ALPHARETTA, Ga., Nov. 3 /CNW/ -- (NYSE: NP) - Neenah
Paper reported today a third quarter 2005 net loss of $1.5 million, or $0.10
per diluted common share. Net income in the third quarter of 2004, during
which operations were part of Kimberly-Clark, was $4.5 million and did not
include interest expense or other costs attributable to operating as a stand-
alone company.
THIRD QUARTER RESULTS
Consolidated net sales for the third quarter of 2005 were $167.7 million
versus $188.9 million in the third quarter of 2004. Decreased pulp sales
generated most of the decline and were largely due to the May 1 shutdown of
the No. 1 Mill at Terrace Bay. The balance of the decrease in consolidated
sales was primarily from lower revenues of Technical Paper products.
Consolidated operating income for the third quarter of 2005 was $1.5 million,
compared to $7.8 million for the prior year period. Operating results in 2005
continued to reflect higher discounts on pulp sales to Kimberly-Clark
following the spin-off and incremental expenses as a stand-alone company.
Additionally, in the third quarter of 2005, costs were approximately $10
million higher than the third quarter of 2004 due to the combination of a
stronger Canadian dollar, which increased costs by $6 million, and higher
prices for energy and materials, which increased costs by $4 million. Partly
offsetting these factors were cost savings programs and significantly lower
manufacturing costs in pulp due to spending reductions, efficiencies, and
timing associated with annual maintenance downs.
Fine Paper segment net sales of $52.2 million in the third quarter of 2005
were 1 percent below the same quarter of 2004. Volumes declined 5 percent due
in part to reduced sales of lower margin, special order business; however,
average prices increased 4 percent, reflecting the improved sales mix and
slightly higher selling prices. Operating income for this segment was
$12.3 million in 2005, compared with $14.2 million in the same quarter of
2004. In 2005, operating income reflected increased costs for raw materials
and energy and higher allocated corporate expenses.
In the Technical Paper segment, third quarter sales of $28.7 million were
12 percent lower than 2004 primarily due to a 9 percent decrease in unit
volumes. The volume decline resulted from exiting certain lower margin supply
agreements, reduced demand for selected products and installation and start-up
of major new capital components on one of the paper machines at the Munising
mill. Selling prices were higher in the third quarter of 2005 following
implementation of a pricing surcharge in the third quarter of this year. This
favorable price impact was partly offset by a one-time distributor termination
fee paid in the current quarter. Operating income for Technical Paper in the
third quarter of 2005 was $0.2 million, compared with $4.1 million in the
third quarter of 2004. The decline in operating results in 2005 was primarily
due to lower sales, increased costs of approximately $1.2 million for latex
and higher allocated corporate expenses.
Net sales for the Pulp segment in the third quarter of 2005 were $89.6
million, approximately 19 percent below the second quarter of 2004. Volumes
declined 16 percent in the quarter versus the prior year primarily due to the
No. 1 mill shutdown. Lower selling prices in the quarter also contributed to
decreased sales and reflected higher discounts associated with the Kimberly-
Clark contract and lower market prices. In the third quarter of 2005, the pulp
segment had an operating loss of $9.3 million, compared with an operating loss
of $8.6 million in the same period of 2004. Overall mill costs improved by
approximately $13 million versus the third quarter 2004 due in part to
decreased spending, improved efficiencies, and timing for annual maintenance
downs; however, these benefits were offset by the lower net selling prices, a
stronger Canadian dollar and higher energy and material prices. Gains of $3
million in the quarter from hedges of currency and pulp also mitigated cost
increases.
Commenting on results, Sean Erwin, Chairman and Chief Executive Officer
said, "It was a difficult third quarter, with industry conditions that are
clearly more challenging than a year ago due to higher prices for energy and
materials and a stronger Canadian dollar. Our teams have responded to these
challenges by delivering over $15 million of cost savings so far this year,
including successful changes in our approach to the annual down at Terrace Bay
this past quarter, and our hedging programs are also helping to offset
currency and energy impacts. We recently updated our strategic plan and
continue to make progress on short and longer term initiatives intended to
grow our paper businesses, generate value from our pulp operations, and
deliver attractive returns to shareholders."
