Neenah Paper Reports 2016 First Quarter Results
May 11, 2016 - Neenah Paper, Inc. (NYSE: NP) today reported 2016 first quarter results.
First Quarter Highlights
- All-time record quarterly sales, operating income and adjusted earnings per share (E.P.S.), which included results from August 2015 acquisition of FiberMark.
- Revenue growth of 13 percent to $242.1 million.
- Operating income increase of 11 percent to $31.4 million (14 percent growth after excluding $1.1 million of adjusting items for integration and restructuring costs).
- Earnings per diluted share from continuing operations up 18 percent to $1.11 compared with $0.94 per share in 2015. Excluding 2016 integration and restructuring costs of $0.04 per share, adjusted E.P.S. of $1.15 increased 22 percent.
- Cash generated from operations of $16.0 million compared with $5.1 million in the prior year.
- Cash dividends paid of $0.33 per share, up 10% from prior year. In addition, $5.3 million of shares were repurchased during the quarter.
"We delivered considerable growth in profits and cash flows in the first quarter as our business teams continue to execute against value-adding initiatives, including the integration of FiberMark," said John O'Donnell, Chief Executive Officer. "While global market and economic conditions remain less than stellar, this environment has helped moderate input costs and we've further improved results through synergies and manufacturing efficiencies. Our cash continues to be deployed where we can generate attractive returns, and in the first quarter this included capital spending for added US filtration capacity and increased returns to shareholders through share buybacks and a higher dividend."
QUARTERLY CONSOLIDATED RESULTS
Consolidated net sales increased 13 percent to $242.1 million compared with $214.4 million in the first quarter of 2015. Revenues increased as a result of acquired sales in all segments and organic volume growth in Technical Products that more than offset modest unfavorable impacts from lower net selling prices and currency translation.
Selling, general and administrative (SG&A) expense of $26.4 million in the first quarter of 2016 increased from $20.8 million in the prior year. SG&A increased in 2016 primarily as a result of the addition of FiberMark, as well as timing of other expenses.
Operating income of $31.4 million in 2016 increased 11 percent compared with $28.4 million in 2015. Higher income in 2016 resulted primarily from revenue growth and lower input costs, including purchasing synergies and sourcing initiatives, that more than offset increased SG&A and other costs. Excluding $1.1 million of costs in 2016 for integration and restructuring related activities, adjusted 2016 operating income of $32.5 million increased 14 percent compared with the prior year.
Net interest expense of $2.9 million in 2016 was equal to the prior year. The 2016 effective tax rate of 33 percent compared with 37 percent in the first quarter of 2015. The lower rate in 2016 reflects timing of R&D credits, which are being recognized throughout 2016, but in 2015 were recognized all in the fourth quarter. The difference in timing resulted from the U.S. Congress permanently extending these credits beginning in December 2015.
Income from continuing operations of $19.0 million increased 18 percent compared with $16.1 million in the first quarter of 2015 as a result of higher operating income and a lower tax rate.
Cash Flow and Balance Sheet
Cash provided from operations in the first quarter of 2016 was $16.0 million compared with $5.1 million in the first quarter of 2015. Increased cash generation in the current year period resulted from a lower investment in working capital and higher earnings.
Capital spending of $11.3 million in the first quarter of 2016 compared with $5.7 million in the prior year period. Increased spending in 2016 was due to an investment to increase transportation filtration capacity in the U.S. that is expected to be largely complete by year end.
Debt of $238.8 million as of March 31, 2016 compared with $229.4 million on December 31, 2015 and $217.5 million as of March 31, 2015. Debt increased versus year ago levels as a result of partial funding for the acquisition.
QUARTERLY SEGMENT RESULTS
Technical Products net sales of $121.5 million increased 15 percent compared with prior year sales of $106.1 million. The increase in revenues resulted from both acquired sales and organic volume growth, partly offset by lower net selling prices and currency effects. After excluding $0.3 million in 2016 for integration costs, adjusted operating income of $19.5 million in the first quarter of 2016 increased 25 percent compared with prior year income of $15.6 million. Higher 2016 operating income resulted from increased sales and lower input costs that more than offset higher SG&A (including SG&A from the acquisition) and currency impacts.
Fine Paper & Packaging net sales were $113.8 million in the first quarter of 2016, up 5 percent compared with $108.3 million in the prior year. The increase in revenues reflected the addition of acquired sales. After excluding $0.3 million in 2016 for integration costs, adjusted operating income of $17.8 million in the first quarter of 2016 increased from $17.6 million in the prior year. Higher adjusted income in 2016 resulted from lower input costs, higher sales, and manufacturing efficiencies that were largely offset by a less favorable mix and increased SG&A, both due to acquired SG&A and timing of other expenses.
Unallocated corporate costs in the first quarter of 2016 were $5.3 million compared with $4.8 million in prior year period. Costs in 2016 increased primarily due to $0.3 million of restructuring related to the transportation filtration project.
Neenah is a leading global specialty materials company. Key products and markets include advanced filtration media, specialized performance substrates used for tapes, labels and other products, and premium printing and packaging papers. To learn more, please visit: www.neenahpaper.com.
SOURCE: Neenah Paper Inc.