Q Earnings Conference Call July 31, 2012

Transcription

1 Q Earnings Conference Call July 31, 2012 Henry C. Newell President and Chief Executive Officer Sherri L. Lemmer Senior Vice President and Chief Financial Officer Matthew L. Urmanski Senior Vice President, Tissue Perry D. Grueber Director Investor Relations Michael W. Nelson Senior Vice President, Paper

2 Forward Looking Statements The matters discussed in this presentation 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 Securities Reform Act of 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, The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Non-GAAP Financial Measures This presentation refers to certain non-u.s. GAAP financial measures. A reconciliation of those numbers to U.S. GAAP financial measures is provided on the Company's website at: Q Earnings Call 2

3 Succession Plan Complete Henry C. Newell (54) President & CEO January 2012 Sherri L. Lemmer (45) Senior Vice President and Chief Financial Officer May 2012 Matthew L. Urmanski (39) Senior Vice President, Tissue March 2012 Michael W. Nelson (45) Senior Vice President, Paper March 2011 Patrick J. Medvecz (49) Senior Vice President, Operations March 2011 Q Earnings Call 3

4 High Intensity First Half Tissue Expansion EcoSoft Brand Repositioning Brainerd Commercialization Print Exit Q2 Specific Two Major Maintenance Outages Company-wide ERP Systems Conversion Q Earnings Call 4

5 Intensity Increasing In Second Half Tissue: Execution Accelerating Year-Over-Year Growth New Machine Start-up in Q4 Paper: Convergence of Short-term Risks Cautious Customer Response to Economic Conditions Rate of Tape & Industrial Growth Neenah Transition Ramp Down Q Earnings Call 5

6 2012 Imperatives Execute our Growth Strategy Execute Tissue Expansion Print Exit Q Earnings Call 6

7 FINANCIALS & MAJOR STRATEGIC INITIATIVES Sherri Lemmer Q Earnings Call 7

8 Financial Overview Growth Tissue: (Case Growth) Q2: +2% 1H: +3% Paper: (Technical Volume) Q2: +2% 1H: +8% Cash Generation Strong Sale of Premium Brands Brokaw Mill Closure Inventory Reduction Adjusted EPS Q $.09 Q $.11 See Appendix for reclassification of Net Sales for Continuing Operations and presentation of Adjusted Earnings per Share reconciled to Earnings per Share $192 $0.04 $0.11 Net Sales ($MM) $216 $216 $213 Q1 Q2 Q1 Q2 1H 1H $0.10 $0.09 $408 Adjusted Earnings Per Share Continuing Operations $0.15 $429 $0.19 Q1 Q2 Q1 Q2 1H 1H Q Earnings Call 8

9 Print Exit Brokaw Mill Closure February 2012, Papermaking May 2012, Converting Net Cash Generation Target was $20MM in 2012 Projection at $35-$40MM for 2012 Q Earnings Call 9

10 Tissue Expansion Progressing on Schedule and on Budget $119MM Spending Through the Second Quarter Includes $6MM of Project Expense Expect Q3 Spending of $60MM Q Startup; Q Commercial Production Q Earnings Call 10

11 Capital Spending Expect $162MM 2012 Capital Spend - $150MM from Tissue Expansion Capital Spending ($MM) $ Spending: $78MM - $45MM for Tissue Expansion $46 $43 $78 $35 Prudently Managing CapEx F 2013F All Other Tissue Expansion Q Earnings Call 11

12 Balance Sheet Highlights ($MM) 6/30/12 12/31/11 Cash & Equivalents $33.1 $26.7 Net Working Capital $58.2 $71.0 Long-Term Debt $150.0 $127.7 Shareholders Equity $204.7 $196.2 Debt/Total Capital* 42.3% 39.4% Total Borrowing Base $325 Remaining Available Borrowing Capacity $175 * The calculation of Debt/Total Capital is not intended to be used for purposes of calculating debt covenant compliance Q Earnings Call 12

13 Change in Net Debt ($MM) (1) See Appendix for reconciliation of EBITDA (2) See Appendix for details of the Other category Six Month Ended 6/30/12 Year Ended 12/31/11 EBITDA (1) $37.9 $29.8 Capital Expenditures, Net of Grants (73.6) (77.5) Change in Receivables Change in Inventories Change in Other Assets/Liabilities (18.7) (19.2) Proceeds on Disposals Other (2) (15.2) 22.1 Net Change in Debt $(15.9) $24.4 Beginning Net Debt $101.0 $125.4 Ending Net Debt $116.9 $101.0 Q Earnings Call 13

14 Pension Update ($MM) $300 $200 $100 $0 $141 $77 Discount Rates: % % % % $159 $172 $104 $125 $193 $197 $201 $208 $199 $147 $165 $150 $223 $172 $241 $286 $190 $ Pension Assets PBO Discount Rates Continue to Decline Increasing Long-term Obligations Increase Expense Minimum Funding Levels Achieved Despite Economics Q2 & 2H Charges as Result of Settlements and Plan Terminations Q Earnings Call 14

