Wausau Paper narrows Q3 net loss to US$184,000 from US$1.8M in year-ago period, with US$818,000 loss from discontinued operations; net sales up 5.6% year-over-year, to US$91.7M, helped by ramp-up of new paper machine in Harrodsburg, Kentucky
October 28, 2013
– Wausau Paper (NYSE:WPP) reported:
On a reported basis, third-quarter 2013 results from continuing operations were a net loss of $0.04 per share. Excluding special items, the adjusted net loss from continuing operations was $0.02 per share, improved sequentially from the net loss from continuing operations, excluding special items, of $0.05 per share for the three months ended June 30, 2013.
Net sales increased 5.6 percent to $91.7 million in the third quarter of 2013 compared to $86.8 million in the third quarter of 2012, and 4.6 percent compared to $87.6 million in the second quarter of 2013.
Results of continuing operations reflect the impact of the Harrodsburg, Kentucky, manufacturing and converting operations as the facility continues to advance along the anticipated start-up curve and transition inventory in support of the launch of new products.
Case Volume Growth of 7.4%
Third-quarter volume of cases shipped increased 7.4 percent in 2013 compared to the same period in 2012, with all-time record cases shipped for the Company of over 4,358,000.
The Company launched an additional four new products in its Green SealTM DublNature® family of premium away-from-home towel and tissue products produced from its new ATMOS technology-enabled Harrodsburg paper machine in the third quarter. The Company has now introduced a total of 20 new tissue, roll and folded towel products to the market since May 2013.
To scale various support processes following the exit of the specialty paper business, the Company will be further reducing overall salaried staffing levels, including a 55 percent reduction in Wisconsin-based staffing. Overall salaried staffing level reductions will approach 20 percent by the end of 2013.
Policy for Return of Capital to Shareholders
As previously announced, after a thorough review of its expected cash flows and capital allocation policies, the Company has established a targeted return of capital percentage of 50 percent of its free cash flow, which the Company defines as net cash flow provided by operating activities less payments for property and equipment. This policy of a greater return of capital to shareholders reflects the Company’s confidence in its strategy and long-term business outlook as well as a commitment to delivering value to our shareholders.
The return of capital is expected to take the form of dividends, share repurchases, or a combination of both. The timing and amount of dividends or share repurchases will be determined by the Company based on expected cash flows, pro forma leverage levels and obligations under credit agreements, evaluation of market conditions, trading price of the stock, and other factors. The Company’s capital allocation and return policies will continue to be subject to regular review by the Board.
Henry C. Newell, president and CEO, commented, “Third-quarter results demonstrate continued progress on our strategic repositioning efforts and our first quarter as a 100 percent tissue company. We are delivering on our growth commitments with 7.4 percent case volume growth in the third quarter and continue to make progress in optimizing our ramp up plan. We expect strong case volume growth and continued EBITDA margin expansion in the fourth quarter of 2013.”
In the fourth quarter of 2013, we expect case volume growth of approximately 6 percent. As a result of a modified sequencing of premium product introductions to the market, we are now expecting an adjusted EBITDA range of between $13 million and $15 million in the fourth quarter of this year, representing an adjusted EBITDA margin in a range of 14 to 16 percent, up from 11.5 percent in the third quarter of 2013, and adjusted net earnings per share from continuing operations of $0.01 to $0.03.
For the full year 2014, we expect to achieve 6 percent annual sales volume growth; EBITDA in a range of $65 to $70 million, with EBITDA margins of 17 to 19 percent; and net earnings per share from continuing operations of $0.21 to $0.28, with the EBITDA in fourth quarter of 2014 in a range of $20 to $24 million and EBITDA margins of between 20 and 24 percent. We anticipate 2014 fourth-quarter net earnings from continuing operations of between $0.10 to $0.13 per share. In 2014, we expect the first half of the year to be pressured by seasonality in demand, a Middletown, Ohio, maintenance outage and production trials supporting the launch of our new to the market Artisan® products.
