Wausau Paper Q1 2010 Earnings Call Transcript
Wausau Paper Corp. (WPP)
Q1 2010 Earnings Call
April 27, 2010 11:00 AM ET
Executives
Perry Grueber - Director IR
Tom Howatt - President and CEO
Hank Newell - SVP, Paper Segment
Scott Doescher - EVP and CFO
Analysts
Anna Torma
Mark Wilde
Ryan Rosenthal
Michael Roxland
Presentation
Operator
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Ladies and gentlemen, thank you for standing by and welcome to the Wausau Paper 2010 first quarter results conference call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions). As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Director of Investor Relations, Perry Grueber. Please go ahead.
Perry Grueber
Thank you, Stephanie. Good morning, everyone. Thank you for joining us for Wausau Paper’s 2010 first quarter analyst and investor call. I am pleased to be here today with Tom Howatt our President and Chief Executive Officer; Scott Doescher, Executive Vice President and Chief Financial Officer; and Hank Newell, Senior Vice President of our Paper Segment.
This call is being web caste and slides are provided to summarize key elements of our presentation. The presentation is also available as a download from the investor section of our Wausau Paper website.
In a moment Tom will begin our presentation by reviewing first quarter results for the corporation and our tissue segment. Hank will then review the paper segment’s financial performance and discuss current markets within which paper competes. Following those comments, Scott will provide a high level financial review, and update key elements of our financing and balance sheet strategies. And finally, Tom will comment on our second quarter outlook, after which we would be happy to address any questions you may have.
Before proceeding with the presentation, I’ll remind you that statements made during this presentation, other than those that refer to past results are forward-looking statements made pursuant to the Safe Harbor provisions of the Securities Reform Act of 1995. Such statements, including those concerning earnings, outlook, and price increases involve risks and uncertainties that may cause results to differ materially from our presentation set forth during the discussion. Among other things, these risks and uncertainties include the risks and assumptions described in item 1A and item 7 of the company’s Form 10-K for the year ended December 31, 2009. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. In addition our presentation refers to certain non-GAAP financial measures and reconciliation of these measures to GAAP is provided in the appendix of this presentation and is available on our website.
And with those formalities out of the way, I’ll now turn the call over to Tom. Tom?
Tom Howatt
Good morning everyone. I’ll begin with highlights of our first quarter performance. Continuing our favorable trend of recent quarters, first quarter adjusted earnings were solid $0.08 per share despite relatively lackluster demand in some market sectors and much higher input costs. Our tissue business reported record first quarter profits and a fifth consecutive quarter of year-over-year earnings gains while paper segment results improved despite a significant impact from much higher fiber costs.
During the quarter, we announced Board approval for $27 million investment to provide tape-backing capabilities at our Brainerd mill. And finally, we completed a debt facility at quarter-end which significantly increases our credit capacity. Market conditions for our product sectors are reflective of the weak economic recovery experienced to-date.
Away from home demand was essentially flat for the quarter while uncoated free sheet demand improved only modestly against a very weak comparable period. The one area where we had experienced notable demand gains is for our technical grades such as tape, food and industrial. At the same time, market pulp costs have risen at historic highs and have impacted paper sector margins. Strong first quarter earnings reflect the continued growth of our highly profitable tissue business as well as benefits from the recently completed restructuring of our paper segment.
Earnings gains were achieved despite fiber cost increases of $12 million. As we look to the future our focus remains on sustaining strong growth on our tissue business. While building on the competitive position of our newly formed paper segment.
Our tissue segment reported a strong start to the year with operating profits reaching a record $11 million for the first quarter. These results were achieved despite Wastepaper pricing that was double prior year levels. Shipments improved 7% over prior year in the phase of flat market demand supported by strong proprietary dispenser placements and a more normalized first quarter order pattern compared to the uncertainty of 2009.
Results also benefited from increased operating efficiency at our paper mill and converting plant. The key to the success of our tissue business in recent years has been the development of products for markets such as property management; education and government or environmentally sensitive products are preferred. The addition of towel and tissue capacity at our Middletown mill has enhanced our ability to service these markets while significantly improving our cost structure.
Hank will now review market conditions and the performance of our paper segment, Hank?
Hank Newell
Thank you, Tom. On January 1st, we completed the final step in our three year business restructuring initiative by combining our printing and writing and specialty products businesses into a single operating unit known as the Paper segment. The consolidation eliminates $2 million in annual administrative costs, enhances market access for a full range of products and creates a flexible manufacturing platform that supports both mature and growth oriented markets.
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