Neenah Paper Posts Improved Third Quarter Earnings
Nov. 9, 2011 - Neenah Paper, Inc. yesterday reported a 40 percent increase in earnings per diluted common share, with $0.42 in the third quarter of 2011 compared to $0.30 in the third quarter of 2010.
Net sales of $174.9 million in the third quarter of 2011 rose eight percent compared to the third quarter of 2010, while consolidated operating income increased seven percent, growing to $12.5 million in the current quarter from $11.7 million in the third quarter of 2010.
Commenting on results, John O’Donnell, Chief Executive Officer, said, “Our businesses performed well in the quarter, as we delivered solid growth in revenues and EBIT despite cresting input costs and added economic uncertainty. We continue to take actions to improve our mix and grow our higher value products, while carefully managing costs and selling prices. Our stronger balance sheet and lower debt this year have also helped both our bottom line and cash flow.”
QUARTERLY SEGMENT AND OTHER FINANCIAL RESULTS
Technical Products net sales of $107.1 million in the third quarter of 2011 increased 13 percent compared to $94.8 million in the third quarter of 2010. Volumes increased four percent, led by growth in filtration, tape and wall cover. Average selling prices were up two percent, reflecting price increases implemented over the past year and sales of more advanced, higher value products. The remaining sales growth was due to currency impacts from a stronger Euro.
Operating income was $5.6 million in the third quarter of 2011 compared to $7.0 million in the prior year period. Costs for latex, pulp and energy rose significantly during the third quarter of 2011 compared to both the prior year and prior quarter. These higher input costs could not be fully offset by higher selling prices in the quarter. In addition, operating income in the third quarter of 2011 was impacted by higher manufacturing costs resulting from reduced operating schedules.
Fine Paper third quarter 2011 net sales of $67.8 million grew two percent compared to $66.7 million in 2010. A four percent decline in volume, reflecting continued weak market conditions, was more than offset by a six percent gain in average selling prices. Higher average prices reflected benefits from sales growth in higher value products, as well as price increases implemented over the past year. Volumes in targeted growth areas such as labels, luxury packaging and international markets increased by more than six percent in the quarter.
Operating income was $9.5 million in the third quarter of 2011, growing nine percent compared to $8.7 million in the prior year. Benefits from a more profitable mix, higher prices and manufacturing efficiencies offset higher input costs, lower volumes and increased advertising spending associated with a relaunch of the leading CLASSIC® brand portfolio.
Consolidated selling, general and administrative (SG&A) expense was $15.1 million in the third quarter of 2011 and decreased $1.5 million compared to the prior year period. The lower expense in 2011 resulted from reduced spending and timing of corporate and other general expenses. Unallocated corporate expense of $2.6 million in the third quarter of 2011 similarly fell from $4.0 million in the prior year.
Net interest expense of $3.6 million in the third quarter of 2011 was $1.2 million less than $4.8 million in the prior year period due to lower average debt levels in 2011, including the impact of the early redemption of $65 million of the Company’s long-term notes in March 2011.
The effective tax rate for the third quarter of 2011 was 24 percent compared to a rate of 32 percent in the third quarter of 2010. The third quarter of 2011 included adjustments to reflect a full year expected rate of 31 percent based on the projected mix of income.
Cash flow provided from operations was $25.0 million in the third quarter of 2011 compared to $13.7 million in the third quarter of 2010. Cash flow was higher in 2011 as a result of increased earnings and reductions in working capital during the quarter. Capital spending was $6.0 million in the third quarter of 2011 and $6.2 million in the third quarter of 2010.
Debt as of September 30, 2011 was $190 million compared to $206 million as of June 30, 2011 and $245 million as of December 31, 2010. Cash generated by operations has been used to reduce debt. In addition, the company used available cash of $39 million in March 2011 for the early redemption of $65 million of the Company’s long term notes.
Neenah Paper is a leader in premium and performance-based products used in a variety of applications. Its technical products business manufactures a variety of base substrates and applies saturating, coating and other surface treatments to make filtration media, backing and release papers, and other specialty materials for industrial and consumer applications. Neenah also produces premium fine papers for high-end printing and writing needs.
Based in Alpharetta, Georgia, Neenah Paper has manufacturing operations in the United States and Germany and sells its products in over 70 countries worldwide.
SOURCE: Neenah Paper Inc.