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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

(Mark One)

For the quarterly period ended June 30, 2013

OR

For the transition period from                    to                   

Commission file number:  1-13923

WAUSAU PAPER CORP.

(Exact name of registrant as specified in charter)

100 Paper Place

Mosinee, Wisconsin  54455-9099

(Address of principal executive office)

Registrant’s telephone number, including area code:  715-693-4470

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2) of the Exchange Act).  Yes o  No x

The number of common shares outstanding at July 31, 2013 was 49,432,754.

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WAUSAU PAPER CORP.

AND SUBSIDIARIES

INDEX

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PART I.  FINANCIAL INFORMATION

Item 1.                                      Financial Statements

Wausau Paper Corp. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

See Notes to Condensed Consolidated Financial Statements.

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Wausau Paper Corp. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

See Notes to Condensed Consolidated Financial Statements.

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Wausau Paper Corp. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

See Notes to Condensed Consolidated Financial Statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1.                                 Description of the Business

Wausau Paper Corp. manufactures, converts, and sells a complete line of towel and tissue products that are marketed along with soap and dispensing systems for the industrial and commercial “away-from-home” market. Our products are primarily sold within the United States and Canada.

Wausau Paper Corp. manufactured, converted, and sold specialty paper products for industrial and commercial end markets and premium printing and writing papers within the former Paper segment. The premium Print & Color brands were sold in January of 2012 and the Brokaw, Wisconsin mill closed in February 2012. In January 2013, we announced our intent to focus our management efforts and future investments on the Tissue segment. In March 2013, we permanently closed our Brainerd, Minnesota mill and completed the sale of our specialty paper business on June 26, 2013, ending our participation in the markets in which our former Paper segment previously competed.  See Note 4 for further information regarding discontinued operations.

Note 2.                                 Basis of Presentation

The condensed consolidated financial statements include the results of Wausau Paper Corp. and our consolidated subsidiaries.  The accompanying condensed consolidated financial statements, in the opinion of management, reflect all adjustments, which are normal and recurring in nature and which are necessary for a fair statement of the results for the periods presented.  Results for the interim period are not necessarily indicative of future results.  In all regards, the financial statements have been presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Refer to the notes to consolidated financial statements, which appear in the Annual Report on Form 10-K for the year ended December 31, 2012, for our accounting policies and other disclosures, which are pertinent to these statements.

The results of operations of our specialty paper and printing and writing business are reported as a discontinued operation in the Condensed Consolidated Statements of Comprehensive Income (Loss) for all periods presented.  The corresponding assets and liabilities of the discontinued operations in the Condensed Consolidated Balance Sheets have been reclassified in accordance with authoritative literature on discontinued operations when the respective component met the criteria for discontinued operations presentation and prior periods were not restated. As such, the December 31, 2012 balance sheet amounts included liabilities of discontinued operations related only to the Brokaw mill. Also, in accordance with the authoritative literature, we have elected to not separately disclose the cash flows related to the discontinued operation.  See Note 4 for further information regarding discontinued operations.

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Note 3.                                 New Accounting Pronouncements

Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” requires expanded disclosures for amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component.  The guidance requires the presentation of amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts that do not meet this requirement, a cross-reference to other disclosures that provide additional detail about those amounts is required.  The guidance is to be applied prospectively for reporting periods beginning after December 15, 2012.  We adopted ASU No. 2013-02 on January 1, 2013.  The new guidance affects disclosures only and did not have an impact on our results of operations or financial position.  See Note 12 for further information regarding AOCI.

In July 2013, the FASB issued ASU No. 2013-11 “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”.  This guidance requires unrecognized tax benefits to be presented as a decrease in net operating loss, similar tax loss or tax credit carryforward if certain criteria are met.  The guidance is to be applied prospectively beginning January 1, 2014.  We are currently evaluating the impact of the standard as it may affect balance sheet classification of certain unrecognized tax benefits.

Note 4.                                 Restructuring, Discontinued Operations, and Other

In May 2013, we announced that our Board of Directors had approved the sale of our specialty paper business. The sale of the specialty paper business and primarily all related assets, excluding the Brainerd, Minnesota mill, closed on June 26, 2013 resulting in net cash proceeds, subject to certain post-closing adjustments, of approximately $105 million after settlement of transaction-related liabilities, transaction costs and taxes. The sale generated a pre-tax impairment charge of $63.7 million, which is recorded in loss from discontinued operations in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2013. As there were no quoted market prices available for these or similar assets, we used the actual sales price to determine the fair market value of the assets, which is a level 3, unobservable input. Included in the impairment charge is a net pre-tax credit of approximately $5.9 million related to pension and other postretirement plan settlements, curtailments, and special termination benefits resulting from modifications made to the plans in connection with the transaction.  Additionally, discontinued operations includes pre-tax expenses related to severance and benefits, contract termination costs, and other associated closure costs totaling $4.3 million in the three and six months ended June 30, 2013.  We expect to incur additional pre-tax closure charges of approximately $2.0 million, with approximately $1.0 million expected to be incurred in the remainder of 2013. The agreement to sell the specialty paper business also includes a provision whereby we would receive a contingent payment from the buyer if certain performance thresholds and other events occur. At June 30, 2013, no amounts have been recognized related to this provision, as we are not able to determine whether such events will occur.

