Welcome to the Wausau Paper 2010 Second Quarter Results. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host Director of Investor Relations, Perry Grueber. Please go ahead.

Good morning, everyone. Thank you for joining us for Wausau Paper's 2010 second quarter analyst and investor call. I am pleased to be here today with Tom Howatt, our President and Chief Executive Officer; Scott Doescher, Executive Vice President and Chief Financial Officer; and Hank Newell, Senior Vice President of our Paper Segment. This call is being web cast and slides are provided to summarize key elements of our presentation. The presentation is also available as a download from the investor section of the Wausau Paper website. In a moment Tom will begin our presentation by reviewing second quarter results for the corporation and our Tissue segment. Hank will then review the Paper segment's financial performance and discuss our current expectations for this business. Following those comments, Scott will provide a high level financial review, and finally, Tom will comment on our third quarter outlook, after which time we would be happy to address any questions you might have. Statements made during this presentation, other than those that refer to past results are forward-looking statements made pursuant to the Safe Harbor provisions of the Securities Reform Act of 1995. Such statements, including those concerning expected performance, and price increases and future earnings or dividends involve risks and uncertainties that may cause results to differ materially from the expectations set forth during this discussion. Among other things, these risks and uncertainties include the risks and assumptions described in item 1A and item 7 of the company's Form 10-K for the year ended December 31, 2009. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. In addition our presentation refers to certain non-GAAP financial measures. A reconciliation of these measures to GAAP is provided in the appendix of this presentation and is also available on our website. With those formalities out of the way, I'll now turn the call over to Tom Howatt. Tom?

Good morning everyone. I'll begin with highlights of our second quarter performance. Second quarter net earnings of $0.11 a share represents a significant improvement from the $0.04 per share loss reported last year. Adjusted earnings for the quarter were $0.07 per share, with Tissue and Paper both achieving solid results despite absorbing $22 million in year-over-year fiber cost increases. We believe the performance of our paper segment is particularly noteworthy, with the business remaining profitable despite a weak economic recovery and an unprecedented run-up of fiber costs over the last year. Overall results also include maintenance outages at our Rhinelander and Middletown mill that were not present in prior year result. Finally, we completed the replacement of our bank credit facility, which concludes the refinancing activities we've highlighted in previous quarters. We expect the pace of economic recovery to be very modest for the foreseeable future with market sectors tight and consumer spending continuing to experience limited growth. At the same time, our core market strategy is continue to create opportunities for growth, as we benefit from our green leader position in away-from-home tissue market and from the Paper segments capacity realignment in growth markets such as food, tape and coated liners. Finally, market pulp pricing has clearly peaked for the cycle with several suppliers already announcing list price reductions. This will provide an increasing benefit over the balance of the year. Adjusted net earnings of $0.07 per share for the quarter were achieved despite observing year-over-year fiber cost increases equal to $0.28 per share. Results benefited from solid product mix gains of tissue as well as recent capital investments and capacity realignment in growth markets in paper. We believe the restructuring and investment actions we've taken in recent years coupled with effective market development strategies have positioned us to achieve relative earnings stability in the face of significant input cost volatility. Our Tissue segment reported operating profits of $10.5 million compared last year's record second quarter profit of $13.8 million. Results were driven by a 9% increase in our Green Seal certified grade against the backdrop of nearly flat market demand. Overall, shipments were flat as competitive market conditions, limited volume for support on our commodity oriented grades. Earnings were also impacted by waste paper costs that more than doubled for the quarter and a scheduled maintenance outage at the Middletown mill not included in prior year results. Hank will now review market conditions and the performance of our Paper segment, Hank?

Thank you, Tom. This morning I will provide comments on the second quarter performance of the Paper segment, an overview of our core markets and an update on the progress of our Brainerd machine rebuild and priorities for the balance of 2010. We have made rapid progress in every aspect of our business since forming the Paper segment in January. This includes aligning our organization around core markets, establishing investment plans for our manufacturing operations and creating an operating framework that overtime reduces the historical volatility of our margins. Second quarter adjusted operating profit was $1.4 million versus $5.09 million in the prior year. This result includes a major planned maintenance outage at our Rhinelander mill that impacted the quarter by approximately $2 million and year-over-year increases in fiber cost of $19 million. During the quarter we continued to take price actions that included demand-driven base price increases, a pulp surcharge based on short-term disruption and worldwide pulp supply and other contractual arrangements with both customers and our suppliers. These actions are fully implemented and with pulp at or near peak levels we expect the full utilization of these actions to drive improved margins in the third quarter. Pulp markets are poised to moderate during the second half after setting a record high in June and what should be the cycle peak. We expect the new quarter high for pulp cost in the third quarter before pulp declines manifest in the market late in the year. Our third quarter fiber cost will remained elevated and in some markets we may see modest inventory destocking as a short-term response to anticipated decreases in pulp cost. Overall, demand trends improved in all sectors during the second quarter and year-to-date based on modest improvement in our domestic markets. The food sector continues to…

Thank you, Hank. As mentioned, second quarter adjusted earnings of $0.07 per share were relatively stable considering the record high pulp price environment in which we operated. During the period, we sold 2,200 acres of timberlands achieving an average selling price of $8000 per acre and an after-tax gain of $2.3 million. Since its inception in 2005, we've sold approximately 32,000 acres of non-strategic timberlands with approximately 10,000 acres remaining in our sales program. Our balance sheet at mid-year remained solid with a debt-to-capital ratio of 34%. During the quarter, we completed planned debt refinancing activities finalizing our full year $125 million bank credit facility. Over the first half of the year, we effectively addressed 2011 debt obligations creating the credit capacity and financing flexibility to fund operations and pursue strategic investments as they are identified. I would like to briefly review two earnings reconciliation schedules. The first schedule compares second quarter 2009 adjusted earnings of $0.15 per share with second quarter 2010 adjusted earnings of $0.07 per share. Compared with last year, sales price, mix and volume variances favorably impacted second quarter earnings by $0.80 per share. Average selling price increased in both business units with Paper reflecting the strongest year-over-year variance. Fiber prices increased $22 million, or $0.28 per share on a year-over-year basis, market pulp costs increased approximately 40% or $18 million, waste paper cost more than doubled increasing by $3 million and other fiber cost increased a combined $1 million. Our paper machines operated at capacity week through the second quarter, avoiding the market-related downtime executed during the second quarter of last year. The elimination of market-related downtime, increased current year earnings to an equivalent of $0.08 per share. We did however execute scheduled annual maintenance outages at our Middletown, tissue; and Rheinlander paper mills. These…

We believe we're continuing to make progress in our efforts to enhance the long-term competitiveness and profitability of our businesses and expect substantial margin expansion at Paper and continued solid returns at Tissue in the third quarter. At the same time, we expect sluggish economic conditions will continue for the foreseeable future and that elevated pulp prices will remain a factor in third quarter. We would be pleased to answer your questions at this time.

(Operators Instructions) We go to Michael Roxland with Bank of America.

Good morning guys. Just following the 1Q call, you mentioned that you expected earnings to if I quote it here correctly, improve modestly from first quarter adjusted earnings of $0.08 per share. That was your expectation of 2Q. What were the biggest surprises during 2Q such that earnings fell short of what you initially expected?

Mike, there are a couple of issues there. One was, tissue volume was a bit off expectations and other was a couple of onetime issues within our Paper segment that we do not anticipate would repeat. Scott, any further detail on that?

No, I think that covers it well. With regard to the volume weakness at Tissue, it really related primarily Mike to the lower margin standard product category as opposed to the value-add product category for us.

Then can you give a little more color on what occurred within Tissue, we say it's related to the more lower margin, but did you sell more lower margin products than some of the higher Green-Seal products. Is that what occurred?

No, Mike, actually, it was just the opposite. We periodically have a circumstance where we have increasing input cost and of course during the period, waste paper more than doubled versus prior year. With limited benefits from the spring price increase, we wound up with a margin squeeze on those lower margin grades and as a result shows to back away from some volume in that segment.

Got you. Obviously you put the margin, in terms of margin expansion, that should actually occur in the second half, so you are going to get the full benefit from I think, the 6% or 9% price increase you have on the table?

Those spring price increases that were announced quite frankly, we see limited benefits occurring as a result of those increases. I think, we, initially at the time of those price increase implementations were somewhat encouraged, but I would say that we've seen a relatively competitive marketplace with volumes in that marketplace not really growing much over the prior year.

Got you. Then just two quick questions, when we look at your 3Q guidance, you seem to be pointing to a number that is obviously lower than last year, I think last year, Paper did around $10 million while Tissue did around $16 million. Where are we likely to see the greatest changes?

We would expect as compared to the second quarter, Mike, we would expect to see improvement within our Paper business, and that being stronger than the relative performance of our Tissue business. As you look at that year-over-year comparison, keep in mind that although market pulp is beginning to tip over, we do expect that third quarter average price for market pulp, again within our paper business, will be in fact higher than what the second quarter was for us. So that year-over-year comparison just in terms of the market pulp comparison within paper will remain difficult, but again the greatest level of improvement compared to the second quarter, I would anticipate within our Paper business.

Final question, just in terms of tissue versus paper, it sounds like tissue is going to remain pressured until you start to see a pullback in, [whether] it started off as paper or pulp, is that there? In terms of the growth, it's really going to be in the second half. You are looking at it sounds like anyway coming from the paper segment?

I can comment on the Paper segment just a little bit. As we've implemented our price actions across the sector, we've recognized a piece of those price actions going from Q1 into Q2, I think on an average we will begin to see full realization of our price actions as we go from Q2 to Q3 in the neighborhood of that 4% to 4.5% range in aggregate.

Next we will go to the line of Ryan Rosenthal with Sidoti & Co.

In your comments, you guys mentioned that the paper machine rebuild is on track to be completed in the first quarter of '11. Could you provide some color on the recent demand trend you are seeing for the Specialty tape market the upgrade is designed to serve?

Sorry, I missed a very last part of that question.

Looking to get a better understanding of the demand that you are currently seeing for the Specialty tape market that the machine rebuild is designed to serve?

The Brainerd's revenue is going to rebuilt primarily to service and provide crepe-tape backing paper. We got a line up with our customer base and as we understand their strategy is for growth. This capacity will service that growth both in North America and worldwide. As a general statement we expect to see double-digit growth within our tape category.

Then drilling down a bit on the Towel and Tissue standard products if you will, could you discuss how you positioned that in the market place and it would seem to me that based on the flat volume for the away-from-home market and your increase in the Green product shipments that the standard products fell short of the market place, and I was just curious about your positioning there?

Yes, you are right. In fact those standard product volumes declined on a year-over-year basis in market that was flat to perhaps up nominally. We offered those standard products for a number of reasons. They certainly are complimentary product that provides a full product portfolio for the vast majority of our customers. Those are not the strategic grades obviously that we would want to lead with and they support proprietary dispensing systems business, but nonetheless we believe that they are necessary part of our product portfolio.

Okay. Then turning to your capital structure, my understanding is you now planning to spend a bit more on the machinery build this year. Can you discuss your overall capital structure strategy following the refinancing and kind of where you expect long-term debt to trend from here?

Sure Ryan. When you step back and look at the refinancing that we put in place I think it has positioned us well as we move into the future with a high degree of flexibility. The $125 million bank credit agreement gives us an ability to take down additional monies on a daily basis should operating and investment needs dictate. At the same time, the $125 million private shelf, which represents an uncommitted amount, but nevertheless it gives us the framework to quickly issue longer term notes for, what I would describe as, larger strategic investments in our business. Certainly that Brainerd paper machine rebuild fits in that category, and other future investments that we would contemplate either in Paper or even more specifically within Tissue, that additional private shelf facility I think will serve us very well. If we look out over the balance of the year, I'll let you complete your cash projections on it, but $41 million I think is a good spending estimate for us in 2010. Then as you look beyond that, we have typically spent on average over the last several years between $25 million and $30 million on capital exclusive of larger strategic projects, such like the $27 million paper machine rebuild.

Great. Do you expect to be free cash flow positive this year and if so, would you be using that free cash flow to pay down debt. Would that be a priority at this point or do you think there's enough capital projects out there that you'd likely invest this amount of cash at this point?

No, I think in the near term what you are going to see are, those debt level is likely to come down modestly as we work through the balance of this year.

Next we will go to the line of Mark Wilde with Deutsche Bank.

Can we sort of just talk a little bit about the pulp market again, you mentioned you will be up a little bit quarter-on-quarter in the third quarter, but what I am sensing is that we are starting to see list prices come down but we are also seeing discounts to large buyers like yourself widen out a bit. Can you confirm that and can you perhaps quantify what you see going on in the market up to this point?

You are right Mark. With that market tipping over and signs that the list price for both soft and hard wood is declining, we would expect to see benefit from that as we work through the balance of the year. Now, most of the benefit we would anticipate would come from those list price reductions as opposed to an expanded discount situation. As we had mentioned, despite the fact that pulp is tipping over, we do expect that our third quarter average will be slightly higher than our Q2 average and then of course if list prices continue to move down, we should see a nice movement in that fourth quarter average.

Thanks. I mean, we've seen some big announcements like this, announcement of a big price cut by [other brands], in the Asian market, can you talk it all about, you know how Wausau can kind of squeeze the maximum benefit, over the next couple of quarters, from what looks like a lot of uncertainty in this market?

Well, in terms of our pulp relationships we have one established and as you pointed out Mark, we are a large consumer of market pulp, we have long and very well established relationships with pulp producers and that typically leads to longer and more stable pricing relationships with them as well. So although we do participate in the spot market, I would tell you that ends up being a relative small portion of the overall pulp that we consume.

Okay. Then turning over to the Tissue business, is it possible to just get some kind of a sense of what the placements of those hands free dispensers looked like over the last three to five years, and what time the current trajectory is?

I don't think we have specifically talked about the numbers of those dispensers that we've moved to the market place, Mark and I would tell you though that, on overall basis, we do track our placement of proprietary dispensers in the market place, because those are obviously a leading indicator of the future success of that tissue business and we know that as we have a successful period of placement of those dispensers that three to six months is down the road, we will see a fair little volume improvement in those categories. So I would tell you that, if you take a look over a period of time, you would see continuing modest growth on a year-over-year basis in those overall proprietary dispenser placements.

Okay, so as we see this other big guy from Atlanta, putting a lot in and does not cut into your business?

We have successfully been able to compete in that marketplace and continue to grow the placement of those proprietary dispensers.

Okay. I just want to turn to the paper business briefly. First of all, can you talk about what those couple of unexpected items were in the second quarter in paper? Just to give us some sense of what they were and what the order of magnitude might have been?

In terms of the two factors, Mark, that we had talked about. I would say that the impact on paper was the smaller of the two, in terms of our underperforming earlier expectations. An example of that would be for example fringe costs. We are self insured on a health basis. Our experience for the quarter a was bit higher than our overall trend and higher than what we had expected. We wouldn't anticipate those costs staying at that level but it was certainly an impact on a quarter. I think that's a good example of what Tom referred to in terms of one-time issues within paper.

Okay. Then I think that, Henry mentioned in regard to some of the markets in particular. Did you say you are seeing some signs Henry of global demand moderation in some of that industrial and tape business?

I think in the beginning of the year on our industrial space particularly in markets that either have a direct or indirect relationship with Asia or Pacific Rim, we are seeing some moderation in that demand as we look towards a second half versus the first half. I think as we went through the first half of the year, this is very much in line with our expectations for that space but we are seeing that to be a little less overheated.

Okay. Could you just walk through on those comments that you'd made again in regard to Print and Color, it sounded like you are still seeing some growth in sort of Astrobrights and kind of Premium colors but weakness in other markets. Is that right?

I think we've seen a promising growth in Astrobrights brands, 10% up second quarter versus first quarter, 3% year-to-date. This an area that as we move into the third quarter, we traditionally see a seasonal improvement in our Premium categories moving from Q2 into Q3.

Okay. When I was at Brainerd about three or four years ago, we talked a lot about the Opaque market. Are you as you kind of rebuild the machine; are you really moving away from the Opaque market?

Well, the rebuilt machine will enhance and improve on all of our current capabilities in the Print and Color markets at Brainerd and the primary emphasis of the rebuild is to participate in the growth in Tape.

So, you would say it ought to shrink kind of reducing presence in the Opaque side of the business?

I think Mark, if you look at it on a big picture basis, we all know that there is a secular decline occurring in the uncoated free sheet markets and what the rebuild at the Brainerd facility allows us to do is, on a very measured basis that ultimately drives improved operating margins across the segment. It allows us to reallocate capacity over time from those more challenged portions of our uncoated portfolio over to these technical grades where there are strong growth characteristics and favorable margins.

There are no more questions in queue.

We believe that our success in recent quarters has been driven by a combination of our restructuring initiative, appropriate capital investments and a steadfast focus on market strategies that achieved differentiation and competitive advantage. We remain confident in these strategies over the long-term and are committed to their successful implementation. We look forward to reporting our third quarter results on Wednesday, October 27. Our next scheduled conference call is set for 11:00 a.m. Eastern Daylight Time, on Thursday October 28. We appreciate your taking part in today's discussion and your interest in Wausau Paper. Thank you for your participation.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.