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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

(Mark One)

T         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

OR

£         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 Data 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 October 31, 2013 was 49,445,754.

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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 was closed in February 2012. In January 2013, we announced our intent to focus our management efforts and future investments on our Tissue business. In March 2013, we permanently closed our Brainerd, Minnesota, mill and on June 26, 2013, completed the sale of our specialty paper business, ending our participation in the markets in which our former Paper segment 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 guidance 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 and selected liabilities, excluding the Brainerd 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 nine months ended September 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.

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 September 30, 2013, no amounts have been recognized related to this provision, as we are not aware of any such events that have occurred or if any such events will occur in the future.

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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 September 30, 2013, Brainerd meets the criteria for presentation as discontinued operations.

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 $12.5 million, which is recorded in earnings from discontinued operations in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2012.  During the third quarter of 2012, we completed the sale and disposal of the remaining long-lived assets of the Brokaw mill, generating proceeds of $4.8 million and a pre-tax gain of approximately $0.2 million.

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 nine months ended September 30, 2013 and 2012, have not been adjusted to separately disclose cash flows related to discontinued operations.

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

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

During the third 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 $1.8 million during the three months ended September 30, 2013, and net pre-tax charges of $114.8 million during the nine months ended September 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).

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In addition, during the third quarter of 2012, we recognized pre-tax charges related to the closure of the Brokaw mill of $0.4 million and, exclusive of the gain recorded for the sales transaction, net pre-tax charges of $6.7 million during the nine months ended September 30, 2012. No additional pre-tax closure charges related to the Brokaw mill were incurred during the first nine months 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).

Following is a summary of the liabilities for restructuring expenses through September 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 nine months ended September 30, 2013, were net expense of approximately $0.2 million and a net credit of approximately $1.1 million, respectively, related to a natural gas contract for a closed facility.  During the first nine months of 2013, we have made payments related to this natural gas contract of approximately $1.0 million.  At September 30, 2013, $0.7 million and $9.4 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

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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.

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 nine months ended September 30, 2013, and the three and nine months ended September 30, 2012 stock-based grants for 1,761,065 shares, 1,859,636 shares, 1,801,659 shares, and 1,151,222 shares, respectively, were considered to be antidilutive.

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Note 6.                                 Receivables

Receivables at September 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 September 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 September 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.

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The continuing operations provision for depreciation and amortization for the three months ended September 30, 2013 and 2012 was $9.9 million and $7.4 million, respectively.  The continuing operations provision for depreciation and amortization for the nine months ended September 30, 2013 and 2012 was $29.7 million and $21.9 million, respectively.

Note 9.                                 Debt

A summary of total debt is as follows:

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 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 September 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 September 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

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aggregate commitments from $125 million to $100 million. At September 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 September 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 September 30, 2013, we were in compliance with all required covenants and expect to remain in full compliance throughout the remainder of 2013.

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 September 30, 2013 and 2012 are as follows:

The settlement recognized during the three months ended September 30, 2013, relates to benefits associated with a cash balance pension plan.  The settlements recognized during the three months ended September 30, 2012, relate to benefits associated with various pension plans.  Approximately $7.7 million of the settlements during the three months ended September 30, 2012, related to the final termination of a certain defined benefit pension plan, which is included in discontinued operations.  See Note 4 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 Income for the nine months ended September 30, 2013 and 2012 are as follows:

The settlements recognized during the nine months ended September 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 nine months ended September 30, 2013, are due to the sale of our specialty paper business.  The settlements recognized during the nine months ended September 30, 2012, relate to benefits associated with various pension plans.  Approximately $7.7 million of the settlements during the nine months ended September 30, 2012 related to the final termination of a certain defined benefit pension plan, which is included in discontinued operations.  The other post-retirement benefits curtailment, which is included in discontinued operations, in the nine months ended September 30, 2012 related to the closure of the Brokaw, Wisconsin mill. See Note 4 for additional information regarding discontinued operations.