15 Value Drivers Update 2012 LAST UPDATE Tissue Growth (Cases) +3-4% +3-4% No change Operating Margin 12% 13% No change Paper Growth (Technical Volume) +13% +13% +8% Operating Margin Cash Focus Cash Focus Print Exit Constraining Technical Growth Wausau Print Exit Cash $20MM $20MM $35-40MM Q Earnings Call 15

16 PAPER Mike Nelson Q Earnings Call 16

17 Paper Highlights Volume Growth Continues in Technical Print Transition Volume Ahead of Plan Q2 Technical Volume Growth of 2% 1H Technical Growth of 8% Strong Cash Flows Inventory Reduction Print Exit Ahead of Plan 62.6 $3.9 Technical Volume (tons) $5.6 $ $ Q1 Q2 Q3 Q4 Q1 Q Adjusted Operating Profit ($MM) $3.6 $2.0 Q1 Q2 Q3 Q4 Q1 Q See Appendix for presentation of Adjusted Operating Profit reconciled to Operating Profit Q Earnings Call 17

18 Paper - Technical Sectors* ($MM) 11% ROCE $21 Brainerd Rebuild Redeployed Paper Machine to Support Technical Growth % Capacity Increase for Technical +$62MM in Capital Employed After Investment 16% ROCE $35-$ * Rhinelander & Mosinee Q Earnings Call 18

19 Brainerd Transition to Technical % Machine Hours 60-70% 14% Tape Growth in 1H 45-55% Significant Trial Activity 27% 40% 47% 60-70% Technical by end of 2012 Attain Cost Targets in 1H Launched DuraTec Elite Q4 Q1 Q2 Q3 Q Q Earnings Call 19

20 Paper - Technical Sectors Strategic Markets Margins Target Margins Technical Specialty Food 10-12% 10-12% Tape & Industrial 11-13% 10-12% GROWTH Coated & Liner 0-3% 5-8% Specialized Commodity (0-8%) 0-2% OPTIMIZE Core Growth Technical Total 5% 7-8% Q Earnings Call 20

21 Paper - Volume Growth 1H Outlook Target Growth Food 8% 3-4% 7-9% Tape & Industrial 6% 9-11% +10% Coated & Liner 11% 5-7% Optimize Q Earnings Call 21

22 TISSUE Matt Urmanski Q Earnings Call 22

23 Tissue Highlights Q2 Adjusted Operating Profit $10.6MM 3.6 Case Growth (MM) Full Realization of Price Actions 1H Case Growth 3.5% vs Prior Year 1H Operating Margins +12.7% Returning to Historical Margin Levels Q1 Q2 Q3 Q4 Q1 Q Adjusted Operating Profit ($MM) $6.5 $9.0 $7.7 $10.4 $11.1 $10.6 Q1 Q2 Q3 Q4 Q1 Q See Appendix for presentation of Adjusted Operating Profit reconciled to Operating Profit Q Earnings Call 23

24 Tissue EBITDA Expansion ($MM) $150* 95% of Benefit $64* $72 - $75* 50-60% of Benefit Sources of Total Benefit Growth Price Manufacturing Cost Sources of Total Benefit Product Design Manufacturing Cost Growth Sources of Total Benefit Premium Growth Margin Expansion (Product Mix) Sources of Total Benefit Growth 40-50% Manufacturing Cost 30-35% Product Mix 20-25% * Represents Adjusted EBITDA. See Appendix for reconciliation of EBITDA and 2017 represent estimates of Adjusted EBITDA. Q Earnings Call 24

25 Tissue Q Earnings Call 25

26 SUMMARY Q Earnings Call 26

27 Wausau Paper Revenue 2011 $1.0B 2012 Expected $0.9B 5-Year $1.1B Print 33% Tissue 31% Food 16% Tape & Industrial 19% Coated & Liner 16% Tissue 41% Food 15% Tape & Industrial 18% Coated & Liner 15% Tissue 52% Transition 8% Executing Growth Strategy (Post Print) Q Earnings Call 27

28 Investment Thesis Wausau: Grow at Target Margins 4-5% Revenue Growth (CAGR) 15% Return on Capital Employed (ROCE) Paper: Tissue: Earn the Right to Grow (ROCE Improvement) Stable Revenue 7-8% Operating Margins within 36 months 16% ROCE Investing $220MM (High ROCE Business) +6% Case Growth (CAGR) 13-15% Operating Margins 20-25% ROCE ROCE: Return on Capital Employed (pretax) Q Earnings Call 28

29 Second Half Outlook Cautious Economic Outlook New Tissue Machine Startup Brainerd Machine Commercialization Full Year Adjusted EPS $.39-$.41 per Share 1H $.19 $.10 $.09 Adjusted EPS 2H $.20-$.22 $.39-$.41 $.33 Q1 Q2 Q3 Q4 FY 12 FY Q Earnings Call 29

30 Q&A Q Earnings Call 30

31 Upcoming Events: Q Earnings Release - Monday, October 29, 2012 Next Investor and Analyst Conference Call - Tuesday, October 30, AM Central Investor Luncheons - Boston Sept New York Sept. 19 UBS Paper & Forest Conference - New York Sept. 13 Credit Suisse SMID Conference - New York Sept. 20

32 APPENDIX Q Earnings Call 32

33 2012 Guidance ($MM) Continuing Operations 2012 Targets Depreciation, Depletion and Amortization $45-$48 Interest Expense, net of Capitalized Interest $2-$3 Tax Rate 37% Capital Expenditures $162 Pension: Cash Contributions $25 Non-Cash Pension Expense $19-$21 Q Earnings Call 33

34 Statistical Measures Continuing Operations As Reported Continuing Operations Q4 11 Q3 11 Q2 11 Q1 11 Q2 12 Q1 12 Q4 11 Q3 11 Q2 11 Q1 11 Statistical Measures: Fiber consumption: Market Pulp (metric tons) 82,717 84,428 88,040 86,133 62,243 63,610 61,731 61,080 65,064 60,836 Waste Paper (tons) 35,663 37,251 37,550 35,844 35,372 35,359 35,663 37,251 37,550 35,844 Energy consumption: Natural Gas DTH 752, , , , , , , , , ,829 Coal - tons 64,494 56,517 57,043 63,756 46,539 61,044 64,494 56,517 57,043 63,756 Q Earnings Call 34

35 Net Earnings Net Earnings to Adjusted Net Earnings Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 GAAP Net Earnings (Loss) per Share $ (0.03) $ 0.07 $ 0.10 $ (0.58) $ 0.20 $ (0.03) Discontinued Operations, Net of Tax (0.17) 0.07 Restated Earnings per Share 1 $ 0.00 $ 0.10 $ 0.11 $ 0.51 $ 0.03 $ 0.04 Gain on Sale of Timberlands (0.47) - - Contract Adjustment at Former Manufacturing Facility Capital-Related Expense Pension Plan Settlement Charges Adjusted Net Earnings per Share 1 $ 0.04 $ 0.11 $ 0.12 $ 0.05 $ 0.10 $ Totals may not foot due to rounding differences Q Earnings Call 35

36 Change in Net Debt Reconciliation of EBITDA Year Ended December 31, 2011 Six Months Ended June 30, 2012 Operating profit $ 62.2 $ 7.5 Earnings (loss) from discontinued operations, net of tax (57.1) 4.8 Tax impact on earnings of discontinued operations (31.1) 2.8 Depreciation, depletion, and amortization $ 29.8 $ 37.9 Reconciliation of "Other" Changes Year Ended December 31, 2011 Six Months Ended June 30, 2012 Compensation expense for stock-based grants $ 3.0 $ 1.5 Change in deferred taxes (23.3) (5.1) Change in accrued taxes Cash paid for taxes (1.2) (2.4) Dividends paid (5.9) (3.0) Gain on sale of business - (12.2) Gain on sale of assets (36.2) - Impairment and writedown of long-lived and other assets Other $ 22.1 $ (15.2) Q Earnings Call 36

37 Net Sales and EBITDA Net Sales to Net Sales - Continuing Operations WPP Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Consolidated Net Sales $ $ $ $ $ $ Net Sales from Discontinued Operations (57.2) (51.3) (53.3) (49.6) (41.5) (3.5) Consolidated Net Sales - Continuing Operations 1 $ $ $ $ $ $ Reconciliation of Tissue Segment Adjusted EBITDA Year Ended December 31, 2011 Operating profit $ 31.4 Depreciation, depletion, and amortization 30.0 EBITDA 61.4 Capital-related expenses 2.2 Adjusted EBITDA $ Totals may not foot due to rounding differences Q Earnings Call 37

38 Quarterly Reconciliations Operating Profit to Adjusted Operating Profit ($MM) Paper Segment Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Operating Profit (Loss) $ (1.4) $ 2.4 $ 5.6 $ (82.9) $ 13.3 $ (3.4) Discontinued Operations (13.0) 5.4 Contract Adjustment at Former Manufacturing Facility Capital Related Expenses Adjusted Operating Profit 1 $ 3.9 $ 5.6 $ 5.9 $ 0.7 $ 3.6 $ 2.0 Operating Profit to Adjusted Operating Profit ($MM) Tissue Segment Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Operating Profit $ 6.3 $ 8.7 $ 7.0 $ 9.4 $ 9.2 $9.1 Capital Related Expense Adjusted Operating Profit 1 $ 6.5 $ 9.0 $ 7.7 $ 10.4 $ 11.1 $ Differences in total due to rounding Q Earnings Call 38