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ALPHARETTA, Ga.--(BUSINESS WIRE)--
Neenah Paper, Inc. (NYSE:NP) today reported adjusted earnings from
continuing operations of $0.85 per diluted common share in the second
quarter of 2012 compared with earnings of $0.49 per share in the second
quarter of 2011. Without adjustments of $0.08 per share ($1.9 million
pre-tax) to exclude costs of integrating purchased fine paper brands,
earnings on a GAAP basis in the second quarter of 2012 were $0.77 per
share. There were no adjusting items in the second quarter of 2011.
Net sales of $211.7 million in the second quarter of 2012 grew 16
percent compared with the second quarter of 2011. Adjusted operating
income of $23.9 million increased 52 percent from $15.7 million in the
prior year. Adjusted income of $13.9 million increased 78 percent
compared to $7.8 million in the prior year. Adjusted earnings are
reconciled to GAAP figures later in this release.
"Our businesses set an all-time quarterly record for sales and profits,
with Technical Products and Fine Paper each delivering double-digit
earnings growth. Our teams are executing well against key objectives of
growing high value, performance-oriented Technical Products offerings
and delivering the value promised from our expanded Fine Paper
business," said John O'Donnell, Chief Executive Officer. "In addition,
both businesses are realizing cost benefits from more efficient
manufacturing operations; and this, along with our strong market
positions, will serve us well in what may be weaker global economic
conditions in the second half of the year."
Quarterly Segment and Other Financial Results
Technical Products net sales were $106.9 million in the
second quarter of 2012, a decrease of seven percent compared with the
second quarter of 2011. On a constant currency basis, revenue grew one
percent and reflected volume gains in filtration, label and non-woven
wall cover products that partially offset lower tape shipments. In
addition, sales grew as a result of a higher value mix and increased
selling prices for most products. Offsetting these factors was
unfavorable currency impacts due to an 11 percent decline in the Euro.
Operating income for Technical Products of $12.3 million in the second
quarter of 2012 increased 26 percent compared with $9.8 million in the
second quarter of 2011. Higher income in 2012 resulted from growth in
higher value products, increased selling prices and improved
manufacturing efficiencies that more than offset higher input costs and
unfavorable currency translation effects.
Fine Paper net sales of $96.3 million in the second
quarter of 2012 increased 41 percent compared with prior year sales of
$68.5 million. Higher sales in 2012 resulted from volume growth,
primarily due to acquired Wausau brands, as well as from double-digit
sales gains in luxury packaging, labels and international markets.
Operating income of $13.3 million in the second quarter of 2012 compared
to $10.0 million in 2011. Operating income in 2012 included $1.9 million
of integration costs for the acquired brands. Excluding these costs,
operating income increased 52 percent in 2012 as a result of growth in
volume and associated manufacturing cost efficiencies, as well as lower
pulp prices.
Other/Unallocated Corporate Costs includes sales and
profits from non-premium business acquired in the Wausau transaction. In
the second quarter of 2012, sales for these products were $8.5 million,
with operating income of $0.6 million. Unallocated Corporate Costs were
$4.2 million in the second quarter of 2012 and $4.1 million in 2011.
Consolidated selling, general and administrative (SG&A) expense
was $19.1 million in the second quarter of 2012 compared to
$18.0 million in the second quarter of 2011. Higher spending in 2012 was
primarily to support the growth in fine paper. As a percent of sales,
SG&A declined from 9.8 percent in the second quarter of 2011 to 9.0
percent in the most recent quarter, with the improvement reflecting
spending efficiencies associated with the higher sales.
Net interest expense of $3.5 million in the second quarter
of 2012 compared to $3.7 million in the same quarter of 2011. Reduced
interest expense in 2012 resulted from lower debt levels and lower
average interest rates, the latter mostly due to a reduced proportion of
long-term bonds in the mix of debt following the Company's partial
redemptions of long-term notes in March 2011 and April 2012.
The effective income tax rate of 31 percent for the second
quarter of 2012 compared to a rate of 35 percent in the second quarter
of 2011.
Cash flow provided by operations of $3.4 million in the
second quarter of 2012 compared to $13.0 million in the same quarter of
2011. The reduction in cash from operations versus the prior year
reflected higher operating income in 2012 that was offset by planned
increases in working capital associated with the higher sales and to
support customer service levels during the initial integration period
for the acquired brands. Capital spending of $5.8 million in the second
quarter of 2012 compared to $4.7 million in the prior year period.
Debt as of June 30, 2012 of $202.8 million compared to
$186.2 million at December 31, 2011. Cash and equivalents as of June 30,
2012 were $1.8 million compared to $12.8 million on December 31, 2011.
Increased debt and lower cash versus December 31 was primarily to
finance the $20.7 million payment to Wausau Paper Corp. in January 2012
for acquired Fine Paper brands and assets.
Reconciliation to GAAP Measures
The company will report adjustments to GAAP figures when they are
believed to more clearly communicate results of ongoing operations. In
these instances, a reconciliation of adjusted income measures to
comparable GAAP measures will be provided, as shown below:
Continuing Operations Second Quarter YTD
$ millions 2012 2011 2012 2011
GAAP Operating Income $ 22.0 $ 15.7 $ 38.2 $ 30.5
Pension settlement charge - - 3.5 -
Integration costs 1.9 - 4.4 -
Costs for early redemption of bonds - - - 2.4
Adjusted Operating Income $ 23.9 $ 15.7 $ 46.1 $ 32.9
GAAP Income $ 12.7 $ 7.8 $ 21.6 $ 14.8
Pension settlement charge - - 2.2 -
Integration costs 1.2 - 2.7 -
Costs for early redemption of bonds - - - 1.4
Adjusted Income $ 13.9 $ 7.8 $ 26.5 $ 16.2
GAAP Earnings per Diluted Common Share $ 0.77 $ 0.49 $ 1.32 $ 0.94
Pension settlement charge - - 0.14 -
Integration costs 0.08 - 0.17 -
Costs for early redemption of bonds - - - 0.09
Adjusted Earnings per Share $ 0.85 $ 0.49 $ 1.63 $ 1.03
Diluted Shares 16,099 15,651 15,918 15,597
Year to Date
Year-to-date net sales of $409.9 million in 2012 increased 15 percent
compared to sales of $355.6 million in 2011. Most of the growth resulted
from a 35 percent gain in Fine Paper sales, primary reflecting acquired
brands. Technical Products sales decreased three percent as a higher
value mix and improved selling prices were more than offset by
unfavorable currency effects and lower volumes. On a constant currency
basis, year-to-date Technical Products sales were up two percent.
Operating income of $38.2 million in 2012 increased from $30.5 million
in 2011. Growth in operating income resulted from higher selling prices,
manufacturing efficiencies and lower input costs in addition to Fine
Paper volume growth and a more profitable Technical Products mix.
Operating income in 2012 included costs of $7.9 million for integration
of acquired fine paper brands and a pension settlement charge.
Cash flow used in operations of $10.2 million for the first six months
of 2012 included special items totaling $22.7 million. These items were
comprised of $6.6 million for inventories acquired as part of the $21
million payment to Wausau (with the remaining $14.1 million shown as
Investing Activities), $4.4 million for Wausau-related integration
costs, $6.9 million for one-time pension payments, and $4.8 million for
excess tax benefits from stock-based compensation (fully offset under
Financing Activities). Excluding these items, cash provided by
operations of $12.5 million for the first six months of 2012 decreased
from $14.5 million in 2011; as higher operating income in 2012 was
offset by increased investments in working capital primarily related to
the acquired Wausau brands. Year-to-date capital spending of $9.3
million compared to $12.9 million in the prior year period.
Conference Call
Neenah Paper will hold a webcast to discuss second quarter earnings and
other matters of interest at 11:00 a.m. Eastern time on Thursday, August
9, 2012. Stockholders and other interested parties are invited either to
listen live to the webcast via the Company's Internet site at www.neenah.com
by clicking on the Investors tab and going to the News and Events page
or participate actively in the call by dialing (888) 893-0989 from the
U.S. and Canada or (706) 758-4223 for other locations. All participants
should use conference ID 11722142.
A replay of the call will be available through the company's web site
until September 10, 2012 and may also be accessed by dialing (855)
859-2056 in the U.S. or (404) 537-3406 internationally, using conference
ID 11722142.
About Neenah Paper, Inc.
Neenah Paper is a leader in premium image and performance-based
products, including filtration, specialized substrates used for tapes,
labels and other products, and high-end printing papers. Products are
marketed under well-known brands such as CLASSIC(R), ASTROBRIGHTS(R),
ENVIRONMENT(R), CRANE(R), ROYAL SUNDANCE(R), KIMDURA(R), Gessner(R), JET-PRO(R)
SofStretch(TM) and varitess(R). Neenah Paper is headquartered
in Alpharetta, Georgia and sells products in over 70 countries worldwide
from manufacturing operations in the United States and Germany.
Additional information about Neenah Paper can be found at the company's
web site, 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) unexpected challenges
associated with the integration of the Wausau premium business; (ii)
changes in prices for pulp, energy, latex and other raw materials, (iii)
worldwide economic conditions, (iv) U.S. dollar/euro and other exchange
rates, (v) significant capital and credit market volatility, (vi) the
availability of raw materials, (vii) unanticipated expenditures related
to the cost of compliance with environmental and other governmental
regulations and (viii) 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 June 30, Six Months Ended June 30,
2012 2011 2012 2011
Net Sales $ 211.7 $ 182.9 $ 409.9 $ 355.6
Cost of products sold 167.9 149.4 324.2 288.9
Gross Profit 43.8 33.5 85.7 66.7
Selling, general and
administrative expenses 19.1 18.0 38.6 35.0
Acquisition integration costs 1.9 - 4.4 -
SERP settlement charge - - 3.5 -
Loss on retirement of bonds 0.2 - 0.2 2.4
Other (income) expense - net 0.6 (0.2 ) 0.8 (1.2 )
Operating Income 22.0 15.7 38.2 30.5
Interest expense-net 3.5 3.7 7.1 8.2
Income From Continuing Operations
Before Income Taxes 18.5 12.0 31.1 22.3
Provision for income taxes 5.8 4.2 9.5 7.5
Income From Continuing Operations 12.7 7.8 21.6 14.8
Loss From Discontinued Operations,
net of income taxes - - - (0.1 )
Net Income $ 12.7 $ 7.8 $ 21.6 $ 14.7
Earnings Per Common Share:
Basic
Continuing Operations $ 0.78 $ 0.52 $ 1.34 $ 0.98
Discontinued Operations - - - (0.01 )
$ 0.78 $ 0.52 $ 1.34 $ 0.97
Diluted
Continuing Operations $ 0.77 $ 0.49 $ 1.32 $ 0.94
Discontinued Operations - - - (0.01 )
$ 0.77 $ 0.49 $ 1.32 $ 0.93
Weighted Average Common
Shares Outstanding (000s)
Basic 15,809 14,943 15,587 14,899
Diluted 16,099 15,651 15,918 15,597
NEENAH PAPER, INC. AND SUBSIDIARIES
BUSINESS SEGMENT DATA
(In millions)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Net Sales:
Technical Products $ 106.9 $ 114.4 $ 212.9 $ 219.8
Fine Paper 96.3 68.5 182.7 135.8
Other 8.5 - 14.3 -
Consolidated $ 211.7 $ 182.9 $ 409.9 $ 355.6
Operating Income:
Technical Products $ 12.3 $ 9.8 $ 24.8 $ 20.3
Fine Paper 13.3 10.0 24.1 20.5
Other 0.6 - 1.3 -
Unallocated corporate costs (4.2 ) (4.1 ) (12.0 ) (10.3 )
Consolidated $ 22.0 $ 15.7 $ 38.2 $ 30.5
NEENAH PAPER, INC. AND SUBSIDIARIES
SELECTED BALANCE SHEET DATA
(In millions)
(Unaudited)
June December
30, 31,
2012 2011
ASSETS
Cash and cash equivalents $ 1.8 $ 12.8
Restricted cash - 7.0
Accounts receivable - net 102.1 71.4
Inventories 105.3 68.8
Deferred income taxes 27.4 17.6
Prepaid and other current assets 13.6 15.9
Total current assets 250.2 193.5
Property, plant and equipment - net 244.0 252.3
Deferred income taxes 30.9 45.5
Goodwill and other intangibles - net 73.1 62.4
Other non-current assets 10.7 11.4
Total assets $ 608.9 $ 565.1
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt payable within one year $ 6.5 $ 21.7
Accounts payable 45.7 30.2
Accrued expenses 50.6 51.6
Total current liabilities 102.8 103.5
Long-term debt 196.3 164.5
Deferred income taxes 14.5 16.0
Non-current employee benefits 106.2 113.0
Other noncurrent obligations 1.4 1.4
Total liabilities 421.2 398.4
Stockholders' equity 187.7 166.7
Total liabilities and stockholders' equity $ 608.9 $ 565.1
NEENAH PAPER, INC. AND SUBSIDIARIES
SELECTED CASH FLOW DATA
(In millions)
(Unaudited)
Six Months Ended June 30,
2012 2011
Operating Activities
Net income $ 21.6 $ 14.7
Depreciation and amortization 14.6 15.6
Stock-based compensation 3.0 2.2
Excess tax benefits from stock-based compensation (4.8 ) (0.6 )
Deferred income tax provision 5.8 4.3
Inventory acquired in Wausau acquisition (6.6 ) -
SERP payment, net of settlement charge (3.4 ) -
Loss on retirement of bonds 0.2 2.4
Increase in working capital (39.2 ) (19.9 )
Pension and other postretirement benefits (1.1 ) (3.5 )
Other (0.3 ) (0.7 )
Cash provided by (used in) operating activities (10.2 ) 14.5
Investing Activities
Capital expenditures (9.3 ) (12.9 )
Purchase of Wausau brands (14.1 ) -
Decrease in restricted cash 7.0 -
Purchase of marketable securities (0.1 ) (3.7 )
Other 0.1 0.6
Cash used in investing activities (16.4 ) (16.0 )
Financing Activities
Short and long-term borrowings - net of
debt issuance costs 46.4 35.5
Repayment of debt (29.4 ) (78.3 )
Proceeds from exercise of stock options 4.1 1.1
Cash dividends paid (3.9 ) (3.3 )
Shares purchased (6.3 ) (0.5 )
Excess tax benefits from stock-based compensation 4.8 0.6
Cash provided by (used in) financing activities 15.7 (44.9 )
Effect of exchange rates on cash and
cash equivalents (0.1 ) 0.1
Net decrease in cash and cash
equivalents $ (11.0 ) $ (46.3 )
Source: Neenah Paper, Inc.
Neenah Paper, Inc.
Bill McCarthy, 678-518-3278
Vice
President - Financial Analysis and Investor Relations
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