Description of the Business and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2014 |
Description of the Business and Summary of Significant Accounting Policies | |
Description of the Business and Summary of Significant Accounting Policies | |
NOTE 1 DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Wausau Paper Corp. manufactures, converts, and sells a complete line of towel and tissue products that are marketed along with soap and dispensing systems for the industrial and commercial away-from-home market. Our products are primarily sold within the United States and Canada. |
Wausau Paper Corp. manufactured, converted, and sold specialty paper products for industrial and commercial end markets and premium printing and writing papers within the former Paper segment. The premium Print & Color brands were sold in January of 2012 and the Brokaw, Wisconsin mill was closed in February 2012. In January 2013, we announced our intent to focus our management efforts and future investments on our Tissue business. In March 2013, we permanently closed our Brainerd, Minnesota, mill and on June 26, 2013, completed the sale of our specialty paper business, ending our participation in the markets in which our former Paper segment competed. See Note 2 for further information regarding discontinued operations. |
BASIS OF PRESENTATION |
The consolidated financial statements include the accounts of Wausau Paper Corp. and our subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. |
The results of operations of our specialty paper and printing and writing business are reported as discontinued operations in the Consolidated Statements of Comprehensive Income (Loss) for all periods presented. The corresponding assets and liabilities of the discontinued operations in the Consolidated Balance Sheets have been reclassified in accordance with authoritative literature on discontinued operations. Also, in accordance with the authoritative literature, we have elected to not separately disclose the cash flows related to the discontinued operation. See Note 2 for further information regarding discontinued operations. |
USE OF ESTIMATES |
The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Actual results may differ from these estimates. |
CASH AND CASH EQUIVALENTS |
We define cash equivalents as highly liquid, short-term investments with an original maturity of three months or less. Cash and cash equivalents are stated at cost, which approximates market. There were approximately $2.6 million and $18.3 million of cash and cash equivalents on deposit with one bank at December 31, 2014 and 2013, respectively. |
INVENTORIES |
Finished paper products and raw materials are valued at the lower of cost, determined on the last-in, first-out ("LIFO") method, or market. As of December 31, 2014 and December 31, 2013, 97%, and 96% of inventory, respectively, was valued on a LIFO basis. Liquidations in individual LIFO inventory pools, excluding the impact of discontinued operations, decreased cost of sales by less than $0.1 million for the years ended December 31, 2014 and 2013. |
PROPERTY, PLANT, AND EQUIPMENT |
Property, plant, and equipment are stated at cost and are depreciated over the estimated useful lives of the assets using the straight-line method for financial statement purposes. Land and construction in progress are stated at cost. The cost and related accumulated depreciation of all plant and equipment retired or otherwise disposed of are removed from the accounts, and any resulting gains or losses are included in the Consolidated Statements of Comprehensive Income (Loss). |
Buildings are depreciated over a 20 to 45 year period; machinery and equipment over a 3 to 20 year period. Maintenance and repair costs are charged to expense as incurred. Improvements that extend the useful lives of the assets are added to the property, plant, and equipment accounts. |
Excluding discontinued operations, interest capitalized on long-term projects in 2014, 2013, and 2012 totaled $0.3 million, $0.4 million, and $4.8 million, respectively. |
We assess the recoverability of assets to be held and used by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets, generally based on a discounted cash flow analysis. Included in discontinued operations in 2014, 2013, and 2012, we recorded impairment losses of $0.2 million, $64.5 million, and $2.1 million, respectively. See Note 2 for a further discussion on impairment losses. |
INCOME TAXES |
Estimates of income taxes refundable and payable, deferred income tax assets and liabilities, and the effective tax rate are based on an analysis of many factors including interpretations of Federal, state, and foreign income tax laws, the difference between tax and financial reporting basis of assets and liabilities, estimates of amounts currently due or owed, realization of income tax benefits in future years, and current accounting standards. Estimates are reviewed and updated on a quarterly basis as facts and circumstances change and actual results are known. Adjustments to the effective income tax rate and recorded assets and liabilities may occur in future periods if actual results differ significantly from original estimates and interpretations. |
TREASURY STOCK |
Common stock purchased for treasury is recorded at cost. At the date of subsequent reissue, the treasury stock account is reduced by the cost of such stock on the weighted-average cost basis. |
ACCUMULATED OTHER COMPREHENSIVE LOSS |
For all periods presented, the accumulated other comprehensive loss is comprised of cumulative net actuarial losses and prior service cost not yet recognized as a component of net periodic benefit costs for retirement plans and other post-retirement benefit plans, net of tax of $27.6 million, $17.6 million, and $56.2 million at December 31, 2014, 2013, and 2012, respectively. |
REVENUE RECOGNITION |
Revenue is recognized, net of estimated discounts, allowances and returns, at the time title passes to the customer, which is typically upon the shipment of goods. We grant credit to customers in the ordinary course of business. |
Shipping and handling costs billed to customers are included in net sales, and the related costs are included in cost of sales in the Consolidated Statements of Comprehensive Income (Loss). |
In certain circumstances, we will enter into agreements to sell dispenser systems to our customers at a reduced cost. These agreements contain specific provisions, among which the customer must maintain the dispenser system and utilize our products in the dispenser over the term of the agreement. We evaluate the recoverability of the carrying amount of the dispenser systems whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. We use judgment to determine when an impairment test is necessary. No impairment losses related to dispenser systems were recorded in 2014, 2013, or 2012. The net costs associated with providing the dispenser system at a discount are recorded in other assets on our Consolidated Balance Sheets, and are amortized as a reduction of net sales over the term of the agreement. There were approximately $47.4 million and $47.2 million recorded in other assets for dispenser systems at December 31, 2014 and 2013, respectively. In the years ended December 31, 2014, 2013, and 2012, deferred costs related to dispenser systems were approximately $18.6 million, $20.7 million, and $19.1 million, respectively. In the years ended December 31, 2014, 2013, and 2012, amortization of deferred costs related to dispenser systems was approximately $18.4 million, $18.0 million, and $17.2 million, respectively. |
