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Neenah Paper Reports 2008 Fourth Quarter and Full Year Results
| Date: |
March 11, 2009 |
| Location: |
Alpharetta, GA |
ALPHARETTA, Ga., March 11 /PRNewswire-FirstCall/ -- Neenah Paper, Inc.
(NYSE: NP) today reported a loss from continuing operations for the fourth
quarter of 2008 of $67.0 million, or $4.58 per diluted common share, including
after-tax charges of $54.0 million, or $3.69 per diluted common share, related
to the impairment of German goodwill and $3.9 million, or $0.27 per share, to
increase current tax expense to reflect limitations on tax benefits associated
with the Fox River acquisition.
Excluding these items, the company generated an adjusted loss from
continuing operations of $9.1 million, or $0.62 per diluted common share,
compared with income from continuing operations of $1.4 million, or $0.09 per
diluted common share, in the fourth quarter of 2007. Consolidated net sales of
$147 million in the fourth quarter 2008 was comparable to $193 million of
sales in the same prior year period, as deteriorating global economic
conditions led to lower market demand and reductions in customer inventory
levels.
Adjusted earnings (loss) per share is a non-GAAP measure and is reconciled
to GAAP earnings (loss) per share in the table below.
Earnings per Diluted Common Share Full Year Fourth Quarter
--------------- ---------------
Continuing Operations 2008 2007 2008 2007
GAAP Earnings/(Loss) Per Diluted Share $(3.23) $2.13 $(4.58) $0.09
Goodwill impairment charge (3.69) (3.69)
Non recurring tax expense adjustment (0.27) (0.27)
Reduction in deferred tax expense 0.58
--------------- ---------------
Adjusted Earnings/(Loss) Per
Diluted Share $0.73 $ 1.55 (0.62) $0.09
======= ====== ======= ======
Commenting on results, Sean Erwin, Chairman and Chief Executive Officer,
said, "With significant and rapid declines in market demand in the fourth
quarter, we moved quickly and took actions to reduce spending and maximize
cash flow. Consequently, despite the earnings loss and our $8 million semi-
annual bond interest payment, we still generated free cash flow of more than
$6 million and paid down debt by $9 million. Without our pulp business, Neenah
Paper is clearly better positioned to handle the current economic turmoil.
Although we did not see much benefit in the fourth quarter, input costs for
pulp, latex and energy did begin to decline. We expect to realize much more
significant benefits from this in 2009, along with additional savings from our
spending reductions. Our balance sheet remains manageable, and we continue to
have adequate liquidity with no significant financing requirements in the near
term. Most importantly, we have the right teams and resources in place and are
executing strategies that have made us a leader in the markets we serve, and
that will bring value to our customers and to our shareholders."
Quarterly Segment and Other Financial Results
Fine Paper fourth quarter 2008 net sales of $72 million declined from $95
million in 2007. Decreased sales in 2008 were due to lower shipments,
primarily as a result of weaker market demand for premium writing, text and
cover papers. Operating income was $1.2 million in the fourth quarter of 2008
and $11.7 million in the fourth quarter of 2007. The decline in 2008 is due to
lower volumes, $3 million of higher raw material and energy prices, and
approximately $4 million of additional costs for mill downtime. These items
were partly offset by increased selling prices, reductions in spending and
other operational efficiencies.
Technical Products net sales of $74 million in the fourth quarter of 2008
decreased from $98 million in the fourth quarter of 2007. The decline in sales
resulted primarily from lower volumes due to weaker end-use demand and
reductions in customer inventory levels. A three percent decline in sales due
to currency translation from a weaker Euro was more than offset by higher
global selling prices and an improved sales mix. The reported fourth quarter
2008 operating loss of $60.5 million included the $54.5 million impairment
charge. Without this charge, the adjusted operating loss of $6.0 million
compared with operating income of $2.6 million in 2007. In addition to the
impairment charge, reasons for the decline in 2008 include more than $6
million of additional costs for market-related downtime, $3 million of higher
input costs, lower volumes and one-time write-offs. These items were partly
offset by higher selling prices, increased manufacturing efficiencies in North
America and reductions in spending.
Consolidated selling, general and administrative (SG&A) expense of $19.8
million in the fourth quarter 2008 was below the prior year level of $21.0
million due to targeted spending reductions. Unallocated corporate expense was
$4.4 million in the fourth quarter of 2008 and $8.3 million in the fourth
quarter of 2007. Unallocated expense included $0.5 million in 2008 for long-
term disability costs related to Terrace Bay retirees and $5.3 million charged
to Other (Income)/Expense in 2007 for settlement of litigation associated with
Terrace Bay retirees.
Net interest expense of $6.4 million in the fourth quarter of 2008 was
similar to $6.3 million in the prior year, as lower interest rates in 2008
offset higher debt levels. The quarterly and full year effective tax rates
reflect the impact of the non deductible goodwill impairment and other charges
in 2008 and a reduction in deferred tax expense in 2007 following a German
statutory rate decrease.
Stockholders' equity in the fourth quarter of 2008 was reduced by an
after-tax adjustment of $17 million to reflect a net increase in the Company's
liabilities for pension plans, primarily as a result of a decline in plan
assets in 2008. This decline in plan assets resulted from losses incurred on
plan investments in global debt and equity markets.
Cash provided by operating activities was $12.9 million in the fourth
quarter of 2008, primarily as a result of decreases in working capital
generated by reducing operating schedules and the lower sales volumes. Capital
spending was $6.4 million in the quarter. The net available cash flows were
used to pay down $9 million of debt in the quarter.
Full Year Results
As a result of the decline in the fourth quarter, full year net sales fell
from $767 million in 2007 to $732 million in 2008. Excluding the previously
mentioned unusual charges for goodwill impairment and tax expense in 2008 and
a $0.58 per share benefit from a reduction in deferred tax expense in 2007
following a German statutory rate change, adjusted earnings per diluted common
share from continuing operations were $0.73 in 2008 and $1.55 in 2007. For the
same periods, GAAP earnings (loss) per diluted common share were $(3.23) in
2008 and $2.13 in 2007. Lower earnings in 2008 resulted from higher input
prices, lower volumes and additional costs for downtime that offset benefits
from higher selling prices, lower SG&A spending and improved mill
efficiencies.
Discontinued Operations
Discontinued operations include results from the Company's divested pulp
mills and its remaining timberlands operation. Net losses from discontinued
operations in the fourth quarter of 2008 were $0.7 million and $23.9 million
for the same period in 2007. Losses in the fourth quarter 2008 were due to
adjustments in tax expense; results in 2007 included a noncash charge of $23.9
million for final settlement of the Ontario pension plan.
For the full year, net losses from discontinued operations were $111.2
million in 2008 and included $107.6 million of primarily noncash charges
related to the write-down of assets and recognition of a loss on the sale of
the Pictou pulp mill. In 2007, net losses were $22.0 million, primarily as a
result of the previously mentioned fourth quarter charge for settlement of the
Ontario pension plan.
Outlook
The company noted certain assumptions for 2009, as follows:
-- Lower net sales and higher costs for downtime in the first half of 2009
(versus 2008).
-- Significant benefits from input cost deflation for pulp, energy, latex
and other raw materials.
-- Reductions in operating expenses from cost savings initiatives of $10
million.
-- Capital spending decrease to $15 million, following key investments in
capabilities and systems made over the past few years.
-- Increased pension expense of approximately $4 million as a result of
lower asset returns in 2008. Required cash contributions similarly
increase from $7 million in 2008 to $11 million in 2009.
-- No cash tax payments on North American income due to use of existing
operating losses. Cash refund of approximately $11 million tax payments
in prior years.
-- Quarterly dividend of $0.10 per share.
Conference Call
Neenah Paper will hold a webcast to discuss fourth quarter earnings and
other matters of interest at 11 a.m. Eastern on Thursday, March 12.
Stockholders and other interested parties are invited to either listen live or
participate directly in the call by following the instructions noted in the
company's web site ( http://www.neenah.com ). A taped audio replay of the call
will be available on the site beginning approximately two hours after the call
and lasting through March 31, 2009.
About Neenah Paper, Inc.
Neenah Paper is a leading global manufacturer of premium, performance-
based papers and specialty products used in a variety of applications
including filtration, printing and writing, and as backing and component
materials for many specialized industrial and consumer applications. Products
are marketed under well-known brands such as CLASSIC(R), ENVIRONMENT(R),
STARWHITE(R), Gessner(R), JET-PRO(R) SofStretch(TM) and varitess(R). Based in
Alpharetta, Georgia, the company has paper manufacturing operations in the
United States and Germany and approximately 500,000 acres of timberlands in
Nova Scotia, Canada. Additional information about Neenah Paper can be found at
the company's web site, http://www.neenah.com .
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking"
statements as defined in Section 27A of the Securities Act of 1933 (the
"Securities Act"), Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the
"PSLRA"), or in releases made by the Securities and Exchange Commission, all
as may be amended from time to time. Statements contained in this press
release that are not historical facts may be forward-looking statements within
the meaning of the PSLRA. Any such forward-looking statements reflect our
beliefs and assumptions and are based on information currently available to us
and are subject to risks and uncertainties that could cause actual results to
differ materially including, but not limited to: (i) worldwide economic
conditions, which have deteriorated significantly in the U.S., Germany and
many other countries and regions, (ii) significant capital and credit market
volatility and deterioration, (iii) U.S. dollar/Euro and other exchange rates,
(iv) changes in prices for pulp, energy, latex and other raw materials, (v)
the cost or availability of raw materials, (vi) unanticipated expenditures
related to the cost of compliance with environmental and other governmental
regulations and (vii) the ability of the company to realize anticipated cost
savings. These and other factors that could cause or contribute to actual
results differing materially from any forward-looking statements are discussed
in more detail in our other filings with the Securities and Exchange
Commission. Forward-looking statements are only predictions and involve known
and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. We undertake no obligation to
publicly update any forward-looking statements, whether as a result of new
information, future events or otherwise. These cautionary statements are
being made pursuant to the Securities Act, the Exchange Act and the PSLRA with
the intention of obtaining the benefits of the "safe harbor" provisions of
such laws. Neenah Paper, Inc. cautions investors that any forward-looking
statements we make are not guarantees or indicative of future performance.
NEENAH PAPER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Net Sales $146.6 $193.0 $732.3 $767.0
Cost of products sold 135.6 162.9 633.2 635.5
Gross Profit 11.0 30.1 99.1 131.5
Selling, general and administrative
expenses 19.8 21.0 75.2 79.3
Goodwill and other intangible asset
impairment charge 54.5 - 54.5 -
Other income - net 0.4 3.1 (11.3) (1.7)
Operating Income (Loss) (63.7) 6.0 (19.3) 53.9
Interest expense-net 6.4 6.3 25.0 25.4
Income (Loss) From Continuing
Operations Before Income Taxes (70.1) (0.3) (44.3) 28.5
Provision (benefit) for income taxes (3.1) (1.7) 3.0 (3.7)
Income (Loss) From Continuing
Operations (67.0) 1.4 (47.3) 32.2
Loss From Discontinued Operations,
net of income taxes (0.7) (23.9) (111.2) (22.0)
Net Income (Loss) $(67.7) $(22.5) $(158.5) $10.2
Earnings (Loss) Per Common Share:
Basic
Continuing Operations $(4.58) $0.09 $(3.23) $2.17
Discontinued Operations (0.05) (1.60) (7.59) (1.48)
$(4.63) $(1.51) $(10.82) $0.69
Diluted
Continuing Operations $(4.58) $0.09 $(3.23) $2.13
Discontinued Operations (0.05) (1.58) (7.59) (1.46)
$(4.63) $(1.49) $(10.82) $0.67
Weighted Average Common
Shares Outstanding (000s)
Basic 14,620 14,933 14,642 14,874
Diluted 14,620 15,135 14,642 15,141
NEENAH PAPER, INC. AND SUBSIDIARIES
BUSINESS SEGMENT DATA
(In millions)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Net Sales:
Fine Paper $72.3 $95.3 $335.5 $366.5
Technical Products 74.3 97.7 396.8 400.8
Intersegment Sales - - - (0.3)
Consolidated $146.6 $193.0 $732.3 $767.0
Operating Income (Loss):
Fine Paper $1.2 $11.7 $34.0 $46.6
Technical Products (60.5) 2.6 (42.3) 24.7
Unallocated corporate and other (4.4) (8.3) (11.0) (17.4)
Consolidated $(63.7) $6.0 $(19.3) $53.9
NEENAH PAPER, INC. AND SUBSIDIARIES
SELECTED BALANCE SHEET DATA
(In millions)
(Unaudited)
December 31, September 30, December 31,
2008 2008 2007
ASSETS
Cash and cash equivalents $3.3 $8.7 $2.4
Accounts receivable - net 63.2 90.0 145.4
Inventories 88.6 95.3 110.6
Deferred income taxes 53.3 62.7 1.9
Other current assets 30.2 32.1 29.9
Assets held for sale - discontinued
operations 3.3 3.8 -
Total current assets 241.9 292.6 290.2
Property, plant and equipment - net 316.2 319.5 432.3
Deferred income taxes 42.0 26.6 55.4
Goodwill and other intangibles - net 72.5 134.7 140.2
Other non-current assets 12.0 12.7 14.7
Total assets $684.6 $786.1 $932.8
LIABILITIES AND STOCKHOLDERS'
EQUITY
Debt payable within one year $24.1 $22.6 $10.9
