Wausau Paper (NYSE:WPP) announced:
Second-Quarter Highlights
Financial Results
- Second-quarter adjusted EBITDA from
continuing operations in 2014 was $9.9 million compared to adjusted
EBITDA of $8.8 million in 2013. Wausau’s second quarter 2014 EBITDA
guidance was a range of $9 to $10 million. Second quarter 2014
adjusted EBITDA excludes one-time adjustments of $3.1 million for
costs associated with leadership transitions.
- On a reported basis, second-quarter
results from continuing operations were a net loss of $0.07 per
share compared to a prior-year second-quarter net loss of $0.30 per
share. Excluding the after-tax impact of leadership transitions,
the adjusted second quarter 2014 after-tax net loss per share was
$0.04. Excluding the after-tax impacts of non-recurring items, the
adjusted second quarter 2013 after-tax net loss was $0.05 per
share.
Case Volume Growth of More than Three Percent
- Second-quarter case shipment volume
increased 3.1 percent in 2014 compared to the same period in 2013,
resulting in a Company second-quarter shipment record of
approximately 4.34 million cases.
- Strategic product shipments; that is,
those products sold in conjunction with proprietary dispensing
systems or produced from premium substrates, comprised
approximately 49 percent of the Company’s sales mix compared to
approximately 47 percent of the Company’s sales mix in the second
quarter of 2013.
New Product Launches
- Shipments of the Artisan™ premium Green
Seal™-certified towel line, produced from 100 percent recycled
fiber and ATMOS papermaking technology, began May 13.
- The innovative Dubl-Serv® High-Capacity
OptiCore® bath tissue dispenser was launched during the second
quarter to positive distributor response. Alliance™, a
high-capacity, dual 1,000 foot roll, premium towel dispenser is
expected to be available in the market later this summer.
Major Debt Refinancing
- In early July, the Company received
initial senior debt ratings of B2 and B- from Moody’s and Standard
& Poors, respectively.
- On July 30, the Company entered into a
$175 million term loan agreement that will expire in July 2020, and
a $50 million secured revolving credit facility that will expire in
July 2019. Net proceeds of the term loan were used to retire the
outstanding $150 million private placement senior notes, as well
as, accrued interest and make-whole payments of $14.4 million, and
approximately $3.4 million of transaction-related expenses. The
remainder of the net proceeds will be used for general corporate
purposes. At the time of replacement, the Company’s previous
revolving credit facility was undrawn.
Michael C. Burandt, CEO, commented, “Our results in the second
quarter reflect market demand for our new premium DublNature® and
Artisan™ product lines and the continued improvement of operating
efficiencies at our Harrodsburg papermaking and converting
operations. Each of the step-wise initiatives underway is a
process, designed to drive improvement and the business toward the
required higher level of earnings performance. We are very pleased
with the growth of our new products and expect the recently
introduced dispensing technologies to be positive game changers in
this process, for both us and our distributor partners.”
Outlook
In the second quarter, shipments grew above the market rate of
growth with strategic products improving nearly 9 percent over last
year’s second quarter. Additionally, our announced price increase
became effective on July 1 and is expected to provide an increasing
benefit to results in the second half of the year; however, the
supply-side dynamics of excess parent role capacity continues to
exert unfavorable pressure on commodity-oriented product pricing.
During the quarter, we completed our longest production run
utilizing the new ATMOS technology to date and set several new
production records on the new machine.
Mr. Burandt, said, “Our focus remains on the incremental
improvement of operating performance in the second half of the
year. We are pleased with the initial launch of our Artisan premium
towel products and improvement to our strategic mix. During the
third quarter, we will have a maintenance outage at our Middletown,
Ohio, facility that will impact operating results approximately
$1.5 million. Including the cost of the outage and excluding
approximately $1.2 million in third-quarter proxy settlement costs,
we expect adjusted EBITDA for the third quarter of between $10 and
$11 million.”
2014 SECOND-QUARTER AND SIX-MONTH RESULTS
Continuing Operations
The following second-quarter and six-month discussion, as well
as the financial highlights and other information summarized in the
preceding discussion, contain comparisons of financial elements
including EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA
margin, adjusted net earnings (loss) and adjusted net earnings
(loss) per share. These presentations are not in accordance with
generally accepted accounting principles (GAAP). The Company
believes that the presentation of select non-GAAP measures provides
a useful analysis of ongoing operating trends. Please refer to the
attached Reconciliation of Non-GAAP Financial Measures.
Second-quarter net sales for 2014 were $89.2 million, an
increase of approximately 2 percent compared to $87.6 million
reported for the second quarter of 2013. On a year-to-date basis,
net sales rose approximately 1 percent to $166.7 million compared
to $165.8 million in 2013.
Case shipment volume in the second quarter improved 3.1 percent
over the prior-year period, resulting in year-to-date growth of 2.7
percent. Quarterly volume of strategic product case shipments grew
nearly 9 percent over the prior year second quarter while shipments
of support products were down nearly 2 percent. Overall, the
Company is expecting case growth to remain above market rates of
growth and the mix of strategic product shipments to improve given
the Company’s recent introduction of new premium products and
proprietary dispensing systems to the away-from-home market.
On a continuing operations basis, adjusted EBITDA and adjusted
EBITDA margin for the second quarters of 2014 and 2013 were $9.9
million, or 11.1 percent, and $8.8 million, or 10.1 percent,
respectively. While case volume shipments increased, strategic mix
improved and efficiencies were gained in operations
quarter-over-quarter, a portion of the benefit was offset by
continued pressure on product pricing. On a year-to-date basis,
adjusted EBITDA and adjusted EBITDA margin was $15.5 million, or
9.3 percent, compared to $14.8 million, or 8.9 percent, in
2013.
Excluding special items, the second quarter resulted in an
adjusted net loss of $1.8 million, or $0.04 per share. Prior-year
second-quarter performance, excluding special items, was an
adjusted net loss of $2.4 million, or $0.05 per share. On a
reported basis, the second quarter was a net loss of $0.07 per
share compared to a net loss of $0.30 per share a year ago.
The first half of 2014 and 2013, excluding special items,
resulted in adjusted net losses of $6.2 million, or $0.12 per
share, for both comparative periods. On a reported basis, the first
half of 2014 was a net loss of $0.16 per share compared to a net
loss of $0.37 per share for the first six months of 2013.
Discontinued Operations
During 2013, the Company completed the sale of its specialty
paper business and the closure of a related mill in Brainerd,
Minnesota, together constituting its former Paper segment.
Reclassified as a discontinued operation, the results of this
former segment are presented separately from continuing operations
in all periods presented in the condensed consolidated statements
of operations.
For the quarter and year-to-date periods of 2014, the after-tax
net loss of $0.1 million and $0.6 million, respectively, include
charges associated with closure and severance-related items. For
the second quarter of 2013, discontinued operations resulted in a
loss, net of tax, of $40.2 million, or $0.81 per share. Included in
the loss, net of tax, in the second quarter of 2013 is an after-tax
impairment charge related to the disposition of assets of
approximately $40.1 million, or $0.81 per share, and after-tax
closure-related costs of $3.1 million, or $0.06 per share, offset
by earnings from operations, net of tax, of $2.9 million, or $0.06
per share. For the first half of 2013, discontinued operations, net
of tax, resulted in a net loss of $66.1 million, or $1.34 per
share. In addition to the impairment charge and closure-related
costs recorded in the second quarter of 2013, the first-half
results include $27.9 million, or $0.57 per share, in after-tax
charges related to the closure of the Brainerd mill offset by
after-tax results of operations of $5.0 million, or $0.10 per
share.
CONFERENCE CALLWausau Paper’s second-quarter conference
call is scheduled for 9:00 a.m. Central - 10:00 a.m. Eastern on
August 7, 2014, 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 15.
About Wausau Paper:Wausau Paper produces and markets a
complete line of away-from-home towel and tissue products, as well
as soap and dispensing systems. The Company is listed on the NYSE
under the symbol WPP. To learn more about Wausau Paper visit
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 Private Securities
Litigation 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, 2013. The Company assumes no obligation to update or
supplement forward-looking statements that become untrue because of
subsequent events.
Wausau Paper Corp. Quarter Ended June 30, 2014
(in thousands,
except per share amounts)
Condensed Consolidated Statements
Three Months Six Months
of Operations (Unaudited) (Note 1)
Ended June 30, Ended June 30,
2014 2013
2014 2013 Net
sales
$ 89,214 $ 87,623
$ 166,721 $
165,817 Cost of sales
77,654 77,810
146,952 144,728 Gross
profit
11,560 9,813
19,769 21,089 Selling &
administrative expenses
15,058 10,623
27,925 25,708 Operating
loss
(3,498 ) (810 )
(8,156 ) (4,619 )
Interest expense
(2,411 ) (2,540 )
(4,579
) (4,868 ) Other income (expense), net
(20
) 10
3 (5 ) Loss
from continuing operations before income taxes
(5,929
) (3,340 )
(12,732 ) (9,492 ) Provision
(credit) for income taxes
(2,208 )
11,255
(4,565 ) 8,835
Loss from continuing operations
(3,721 ) (14,595 )
(8,167 ) (18,327 ) Loss from discontinued operations,
net of taxes
(107 ) (40,231 )
(561 ) (66,104 ) Net loss
$
(3,828 ) $ (54,826 )
$ (8,728 )
$ (84,431 ) Net loss per share (basic and diluted):
Continuing operations
$ (0.07 ) $ (0.30 )
$ (0.16 ) $ (0.37 ) Discontinued operations
(0.00 ) (0.81 )
(0.01
) (1.34 ) Net loss per share
$ (0.08
) $ (1.11 )
$ (0.17 ) $ (1.71 )
Weighted average shares outstanding-basic
50,021
49,399
49,930
49,381 Weighted average shares outstanding-diluted
50,021 49,399
49,930
49,381 * Totals may not foot due to
rounding differences.
Condensed Consolidated Balance
Sheets (Unaudited) (Note 1) June 30, December 31,
2014 2013 Current assets
$ 81,973 $ 99,195
Property, plant, and equipment, net
293,247 298,964 Other
assets
78,358 74,817 Assets of discontinued operations
5,172 8,587 Total Assets
$ 458,750 $ 481,563 Current
liabilities
$ 65,111 $ 71,983 Long-term debt
150,000 150,000 Other liabilities
83,110 88,555
Liabilities of discontinued operations
1,341 2,883
Stockholders' equity
159,188 168,142
Total Liabilities and Stockholders' Equity
$
458,750 $ 481,563
Condensed
Consolidated Statements of Cash Flows (Unaudited) (Note 1) Six
Months Ended June 30,
2014 2013 Cash flows from operating
activities: Net loss
$ (8,728 ) $ (84,431 )
Provision for depreciation, depletion, and amortization
20,595 62,046 Loss on sale of assets
119 110
Impairment of long-lived assets
- 63,712 Non-cash inventory,
spare parts and other writedowns
- 6,653 Deferred income
taxes
(5,052 ) (31,257 ) Other non-cash items
2,349 1,151 Changes in operating assets and liabilities:
Receivables
5,564 328 Inventories
272 (6,488 ) Other
(20,801 ) (6,963 ) Net cash (used in)
provided by operating activities
(5,682 )
4,861 Cash flows from investing activities:
Capital expenditures
(8,982 ) (19,465 ) Proceeds from
sale of business
- 105,067 Proceeds from sale of assets
2,690 1,098 Net cash (used in)
provided by investing activities
(6,292 )
86,700 Cash flows from financing activities:
Net payments of commercial paper
- (40,700 ) Borrowings
under credit agreement
- 65,000 Payments under credit
agreement
- (70,500 ) Proceeds from stock option exercises
1,450 104 Dividends paid
(2,982 )
(2,963 ) Net cash used in financing activities
(1,532 ) (49,059 ) Net (decrease)
increase in cash and cash equivalents
$ (13,506
) $ 42,502
Note 1. Basis of Presentation - Balance sheet amounts at June
30, 2014, are unaudited. The December 31, 2013, balance sheet
amounts are derived from audited financial statements. The
statements of cash flows for six months ended June 30, 2014 and
June 30, 2013 are unaudited and have not been adjusted to
separately disclose cash flows related to discontinued operations.
See Note 3 for additional discussion of Discontinued
Operations.
Note 2. Non-recurring Items - During the three and six months
ended June 30, 2014, the Company recognized expenses, net of tax,
of approximately $1.1 million related to severance benefits for its
former chief executive officer. In addition, on June 19, 2014,
effective with the departure of two members of its Board of
Directors, a change in control event as defined within provisions
of the equity compensation plans and related grants occurred
resulting in the satisfaction of conditions to vesting under
certain awards and recognitions of approximately $1.0 million of
expense, net of tax. In the three and six months ended June 30,
2013, we recognized expenses, net of tax, of $0.8 million related
to settlement charges associated with a defined benefit retirement
plan and a credit, net of tax, of approximately $1.1 million
related to a contract of a former manufacturing facility.
Note 3. Discontinued Operations, Net of Tax - We determined that
the sale of the specialty paper business and closure of the
Brainerd mill met the criteria for discontinued operations
presentation as established in Accounting Standards Codification
Subtopic 205-20, "Discontinued Operations." The results of
operations of the specialty paper business and Brainerd mill have
been reported as discontinued operations in the Condensed
Consolidated Statements of Operations for all periods presented.
The corresponding assets and liabilities of the discontinued
operations have been reclassified in accordance with authoritative
literature on discontinued operations for all periods
presented.
On June 26, 2013, we completed the sale of the specialty paper
business, which excluded the assets of the Brainerd, Minnesota
mill. Net of tax, the sale generated an impairment charge of $40.1
million in the three and six months ended June 30, 2013. Included
in the impairment charge is an after tax credit of approximately
$3.7 million, which is related to pension and other postretirement
plan settlements, curtailments, and special termination benefits
resulting from the sale transaction. Additionally, expenses related
to severance and benefits, contract termination costs, and other
associated closure costs, net of tax, for the three months ended
June 30, 2014 and June 30, 2013, totaled $0.1 million and $2.7
million, respectively. For the six months ended June 30, 2014 and
June 30, 2013, these expenses, net of tax, were $0.5 million and
$2.7 million, respectively. No significant additional closure
charges are anticipated.
In February 2013, we announced the planned closure of our
technical specialty paper mill in Brainerd, Minnesota. Closure
charges, net of tax, for the six months ended June 30, 2014 were
$0.1 million; there were no additional charges recognized for the
three months ending June 30, 2014. In June 2014, we sold a portion
of the group of held for sale assets associated with Brainerd and
realized proceeds on the sale of $2.6 million. There was no gain or
loss recognized on the sale of the assets. For the three and six
months ended June 30, 2013, closure charges, net of tax, totaled
$0.4 million and $27.9 million, respectively. The charges for the
six months ended June 30, 2013 are primarily a result of
accelerated depreciation on mill assets, an adjustment of mill
inventory and spare parts to net realizable value, severance and
benefit continuation costs, and other associated closure costs. No
significant additional closure charges are anticipated.
Note 4. Supplemental Information for Continuing Operations
(In
thousands, except ton data) Three Months Six Months Ended June 30,
Ended June 30,
2014 2013
2014 2013
Depreciation and amortization (unaudited)
$ 10,306 $
10,032
$ 20,595 $ 19,772 Tons sold (unaudited)
46,524 45,494
88,078
86,382 Cases shipped (unaudited)
4,336
4,205
8,190 7,977
Note 5. Reconciliation of Non-GAAP Financial Measures
(unaudited):
The following tables set forth certain non-U.S. generally
accepted accounting principles ("GAAP") financial metrics.
Management believes that the financial metrics presented are
frequently used by investors and provide a useful analysis of
ongoing operating trends. These metrics are presented as a
complement to enhance the understanding of operating results but
are not a substitute for GAAP results. The totals in the tables may
not foot due to rounding differences.
