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Wausau Paper Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 10, 2009 04:45PM

Wausau Paper Corp. (WPP) filed Quarterly Report for the period ended 2009-06-30. WAUSAU PAPER MILLS CO. manufactures and sells paper through two operating divis ions: the Printing and Writing Division and the Rhinelander division. The Printing and Writing Division manufactures fine printing writing andspecialty papers. The Rhinelander Division manufactures lightweight dense technical specialty papers which are sold directly to converters and end users. Typical end uses are pressure-sensitive products medical packaging food packaging and multiple laminated products. Small volumes of yeast and lignosulfonates are also manufactured. Wausau Paper Corp. has a market cap of $463.25 million; its shares were traded at around $9.47 with a P/E ratio of 28.7 and P/S ratio of 0.39.

Highlight of Business Operations:

In the second quarter of 2009, we reported a net loss of $1.9 million, or $0.04 per share, compared to a prior year net loss of $9.6 million, or $0.20 per share. The net loss for the second quarter of 2009 includes after-tax facility closure charges of $13.4 million, or $0.27 per share, primarily related to the closure of Specialty Products’ Jay, Maine paper mill and the planned closure of Printing & Writing’s Appleton, Wisconsin converting facility. In addition, the second quarter of 2009 also includes an after-tax credit of $3.6 million, or $0.07 per share, related to a tax credit for the use of alternative fuel mixtures at Specialty Products’ Mosinee, Wisconsin facility. The net loss for the second quarter of 2008 includes after-tax charges of $8.8 million, or $0.18 per share, related to the closure of Printing & Writing’s Groveton, New Hampshire mill and the sale and closure of Specialty Products’ roll wrap operations.

For the six months ended June 30, 2009, we reported a net loss of $3.3 million, or $0.07 per share, compared to a net loss of $16.4 million, or $0.33 per share in the first six months of 2008.

The net loss for the first six months of 2009 includes after-tax facility closure charges of $16.2 million, or $0.33 per share, related to the closure of Specialty Products’ Jay, Maine paper mill, the closure of Printing & Writing’s Groveton, New Hampshire paper mill, and the planned closure of Printing & Writing’s Appleton, Wisconsin converting facility. In addition, the net loss during the six months ended June 30, 2009, includes after-tax charges of $2.0 million, or $0.04 per share, related to expenses incurred due to the start-up of Printing & Writing’s Bedford Park, Illinois distribution center and one-time expenses associated with the towel machine rebuild in our Towel & Tissue business segment. The first six months of 2009 also include an after-tax credit of $3.6 million, or $0.07 per share, related to a tax credit for the use of alternative fuel mixtures at Specialty Products’ Mosinee, Wisconsin facility. For additional information on the tax credit, please refer to “Note 2 – New Accounting Pronouncements and Other Items” in the

Gross profit for the three months ended June 30, 2009, was $23.6 million compared to $21.8 million for the three months ended June 30, 2008. The increase in gross profit in the quarter-over-quarter comparison is primarily due to significant favorable declines in quarter-over-quarter fiber and energy prices and the impact of the alternative fuel mixture tax credit, which combined to more than offset a slight decline in average net selling prices, costs associated with market-related downtime, and the gross profit impact of facility closure charges. For additional information on the tax credit, please refer to “Note 2 – New Accounting Pronouncements and Other Items” in the Notes to Condensed Consolidated Financial Statements. In total, fiber related costs decreased by approximately $20 million in the second quarter of 2009 compared to the second quarter of 2008, while energy prices decreased by approximately $6 million over the same comparative period. In addition, gross profit margins in the second quarter of 2009 were negatively impacted by combined charges of approximately $18.3 million related to the closure of the Jay, Maine paper mill and the planned closure of the Appleton, Wisconsin converting facility. Also, during the three months ended June 30, 2008, we recognized $1.1 million of expense in cost of sales as a result of the closure of the Groveton, New Hampshire paper mill. For additional information on the closure of the Jay, Maine paper mill, planned closure of the converting facility in Appleton, Wisconsin, and closure of the Groveton, New Hampshire paper mill, refer to “Note 3 – Restructuring and Divestitures” in the Notes to Condensed Consolidated Financial Statements.

In total, fiber related costs decreased by approximately $33 million in the first half of 2009 compared to the first half of 2008, while energy prices decreased by approximately $6 million over the same comparative period. In addition, gross profit margins in the first six months of 2009 were negatively impacted by combined charges of approximately $22.0 million related to the closure of the Jay, Maine paper mill and the planned closure of the Appleton, Wisconsin converting facility. Also, during the six months ended June 30, 2008, we recognized $7.9 million of expense in cost of sales as a result of the closure of the Groveton, New Hampshire paper mill. For additional information on the closure of the Jay, Maine paper mill, planned closure of the converting facility in Appleton, Wisconsin, and closure of the Groveton, New Hampshire paper mill, refer to “Note 3 – Restructuring and Divestitures” in the Notes to Condensed Consolidated Financial Statements.

Interest expense in the second quarter of 2009 was $3.1 million compared to interest expense of $2.5 million in the second quarter of 2008. For the first six months of 2009, interest expense increased to $5.7 million from $5.3 million of interest expense recorded during the same period in 2008. The increase in both the quarter-over-quarter and year-over-year comparisons is due to higher average debt balances over the comparative periods somewhat offset by lower variable interest rates on certain debt instruments. Total debt was $176.0 million and $152.4 million at June 30, 2009 and 2008, respectively. Total debt at December 31, 2008, was $192.0 million. We will to continue to focus on reducing our total debt over the second half of 2009, although average debt balances will still remain mildly higher than those during 2008. However, as a result of lower variable interest rates on certain debt instruments, interest expense for the remainder of 2009 is expected to be comparable with 2008 levels. Other (expense) income, consisting principally of interest income in 2008, during the second quarter and year-to-date periods of 2009 as compared with the prior year, is lower as a result of decreases in average cash and cash equivalent balances and a significant reduction of our use of short-term investments due to significant declines in available interest rates on such investments.

Read the The complete Report

WPP is in the portfolios of John Keeley of Keeley Fund Management, NWQ Managers of NWQ Investment Management Co.


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