure. On the same basis, second-quarter 2007 earnings were $0.05 per share."
Wausau Paper's first-quarter conference call is scheduled for 11:00 a.m. (EDT) on Tuesday, April 29, and can be accessed through the company's Web site at www.wausaupaper.com under "Investor Information." A replay of the webcast will be available at the same site through May 6.
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