Accounts payable 40.6 47.4 86.9
Accrued expenses 32.3 42.4 72.1
Liabilities related to discontinued
operations - 0.8 -
Total current liabilities 97.0 113.2 169.9
Long-term debt 340.5 351.4 321.2
Deferred income taxes 25.4 32.1 30.4
Noncurrent employee benefits and
other obligations 111.3 84.6 123.3
Total liabilities 574.2 581.3 644.8
Stockholders' equity 110.4 204.8 288.0
Total liabilities and
stockholders' equity $684.6 $786.1 $932.8
NEENAH PAPER, INC. AND SUBSIDIARIES
SELECTED CASH FLOW DATA
(In millions)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Operating Activities
Net income (loss) $(67.7) $(22.5) $(158.5) $10.2
Depreciation and amortization 8.7 11.8 38.6 45.3
Stock-based compensation 0.9 1.3 4.0 6.4
Deferred income tax benefit 0.6 (16.6) (55.7) (26.8)
Goodwill and other intangible asset
impairment charge 54.5 - 54.5 -
Asset impairment loss - - 91.2 -
Loss on disposal - transfer of Pictou
Mill - - 29.3 -
Loss on disposal of postretirement
benefit plans - 38.7 53.7 38.7
(Gain) loss on asset dispositions 0.1 (1.0) (6.3) (0.8)
Net cash provided by (used) in
changes in operating working capital 16.7 12.5 (21.5) -
Other (0.9) 0.8 (16.2) (3.5)
Cash provided by operating activities 12.9 25.0 13.1 69.5
Investing Activities
Capital expenditures (6.4) (21.1) (30.0) (58.3)
Acquisition of Fox River - - - (54.7)
Other (0.7) 1.4 (0.4) (0.4)
Cash used in investing activities (7.1) (19.7) (30.4) (113.4)
Financing Activities
Short and long-term borrowings 4.9 4.7 72.4 85.0
Repayment of debt (14.0) (13.3) (37.9) (39.1)
Share purchases - - (9.4) -
Cash dividends paid (1.5) (1.5) (6.0) (6.0)
Other (0.7) 0.8 (0.9) 3.9
Cash provided by (used in)
financing activities (11.3) (9.3) 18.2 43.8
Effect of exchange rates on cash
and cash equivalents 0.1 0.2 - 0.9
Net increase (decrease) in cash and
cash equivalents $(5.4) $(3.8) $0.9 $0.8
NEENAH PAPER INC AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
Reconciliation of Non-GAAP Disclosure Items
(In millions, except per share data)
Reconciliation of Technical Products operating income (loss) to adjusted
operating income (loss):
Three Months Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Operating income (loss) - Technical
Products $(60.5) $2.6 $(42.3) $24.7
Subtract: Goodwill and other intangible
asset impairment charge 54.5 - 54.5 -
Operating income (loss) - Technical
Products adjusted for goodwill
and other intangible asset
impairment charge $(6.0) $2.6 $12.2 $24.7
Reconciliation of income from continuing operations to adjusted net income
from continuing operations:
Three Months Ended Year Ended
December 31, December 31,
2008 2007 2008 2007
Income (Loss) From Continuing
Operations $(67.0) $1.4 $(47.3) $32.2
Add (subtract):
After-tax impairment charge 54.0 - 54.0 -
Increase in income limitation
on available tax benefits
acquired in the Fox River
acquisition 3.9 - 3.9 -
Benefit from change in German
tax law - - - (8.8)
Income (loss) from continuing
operations adjusted for after-tax
impairment charge $(9.1) $1.4 $10.6 $23.4
Notes:
In accordance with generally accepted accounting principles in the
United States ("GAAP"), reported operating income (loss) for the
Technical Products segment includes the pre-tax effects of unusual
and non-recurring items. In addition, reported earnings (loss) from
continuing operations and reported earnings (loss) per diluted
common share include the after-tax effects of non-recurring items.
We believe that by adjusting such reported amounts to exclude the
effects of these items, the resulting adjusted operating income for
the Technical Products segment and adjusted earnings from continuing
operations and earnings per share from continuing operations are on
a basis that reflects the results of our ongoing operations.
Adjusted operating income and adjusted earnings from continuing
operations and earnings per share from continuing operations are not
recognized terms under GAAP and should not be considered in
isolation or as a substitute for operating income, earnings from
continuing operations or earnings per share from continuing
operations or any other performance measures derived in accordance
with GAAP. Other companies may use different methodologies for
calculating their non-GAAP financial measures and, accordingly, the
Company's non-GAAP financial measures may not be comparable to their
measures.
SOURCE
Neenah Paper, Inc.
CONTACT:
Bill McCarthy, Vice President - Financial Analysis and Investor Relations, Neenah Paper, Inc., +1-678-518-3278
###
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