Consumables

Wausau Paper Announces Fourth Quarter and Full-Year 2012 Results

Tuesday 12. February 2013 - Comments on Strategic Repositioning Initiatives

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 Tissue segment 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.