MRO Magazine

Wausau Paper Reports Second-Quarter 2015 Results


August 6, 2015
By Business Wire News

MOSINEE, Wis.

Wausau Paper (NYSE:WPP) today announced financial and operating results for the three- and six-month period ended June 30, 2015.

Second-Quarter Highlights

Financial Results

  • Second-quarter adjusted EBITDA from continuing operations in 2015 was $14.5 million compared with adjusted EBITDA of $9.9 million in 2014. Second quarter 2015 adjusted EBITDA exceeded the Company’s previous guidance range of $13 to $14 million.
  • On a reported basis, net earnings from continuing operations were $2.5 million, or $0.05 per share, in the second quarter of 2015 compared with a prior-year second-quarter net loss from continuing operations of $3.7 million, or $0.07 per share.

Case Volume Growth

  • Second-quarter case shipment volume increased 2 percent in 2015 compared with the same period in 2014, resulting in a second-quarter shipment record of approximately 4.4 million cases for the Company.
  • Strategic product shipments – those products sold in conjunction with proprietary dispensing systems or produced from premium substrates – comprised slightly more than 49 percent of the Company’s sales for the second quarter of 2015 and similar to the strategic product shipment mix in the prior-year quarterly period. The improved margin quality of both strategic and support products shipped in 2015 contributed to a 5 percentage point improvement in adjusted EBITDA margin of 16 percent as compared with 11.1 percent for the second quarter of 2014.

Michael C. Burandt, CEO, commented, “Our second quarter results reflect the continuing above-market demand growth for our premium DublNature® and Artisan™ products lines, the positive market response to our differentiated product portfolio, and the benefits from the significant number of Margin Enhancement Initiative (MEI) projects that are evidenced by ongoing improvement in operating performance, as well as, increased cash generation. We are very pleased with the pace of growth of our premium products and the contributions of our entire team toward improving our operating platform.”

Third-Quarter 2015 Outlook

Commenting on the third quarter, Mr. Burandt, said, “Our teams remain focused on furthering the significant performance benefits we are realizing from MEI in the second half of the year. We are pleased with the market’s favorable response to our premium products and the resulting improvement in our strategic mix.

“Although costs of production have improved through the first half of 2015, we maintain our prior forecast for modest cost pressure related to wastepaper pricing through the balance of the year. As a result we currently expect third quarter adjusted EBITDA of $17 million to $18 million,” Mr. Burandt concluded.

2015 Second-Quarter and First-Half 2015 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 financial elements are not measurements of our performance under generally accepted accounting principles (GAAP) and should not be considered an alternative to net earnings (loss) or any other performance measures derived in accordance with GAAP. Additionally, the non-GAAP measures presented may not be the same as similar measures used by other companies. 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 2015 were $90.9 million, an increase of approximately 2 percent compared to $89.2 million in the second quarter of 2014. On a year-to-date basis, net sales rose approximately 5 percent to $175.1 million compared to $166.7 million in 2014. Higher net sales in both the quarter and year-to-date periods, were driven primarily by case shipment volume growth of 2 percent and more than 4 percent, respectively. Average net selling price for the comparable quarterly and first-half periods was relatively flat as actual selling price improvement was largely offset by the unfavorable impact of the Canadian exchange rate.

   

The following table provides a reconciliation of EBITDA(1) to adjusted EBITDA for both the three- and six-month periods ended June 30:

 

Three Months
Ended June 30,

Six Months
Ended June 30,

2015

 

2014

2015

 

2014

EBITDA $ 18.0 $ 6.8 $ 32.0 $ 12.4
Expense related to change in control provisions 1.4 1.4
Expense related to severance benefit of former CEO 1.6 1.6
Credit for contract at former manufacturing facility   (3.5 )         (7.4 )    
Adjusted EBITDA $ 14.5     $ 9.9     $ 24.6     $ 15.5  
 
Adjusted EBITDA margin 16.0 % 11.1 % 14.1 % 9.3 %
 

Note: Totals may not foot due to rounding differences

(1) See also the attached reconciliation of Non-GAAP Financial Measures to the most directly comparable GAAP measure.

 

Year-over-year improvements in adjusted EBITDA and adjusted EBITDA margins in both the second quarter and first half periods of 2015 were driven by the improved quality of mix and volume of products sold, as well as continued operational improvement. These positive factors were partially offset by pre-tax costs of approximately $1.2 million as a result of planned, routine maintenance outages that occurred at both our Kentucky and Ohio, facilities in the second quarter of 2015.

Excluding the after-tax impact of the special items previously mentioned, second quarter 2015 adjusted net earnings were $0.2 million, or $0.00 per share, compared to an adjusted net loss of $1.8 million, or $0.04 per share, in the second quarter of 2014. On a reported basis, second quarter net earnings were $2.5 million, or $0.05 per share, in 2015 compared to a net loss of $3.7 million, or $0.07 per share, in the year-ago period.

