Wausau Paper announced a series of plans intended to improve financial performance, conserve cash and increase financial flexibility.
Plans are to retain cash, permanently close the remaining paper machine in Jay, Maine, authorize up to $15 million in additional borrowing on a secured basis and reduce operating costs.
Cash retention plans include suspending cash dividends, a move the company expects will result in savings of more than $16 million annually. Cost reductions and the paper mill closure are expected to improve annual pre-tax operating profits by $20 million, Wausau reports.
"In light of the continuing uncertain business environment, we believe it's prudent to take measures to conserve cash and focus on debt reduction," Thomas J. Howatt, president and chief executive officer, said in a news release.
"The dividend suspension and Jay mill closure are particularly difficult decisions to make, but are nonetheless necessary to preserve liquidity and match capacity with demand during a period of severe economic difficulty. We are confident that these actions, in addition to other cost reduction measures identified, will substantially improve the competitive position and long-term financial performance of our business."
Cost reduction and conservation measures include a hiring freeze, a salaried workforce reduction of 7 percent, a salary freeze for 2009, suspension of company match on non-bargained 401(k) plans, limitation of capital spending to essential maintenance and safety-related projects in addition to major strategic projects already underway, a reduction in spending of $6 million during the first half of 2009 targeted at manufacturing, selling and administrative costs, a reduction in working capital of $20 million with a principal emphasis on inventories.
Howatt said the move narrows Wausau's footprint to six strategic facilities that are highly competitive in the company's core markets and dramatically improves the company's cost structure.
Operations at the Jay, Maine mill will cease by May 31 and will reduce Specialty Products annual production capacity by 28,000 tons or 10 percent. Ninety-six jobs will be affected by the shutdown.
In addition, the company's board of directors has authorized additional borrowing of up to $15 million of secured debt. Collectively, these actions position the company to remain comfortably in compliance with loan covenants and provide adequate liquidity to meet the operating needs of the business, Wausau reported.
Wausau had $1.2 billion in revenues in fiscal 2008.
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