We previously disclosed in our consolidated financial statements for the year ended December 31, 2012 that we anticipate making contributions of approximately $0.8 million directly to our pension and retirement plans as a result of minimum funding requirements and elective contributions in 2013.  As of September 30, 2013, we have made payments of approximately $0.6 million to our pension plans.  In addition, as previously reported, we expected to contribute approximately $4.7 million, net of subsidy reimbursements, directly to other post-retirement plans in 2013.  As of September 30, 2013, we have contributed approximately $2.7 million to our other post-retirement plans.  We now expect to contribute approximately $3.6 million to our other post-retirement plans in 2013.

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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 and nine months ended September 30, 2013, share-based compensation expense related to non-qualified stock option grants, restricted stock awards, and performance unit awards was approximately $0.2 million and $1.6 million, respectively.  As a result of share-based compensation related to non-qualified stock option grants, restricted stock awards, and performance unit awards, during the three and nine months ended September 30, 2012, we recognized a credit of less than $0.1 million and expense of approximately $1.5 million, respectively.  We recognize compensation expense on grants of stock options, and performance unit share-based compensation awards on a straight-line basis over the requisite service period of each award.  Forfeiture rates are estimated based upon our historical experience for each grant type.  As of September 30, 2013, total unrecognized compensation cost, net of estimated forfeitures, related to share-based compensation awards was approximately $1.7 million, which we expect to recognize over a weighted average period of approximately 1.0 years.

During the nine months ended September 30, 2013, as part of compensation for our directors and certain employees of Wausau Paper, we granted awards of performance units.  Of the awards granted, 48,846 performance units were granted to directors.  The grants to certain employees were comprised of three types of awards.  The first type of award included 73,628 performance units with vesting based upon the completion of a requisite period of service.  The second type of award included 263,599 of performance units with the award subject to achievement of a targeted shareholder return on our common stock over a three-year period.  The third type of award was comprised of 228,968 performance units with vesting contingent on (1) achieving certain operating profit levels and (2) completion of a service requirement.  We have recognized compensation expense related to these performance-based awards during the three and nine months ended September 30, 2013, as it is probable a portion of the awards will vest as performance criteria are met.  As a result of the sale of the specialty paper business and the closure of the Brainerd mill, 197,067 unvested performance units were forfeited during the nine months ended September 30, 2013.

Stock Appreciation Rights and Dividend Equivalents

Share-based compensation provisions or credits related to stock appreciation rights and dividend equivalents are determined based upon a remeasurement to their fair value at each interim reporting period in accordance with the provisions of FASB ASC Subtopic 718-10.  During the three and nine months ended September 30, 2013 and September 30, 2012, we recognized a credit of less than $0.1 million and expense of less than $0.1 million, respectively, in share-based compensation related to stock appreciation rights and dividend equivalents.

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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.  During the nine months ended September 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 nine months ended September 30, 2013:

(a) These accumulated other comprehensive income components are included in the computation of net periodic benefit costs.  See Note 10, “Pension and Other Post-retirement Benefit Plans” regarding the pension and other post-retirement net periodic benefit costs.

Note 13.                          Interim Segment Information

Factors Used to Identify Reportable Segments

We have evaluated our disclosures of our business segments in accordance with FASB ASC Subtopic 280-10, and as a result of our discontinued operations, we have classified our operations into one reportable segment: Tissue. See Note 4 for additional information on discontinued operations.

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Products from which Revenue is Derived

We produce a complete line of towel and tissue products that are marketed along with soap and dispensing systems for the “away-from-home” market.  We operate a paper mill in Middletown, Ohio, and a manufacturing and converting facility in Harrodsburg, Kentucky.

Our former Paper segment produced specialty papers within three core markets — Food, Industrial & Tape, and Coated & Liner.  The sale of the specialty paper business on June 26, 2013 and closure of the Brainerd mill in March 2013 effectively eliminated this business segment.  See Note 4 for additional information on discontinued operations.

Reconciliations

In accordance with ASC 280-10, we are presenting the non-restated historical segment asset reconciliation for December 31, 2012.  Predominately all assets of the historically classified Paper segment were disposed of in the sale of the specialty paper business. We previously had only two segments Paper and Tissue; however, for reconciliation purposes we had shown Corporate and unallocated assets separately. For the current period this reconciliation is not required as only one segment exists at September 30, 2013.