Three Months Ended June 30, 2014
Three Months Ended June 30, 2013 (in thousands) Consolidated
Consolidated Net loss $ (3,828 ) $ (54,826 ) Loss from
discontinued operations, net of taxes 107 40,231 Provision (credit)
for income taxes (2,208 ) 11,255 Interest expense and other, net
2,431 2,530 Operating loss (3,498 )
(810 ) Depreciation, depletion, and amortization 10,306
10,032 EBITDA $ 6,808 $ 9,222
Net sales $ 89,214 $ 87,623 EBITDA margin 7.6 % 10.5 %
EBITDA $ 6,808 $ 9,222 Expense related to change in control
provisions 1,432 - Expense related to severance benefit of former
CEO 1,642 - Credit for contract at former manufacturing facility -
(1,713 ) Defined benefit retirement plan settlement charges
- 1,320 Adjusted EBITDA $ 9,882 $ 8,829
Net sales $ 89,214 $ 87,623 Adjusted EBITDA margin
11.1 % 10.1 % Adjusted EBITDA $ 9,882 $ 8,829 Depreciation,
depletion, and amortization 10,306 10,032
Adjusted operating loss $ (424 ) $ (1,203 )
Six Months Ended June 30, 2014 Six Months Ended June 30,
2013 (in thousands) Consolidated Consolidated Net loss $
(8,728 ) $ (84,431 ) Loss from discontinued operations, net of
taxes 561 66,104 Provision (credit) for income taxes (4,565 ) 8,835
Interest expense and other, net 4,576 4,873
Operating loss (8,156 ) (4,619 ) Depreciation, depletion,
and amortization 20,595 19,772 EBITDA $
12,439 $ 15,153 Net sales $ 166,721 $ 165,817
EBITDA margin 7.5 % 9.1 % EBITDA $ 12,439 $ 15,153 Expense
related to change in control provisions 1,432 - Expense related to
severance benefit of former CEO 1,642 - Credit for contract at
former manufacturing facility - (1,713 ) Defined benefit retirement
plan settlement charges - 1,320
Adjusted EBITDA $ 15,513 $ 14,760 Net sales $
166,721 $ 165,817 Adjusted EBITDA margin 9.3 % 8.9 %
Adjusted EBITDA $ 15,513 $ 14,760 Depreciation, depletion, and
amortization 20,595 19,772 Adjusted
operating loss $ (5,082 ) $ (5,012 )
Three Months Ended Six
Months Ended June 30, June 30, (in thousands)
2014 2013 2014 2013 Net loss $ (3,828 ) $ (54,826 ) $ (8,728
) $ (84,431 ) Loss from discontinued operations, net of taxes 107
40,231 561 66,104 Expense related to change in control provisions,
net of tax 916
- 916
- Expense related to severance
benefit of former CEO, net of tax 1,051
- 1,051
-
Credit for contract at former manufacturing facility, net of tax
- (1,079 )
- (1,079 ) Defined benefit retirement plan
settlement charges, net of tax - 832 - 832 Income tax valuation
allowance - 12,415
- 12,415 Adjusted net loss $ (1,754 ) $
(2,428 ) $ (6,200 ) $ (6,160 )
Three Months
Ended Six Months Ended June 30, June 30,
(all amounts in dollars per diluted share) 2014 2013 2014 2013
Net loss per share $ (0.08 ) $ (1.11 ) $ (0.17 ) $ (1.71 )
Loss from discontinued operations, net of taxes 0.00 0.81 0.01 1.34
Expense related to change in control provisions, net of tax 0.02 -
0.02 - Expense related to severance benefit of former CEO, net of
tax 0.02 - 0.02 - Credit for contract at former manufacturing
facility, net of tax - (0.02 ) - (0.02 ) Defined benefit retirement
plan settlement charges, net of tax - 0.02 - 0.02 Income tax
valuation allowance - 0.25 -
0.25 Adjusted net loss per share $ (0.04 ) $
(0.05 ) $ (0.12 ) $ (0.12 ) * Totals may not foot due to
rounding differences.
Note 6. Subsequent Event - On July 30, 2014, the Company prepaid
the existing $150 million of outstanding obligations with various
maturities under its note purchase and private-shelf agreement
utilizing proceeds received under a new $175 million secured term
loan facility that matures in July 2020. Also, on July 30, 2014, we
terminated the $80 million revolving credit agreement expiring June
2015, and entered into a new $50 million secured revolving credit
facility that matures in July 2019. In addition to the prepayment
of the outstanding note purchase and private-shelf obligations, net
proceeds of $171.5 million under the term loan facility were used
to pay $14.4 million in accrued interest and make-whole payments to
the note holders and $3.4 million of transaction related-fees and
expenses. The remainder of the net proceeds will be used for
general corporate purposes.
Coincident with the securitization of the Company's debt
obligations, a settlement agreement was entered into with the
Pension Benefit Guaranty Corporation (the "PBGC") with respect to
the Company's unfunded defined benefit pension obligations. Under
the agreement, the Company has agreed to grant a lien on
substantially all of its assets to the PBGC that is junior and
subordinate to the lien and security interest on assets pledged
under the secured term loan and revolving credit agreements. The
Company has also agreed to make contributions in excess of minimum
funding requirements of up to $36 million to its defined benefit
pension plans through 2018, with the first contribution under this
agreement of $7.5 million due within 30 days following the close of
the $50 million asset-based revolver and $175 million term loan
facility.
Wausau PaperInvestor and Media Contact:Perry
Grueber, 715-692-2056Director Investor
Relationspgrueber@wausaupaper.com
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