Wausau Paper Announces Fourth-Quarter, Year-End Financial Results

In December 2008, we announced plans to permanently close Printing & Writings's converting operations at our Appleton, Wisconsin facility. The operations at the Appleton facility will be reduced in a phased manner beginning in early 2009 and will be permanently closed prior to December 31, 2009. The closure will result in the elimination of approximately 90 permanent jobs. The converting equipment at the Appleton facility will be relocated to our remaining Printing & Writing mills, and distribution activities will also be relocated to a centralized location. The cost of sales for the three and twelve months ended December 31, 2008, includes less than $0.1 million in pre-tax charges for associated closure costs. Pre-tax restructuring expense related to severance and benefit continuation costs was also less than $0.1 million for the three and twelve months ended December 31, 2008. Additional pre-tax closure charges of approximately $3.4 million are expected to be incurred in 2009.

In August 2008, we announced plans to permanently shutdown one of the two paper machines at our Specialty Products mill in Jay, Maine. The shutdown was completed in December 2008, and impacted approximately 150 of the 235 employees at the facility. The cost of sales for the three and twelve months ended December 31, 2008, includes $5.1 million and $7.2 million, respectively, in pre-tax charges for depreciation on assets and other associated costs of the machine shutdown. Pre-tax restructuring expense related to severance and benefit continuation costs and other associated costs of the machine shutdown was $0.7 million and $2.4 million, respectively, for the three and twelve months ended December 31, 2008. Additional pre-tax charges related to the permanent machine shutdown of approximately $0.1 million are expected to be incurred in 2009.

During the third quarter of 2008, we settled an ongoing examination by the Internal Revenue Service for our 1998 to 2003 tax years. The examination related to certain research and development credits recorded for these respective tax years. In the third and fourth quarters of 2008, we recorded a credit for income taxes of $0.9 million and $0.2 million, respectively, related to the settlement of the ongoing examination, interest costs, and closure of the related tax years.

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Benefit Plans" ("SFAS 158"), which requires that we recognize in our financial statements the overfunded or underfunded status of a defined benefit post-retirement plan as an asset or liability and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS 158 also requires the measurement date of the funded status of a plan as of the date of the year end financial statements. The recognition provisions of SFAS 158 were adopted on December 31, 2006. We adopted the measurement date provisions on January 1, 2008, which resulted in an increase in our liabilities for defined benefit pension and post-retirement plans of $2.9 million, an increase in deferred tax assets of $1.0 million, an after-tax increase to accumulated other comprehensive income of $0.4 million, and an after-tax charge to retained earnings of $2.3 million.

In December 2007, the roll wrap portion of our Specialty Products' business was sold to Cascades Sonoco, Inc. We continued to manufacture roll wrap and related products for the buyer during a post-closing transition period that expired on July 2, 2008. The cost of sales for the three and twelve months ended December 31, 2008, includes $0.1 million in pre-tax charges related to the closure of the roll wrap operations. During the three and twelve months ended December 31, 2007, cost of sales was impacted by a credit of $0.8 million due to a gain on the sale of the roll wrap business offset by asset impairment charges. Pre-tax restructuring expense related to severance and benefit continuation costs and other associated closure costs for the three months ended December 31, 2008 and 2007, was $0.1 million and $0.2 million, respectively. Pre-tax restructuring expense related to severance and benefit continuation costs and other associated closure costs for the twelve months ended December 31, 2008 and 2007, was $0.5 million and $0.2 million, respectively. We have retained and intend to sell the real property at the roll wrap production facilities. At December 31, 2008, both of the facilities used for roll wrap manufacturing met the classification requirements of net assets held for sale as defined in SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". Accordingly, the net assets associated with the facilities are classified as net assets held for sale, which are included in current assets on our Condensed Consolidated Balance Sheets. We continue to sell certain specialty products to our customers that were previously manufactured at these facilities. We do not expect to incur any additional pre-tax closure charges related to the sale and closure of our roll wrap operations.

In October 2007, we announced plans to cease Printing & Writing's papermaking operations at our Groveton, New Hampshire mill. Papermaking operations ceased in December 2007, and resulted in the elimination of approximately 300 permanent jobs. The cost of sales for the three months ended December 31, 2008 and 2007, includes less than $0.1 million and $38.8 million, respectively, in pre-tax charges for depreciation on assets and other associated closure costs and, in 2007, an adjustment of spare parts and mill inventory to net realizable value. The cost of sales for the twelve months ended December 31, 2008 and 2007, includes $10.1 million and $38.8 million, respectively, in pre-tax charges for depreciation on assets, an adjustment of spare parts and mill inventory to net realizable value, and other associated closure costs. Pre-tax restructuring expense related to severance and benefit continuation costs and other associated closure costs was $7.1 million for the three months ended December 31, 2007. An adjustment to contract termination costs during the three months ended December 31, 2008, offset other associated closure costs resulting in a credit to pre-tax restructuring expense of $0.3 million. Pre-tax restructuring expense for the twelve months ended December 31, 2008 and 2007, includes $13.4 million and $7.1 million, respectively, related to severance and benefit continuation costs and other associated closure costs, and in 2008, contract termination costs. We do not expect to incur any additional closure charges related to the closure of the Groveton, New Hampshire mill.

On January 1, 2007, we adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109" ("FIN 48"). FIN 48 defines the threshold for recognizing the benefits of tax return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority. The literature provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. FIN 48 also includes guidance concerning accounting for income tax uncertainties in interim periods and increases the level of disclosures associated with any income tax uncertainties. The adoption of FIN 48 did not have a significant impact on our financial statements.

Effective January 1, 2007, we reorganized the various subsidiaries which comprised our operating segments to align more closely with our operating structure. Each segment is now organized as a single member limited liability company and operates as a direct subsidiary of Wausau Paper Corp. The new structure allowed us to utilize state net operating loss and credit carryovers of certain subsidiaries for which full valuation allowances had been previously established due to the fact that separate state tax returns were filed under our previous structure. In the first quarter of 2007, we recorded state income tax benefits of $12.0 million, or $0.24 per basic and diluted share, primarily as a result of the reversal of these valuation allowances. In the second quarter of 2007, we recorded state income tax charges of $0.4 million, or $0.01 per basic and diluted share, as a result of the recognition of a change in our effective state tax rate from our previous tax structure to our single member limited liability company tax structure.

Interim Segment Information

Our operations are classified into three principal reportable segments: Specialty Products, Printing & Writing, and Towel & Tissue, each providing different products. Separate management of each segment is required because each business unit is subject to different marketing, production, and technology strategies.

Specialty Products produces specialty papers at its manufacturing facilities in Rhinelander, Wisconsin; Mosinee, Wisconsin; and Jay, Maine. Specialty Products also includes two converting facilities that produced laminated roll wrap and related specialty finishing and packaging products (see Note 5). Printing & Writing produces a broad line of premium printing and writing grades at manufacturing facilities in Brokaw, Wisconsin; and Brainerd, Minnesota. The Printing & Writing 2007 interim segment information also includes a manufacturing facility in Groveton, New Hampshire, which ceased papermaking operations in December 2007 (see Note 6). Printing & Writing also includes a converting facility that converts printing and writing grades (see Note 1). Towel & Tissue produces a complete line of towel and tissue products that are marketed along with soap and dispensing systems for the "away-from-home" market. Towel & Tissue operates a paper mill in Middletown, Ohio and a converting facility in Harrodsburg, Kentucky.

*Segment assets do not include intersegment accounts receivable, cash, deferred tax assets, and certain other assets which are not identifiable with the segments.