Exhibit 99.1
WAUSAU PAPER REPORTS THIRD-QUARTER RESULTS, EXPANDED TIMBERLAND SALES PROGRAM
MOSINEE, WIS...OCTOBER 24, 2005...Wausau Paper (NYSE:WPP) today reported a net
loss for the third quarter of $9.0 million, or $0.18 per diluted
share, compared to net earnings of $8.1 million, or $0.16 per diluted share,
last year. Net sales rose 9 percent to $285.6 million, and shipments increased
7 percent to 229,000 tons.
Third-quarter operating results included after-tax charges of $13.6 million, or
$0.26 per diluted share, related to the previously announced closure of
Printing & Writing's sulfite pulp mill in Brokaw, Wisconsin, and an after-tax
gain of $0.7 million, or $0.01 per diluted share, from the sale of timberlands.
For the first nine months, the Company reported a net loss of $9.7 million, or
$0.19 per diluted share, compared with net earnings of $15.3 million, or $0.29
per diluted share, during the same period in 2004. In addition to sulfite pulp
mill closure charges of $0.38 per diluted share, results for the first nine
months included losses of $0.15 per diluted share at the Brainerd, Minnesota,
paper mill; a gain on the sale of timberlands of $0.02 per diluted share, and
stock incentive credits of $0.03 per diluted share. Prior-year results
included stock incentive charges of $0.02 per diluted share. Net sales
increased 6 percent to $828.7 million and shipments increased 3 percent to
672,000 tons.
"Net sales and shipments increased to record levels in the third quarter
despite soft demand in printing and specialty paper markets," said Thomas J.
Howatt, president and CEO. "We continue to gain share in our target markets as
recently introduced products - such as our new OptiServ (trademark) brand
hands-free towel dispensing system - build in popularity with customers. Our
progress in improving production efficiencies has been masked by sharply higher
energy-related costs - most notably natural gas, transportation, and fuel oil.
In total, the Company's energy-related costs increased the equivalent of $0.03
per diluted share in September compared with August, in large part because of
the production and supply disruptions caused by Hurricane Katrina. In the
third quarter, energy-related prices were approximately $0.06 per diluted share
higher than last year."
Specialty Products reported third-quarter operating profits of $4.3 million,
compared with $6.3 million last year. Current-quarter results included a $1.0
million gain from the sale of timberlands. Net sales increased 1 percent while
shipments declined slightly. "Third-quarter revenues increased despite highly
competitive specialty markets and a continued decline in paper mill packaging
volumes," commented Mr. Howatt. "Sales mix improvements, productivity gains,
and somewhat lower fiber prices only partially offset higher manufacturing
costs, including energy and transportation."
Printing & Writing reported third-quarter operating losses of $23.1 million,
compared with operating profits of $4.0 million last year. Net sales and
shipments increased 13 percent and 16 percent, respectively. Third-quarter
results included pre-tax pulp mill closure charges of $20.8 million, consisting
primarily of non-cash charges related to accelerated depreciation of long-lived
assets. Results also included operating losses of $2.8 million at Brainerd,
equal to $1.8 million, or $0.04 per diluted share on an after-tax basis, and a
$0.2 million gain from the sale of timberlands. "Market conditions remain very
weak with uncoated freesheet demand down 4 percent from a year ago.
Chronically oversupplied markets continued to severely limit pricing leverage
and our ability to pass through increased costs," Mr. Howatt stated. "Despite
these conditions, Printing & Writing increased third-quarter sales and upgraded
its sales mix with the introduction of Exact Ice (trademark) and Exact
Digital (trademark) brand products. We remain focused on improving the long-
term profitability of this business and further penetrating attractive niche
markets by leveraging our strong brands and broad manufacturing capabilities."
During the third quarter, Printing & Writing reduced production by
approximately 5,000 tons, taking four days of downtime at Brainerd and nearly
one month of downtime on a 50,000 ton-per-year paper machine at Brokaw, with
the latter remaining temporarily idled. "These moves allow Printing & Writing
to more closely match production capacity with current demand and optimize
production efficiencies and distribution costs," said Mr. Howatt.
Towel & Tissue's third-quarter operating profits increased 37 percent to a
record $10.8 million from $7.9 million last year. Net sales and shipments also
reached record levels, increasing 19 percent and 9 percent, respectively. "We
are pleased with the continued growth - both revenue and operating profit -
achieved by our Towel & Tissue business," Mr. Howatt commented. "Selling price
increases and product mix improvements are continuing to drive profitability,
offsetting increased energy and transportation costs."