The first half of 2015 and 2014, excluding special items previously mentioned, resulted in adjusted net losses of $2.0 million, or $0.04 per share, and $6.2 million, or $0.12 per share, respectively. On a reported basis, net earnings for the first half of 2015 were $2.7 million, or $0.05 per share, compared to a net loss of $8.2 million, or $0.16 per share, for the first six months of 2014.

CONFERENCE CALL

Wausau Paper’s second-quarter conference call is scheduled for 9:00 a.m. Central – 10:00 a.m. Eastern on August 6, 2015, and can be accessed through the Investor section of the Company’s website at www.wausaupaper.com. A replay of the webcast will be available at the same site through August 13.

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, 2014.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, 2015
       
(in thousands, except per share amounts)
Condensed Consolidated Statements Three Months Six Months
of Operations (Unaudited) (Note 1) Ended June 30, Ended June 30,
2015 20142015 2014
Net sales$90,894 $ 89,214$175,075 $ 166,721
Cost of sales  73,488     77,654    144,788     146,952  
Gross profit17,406 11,56030,287 19,769
Selling & administrative expenses  9,745     15,058    19,103     27,925  
Operating profit (loss)7,661 (3,498 )11,184 (8,156 )
Interest expense(3,272) (2,411 )(6,516) (4,579 )
Other (expense) earnings, net  (15)   (20 )  (14)   3  
Earnings (loss) from continuing operations before income taxes4,374 (5,929 )4,654 (12,732 )
Provision (credit) for income taxes  1,921     (2,208 )  1,997     (4,565 )
Earnings (loss) from continuing operations2,453 (3,721 )2,657 (8,167 )
Loss from discontinued operations, net of taxes  (362)   (107 )  (124)   (561 )
Net earnings (loss)$2,091   $ (3,828 )$2,533   $ (8,728 )
 
Net earnings (loss) per share (basic and diluted):
Continuing operations$0.05 $ (0.07 )$0.05 $ (0.16 )
Discontinued operations  (0.01)   (0.00 )  (0.00)   (0.01 )
Net earnings (loss) per share*$0.04   $ (0.08 )$0.05   $ (0.17 )
 
Weighted average shares outstanding-basic  50,374     50,021    50,387     49,930  
Weighted average shares outstanding-diluted  50,407     50,021    50,422     49,930  
 
* Totals may not foot due to rounding differences.
       
Condensed Consolidated Balance Sheets (Unaudited) (Note 1)June 30, December 31,
2015 2014
Current assets$74,554 $ 72,489
Property, plant, and equipment, net279,887 289,840
Other assets96,392 100,483
Assets of discontinued operations  1,029   1,050
Total Assets$451,862 $ 463,862
 
Current liabilities$62,798 $ 70,140
Long-term debt173,369 170,868
Other liabilities85,033 92,551
Liabilities of discontinued operations2,721 2,791
Stockholders’ equity  127,941   127,512
Total Liabilities and Stockholders’ Equity$451,862 $ 463,862
 
     
Condensed Consolidated Statements of Cash Flows (Unaudited) (Note 1) Six Months
Ended June 30,
2015   2014
Cash flows from operating activities:
Net earnings (loss)$2,533 $ (8,728 )
Provision for depreciation, depletion, and amortization20,829 20,595
(Gain) loss on sale of assets(819) 119
Deferred income taxes2,059 (5,052 )
Other non-cash items1,541 2,349
Changes in operating assets and liabilities:
Receivables(2,465) 5,564
Inventories1,543 272
Other assets(8,156) (10,909 )
Accounts payable and other  (12,647)   (9,892 )
Net cash provided by (used in) operating activities  4,418     (5,682 )
 
Cash flows from investing activities:
Capital expenditures(3,924) (8,982 )
Proceeds from sale of assets  1,002     2,690  
Net cash used in investing activities  (2,922)   (6,292 )
 
Cash flows from financing activities:
Borrowings under credit agreements11,500
Payments under credit agreements(9,291)
Proceeds from stock option exercises 1,450
Dividends paid  (3,002)   (2,982 )
Net cash used in financing activities  (793)   (1,532 )
 
Net increase (decrease) in cash and cash equivalents703 (13,506 )
Cash and cash equivalents beginning of period  2,675     19,594  
 
Cash and cash equivalents, end of period$3,378   $ 6,088  
 
 
Note 1. Basis of Presentation – Balance sheet amounts at June 30, 2015, are unaudited. The December 31, 2014, balance sheet amounts are derived from audited financial statements. The statements of cash flows for six months ended June 30, 2015 and June 30, 2014 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, Included Within Selling and Administrative Expenses of Continuing Operations, Net of Tax – In the three and six months ended June 30, 2015, we realized credits of $2.2 million, and $4.7 million, respectively, associated with a rate adjustment and capacity release on a contract obligation for a former manufacturing facility. During the three and six months ended June 30, 2014, the Company recognized expenses 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.
 
