Neenah Paper Fourth Quarter and Full Year Results

Wed Feb 20, 2013 5:00pm EST

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Fourth Quarter Adjusted E.P.S. of $0.60 (+28%)

Record Full Year Adjusted E.P.S. of $2.78 (+46%)
ALPHARETTA, Ga.--(Business Wire)--
Neenah Paper, Inc. (NYSE:NP) today reported earnings from continuing operations
for the fourth quarter of 2012 of $0.55 per diluted common share compared with
earnings of $0.47 per diluted share in the fourth quarter of 2011. After
excluding $0.05 per share ($1.5 million pre-tax) of costs incurred in 2012 for
integration of acquired fine paper brands and the early redemption of bonds,
adjusted earnings per share in the fourth quarter of 2012 of $0.60 increased 28
percent compared with the prior year period. 

Net sales of $192.6 million in the fourth quarter of 2012 grew 16 percent
compared with $165.5 million in the fourth quarter of 2011. Increases resulted
primarily from growth in Fine Paper due to acquired brands, as well as higher
Technical Products and Other sales. Consolidated operating income of $15.9
million ($17.4 million adjusted) in the fourth quarter of 2012 increased 28
percent on an adjusted basis as a result of the higher sales and lower
manufacturing costs. 

For the full year, 2012 net sales of $808.8 million increased 16 percent
compared with $696.0 million in 2011. Adjusted operating income of $80.3 million
in 2012 increased 36 percent compared with 2011, while 2012 adjusted earnings
per diluted share of $2.78 increased 46 percent from $1.91 in 2011. Adjusted
earnings is a non-GAAP measure and is reconciled to comparable GAAP measures
later in this release. On a GAAP basis compared with prior year, 2012 earnings
per diluted share of $2.41 grew 32 percent and operating income of $70.4 million
increased 24 percent. 

"In 2012, Neenah grew significantly and each of our businesses successfully
increased sales in targeted niche markets, improved operating margins and
increased returns on capital. In addition, we deployed our cash flow in ways
that created value and delivered attractive returns for our shareholders," said
John O`Donnell, Chief Executive Officer. "With consistent investments to extend
our capabilities and grow in technical products, as well as an expanded retail
platform in fine paper, we are well positioned to deliver additional value as we
act on the market opportunities within each of our businesses." 

Quarterly Segment and Other Financial Results

Technical Products net sales of $95.0 million in the fourth quarter of 2012
increased one percent compared with prior year sales of $94.2 million. Excluding
unfavorable impacts from currency translation, sales in constant currency
increased [four] percent, primarily due to volume growth led by increases in
filtration, tape and label products. 

Operating income for Technical Products of $6.4 million in the fourth quarter of
2012 declined from a record fourth quarter profit of $7.9 million in 2011. Lower
income in 2012 resulted from higher manufacturing, selling and administrative
costs, which offset the benefits of higher sales. 

Fine Paper net sales of $90.9 million in the fourth quarter of 2012 increased 27
percent compared with prior year sales of $71.3 million. Higher sales in 2012
reflected a 36 percent increase in volume, primarily due to brands acquired from
Wausau in January 2012 and double-digit gains in luxury packaging, labels and
international markets. 

Operating income of $13.1 million in the fourth quarter of 2012 increased 35
percent compared with $9.7 million in the prior year. Operating income in 2012
was reduced by $1.1 million for integration costs of acquired brands, which
included the startup of a previously idled machine at the Neenah, Wisconsin
mill. In addition to benefits from the higher sales and improved mix, operating
income in 2012 increased as a result of improved manufacturing efficiencies and
lower input costs. These items more than offset higher selling and
administrative costs related to the increased sales. 

Other/Unallocated Corporate Costs In the fourth quarter of 2012, sales of
acquired non-premium paper brands were $6.7 million, with operating income of
$0.6 million. There were no sales or profits in the same period of the prior
year. Unallocated Corporate Costs in the fourth quarter were $4.2 million in
2012 compared with $4.0 million in 2011. Costs in 2012 included $400,000 related
to the early redemption of bonds. 

Consolidated selling, general and administrative (SG&A) expensewas$20.3 million
in the fourth quarter of 2012 compared with $18.1 million in the fourth quarter
of 2011. Higher spending in 2012 resulted primarily from additional selling and
other costs for acquired fine paper brands. As a percentage of sales, SG&A
continues to decline as sales growth outpaces increases in spending. 

Net interest expense of $3.0 million in the fourth quarter of 2012 declined from
$3.5 million in the same quarter of 2011. Lower interest expense in 2012
resulted from reduced debt levels and lower average interest rates following the
Company`s partial redemptions of long-term notes in April and November 2012. 

The effective income tax rate of 29 percent for the fourth quarter of 2012
compared with a rate of 24 percent in the fourth quarter of 2011. The lower
prior year rate included adjustments to reflect the final mix of income between
tax jurisdictions, which resulted in a full year rate of 29 percent in 2011,
compared with a rate of 30 percent in 2012. 

Cash flow provided from operations in the fourth quarter of 2012 was $18.2
million; up from $17.7 million in the same period of 2011. Increased cash flow
resulted from higher operating income and reduced investments in working capital
that were partly offset by timing and amounts of benefit plan contributions.
Capital spending was $9.2 million in the fourth quarter of 2012 compared with
$4.2 million in the prior year. Spending in 2012 included initial payments for a
new nonwovens meltblown line in Germany to support filtration growth. 

During the fourth quarter of 2012, the Company purchased approximately $2.9
million of shares under its share repurchase program. Approximately 110,000
shares were repurchased at an average price of less than $26 per share. 

Debt as of December 31, 2012 was $182.3 million compared with $183.1 million as
of September 30, 2012 and $186.2 million as of December 31, 2011. During the
fourth quarter of 2012, the Company entered into a Second Amended and Restated
Credit Agreement. The new agreement extended the term of the prior credit
facility, increased the revolving credit commitment, reduced certain interest
rates and added a new $30 million five-year Term Loan. Borrowings under the Term
Loan and Revolving Credit Facility were used to finance the redemption of $58
million of the Company`s senior notes in November 2012. 

Full Year 2012

Net sales of $808.8 million in 2012 increased 16 percent compared with sales of
$696.0 million in 2011. The increase in 2012 resulted from increased sales in
Fine Paper of $98 million (36 percent), primarily due to brands acquired from
Wausau in January 2012. Technical Products sales decreased $15 million (three
percent) compared to 2011 as a result of $22 million of unfavorable currency
effects due to a weaker Euro that offset benefits of a higher value mix and
improved selling prices. On a constant currency basis, Technical Products sales
increased two percent in 2012. Consolidated sales also increased by $30 million
for acquired non-premium paper brands. 

Operating income of $70.4 million in 2012 increased 24 percent compared with
$56.6 million in 2011. Income grew as a result of higher sales, manufacturing
efficiencies and lower input costs. Operating income in 2012 included $9.9
million of costs for integration of acquired fine paper brands, a pension
settlement charge and redemptions of the Company`s senior notes. 

Earnings per diluted share from continuing operations of $2.41 increased 32
percent compared with $1.82 in 2011. Excluding the costs noted above, adjusted
earnings per share were $2.78 in 2012 and $1.91 in 2011. Higher earnings in 2012
resulted both from increased operating income and lower interest expense. 

A reconciliation of adjusted income measures to comparable GAAP measures is
shown below:

 Continuing Operations                 Fourth Quarter                            YTD                             
 $ millions                            2012                        2011          2012               2011         
                                                                                                                 
 Operating Income                      $    15.9              $    13.6          $    70.4          $    56.6    
                                                                                      -                  -       
 SERP settlement charge                     -                      -                  3.5                -       
 Acquisition integration costs              1.1                    -                  5.8                -       
 Cost for early redemption of bonds         0.4                    -                  0.6                2.4     
 Adjusted Operating Income             $    17.4              $    13.6          $    80.3          $    59.0    
                                                                                                                 
 Income from Continuing Operations     $    9.1               $    7.7           $    39.9          $    29.3    
 SERP settlement charge                     -                      -                  2.2                -       
 Acquisition integration costs              0.7                    -                  3.5                -       
 Cost for early redemption of bonds         0.2                    -                  0.4                1.4     
 Adjusted Income                       $    10.0              $    7.7           $    46.0          $    30.7    
                                                                                                                 
 Earnings per Diluted Common Share     $    0.55              $    0.47          $    2.41          $    1.82    
 SERP settlement charge                     -                      -                  0.13               -       
 Acquisition integration costs              0.04                   -                  0.22               -       
 Cost for early redemption of bonds         0.01                   -                  0.02               0.09    
 Adjusted Earnings per Share           $    0.60              $    0.47          $    2.78          $    1.91    
                                                                                                                 
 Diluted Shares                             16,187                 15,554             16,072             15,649  


Cash flow provided by operations was $40.1 million in 2012 compared with $57.2
million in 2011. Cash from operations in 2012 included outflows of $25.4 million
for Wausau brand integration and purchased inventories, a SERP settlement
payment and classification of excess tax benefits. Excluding these items in both
years, Cash from Operations of $65.5 million increased $7.3 million versus 2011,
primarily due to higher net income. Capital spending of $25.1 million in 2012
compared with $23.1 million in 2011. Cash generated in 2012 was deployed to
acquire brands from Wausau and return cash to shareholders through dividends and
share buybacks. 

Discontinued Operations

Income from discontinued operations was $4.4 million in 2012 compared with a
loss of $0.2 million in 2011. In the fourth quarter of 2012, the company
recognized income of $4.4 million when previously recorded tax liabilities were
reversed following a tax ruling upholding the Company`s position related to an
IRS audit for the years 2007 and 2008. 

Outlook

The Company noted certain items related to 2013:

* Fine Paper sales will include premium brands purchased from Southworth on
January 31, 2013 for a price of $7.5 million. Annual sales for these brands are
approximately $20 million, and integration costs are projected to be
approximately $2 million. 
* A consolidated effective tax rate of 35 percent is expected, primarily as a
result of increased cash repatriation in 2013. A further increase to near 40
percent could occur based on pending German tax legislation that would reduce
allowable deductions. 
* Cash taxes paid will continue to reflect benefits from the use of Net
Operating Losses applied against U.S.-based income. 
* Interest expense will decrease to approximately $11 million as a result of
debt restructuring and reductions in 2012. 
* Capital spending will continue to be within the stated target range of $25 -
30 million. 
* Quarterly dividends will increase by 25 percent to $0.15 per share.

Conference Call

Neenah Paper will hold a webcast to discuss fourth quarter earnings and other
matters of interest at 11:00 a.m. Eastern time on Thursday, February 21, 2013.
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 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 95710779. 

A replay of the call will be available through the Company`s web site until
March 29, 2013 and may also be accessed by dialing (855) 859-2056 in the U.S. or
(404) 537-3406 internationally, using conference ID 95710779. 

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, ASTROBRIGHTS, ENVIRONMENT, CRANE, ROYAL SUNDANCE,
Southworth KIMDURA, Gessner, JET-PRO SofStretch(TM) and varitess. 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 December 31,                                     Year Ended December 31,                       
                                                                                     2012                            2011                                2012                        2011              
                                                                                                                                                                                                       
 Net Sales                                                                           $     192.6                     $     165.5                         $    808.8                  $    696.0        
 Cost of products sold                                                                     154.9                           134.2                              649.7                       570.6        
                         Gross Profit                                                      37.7                            31.3                               159.1                       125.4        
 Selling, general and administrative expenses                                              20.3                            18.1                               77.4                        68.2         
 Acquisition integration costs                                                             1.1                             -                                  5.8                         -            
 SERP settlement charge                                                                    -                               -                                  3.5                         -            
 Loss on retirement of bonds                                                               0.4                             -                                  0.6                         2.4          
 Other (income) expense - net                                                              -                               (0.4    )                          1.4                         (1.8    )    
                         Operating Income                                                  15.9                            13.6                               70.4                        56.6         
 Interest expense-net                                                                      3.0                             3.5                                13.4                        15.3         
                         Income From Continuing Operations Before Income Taxes             12.9                            10.1                               57.0                        41.3         
 Provision for income taxes                                                                3.8                             2.4                                17.1                        12.0         
                         Income From Continuing Operations                                 9.1                             7.7                                39.9                        29.3         
 Income (loss) from discontinued operations, net of income taxes                           4.5                             -                                  4.4                         (0.2    )    
                         Net Income                                                  $     13.6                      $     7.7                           $    44.3                   $    29.1         
                                                                                                                                                                                                       
                                                                                                                                                                                                       
 Earnings (Loss) Per Common Share:                                                                                                                                                                     
 Basic                                                                                                                                                                                                 
                         Continuing Operations                                       $     0.56                      $     0.49                          $    2.46                   $    1.91         
                         Discontinued Operations                                           0.27                            -                                  0.27                        (0.01   )    
                                                                                     $     0.83                      $     0.49                          $    2.73                   $    1.90         
                                                                                                                                                                                                       
 Diluted                                                                                                                                                                                               
                         Continuing Operations                                       $     0.55                      $     0.47                          $    2.41                   $    1.82         
                         Discontinued Operations                                           0.27                            -                                  0.27                        (0.01   )    
                                                                                     $     0.82                      $     0.47                          $    2.68                   $    1.81         
                                                                                                                                                                                                       
                                                                                                                                                                                                       
 Weighted Average Common                                                                                                                                                                               
                         Shares Outstanding (000s)                                                                                                                                                     
                         Basic                                                             15,888                          15,088                             15,752                      14,974       
                                                                                                                                                                                                       
                         Diluted                                                           16,187                          15,554                             16,072                      15,649       
                                                                                                                                                                                                       
                                                                                                                                                                                                       
 NEENAH PAPER, INC. AND SUBSIDIARIES                                                                                                                                                                   
 BUSINESS SEGMENT DATA                                                                                                                                                                                 
 (In millions)                                                                                                                                                                                         
 (Unaudited)                                                                                                                                                                                           
                                                                                                                                                                                                       
                                                                                     Three Months Ended December 31,                                     Year Ended December 31,                       
                                                                                     2012                            2011                                2012                        2011              
                                                                                                                                                                                                       
 Net Sales:                                                                                                                                                                                            
                         Technical Products                                          $     95.0                      $     94.2                          $    406.6                  $    421.1        
                         Fine Paper                                                        90.9                            71.3                               372.7                       274.9        
                         Other                                                             6.7                             -                                  29.5                        -            
                                                      Consolidated                   $     192.6                     $     165.5                         $    808.8                  $    696.0        
                                                                                                                                                                                                       
 Operating Income (Loss):                                                                                                                                                                              
                         Technical Products                                          $     6.4                       $     7.9                           $    37.6                   $    33.8         
                         Fine Paper                                                        13.1                            9.7                                50.0                        39.7         
                         Other                                                             0.6                             -                                  2.4                         -            
                         Unallocated corporate costs                                       (4.2    )                       (4.0    )                          (19.6   )                   (16.9   )    
                                                      Consolidated                   $     15.9                      $     13.6                          $    70.4                   $    56.6         
                                                                                                                                                                                                       
                                                                                                                                                                                                       


 NEENAH PAPER, INC. AND SUBSIDIARIES                                                                                  
 SELECTED BALANCE SHEET DATA                                                                                          
 (In millions)                                                                                                        
 (Unaudited)                                                                                                          
                                                                                                                      
                                                                    December 31, 2012           December 31, 2011     
 ASSETS                                                                                                               
 Cash and cash equivalents                                          $       7.8                 $          12.8       
 Restricted cash                                                            -                              7.0        
 Accounts receivable - net                                                  79.6                           71.4       
 Inventories                                                                102.9                          68.8       
 Deferred income taxes                                                      27.2                           17.6       
 Prepaid and other current assets                                           16.6                           15.9       
                Total current assets                                        234.1                          193.5      
 Property, plant and equipment - net                                        254.8                          252.3      
 Deferred income taxes                                                      35.3                           45.5       
 Goodwill and other intangibles - net                                       75.4                           62.4       
 Other non-current assets                                                   11.1                           11.4       
                Total assets                                        $       610.7               $          565.1      
 LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                 
 Debt payable within one year                                       $       4.7                 $          21.7       
 Accounts payable                                                           35.1                           30.2       
 Accrued expenses                                                           47.6                           51.6       
                Total current liabilities                                   87.4                           103.5      
 Long-term debt                                                             177.6                          164.5      
 Deferred income taxes                                                      12.5                           16.0       
 Noncurrent employee benefits                                               131.1                          113.0      
 Other noncurrent obligations                                               4.3                            1.4        
                Total liabilities                                           412.9                          398.4      
 Stockholders' equity                                                       197.8                          166.7      
                Total liabilities and stockholders' equity          $       610.7               $          565.1      
                                                                                                                      
                                                                                                                      


 NEENAH PAPER, INC. AND SUBSIDIARIES                                                                                 
 SELECTED CASH FLOW DATA                                                                                             
 (In millions)                                                                                                       
 (Unaudited)                                                                                                         
                                                                                                                     
                                                                       Year Ended December 31,                       
                                                                       2012                        2011              
 Operating Activities                                                                                                
 Net income                                                            $    44.3                   $    29.1         
 Depreciation and amortization                                              28.8                        31.0         
 Deferred income tax provision                                              10.7                        7.4          
 Stock-based compensation                                                   4.9                         4.3          
 Excess tax benefit from stock-based compensation                           (6.1    )                   (1.0    )    
 Inventory acquired in acquisition                                          (6.6    )                   -            
 SERP payment, net of settlement charge                                     (3.4    )                   -            
 Loss on retirement of bonds                                                0.6                         2.4          
 Non-cash effects of changes in FIN 48 accruals                             (3.9    )                   -            
 Increase in working capital                                                (20.9   )                   (7.2    )    
 Pension and other postretirement benefits                                  (7.3    )                   (7.7    )    
 Other                                                                      (1.0    )                   (1.1    )    
                            Cash provided by operating activities           40.1                        57.2         
 Investing Activities                                                                                                
 Capital expenditures                                                       (25.1   )                   (23.1   )    
 Sale (purchase) of marketable securities                                   (0.1    )                   1.2          
 Decrease (increase) in restricted cash                                     7.0                         (7.0    )    
 Purchase of brands                                                         (14.1   )                   -            
 Other                                                                      (0.7    )                   -            
                            Cash used in investing activities               (33.0   )                   (28.9   )    
 Financing Activities                                                                                                
 Short and long-term borrowings                                             113.1                       46.3         
 Repayment of debt                                                          (117.1  )                   (106.5  )    
 Share purchases                                                            (11.7   )                   (0.5    )    
 Proceeds from exercise of stock options                                    5.3                         2.6          
 Excess tax benefit from stock-based compensation                           6.1                         1.0          
 Cash dividends paid                                                        (7.8    )                   (6.7    )    
 Other                                                                      (0.2    )                   -            
                            Cash used in financing activities               (12.3   )                   (63.8   )    
                            Effect of exchange rates on cash and            0.2                         -            
                            cash equivalents                                                                         
                            Decrease in cash and cash equivalents      $    (5.0    )              $    (35.5   )    


Neenah Paper, Inc.
Bill McCarthy
Vice President - Financial Analysis and Investor Relations
678-518-3278

Copyright Business Wire 2013

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