In February 2013, we announced the planned closure of our Brainerd paper mill.  The Brainerd mill permanently closed on March 29, 2013. At March 31, 2013, the Brainerd closure did not meet held-for-sale requirements; however, at June 30, 2013 Brainerd meets the criteria for presentation as discontinued operations.  Included in loss from discontinued operations during the three and six months ended June 30, 2013, are pre-tax charges of $0.7 million and $45.0 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.  These charges are included in loss from discontinued operations in the Condensed Consolidated Statements of Comprehensive Income (Loss).

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In December 2011, we announced that our Board of Directors had approved the sale of our premium Print & Color brands, and the closure of our Brokaw, Wisconsin paper mill.  The sale of the premium Print & Color brands, select paper inventory, and certain manufacturing equipment closed on January 31, 2012.  We permanently ceased papermaking operations at the mill on February 10, 2012.  The sale of the premium Print & Color brands, select paper inventory, and certain manufacturing equipment generated a pre-tax gain of $12.2 million, which is recorded in earnings from discontinued operations in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the six months ended June 30, 2012.

We determined that as of June 30, 2013, the sale of the specialty paper business and the closure of the Brainerd mill, and as of March 31, 2012, the closure of the Brokaw mill met the criteria for discontinued operations presentation as established ASC Subtopic 205-20, “Discontinued Operations”. The results of operations of the specialty paper business, Brainerd, and Brokaw mills have been reported as discontinued operations in the Condensed Consolidated Statements of Comprehensive Income (Loss) for all periods presented.  The corresponding assets and liabilities of the discontinued operations have been reclassified in accordance with authoritative literature on discontinued operations when the respective component met the criteria for discontinued operations presentation and prior periods were not restated. As such, the December 31, 2012, balance sheet amounts included liabilities of discontinued operations only related to the Brokaw mill.  The assets and liabilities of the specialty paper business and the Brainerd mill have not been reclassified in the December 31, 2012 balance sheet.  The statements of cash flows for the six months ended June 30, 2013 and 2012, have not been adjusted to separately disclose cash flows related to discontinued operations.

Assets and liabilities of the discontinued operations consist of the following:

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The following table summarizes certain Condensed Consolidated Statements of Comprehensive Income (Loss) information for discontinued operations:

During the second quarter of 2013, we executed restructuring activities related to the sale of the specialty paper business and closure of the Brainerd mill, and have recognized pre-tax charges of $68.7 million during the three months ended June 30, 2013, and net pre-tax charges of $113.0 million during the six months ended June 30, 2013. These net charges, which are detailed in the table below, are recorded in loss from discontinued operations in the Condensed Consolidated Statements of Comprehensive Income (Loss).

In addition, during the second quarter of 2012, we recognized pre-tax charges related to the closure of the Brokaw mill of $2.9 million and, exclusive of the gain recorded for the sales transaction, net pre-tax charges of $6.3 million during the six months ended June 30, 2012. No additional pre-tax closure charges related to the Brokaw mill were incurred during the first half of 2013.  These net charges, which are also detailed in the following table, are recorded in (loss) earnings from discontinued operations in the Condensed Consolidated Statements of Comprehensive Income (Loss).

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Following is a summary of the liabilities for restructuring expenses through June 30, 2013, related to the closure of the Brokaw mill, the closure of the Brainerd mill and the sale of the specialty paper business all of which were included in liabilities of discontinued operations:

Included in selling and administrative expense in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2013, were net credits of approximately $1.3 million and approximately $1.1 million, respectively, related to a natural gas contract for a closed facility.  During the first six months of 2013, we have made payments related to this natural gas contract of approximately $0.8 million.  At June 30, 2013, $1.1 million and $9.0 million are included in current liabilities and noncurrent liabilities, respectively, consisting of contract termination costs associated with this natural gas contract.  At December 31, 2012, $2.3 million and $9.8 million are included in current liabilities and noncurrent liabilities, respectively, related to these contract termination costs. We will continue to make payments related to the contract over the original contractual term.

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Note 5.                                 Earnings Per Share (“EPS”)

The following table reconciles basic weighted average outstanding shares to diluted weighted average outstanding shares:

Stock options for which the exercise price exceeds the average market price over the applicable period have an antidilutive effect on EPS, and accordingly, are excluded from the calculation of diluted EPS.  Due to the net loss from continuing operations for the three and six months ended June 30, 2013, stock-based grants for 1,840,298 shares and 1,908,922 shares, respectively, were considered to be antidilutive.  For the three months ended June 30, 2012, stock-based grants for 1,053,211 shares were excluded from the diluted EPS calculation because the shares were antidilutive.  Due to the net loss from continuing operations for the six months ended June 30, 2012, stock-based grants for 2,033,326 shares were considered to be antidilutive.

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Note 6.                                 Receivables

Receivables at June 30, 2013, exclude discontinued operations.  The receivables related to discontinued operations were not retroactively reclassified and are included in the following table at December 31, 2012.

Note 7.                                 Inventories

Inventories at June 30, 2013, exclude discontinued operations.  The inventories related to discontinued operations were not retroactively reclassified and are included in the following table at December 31, 2012.

Note 8.                                 Property, Plant, and Equipment

Property, plant, and equipment at June 30, 2013, excludes discontinued operations.  Property, plant, and equipment related to discontinued operations was not retroactively reclassified and is included in the following table at December 31, 2012.

The continuing operations provision for depreciation and amortization for the three months ended June 30, 2013 and 2012 was $10.0 million and $7.3 million, respectively.  The continuing operations provision for depreciation and amortization

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for the six months ended June 30, 2013 and 2012 was $19.8 million and $14.5 million, respectively.

Note 9.                                 Debt

A summary of total debt is as follows:

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On March 31, 2010, we entered into a note purchase and private-shelf agreement.  This agreement provided for the April 9, 2010, issuance of $50 million of unsecured senior notes having an interest rate of 5.69% that mature on April 9, 2017, and also established a three-year private shelf facility under which up to $125 million of additional promissory notes may be issued at terms agreed upon by the parties at the time of issuance.  On April 4, 2011, we issued an additional aggregate principal amount of $50 million of our senior notes under the terms of this note purchase and private-shelf agreement.  The notes bear interest at 4.68% and mature on April 4, 2018.  On August 22, 2011, the private-shelf agreement was amended to expand the total amount available under the private-shelf agreement to $150 million.  On April 9, 2012, we issued an additional aggregate principal amount of $50 million of our senior notes under this note purchase and private-shelf agreement.  The notes bear interest at 4.00% and mature on June 30, 2016.  At June 30, 2013, the total availability of unsecured private placement notes was $200 million, with $150 million of unsecured private placement notes currently outstanding.

We have estimated the fair value of our long-term debt in accordance with FASB authoritative guidance.  The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date.  Fair value information for long-term debt is within Level 2 of the fair value hierarchy and is based on current market interest rates and estimates of current market conditions for instruments with similar terms and maturities.  At June 30, 2013, the estimated fair value of long-term debt is approximately $159 million which compares to the carrying value of $150 million.  At December 31, 2012, the estimated fair value of long-term debt was approximately $209 million which compares to the carrying value of $196 million.

On June 23, 2010, we entered into a $125 million revolving-credit agreement with five financial institutions that will expire on June 23, 2014.  On June 26, 2013, we entered into an amendment to the revolving-credit agreement reducing the amount of aggregate commitments from $125 million to $100 million. At June 30, 2013 there were no amounts outstanding under the revolving-credit agreement.  At December 31, 2012, there was $5.5 million outstanding under the revolving-credit agreement.

In addition, we maintain an unrated commercial paper placement agreement with a bank to issue up to $50 million of unsecured debt obligations.  The agreement requires unused credit availability under our revolving-credit agreement equal to the amount of outstanding commercial paper.  There were no outstanding borrowings under this agreement at June 30, 2013.  At December 31, 2012, there were $40.7 million of commercial paper obligations outstanding.

We are subject to certain financial and other covenants under the revolving-credit agreement and the note purchase and private-shelf agreement.  At June 30, 2013, we were in compliance with all required covenants and expect to remain in full compliance throughout the remainder of 2013.

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Note 10.                          Pension and Other Post-retirement Benefit Plans

Inclusive of discontinued operations, the components of net periodic benefit cost recognized in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended June 30, 2013 and 2012 are as follows:

The settlements recognized during the three months ended June 30, 2013 and 2012, relate to benefits associated with a cash balance pension plan.  The curtailments and special termination benefit impacts, which are included in discontinued operations, are due to the sale of our specialty paper business.  See Note 4 for additional information regarding the sale of the specialty paper business.

Inclusive of discontinued operations, the components of net periodic benefit cost recognized in the Condensed Consolidated Statements of Comprehensive Income for the six months ended June 30, 2013 and 2012 are as follows: