ALPHARETTA, Ga., March 8 /CNW/ -- Neenah Paper (NYSE: NP)
today reported a net loss of $37.7 million for the fourth quarter 2005, or
$2.56 per diluted common share, compared with a net loss of $69.7 million, or
$4.73 per diluted common share, during the fourth quarter of 2004. Fourth
quarter 2005 results included after-tax charges for the impairment of Terrace
Bay pulp assets of $33.1 million, or $2.25 per diluted common share. In the
fourth quarter of 2004, $72.0 million, or $4.89 per diluted common share, was
included for the impairment charge of Terrace Bay assets. Excluding these
impairment charges, fourth quarter results would have been a loss of $0.31 per
diluted common share in 2005 and earnings of $0.16 in the fourth quarter of
2004. Neenah Paper was part of Kimberly-Clark through November 30, 2004 and
results prior to the spin-off date did not reflect higher pulp discounts,
interest expense, corporate costs and other changes attributable to operating
as a stand-alone company.
For the Fine Paper segment, fourth quarter 2005 net sales of $55.4 million
were approximately equal with the prior year period, as higher average selling
prices offset a three percent decline in volumes. Operating income for the
quarter was $13.1 million in 2005 compared with $16.2 million in 2004. The
decline in income was primarily attributable to higher costs for energy and
raw materials in 2005, along with lower manufacturing volumes and higher
stand-alone corporate expenses.
Technical Products segment net sales of $31.6 million in the fourth
quarter of 2005 increased three percent compared to the same period of 2004,
primarily as a result of increased volumes. Operating income for the quarter
was $2.5 million in 2005 compared with $4.6 million in the fourth quarter of
2004. Reasons for the decline included higher costs for energy and raw
materials, a less profitable sales mix and increased research and development
and stand-alone corporate expenses.
Pulp segment net sales of $96.8 million in the fourth quarter were two
percent below the same period of 2004. Higher price discounts and volume
declines, the latter due in part to the May 2005 shutdown of the Terrace Bay
No. 1 line, were only partially offset by an improved sales mix and higher
market prices. In 2005, the fourth quarter operating loss was $70.2 million,
including a $53.7 million pre-tax charge for impairment. The operating loss
in the same quarter of 2004 was $124.7 million and included $112.8 million for
pre-tax impairment charges. Operating losses, excluding the impact of
impairment, increased by $4.6 million in the fourth quarter 2005 as a result
of higher costs due to timing of the Pictou mill maintenance down, as well as
increased energy and material prices and higher stand-alone corporate costs.
FULL YEAR RESULTS
Net sales for the full year were $733.4 million in 2005 compared with
$772.1 million in 2004. The decline in total company sales was due to an 11
percent reduction in Pulp sales, where volumes declined as a result of the
closure of the No. 1 mill at Terrace Bay and post spin-off discounts increased
on sales to Kimberly-Clark. Sales for the paper segments were flat overall,
with Fine Paper sales up one percent and Technical Products down one percent.
Consolidated operating results in 2005 reflected a loss of $30.8 million
and included pre-tax charges of $53.7 million for the remaining Terrace Bay
impairment and $6.1 million for closure of the No. 1 mill at Terrace Bay. The
2004 operating loss was $39.9 million and included a $112.8 million pre-tax
charge for Terrace Bay impairment. Operating results, excluding the impact of
impairment and No. 1 mill closure costs, decreased in 2005 primarily due to
higher discounts on pulp sales, a stronger Canadian dollar, increased energy
and raw material costs and higher costs as a stand-alone company. These cost
increases were partly offset by cost savings programs and higher selling
prices.
In 2005, the full year net loss was $29.7 million, or $2.02 per diluted
common share, compared with a loss of $26.4 million, or $1.79 per diluted
common share, in 2004. Combined after-tax Terrace Bay impairment and No. 1
mill closure costs of $36.9 million, or $2.50 per diluted common share, were
included in 2005 and an after-tax impairment charge of $72.0 million, or $4.89
per share, was included in 2004. Excluding the mill closure and impairment
charges in both years, 2005 earnings were $0.48 per diluted common share and
2004 earnings, when Neenah Paper was largely part of Kimberly-Clark, were
$3.10 per share.
OUTLOOK
Commenting on results and the near term outlook, Sean Erwin, Chairman and
CEO said, "Industry conditions remain challenging, with sustained higher raw
material and energy prices, the Canadian dollar at a 14-year high and market
demand for paper that has not been strong. We expect these conditions to
continue in the near term. In response, our teams are focused on implementing
programs to drive both short and long term results. Our brands remain strong
and we are launching new products and expanding distribution channels, as well
as working closely with key customers, to deliver growth. We implemented
selling price increases in January to further reduce the impact of higher
input costs. Our cost savings programs remain active and delivered over
$25 million of year-on-year savings, with a large share coming from efforts at
the Terrace Bay mill. During the year, we also further defined strategic
priorities and actions. These included driving sustainable organic growth in
our paper businesses, focusing our business mix on premium papers and
technical products, and controlling spending in our pulp operations while
developing alternatives to create and unlock value. As part of this process,
we expect to evaluate potential acquisitions that can leverage our current
product and brand strengths and deliver required financial returns."
TERRACE BAY UPDATE
On January 30, 2006, Steelworkers union members in our woodlands operation
who harvest and deliver fiber to the Terrace Bay mill initiated a strike. Due
to a resulting lack of fiber, operations at the mill were suspended on
February 22. Following the shutdown, most hourly and salaried employees at
the mill were laid off and spending curtailed. Shipments will occur until
inventories are depleted. In the event of an extended shutdown, continuing
costs are expected to decline as a result of lower heating, operating and
maintenance requirements. Reductions in working capital will also occur and
could be used as a source of funding for severance payments. The amount of
severance will be dependent on the length of the shutdown and could commence
as early as the second quarter.
CONFERENCE CALL
Neenah Paper's conference call to discuss fourth quarter earnings and
other matters of interest to investors and analysts will be held at 11 a.m.
(Eastern) on March 9. 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 March 31.
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, the labor
situation in Ontario 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
Months Ended For the Years
December 31, Ended December 31,
2005 2004 2005 2004
Net Sales $179.8 $177.4 $733.4 $772.1
Cost of products sold 172.5 154.6 655.9 647.9
Gross Profit 7.3 22.8 77.5 124.2
Selling, general and administrative
expenses 13.6 16.1 53.2 45.8
Restructuring costs and asset
impairment loss(1,2) 53.7 112.8 59.8 112.8
Other (income)/expense - net (4.0) 3.2 (4.7) 5.5
Operating Loss (56.0) (109.3) (30.8) (39.9)
Interest expense-net 4.4 1.4 18.2 1.4
Loss Before Income Taxes (60.4) (110.7) (49.0) (41.3)
Benefit for income taxes (22.7) (41.0) (19.3) (14.9)
Net Loss $(37.7) $(69.7) $(29.7) $(26.4)
Loss Per Common Share:
Basic $(2.56) $(4.73) $(2.02) $(1.79)
Diluted $(2.56) $(4.73) $(2.02) $(1.79)
Weighted Average Common
Shares Outstanding (000s)
Basic 14,741 14,738 14,739 14,738
Diluted 14,741 14,738 14,739 14,738
Notes:
1 - The year ended December 31, 2005 includes restructuring costs ($5.3
million) and asset impairment losses ($54.5 million) at the Terrace
Bay mill. The year months ended December 31, 2004 includes asset
impairment losses of $112.8 million at the Terrace Bay mill.
2 - The three months ended December 31, 2005 and 2004 include asset
impairment losses at the Terrace Bay mill of $53.7 million and $112.8
million, respectively.
NEENAH PAPER INC AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(In millions)
For the Three Months For the Years
Ended December 31, Ended December 31,
Business Segment Data 2005 2004 2005 2004
Net Sales:
Fine Paper $55.4 $55.5 $222.3 $220.8
Technical Products 31.6 30.6 130.6 132.3
Pulp 96.8 99.3 400.7 448.6
Intersegment Sales (4.0) (8.0) (20.2) (29.6)
Consolidated Total $179.8 $177.4 $733.4 $772.1
Operating Income (Loss):
Fine Paper $13.1 $16.2 $58.4 $67.0
Technical Products 2.5 4.6 10.5 21.9
Pulp (70.2) (124.7) (93.2) (120.5)
Unallocated corporate expenses (1.4) (5.4) (6.5) (8.3)
Consolidated Total $(56.0) $(109.3) $(30.8) $(39.9)
Balance Sheet Data December 31, December 31,
2005 2004
Cash and Cash Equivalents $12.6 $19.1
Adjusted Working Capital(1) 112.5 97.3
Total Debt 227.5 225.0
Stockholders' Equity 165.3 197.1
Total Assets 537.0 557.3
For the Years
Ended December 31,
Cash Flow Data 2005 2004
Cash Provided By Operating Activities $22.8 $76.0
Depreciation and amortization(2) 29.8 36.0
Capital expenditures 25.7 19.1
Pension contributions(3) 20.3 16.6
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 and 2004 include approximately $2.0 million and $0.2
million, respectively, for amortization of bond issuance costs.
3 - Amounts of cash contributed to pension trusts.
NEENAH PAPER INC AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
Reconciliation of Non-GAAP Disclosure Items
(In millions, except per share data)
Reconciliation of net loss and loss per share to adjusted net loss and
adjusted loss per share:
For the Three
Months Ended For the Years
December 31, Ended December 31,
2005 2004 2005 2004
Net Loss $(37.7) $(69.7) $(29.7) $(26.4)
Add (subtract):
Restructuring costs and asset
impairment loss 53.7 112.8 59.8 112.8
Income tax benefit (20.6) (40.8) (22.9) (40.8)
Total adjustment 33.1 72.0 36.9 72.0
Net loss adjusted for after-tax
restructuring costs and asset
impairment loss $(4.6) $2.3 $7.2 $45.6
Loss Per Diluted Common Share $(2.56) $(4.73) $(2.02) $(1.79)
Add:
Restructuring costs and asset
impairment loss, net of income
tax benefit 2.25 4.89 2.50 4.89
Net earnings (loss) per diluted share
adjusted for after-tax restructuring
costs and asset impairment loss $(0.31) $0.16 $0.48 $3.10
Notes:
In accordance with generally accepted accounting principles in the
United States ("GAAP"), the reported net losses include the after-tax
effects of unusual and non-recurring items. We believe that by
adjusting the reported net losses to exclude the effects of these
items, the resulting losses are on a basis that reflects the results
of our continuing operations. Adjusted net loss and adjusted net loss
per share are not recognized terms under GAAP and do not purport to be
alternatives to net loss or net loss per share or any other
performance measures derived in accordance with GAAP.