Neenah Paper Reports Jump in Second Quarter Profit
Aug. 8, 2012 - Neenah Paper, Inc. 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.
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. The company is headquartered in Alpharetta, Georgia and sells products in over 70 countries worldwide from manufacturing operations in the United States and Germany.
SOURCE: Neenah Paper, Inc.