STOCK-BASED COMPENSATION PLANS |
The provisions of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Subtopic 718-10, "Compensation – Stock Compensation", require that certain share-based compensation awards be remeasured at their fair value at each interim reporting period until final settlement. See Note 9 for a further discussion on stock-based compensation plans. |
EARNINGS PER SHARE |
We present both basic and diluted net earnings (loss) per share ("EPS") amounts. Basic EPS is calculated based on the weighted average number of common shares outstanding during the respective year, while diluted EPS is calculated based on the weighted average number of common shares and common stock equivalents outstanding during the respective year. The difference between basic and diluted EPS is solely attributable to stock-based compensation plans. See Note 9 for information on stock-based compensation plans. We use the treasury-stock method to calculate the impact of outstanding awards of stock options, restricted stock, and restricted stock unit awards, referred to as performance units. Stock options for which the exercise price exceeds the average market price over the period have an antidilutive effect on EPS and, accordingly, are excluded from the calculation. |
Due to the net loss from continuing operations for the years ended December 31, 2014, 2013, and 2012, all stock-based grants were considered to be antidilutive. |
Basic and diluted net (loss) earnings per share are reconciled as follows: |
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(all amounts in thousands, except per share data) | | | 2014 | | | 2013 | | | 2012 |
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| | | | | | | | | |
|
Basic weighted average common shares outstanding | | | 50,173 | | | 49,411 | | | 49,312 |
Dilutive securities: | | | | | | | | | |
Stock compensation plans | | | – | | | – | | | – |
|
Diluted weighted average common shares outstanding | | | 50,173 | | | 49,411 | | | 49,312 |
|
| | | -17,534 | | | -28,183 | | | -1,562 |
Loss from continuing operations, net of tax | $ | $ | $ |
(Loss) earnings from discontinued operations, net of tax | | | -978 | | | -69,082 | | | 2,238 |
|
Net (loss) earnings | | $ | -18,512 | | $ | -97,265 | | $ | 676 |
|
| | | -0.35 | | | -0.57 | | | -0.03 |
Net loss from continuing operations, per share – basic and diluted | $ | $ | $ |
Net (loss) earnings from discontinued operations, per share – basic and diluted | | | -0.02 | | | -1.4 | | | 0.05 |
|
Net (loss) earnings per share – basic and diluted | | $ | -0.37 | | $ | -1.97 | | $ | 0.01 |
|
DERIVATIVES |
At December 31, 2014 and 2013, there were no derivative instruments outstanding. |
RESEARCH AND DEVELOPMENT EXPENSES |
Research and development costs are expensed as incurred. Expenditures for product development, excluding discontinued operations, were $0.7 million, $1.4 million, and $0.8 million in 2014, 2013, and 2012, respectively. |
NEW ACCOUNTING PRONOUNCEMENTS |
In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-11 "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists". This guidance requires unrecognized tax benefits to be presented as a decrease in net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. The guidance was applied prospectively beginning January 1, 2014. The adoption of ASU No. 2013-11 did not have an impact on our results of operations or financial position. |
On September 13, 2013, the Internal Revenue Service released final tangible property regulations under Sections 162(a) and 263(a) of the Internal Revenue Service Code ("IRC") and proposed regulations under Section 168 of the IRC. These regulations generally apply to taxable years beginning on or after January 1, 2014 and affect all taxpayers that acquire, produce, or improve tangible property. The adoption of these regulations did not have a material impact on our Consolidated Financial Statements. |
On April 10, 2014, the FASB issued ASU No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." This guidance changes the definition of a discontinued operation to a strategic shift that has or will have a major impact on an entity's operations or financial results. Additionally, there are new disclosure requirements to enhance transparency for reporting purposes. ASU 2014-08 is to be applied prospectively to all disposals that occur in annual periods beginning on or after December 15, 2014. We do not expect the adoption of this guidance will have a material impact on our Consolidated Financial Statements. |
On May 28, 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." This standard provides companies with a single model for use in accounting for revenue arising from contracts with customers. The core principle of this model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. ASU No. 2014-09 is effective with annual periods beginning after December 15, 2016, with early adoption not permitted. The guidance allows companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption through a cumulative adjustment. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements. |
On June 19, 2014, the FASB issued ASU No. 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period." For share-based payments with a performance target that could be achieved after the requisite vesting period, the guidance requires the target be treated as a performance condition under FASB ASC Topic 718, "Compensation – Stock Compensation," and, as a result, should not be included in the estimation of the grant-date fair value of the award. Instead, ASU No. 2014-12 requires companies to recognize compensation expense for the award when it becomes probable that the performance target will be achieved. ASU No. 2014-12 is effective for annual periods beginning after December 15, 2015, and may be applied either prospectively or retrospectively. We do not expect the adoption of this guidance will have a material impact on our Consolidated Financial Statements. |
On August 27, 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements – Going Concern." This standard provides guidance on management's responsibility to evaluate whether there is substantial doubt about a company's ability to continue as a going concern and related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company's ability to continue as a going concern within one year from the date the financial statements are issued. ASU No. 2014-15 is effective for annual periods ending after December 15, 2016, and for interim and annual periods thereafter, with early adoption permitted. We do not expect the adoption of this guidance will have a material impact on our Consolidated Financial Statements. |
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