Neenah Paper Posts First Quarter Loss
May 11, 2009 - Neenah Paper, Inc. today reported a loss from continuing operations for the first quarter of 2009 of $0.7 million, or $0.05 per diluted common share, compared with income from continuing operations of $8.5 million, or $0.57 per diluted common share, in the first quarter of 2008.
Consolidated net sales of $134.1 million in the first quarter 2009 compared with sales of $205.6 million in the first quarter of 2008 and $146.6 million in the fourth quarter of 2008. Operating income of $4.9 million in the current period compared with income of $17.9 million in the first quarter of 2008 and a loss of $9.2 million in the fourth quarter of 2008, excluding a charge for goodwill impairment.
Cash flow from operations in the first quarter of 2009 totaled $29.4 million, including a tax refund of $10.9 million. This compared to cash used by operations of $10.4 million in the first quarter of 2008 and cash from operations of $12.9 million in the fourth quarter of 2008.
Commenting on results, Sean Erwin, Chairman and Chief Executive Officer, said "Operating results improved by almost $15 million from the fourth quarter of 2008 as we benefited from actions we have taken to reduce costs and from lower input prices. Our liquidity position improved as each of our businesses continues to generate positive cash flows, and we paid down debt for the second consecutive quarter. These results show that our teams have been successful in taking difficult but necessary actions to manage through the current environment, including the recently announced shutdown of the Ripon fine paper mill to further improve our cost position. In addition, we continue to invest in our brands and products and work closely with customers to support our long-term competitive position. The combination of all of these actions will position us as a stronger, more profitable company as global economies recover."
Quarterly Segment and Other Financial Results
Fine Paper first quarter 2009 net sales of $64.8 million declined from $97.0 million in 2008. Decreased sales in 2009 were due to lower volumes as a result of weaker market demand for premium writing, text and cover papers, as well as inventory destocking at customers. Operating income was $8.6 million in the first quarter of 2009 and $10.0 million in the first quarter of 2008. The reduction in income in 2009 was due both to lower volumes and approximately $4 million of additional costs for reduced mill operating schedules to match market conditions. These items were partly offset by benefits from lower input costs of approximately $3 million, as well as cost savings initiatives and an improved selling price and mix.
Technical Products net sales of $69.3 million in the first quarter of 2009 decreased from $108.6 million in the first quarter of 2008. The decline resulted primarily from lower volumes due to weaker market demand and reductions in customer inventory levels, as well as currency translation resulting from a weaker Euro in 2009. The first quarter 2009 operating loss of $0.6 million compared to operating income of $8.1 million in 2008. The decline in 2009 resulted from lower volumes and approximately $8 million of additional costs for reduced mill operating schedules to match market conditions. These items were partly offset by benefits from improved selling prices, cost savings initiatives and lower input prices. Benefits from reduced input prices were $0.4 million, as reductions in pulp and latex were partly offset by fixed price contracts for energy and specialty fibers.
Unallocated corporate expense was $3.1 million in the first quarter of 2009 and $0.2 million in the first quarter of 2008. Unallocated expense in 2008 included a non-cash gain of $4.3 million for the curtailment and settlement of employee benefit plans for Terrace Bay retirees.
Consolidated selling, general and administrative (SG&A) expense of $16.3 million in the first quarter 2009 was below the prior year level of $21.2 million due to reductions in spending. Net interest expense of $5.7 million in the first quarter of 2009 was below $6.2 million in the prior year, primarily as a result of lower interest rates and reduced debt levels in 2009.
Cash provided by operating activities was $29.4 million in the first quarter of 2009 and included a $10.9 million refund of prior year taxes paid. Capital spending was $2.8 million in the quarter and $7.1 million in the first quarter of 2008. Debt declined from $365 million on December 31, 2008, to $341 million as of March 31, 2009, as available free cash flow was used to pay down debt.
Discontinued operations include results from the Company's divested pulp mills and its remaining timberlands operation. Net income of $0.1 million in the first quarter of 2009 compared to a loss of $81.4 million in the first quarter of 2008. Results in 2008 included after-tax charges of $80.3 million related to the impairment of assets and estimated loss on the sale of the Pictou mill.
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. 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.
SOURCE: Neenah Paper, Inc.