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.
 
Discontinued operations expenses related to severance and benefits, contract termination costs, and other associated closure costs for the three months ended June 30, 2015, and June 30, 2014, totaled $0.4 million and $0.1 million, respectively. For the six months ended June 30, 2015 and June 30, 2014, these expenses were $0.7 million and $0.6 million, respectively. No significant additional closure charges are anticipated. 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 during the three or six months ended June 30,2014.
 

During the six months ended June 30, 2015, land assets of the specialty paper business of less than $0.1 million, excluded from the June 2013 transaction, were sold. During the three months ended June 30, 2015 we recognized a gain of $0.1 million and generated proceeds of $0.1 million on these transactions. During the six months ended June 30, 2015 we recognized a gain of $0.6 million and generated proceeds of $0.9 million on these transactions. There were no similar transactions for the three or six months ended June 30, 2014. No significant additional sales are anticipated.

 
   
Note 4. Supplemental Information for Continuing Operations
   
 
(In thousands, except ton data) Three Months Six Months
Ended June 30, Ended June 30,
2015 20142015 2014
 
Depreciation and amortization (unaudited)$10,388 $ 10,306$20,829 $ 20,595
 
Tons sold (unaudited)  45,012   46,524  87,999   88,078
 
Cases shipped (unaudited)  4,425   4,336  8,546   8,190
 
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, 2015Three Months Ended June 30, 2014
(in thousands) Consolidated Consolidated
 
Net earnings (loss) $ 2,091 $ (3,828 )
Loss from discontinued operations, net of tax 362 107
Provision (credit) for income taxes 1,921 (2,208 )
Interest expense and other, net   3,287     2,431  
Operating profit (loss) 7,661 (3,498 )
Depreciation, depletion, and amortization   10,388     10,306  
EBITDA $ 18,049   $ 6,808  
 
Net sales $ 90,894 $ 89,214
EBITDA margin 19.9 % 7.6 %
 
EBITDA $ 18,049 $ 6,808
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   (3,524 )    
Adjusted EBITDA $ 14,525   $ 9,882  
 
Net sales $ 90,894 $ 89,214
Adjusted EBITDA margin 16.0 % 11.1 %
 
Adjusted EBITDA $ 14,525 $ 9,882
Depreciation, depletion, and amortization   10,388     10,306  
Adjusted operating profit (loss) $ 4,137   $ (424 )
 
 
Six Months Ended June 30, 2015Six Months Ended June 30, 2014
(in thousands) Consolidated Consolidated
 
Net earnings (loss) $ 2,533 $ (8,728 )
Loss from discontinued operations, net of tax 124 561
Provision (credit) for income taxes 1,997 (4,565 )
Interest expense and other, net   6,530     4,576  
Operating profit (loss) 11,184 (8,156 )
Depreciation, depletion, and amortization   20,829     20,595  
EBITDA $ 32,013   $ 12,439  
 
Net sales $ 175,075 $ 166,721
EBITDA margin 18.3 % 7.5 %
 
EBITDA $ 32,013 $ 12,439
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   (7,403 )    
Adjusted EBITDA $ 24,610   $ 15,513  
 
Net sales $ 175,075 $ 166,721
Adjusted EBITDA margin 14.1 % 9.3 %
 
Adjusted EBITDA $ 24,610 $ 15,513
Depreciation, depletion, and amortization   20,829     20,595  
Adjusted operating profit (loss) $ 3,781   $ (5,082 )
 
   
Three Months EndedSix Months Ended
June 30,June 30,
(in thousands) 2015   2014 2015   2014
 
Net earnings (loss) $ 2,091 $ (3,828 ) $ 2,533 $ (8,728 )
Loss from discontinued operations, net of taxes 362 107 124 561
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   (2,220 )         (4,664 )    
Adjusted net earnings (loss) $ 233   $ (1,754 ) $ (2,007 ) $ (6,200 )
 
 
Three Months EndedSix Months Ended
June 30,June 30,
(all amounts in dollars per diluted share) 2015 2014 2015 2014
 
Net earnings (loss) per share $ 0.04 $ (0.08 ) $ 0.05 $ (0.17 )
Loss from discontinued operations, net of taxes 0.01 0.00 0.00 0.01
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   (0.04 )       (0.09 )    

Adjusted net earnings (loss) per share

$ 0.00   $ (0.04 ) $ (0.04 ) $ (0.12 )
 

Wausau Paper
Investor and Media Contact:
Perry Grueber, 715-692-2056
Director Investor Relations
pgrueber@wausaupaper.com