2013 THIRD-QUARTER AND NINE-MONTH RESULTS
The following third-quarter and nine-month discussion, as well as the financial highlights and other information summarized in the preceding discussion, contain comparisons of financial elements including adjusted EBITDA, adjusted EBITDA margin, adjusted net earnings and adjusted net loss. 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.
Excluding special items, the third quarter resulted in an adjusted net loss of $0.9 million, or $0.02 per share. Prior-year third-quarter performance, excluding special items, was adjusted net earnings of $1.7 million, or $0.03 per share. On a reported basis, the third quarters of 2013 and 2012 were net losses of $0.04 per share and $0.03 per share, respectively.
The first nine months of 2013, excluding special items, resulted in an adjusted net loss of $7.1 million, or $0.14 per share, compared to prior-year nine-month net earnings, excluding special items, of $7.2 million, or $0.15 per share.
Due to the significant investment of capital and resources connected with the Company’s Tissue expansion project, comparability of quarter-over-quarter and year-over-year after-tax net results, excluding special items, has been impacted by:
(in millions, except per share data)
Startup, outage and inventory transition costs
Incremental depreciation/interest expense
On a continuing operations basis, adjusted EBITDA and EBITDA margin for the third quarters of 2013 and 2012 were $10.6 million, or 11.5 percent, and $12.0 million, or 13.8 percent, respectively. On a year-to-date basis, adjusted EBITDA and EBITDA margin was $25.3 million, or 9.8 percent in 2013 compared to $37.2 million, or 14.4 percent in 2012.
Third-quarter net sales for 2013 were $91.7 million, increasing 4.6 percent from the second quarter of 2013 and 5.6 percent compared to $86.8 million reported for the third quarter of 2012. On a year-to-date basis, net sales increased slightly to $257.5 million in 2013 compared to $257.2 million in 2012.
As expected, case shipment volume increased as the new line of premium DublNature® products was made available to the away-from-home market in the second quarter. In total, volume in the third quarter improved 7.4 percent over the prior-year period, resulting in year-to-date growth of 3.4 percent. After being down approximately 1 percent in the first half of 2013 compared to the same period in 2012, volume in strategic product categories improved more than 7 percent over the prior-year third quarter, resulting in growth of nearly 2 percent in the nine-month year-over-year comparison. Volume in the support product categories continued to be strong, increasing nearly 8 percent over the prior-year’s third quarter and approximately 5 percent over the comparable nine-month periods.
During the second quarter of 2013, the Company completed the sale of its specialty paper business, including its manufacturing facilities in Mosinee and Rhinelander, Wisconsin. This transaction, combined with the first quarter closure of the technical specialty paper mill in Brainerd, Minnesota, results in the Company’s former Paper segment being reclassified as a discontinued operation and therefore is presented separately from continuing operations in all periods presented in the condensed consolidated statements of operations.
For the third quarter of 2013, discontinued operations resulted in a loss, net of tax, of $0.8 million, or $0.02 per share, compared to a loss of $3.7 million, net of tax, or $0.08 per share, for the third quarter of 2012. Included in the loss, net of tax, in the third quarter of 2013 are after-tax closure-related costs of $0.9 million, or $0.02 per share.
For the first nine months of 2013, discontinued operations, net of tax, resulted in a net loss of $66.9 million, or $1.35 per share. In addition to closure-related costs recorded in the third quarter of 2013, nine-month results include an impairment charge of $40.2 million, net of tax, or $0.81 per share and after-tax closure-related costs of $2.7 million, or $0.05 per share related to the sale of the Company’s specialty paper business, $28.6 million, or $0.58 per share, in after-tax charges related to the closure of the Brainerd mill offset by after-tax results of operations of $5.5 million, or $0.11 per share. The prior-year nine-months included a gain on the sale of the business of $7.7 million, net of tax, or $0.16 per share, and net loss from operations of $2.8 million, net of tax, or $0.06 per share.
Wausau Paper’s third-quarter conference call is scheduled for 9:00 a.m. Central – 10:00 a.m. Eastern on Tuesday, October 29, 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 November 5.
About Wausau Paper:
Wausau Paper produces and markets a complete line of away-from-home towel and tissue products, 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 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, 2012. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
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