PAPER SEGMENTThe Paper segment reported a second-quarter operating profit of $2.0 million. Including pre-tax capital related expense of $0.7 million in the prior year, Paper achieved an operating profit of $4.9 million for the same period in 2011.
During the first quarter, we completed the sale of this segment’s premium Print & Color brands, inventory and select equipment, and ceased papermaking operations at the former primary Print & Color manufacturing site. In the second quarter, we ceased converting operations at the site and continued to execute closure-related activities. Discontinued operations for the second quarter included, net-of-tax, a loss of $3.4 million, or $0.07 per share from operations. On the same basis, discontinued operations for the prior year had a loss, net of tax, of $1.6 million, or $0.03 per share.
FINANCING ACTIVITIESOn April 9, 2012, the Company issued $50 million of Senior Notes with a maturity date of June 30, 2016, and an interest rate of 4 percent per annum. Proceeds were used, in part, to extinguish $19 million of Industrial Revenue Bonds on June 1, 2012.
CONFERENCE CALLWausau Paper’s second-quarter conference call is scheduled for 11:00 a.m. (EDT) on Tuesday, July 31, and can be accessed through the investor information section of the Company’s website at www.wausaupaper.com. A replay of the webcast will be available at the same site through August 7.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 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 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.
|Interim Report - Quarter Ended June 30, 2012|
|(in thousands, except per share amounts)|
|Condensed Consolidated Statements||Three Months||Six Months|
|of Operations (unaudited)||Ended June 30,||Ended June 30,|
|Cost of sales||187,191||189,628||376,873||360,592|
|Selling & administrative expenses||21,468||16,104||44,652||35,348|
|Loss on early extinguishment of debt||-||(666||)||-||(666||)|
|Other expense, net||(6||)||(4||)||(10||)||(10||)|
|Earnings from continuing operations before income taxes||3,333||7,432||5,779||7,134|
|Provision for income taxes||1,232||2,601||2,138||2,497|
|Earnings from continuing operations||2,101||4,831||3,641||4,637|
|(Loss) earnings from discontinued operations, net of taxes||(3,416||)||(1,601||)||4,802||(2,798||)|
|Net (loss) earnings||$||(1,315||)||$||3,230||$||8,443||$||1,839|
|Net earnings (loss) per share (basic and diluted):|
|Net (loss) earnings per share *||$||(0.03||)||$||0.07||$||0.17||$||0.04|
|Weighted average shares outstanding-basic||49,309||49,164||49,302||49,147|
|Weighted average shares outstanding-diluted||49,309||49,398||49,524||49,366|
|* Totals may not foot due to rounding differences.|
|Condensed Consolidated Balance Sheets (Note 1)||June 30,||December 31,|
|Property, plant, and equipment, net||411,609||369,836|
|Assets of discontinued operations **||15,792||-|
|Liabilities of discontinued operations **||2,972||-|
|Total Liabilities and Stockholders' Equity||$||697,236||$||678,830|
|Condensed Consolidated Statements||Six Months|
|of Cash Flows (unaudited) ***||Ended June 30,|
|Cash flows from operating activities:|
|Provision for depreciation, depletion, and amortization||22,841||28,403|
|Gain on sale of business||(12,198||)||-|
|Loss (gain) on sale and disposal of assets||403||(41||)|
|Impairment of long-lived assets||2,075||-|
|Loss on early extinguishment of debt||-||666|
|Other non-cash items||(3,366||)||(928||)|
|Changes in operating assets and liabilities:|
|Net cash provided by operating activities||40,130||18,314|
|Cash flows from investing activities:|
|Grants received for capital expenditures||236||434|
|Proceeds from sale of business||20,500||-|
|Proceeds from sale of assets||2||417|
|Net cash used in investing activities||(53,098||)||(28,556||)|
|Cash flows from financing activities:|
|Net payments of commercial paper||(8,650||)||(1,460||)|
|Borrowings under credit agreement||3,000||33,000|
|Payments under credit agreement||(3,000||)||(33,000||)|
|Issuances of notes payable||50,000||50,000|
|Payments under notes payable obligations||-||(35,000||)|
|Payments under industrial development bond agreement||(19,000||)||-|
|Payment of premium on early extinguishment of debt||-||(708||)|
|Net cash provided by financing activities||19,392||9,877|
|Net increase (decrease) in cash & cash equivalents||$||6,424||$||(365||)|
Balance sheet amounts at June 30, 2012, are unaudited. The December 31, 2011, amounts are derived from audited financial statements.
In December 2011, we announced that our Board of Directors had approved the sale of our premium Print & Color brands, and the closure of our Brokaw, Wisconsin paper mill. The sale of the premium Print & Color brands, select paper inventory, and certain manufacturing equipment to Neenah Paper, Inc. closed on January 31, 2012, generating proceeds of $20.5 million and a pre-tax gain of $12.2 million. We permanently ceased papermaking operations at the mill on February 10, 2012. We have determined that the assets of the Brokaw mill, which are included as part of our Paper segment, meet the criteria for held for sale classification, and under the criteria established in Accounting Standards Codification ("ASC") Subtopic 205-20, "Discontinued Operations", are reported as discontinued operations. We expect to complete the disposal of the Brokaw mill assets within the next nine months.
During the second quarter of 2012, we continued to execute restructuring activities related to the closure of the Brokaw mill, and have recognized pre-tax charges of approximately $2.9 million during the three months ended June 30, 2012. Exclusive of the gain recorded for the sale transaction, during the six months ended June 30, 2012, we have recognized pre-tax charges of approximately $6.3 million. The pre-tax charges in both the three and six months ended June 30, 2012, consist primarily of severance and benefit continuation costs, contract termination costs, an adjustment of spare parts and other inventory to net realizable value, and other associated closure costs. Additional pre-tax closure charges of approximately $0.6 million are expected to be incurred during the remainder of 2012.
In the second quarter of 2012, we incurred a pre-tax charge of $2.2 million related to settlement charges associated with a defined benefit pension plan. The pre-tax charge is included in selling and administrative expenses in the three and six months ended June 30, 2012.
During the second quarter of 2011, we settled our obligations related to the $35.0 million unsecured private placement notes scheduled to expire in August 2011. The settlement of these obligations resulted in a loss on early extinguishment of debt of $0.7 million in the three months ended June 30, 2011, which reflects the premiums paid to retire the unsecured private placement notes, net of unamortized premiums and issuance costs.
Interim Segment Information
|We have evaluated our disclosures of our business segments in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Subtopic 280-10, and as a result we have classified our operations into two principal reportable segments: Tissue and Paper, each providing different products. Separate management of each segment is required because each business unit is subject to different marketing, production, and technology strategies.|
|The Tissue segment produces a complete line of towel and tissue products that are marketed along with soap and dispensing systems for the "away-from-home" market. Tissue operates a paper mill in Middletown, Ohio and a converting facility in Harrodsburg, Kentucky. The Paper segment produces specialty papers within three core markets - Food, Industrial & Tape, and Coated & Liner. These products are produced at manufacturing facilities located in Brainerd, Minnesota and in Rhinelander and Mosinee, Wisconsin. In 2011 and into 2012, the Paper segment produced fine printing and writing papers at a manufacturing facility in Brokaw, Wisconsin. Papermaking operations at the Brokaw facility permanently ceased on February 10, 2012. We have reported the Brokaw facility as a discontinued operation. See Note 2 for additional information.|
|Following is sales, operating profit (loss), and other significant items by segment. The sales, operating profit (loss), and other significant items exclude discontinued operations in all periods presented.|
|(in thousands, except ton data)|
|Three Months||Six Months|
|Ended June 30,||Ended June 30,|
|Net sales external customers (unaudited)|
|Operating profit (loss) (unaudited)|
|Corporate & Eliminations||(6,894||)||(3,421||)||(13,044||)||(8,808||)|
|Depreciation, depletion, and amortization (unaudited)|
|Corporate & Unallocated||705||603||1,330||1,206|
|Tons sold (unaudited)|