CONFERENCE CALL
Neenah Paper's conference call to discuss first quarter earnings and other
matters of interest to investors and analysts will be held at 11 a.m.
(Eastern) on November 4. The call will be simultaneously broadcast over the
World Wide Web and stockholders and others are invited to listen to the live
broadcast by following the instructions set out in the Investors section of
the company's Web site (www.neenah.com). A replay of the call will be
available at the same site through December 30.
About Neenah Paper, Inc.
Neenah Paper manufactures and distributes a wide range of premium and
specialty paper grades, with well-known brands such as CLASSIC(R),
ENVIRONMENT(R), KIMDURA(R) and MUNISING LP(R). The company also produces and
sells bleached pulp, primarily for use in the manufacture of tissue and
writing papers. Neenah Paper is based in Alpharetta, Georgia, and has
manufacturing operations in Wisconsin, Michigan and in the Canadian provinces
of Ontario and Nova Scotia. Additional information about Neenah Paper can be
found at the company's web site at 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, changes in U.S./Canadian
dollar currency exchange rates, changes in pulp prices, the cost or
availability of raw materials, unanticipated expenditures related to the cost
of compliance with environmental and other governmental regulations and the
ability of the company to realize anticipated cost savings. 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
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(In millions, except share and per share data)
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
2005 2004 2005 2004
Net Sales $167.7 $188.9 $553.6 $594.7
Cost of products sold 152.3 165.6 483.4 493.3
Gross Profit 15.4 23.3 70.2 101.4
Selling, general and
administrative expenses 13.4 11.0 39.6 29.7
Restructuring costs and asset
impairment loss(1) 0.1 - 6.1 -
Other (income)/expense - net 0.4 4.5 (0.7) 2.3
Operating Income 1.5 7.8 25.2 69.4
Interest expense-net 4.5 - 13.8 -
Income (Loss) Before Income
Taxes (3.0) 7.8 11.4 69.4
Provision (benefit) for income
taxes (1.5) 3.3 3.4 26.1
Net (Loss) Income $(1.5) $4.5 $8.0 $43.3
Earnings (Loss) Per Common Share:
Basic $(0.10) $0.31 $0.54 $2.94
Diluted $(0.10) $0.31 $0.54 $2.94
Weighted Average Common
Shares Outstanding (000s)
Basic 14,739 14,738 14,739 14,738
Diluted 14,739 14,738 14,789 14,738
Notes:
(1) For the three and nine months ended June 30, 2005, Restructuring costs
and asset impairment loss represent costs associated with the closure
of the No. 1 Mill at Terrace Bay.
NEENAH PAPER INC AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(In millions)
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
Business Segment Data 2005 2004 2005 2004
Net Sales:
Fine Paper $52.2 $53.0 $166.9 $165.3
Technical Paper 28.7 32.8 99.0 101.7
Pulp 89.6 110.4 303.9 349.3
Intersegment Sales (2.8) (7.3) (16.2) (21.6)
Consolidated Total $167.7 $188.9 $553.6 $594.7
Operating Income (Loss):
Fine Paper $12.3 $14.2 $45.3 $50.8
Technical Paper 0.2 4.1 8.0 17.3
Pulp (9.3) (8.6) (23.0) 4.2
Unallocated corporate expenses (1.7) (1.9) (5.1) (2.9)
Consolidated Total $1.5 $7.8 $25.2 $69.4
Balance Sheet Data Sept. 30 Dec. 31
2005 2004
Cash and Cash Equivalents $45.9 $19.1
Adjusted Working Capital(1) 95.9 97.3
Total Debt 226.6 225.0
Stockholders' Equity 216.4 197.1
Total Assets 597.1 565.7
For the Nine
Months Ended
September 30,
Cash Flow Data 2005 2004
Cash Provided By Operating
Activities $46.3 $62.0
Depreciation and amortization(2) 21.5 27.1
Capital expenditures 18.0 13.5
Pension contributions(3) 12.4 12.4
Notes:
(1) Adjusted working capital consists of all current assets and current
liabilities, net of cash and debt payable within one year.
(2) Results for 2005 include approximately $1.5 million for amortization
of bond issuance costs.
(3) Amounts of cash contributed to pension trusts.