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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

(Mark One)

For the quarterly period ended June 30, 2014

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 £

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 £  No  T

The number of common shares outstanding at July 31, 2014 was 49,970,649.

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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 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.

During 2013, we announced our intent to focus our management efforts and future investments in the industrial and commercial “away-from-home” towel and tissue market.  As a result, we exited our participation in the technical specialty paper business in which we had competed.  See Note 4, “Discontinued Operations and Other” 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, 2013, for our accounting policies and other disclosures, which are pertinent to these statements.

The results of operations of our former technical specialty paper business are reported as a discontinued operation in the Condensed Consolidated Statements of Comprehensive 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 for all periods presented. 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, “Discontinued Operations and Other” for further information regarding discontinued operations.

Note 3.                                 New Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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

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beginning January 1, 2014.  The adoption of ASU No. 2013-11 did not have an impact on our results of operations or financial position.

On September 13, 2013, the Internal Revenue Service released final tangible property regulations under Sections 162(a) and 263(a) of the Internal Revenue Service Code (“IRC”) and proposed regulations under Section 168 of the IRC. These regulations generally apply to taxable years beginning on or after January 1, 2014 and affects all taxpayers that acquire, produce, or improve tangible property. We do not expect that the adoption of these regulations will have material impact on our Condensed Consolidated Financial Statements.

On April 10, 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.”  This guidance changes the definition of a discontinued operation to a strategic shift that has or will have a major impact on an entity’s operations or financial results.  Additionally, there are new disclosure requirements to enhance transparency for reporting purposes.  ASU 2014-08 is to be applied prospectively to all disposals that occur in annual periods beginning on or after December 15, 2014.  We do not expect the adoption of this guidance will have a material impact on our Consolidated Financial Statements.

On May 28, 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This standard provides companies with a single model for use in accounting for revenue arising from contracts with customers.  The core principle of this model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance.  ASU No. 2014-09 is effective with annual periods beginning after December 15, 2016, with early adoption not permitted.  The guidance allows companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption through a cumulative adjustment.  We do not expect the adoption of this guidance will have a material impact on our Consolidated Financial Statements.

On June 19, 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.”  For share-based payments with a performance target that could be achieved after the requisite vesting period, the guidance requires the target be treated as a performance condition under FASB ASC Topic 718, “Compensation-Stock Compensation,” and, as a result, should not be included in the estimation of the grant-date fair value of the award.  Instead, ASU No. 2014-12 requires companies to recognize compensation expense for the award when it becomes probable that the performance target will be achieved.  ASU No. 2014-12 is effective for annual periods beginning after December 15, 2015, and may be applied either prospectively or retrospectively.  We do not expect the adoption of this guidance will have a material impact on our Consolidated Financial Statements.

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Note 4.                                 Discontinued Operations and Other

We determined that as of June 30, 2013, the sale of the specialty paper business and the closure of the Brainerd, Minnesota paper mill (“Brainerd”), met the criteria for discontinued operations presentation as established in FASB Accounting Standards Codification (“ASC”) Subtopic 205-20, “Discontinued Operations”. Therefore, the results of operations of the specialty paper business and Brainerd mill have been reported as discontinued operations in the Condensed Consolidated Statements of Comprehensive 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 for all periods presented.  The Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013 have not been adjusted to separately disclose cash flows related to discontinued operations.

The sale of the specialty paper business and primarily all related assets and selected liabilities, excluding Brainerd, closed on June 26, 2013. 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 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, pre-tax charges related to severance and benefits, contract termination, and other associated closure costs totaled $0.1 million and $4.3 million for the three months ended June 30, 2014 and June 30, 2013, respectively.  For the six months ended June 30, 2014 and June 30, 2013, the aforementioned pre-tax closure charges were $0.7 million and $4.3 million, respectively.

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, 2014, 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 Brainerd and the facility permanently closed on March 29, 2013. Pre-tax charges recorded for the six months ended June 30, 2014 were $0.1 million, related to severance and benefit continuation costs and other associated closure costs; there were not any additional charges recognized for the three months ended June 30, 2014. Pre-tax charges for severance and benefit continuation costs and other associated closure costs totaled $0.7 million for the three months ended June 30, 2013.  For the six months ended June 30, 2013, pre-tax charges included accelerated depreciation on long lived assets of $35.7

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million; inventory and spare parts write downs of $6.7 million; and other associated closure costs of $2.6 million.