Commenting on the fourth quarter, Mr. Howatt said, "As we enter the seasonally
slower fourth quarter, underlying business conditions remain strong for our
Towel & Tissue business but particularly challenging in Specialty Products and
Printing & Writing. Despite unsettled markets and significant cost pressures,
we are actively pursuing our core strategies - product leadership, niche market
focus, customer service, and operational excellence - to drive long-term
success. In the short term, energy-related prices are expected to further
pressure margins in the fourth quarter, increasing the equivalent of $0.10 per
share compared with the third quarter. As a result, we expect near break-even
results in the fourth quarter, excluding sulfite pulp mill charges and
timberland sales gains."
Discussing the Company's timberland sales program, Mr. Howatt said, "Nearly
one-third of the timberlands the Company holds would have been used for
pulpwood at Brokaw's sulfite pulp mill. With the fourth-quarter closure of
that facility those lands are no longer strategic to our operations. As a
result, we are expanding our previously announced timberland divestiture
program to 42,000 acres from 12,000 acres, generating estimated after-tax
earnings of $29 million, or $0.57 per share, over the next three to four
years."
Wausau Paper's third-quarter conference call is scheduled for 11:00 a.m. (EDT)
on Tuesday, October 25, 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 November 3.
Wausau Paper produces fine printing and writing papers, technical specialty
papers, and "away-from-home" towel and tissue products. To learn more about
Wausau products go to 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 Securities 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 in Item 1 of the company's Form 10-K for the year ended December 31,
2004. The company assumes no obligation to update or supplement forward-
looking statements that become untrue because of subsequent events.
# # #
(tables follow)
WAUSAU PAPER
INTERIM REPORT - QUARTER ENDED SEPTEMBER 30, 2005
<CAPTION
(in thousands, except share amounts)
CONDENSED CONSOLIDATED STATEMENTS Three Months Nine Months
OF OPERATIONS (UNAUDITED) Ended September 30, Ended September 30,
2005 2004 2005 2004
Net sales $285,624 $262,428 $828,656 $778,352
Cost of sales 277,482 229,983 780,533 691,073
Gross profit 8,142 32,445 48,123 87,279
Selling & administrative expense 19,108 17,158 55,011 55,796
Restructuring 226 0 403 0
Operating (loss) profit (11,192) 15,287 (7,291) 31,483
Interest expense (2,718) (2,608) (8,055) (7,685)
Other income/(expense), net 124 191 361 483
(Loss) earnings before income taxes (13,786) 12,870 (14,985) 24,281
(Credit) provision for income taxes (4,794) 4,762 (5,238) 8,984
Net (loss) earnings $ (8,992) $ 8,108 $ (9,747) $ 15,297
Net (loss) earnings per share-basic $ (0.18) $ 0.16 $ (0.19) $ 0.30
Net (loss) earnings per share-diluted $ (0.18) $ 0.16 $ (0.19) $ 0.29
Weighted average shares outstanding-basic 51,369,000 51,681,000 51,548,000 51,654,000
Weighted average shares outstanding-diluted 51,369,000 51,980,000 51,548,000 51,905,000
CONDENSED CONSOLIDATED BALANCE SHEETS (NOTE 1) SEPTEMBER 30, December 31,
2005 2004
Current assets $277,538 $287,292
Property, plant & equipment, net 510,225 551,160
Other assets 46,278 43,782
Total Assets $834,041 $882,234
Current liabilities $133,703 $147,750
Long-term debt 161,268 161,833
Other liabilities 205,297 215,559
Stockholders' equity 333,773 357,092
Total Liabilities & Stockholders' Equity $834,041 $882,234
CONDENSED CONSOLIDATED STATEMENTS Nine Months
OF CASH FLOW (UNAUDITED) Ended September 30,
2005 2004
Net cash provided by operating activities $ 3,708 $ 47,102
Cash flows from investing activities:
Capital expenditures (26,606) (16,579)
Proceeds on property, plant & equipment disposals 1,490 43
Cash used in investing activities (25,116) (16,536)
Cash flows from financing activities:
Payments under capital lease obligation (76) (83)
Dividends paid (13,162) (13,166)
Payments for purchase of company stock (4,983) 0
Proceeds from stock option exercises 0 1,413
Cash used in financing activities (18,221) (11,836)
Net (decrease) increase in cash & cash equivalents $ (39,629) $ 18,730
Note 1. Balance sheet amounts at September 30, 2005, are unaudited.
The December 31, 2004, amounts are derived from audited
financial statements.
Note 2. Pulp Mill Closure
In July 2005, the Company announced plans to permanently close
the sulfite pulp mill at its Brokaw, Wisconsin, facility. The
pulp mill closure is expected to be substantially completed by
the end of 2005 and will result in the elimination of
approximately 60 jobs, or 11 percent of the facility's workforce.
The related long-lived assets will be abandoned. The cost of
sales for the three months and nine months ended September 30,
2005, as reflected in the Condensed Consolidated Statements of
Operations, include $20.6 million and $29.9 million,
respectively, in pre-tax charges for accelerated depreciation and
an adjustment of pulp mill inventory to net realizable value.
Pre-tax restructuring expense related to certain assets disposed
as a direct result of the closure and other associated costs were
$0.2 million and $0.4 million for the three months and nine
months ended September 30, 2005, respectively. Additional pre-
tax closure charges of approximately $12.1 million are expected
to be recognized over the next three quarters, with $11.5 million
in the fourth quarter of 2005, and $0.6 million in the first half
of 2006.
Note 3. Interim Segment Information
The Company has reclassified certain prior-year interim segment
information to conform to the 2005 presentation. The
reclassification is the result of a reporting change, effective
January 1, 2005, for two converting facilities from the Printing
& Writing segment to the Specialty Products segment.
The Company's operations are classified into three principal
reportable segments: Specialty Products, Printing & Writing, and
Towel & Tissue, each providing different products. Separate
management of each segment is required because each business unit
is subject to different marketing, production, and technology
strategies.
Specialty Products produces specialty papers at its manufacturing
facilities in Rhinelander, Wisconsin; Mosinee, Wisconsin; and
Jay, Maine. Specialty Products also includes two converting
facilities that produce laminated roll wrap and related specialty
finishing and packaging products. Printing & Writing produces a
broad line of premium printing and writing grades at
manufacturing facilities in Brokaw, Wisconsin; Groveton, New
Hampshire; and Brainerd, Minnesota. Printing & Writing also
includes a converting facility that converts printing and writing
grades. Towel & Tissue produces a complete line of towel and
tissue products that are marketed along with soap and dispensing
systems for the "away-from-home market." Towel & Tissue operates
a paper mill in Middletown, Ohio and a converting facility in
Harrodsburg, Kentucky.
Sales, operating profit, and asset information by segment is as follows:
(in thousands, except ton data) SEPTEMBER 30, December 31,
2005 2004
Segment assets (Note 1)
Specialty Products $337,423 $342,724
Printing & Writing 271,496 281,378
Towel & Tissue 174,852 171,080
Corporate & Unallocated* 50,270 87,052
$834,041 $882,234
Three Months Nine Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
Net sales external customers (unaudited)
Specialty Products $115,461 $114,580 $347,806 $347,245
Printing & Writing 100,549 89,361 288,399 264,680
Towel & Tissue 69,614 58,487 192,451 166,427
$285,624 $262,428 $828,656 $778,352
Operating (loss) profit (unaudited)
Specialty Products $ 4,260 $ 6,330 $12,029 $16,073
Printing & Writing (23,103) 3,998 (40,772) 5,603
Towel & Tissue 10,776 7,855 28,582 21,287
Corporate & Eliminations (3,125) (2,896) (7,130) (11,480)
$ 11,192) $ 15,287 $ (7,291) $ 31,483
Depreciation, depletion and amortization (unaudited)
Specialty Products $ 6,164 $ 6,240 $ 18,581 $ 18,824
Printing & Writing 24,752 3,834 36,176 11,600
Towel & Tissue 4,939 4,548 14,619 13,550
Corporate & Unallocated 296 308 867 878
$ 36,151 $ 14,930 $ 70,243 $ 44,852
Tons sold (unaudited)
Specialty Products 101,385 101,547 306,577 317,886
Printing & Writing 84,194 72,287 244,765 218,380
Towel & Tissue 43,196 39,459 120,749 113,592
228,775 213,293 672,091 649,858
<FN>
*Segment assets do not include intersegment accounts receivable, cash,
deferred tax assets and certain other assets which are not identifiable
with the segments.
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