In June 2014, we sold a portion of the group of assets held for sale 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. At June 30, 2014, there was $4.7 million in current assets of discontinued operations, comprised primarily of approximately $4.1 million in remaining held for sale assets of Brainerd, which continue to be actively marketed for sale. Also at June 30, 2014, there were $0.5 million in current liabilities and $0.9 million in other noncurrent liabilities that are primarily related to contract termination costs and are classified as discontinued operations in the Condensed Consolidated Balance Sheets.  At December 31, 2013, there was $8.6 million in current assets of discontinued operations, comprised primarily of $6.7 million related to assets held for sale of Brainerd. Also at December 31, 2013, there were $1.9 million in current liabilities and $1.0 million in other noncurrent liabilities that are primarily related to contract termination costs and were classified as discontinued operations in the Condensed Consolidated Balance Sheets.

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

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The following table summarizes the components of costs included in loss from discontinued operations in the Condensed Consolidated Statements of Comprehensive Loss associated with the sale of the specialty paper business and closure of Brainerd.

Following is a summary of the liabilities for restructuring expenses through June 30, 2014, related to the closure of Brainerd and the sale of the specialty paper business all of which were included in liabilities of discontinued operations:

In addition, the Company maintains a natural gas contract for our previously closed Groveton, New Hampshire mill. The liabilities and charges associated with this natural gas contract are recorded in continuing operations. At June 30, 2014, $1.1 million and $7.6 million are included in current liabilities and noncurrent liabilities, respectively.  During the first six months of 2014 and 2013, we made payments related to this natural gas contract of approximately $0.4 million and $0.8 million, respectively.  At December 31, 2013, $0.8 million and $7.8 million were included in current liabilities and noncurrent liabilities, respectively. There were associated charges of $0.4 million and $0.5 million, respectively, within selling and administrative expenses for the three and six months ended June 30, 2014.  For the three and six months ending June 30, 2013, recognized within selling and administrative expenses were associated charges of $0.1 million and $0.3 million, respectively. In the second quarter of 2013, we recognized a net credit of approximately $1.7 million.  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:

Due to the net loss from continuing operations for the three and six months ended June 30, 2014, stock-based grants for 1,022,000 shares and 1,216,559 shares, respectively, were considered to be antidilutive.  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.

Note 6.           Receivables

Accounts receivable consisted of the following:

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Note 7.           Inventories

The various components of inventories were as follows:

Note 8.           Property, Plant, and Equipment

Property, plant, and equipment included the following:

Depreciation and amortization for the three months ended June 30, 2014 and 2013 was $10.3 million and $10.0 million, respectively.  For the six months ended June 30, 2014 and 2013, depreciation and amortization was $20.6 million and $19.8 million, respectively.

Note 9.                                 Debt

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 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 until July 20, 2014.  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

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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, 2014, the total capacity of unsecured private placement notes was $200 million, with $150 million of unsecured private placement notes 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, 2014, the estimated fair value of long-term debt is approximately $161 million which compares to the carrying value of $150 million.  At December 31, 2013, the estimated fair value of long-term debt was approximately $158 million which compares to the carrying value of $150 million.

On June 23, 2010, we entered into a $125 million revolving-credit agreement with five financial institutions originally set to 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. On December 17, 2013, the credit agreement was amended to reduce the aggregate commitments under the revolving-credit agreement to $80 million and extend the maturity date for those obligations from June 23, 2014 to June 30, 2015.  At June 30, 2014 and December 31, 2013, there were no amounts outstanding under the revolving-credit agreement.

Early in 2014 and during prior years, we had an unrated commercial paper placement agreement with a bank to issue up to $50 million of unsecured debt obligations.  The agreement required unused credit availability under our revolving-credit agreement equal to the amount of outstanding commercial paper.  On February 24, 2014, we terminated this commercial paper placement agreement.  There were no outstanding borrowings under this agreement as of the date of termination or at December 31, 2013.

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, 2014, we were in compliance with all required covenants.  On March 28, 2014, the revolving-credit and the note purchase and private-shelf agreements were amended to adjust certain covenant requirements.  The amendment to the private-shelf agreement resulted in an additional 0.5% per annum fee on all outstanding notes for the fiscal quarter ending March 31, 2014 and a 1% per annum fee thereafter on all outstanding notes under this agreement.  Effective with the amendments dated March 28, 2014, to the agreements, we agreed to seek approval from our Board of Directors to secure the debt obligations by liens on substantially all of our assets within 60 days of the amendments’ effective date. On June 27, 2014, both the revolving-credit and the note purchase and private-shelf agreements were further amended to adjust certain

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covenants and to extend the date to secure our debt obligations by liens on substantially all of our assets by July 28, 2014.

On July 25, 2014, we received an extension to secure our debt obligations by liens to July 31, 2014.  We received approval to secure our debt from our Board of Directors and refinanced our existing debt obligations under a new secured debt structure on July 30, 2014.  For further information, please see Note 14, “Subsequent Events.”

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 Loss for the three months ended June 30, 2014 and 2013 are as follows:

The settlements recognized during the three months ended June 30, 2013, 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, “Discontinued Operations and Other” for additional information regarding the sale of the specialty paper business.

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Inclusive of discontinued operations, the components of net periodic benefit cost recognized in the Condensed Consolidated Statements of Comprehensive Loss for the six months ended June 30, 2014 and 2013 are as follows:

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

We previously disclosed in our consolidated financial statements for the year ended December 31, 2013 that we anticipate making contributions of approximately $5.5 million directly to our pension and retirement plans as a result of minimum funding requirements and elective contributions in 2014.  As of June 30, 2014, we have made payments of approximately $1.6 million to our pension plans.  Coincident with the approval by our Board of Directors to secure our debt, we entered into a settlement agreement with the Pension Benefit Guaranty Corporation to contribute an additional $7.5 million to our defined benefit pension plans during 2014.  See Note 14, “Subsequent Events” for additional information.  As of June 30, 2014, we have contributed approximately $1.5 million to our other post-retirement plans.  We expect to contribute approximately $3.0 million to our other post-retirement plans in 2014.

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Note 11.                          Share-Based Compensation

We account for share-based compensation pursuant to the provisions of FASB ASC Subtopic 718-10.

Stock Options, Restricted Stock Awards, and Performance Units

During the three months ended June 30, 2014, we granted 5,000 performance units as part of compensation for our newly appointed chief executive officer. Including the grant of 5,000 performance units that occurred in the second quarter of 2014, for the six months ended June 30, 2014, we granted a total of 270,650 awards of performance units to our directors and certain employees of Wausau Paper.  Of the awards granted, 31,898 performance units were granted to directors. The grants to certain employees, other than those granted to our newly appointed chief executive officer, were comprised of two types of awards. The first type of award included 114,078 of performance units with the award subject to achievement of a targeted shareholder return on our common stock over a three-year period.  The second type of award was comprised of 119,674 performance units with vesting contingent on (1) achieving certain operating profit levels and (2) completion of a service requirement.

On June 19, 2014, effective with the departure of two members of our Board of Directors, a change in control event as defined within provisions of our equity compensation plans and related grants occurred. As a result, subject to such provisions, conditions to vesting for awards outstanding on June 19, 2014 were deemed to have been satisfied, with the exception of the portion of any awards subject to the attainment of a certain level of operating profit for 2014, and, consequently, $1.4 million of share-based compensation expense was recognized for the remaining unamortized portion of the outstanding awards. Prior to the change in control event, we recognized compensation expense on grants of non-qualified stock options, restricted stock awards, and performance unit awards on a straight-line basis over the requisite service period of each award. Forfeiture rates were estimated based upon our historical experience for each grant type.

Including the share-based compensation expense recognized for the change in control event, total share-based compensation expense was $1.7 million and $2.3 million for the three and six month periods ended June 30, 2014, respectively. For the three and six month periods ended June 30, 2013, share-based compensation expense was $0.4 million and $1.4 million, respectively.

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Note 12.                          Accumulated Other Comprehensive Loss

For all periods presented in the Condensed Consolidated Financial Statements, accumulated other comprehensive loss is comprised solely of cumulative net actuarial losses and prior service cost not yet recognized as a component of net periodic benefit costs for retirement and other post-retirement plans.  For the three and six months ended June 30, 2014, and June 30, 2013, the changes in accumulated other comprehensive loss, net of tax, were as follows:

Following are details of the amounts reclassified out of accumulated other comprehensive loss during the three months ended June 30, 2014 and 2013:

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Following are details of the amounts reclassified out of accumulated other comprehensive loss during the six months ended June 30, 2014 and 2013: