Neenah Paper reports 2009 second quarter results
Tuesday, August 11, 2009
Press release from the issuing companyALPHARETTA, Ga., -- Neenah Paper, Inc. today reported a loss from continuing operations for second quarter 2009 of $8.6 million, or $0.58 per diluted common share. Results included restructuring charges (net of tax) of $11.6 million, or $0.79 per share, for the previously announced closure of the company's fine paper mill in Ripon, California. Income from continuing operations in the second quarter of 2008 was $6.2 million, or $0.42 per diluted common share, and included a gain (net of tax) of $1.8 million, or $0.12 per share, from the sale of the Urbana mill.
Net of unusual items, adjusted income from continuing operations in the second quarter of 2009 was $3.0 million, or $0.21 per diluted common per share, and compared to a net loss $0.7 million, or $0.05 per share in the first quarter of 2009 and adjusted income of $4.4 million, or $0.30 per share in the second quarter of 2008.
Consolidated net sales of $135.2 million in the second quarter of 2009 compared with $134.1 million in the first quarter of 2009 and $194.5 million in the second quarter of 2008. Adjusted operating income, which excludes mill closure costs and gains on asset sales, was $7.5 million in the second quarter of 2009; up from $4.9 million in the first quarter of 2009 but below $11.3 million in the second quarter of 2008.
Adjusted income is a non-GAAP measure and is reconciled to GAAP later in this release.
Commenting on results, Sean Erwin, Chairman and Chief Executive Officer, said, "The sequential improvement in quarterly operating results shows the success of our teams in significantly reducing costs and generating cash in the current economic environment. Technical Products improved notably in the quarter with lower costs and firming sales in some markets, and the May closure of the Ripon mill immediately improved our margins and cost structure for Fine Paper. Strong cash flow generation this year has allowed us to reduce net debt by almost $30 million and sustain an attractive dividend. Our focus and actions will remain on improving margins and delivering cash flow in today's challenging economic times. These actions will yield further benefits as conditions improve."
Quarterly Segment and Other Financial Results
Fine Paper second quarter 2009 net sales of $61.3 million compared to $84.5 million in 2008. Decreased sales in 2009 were due to lower volumes as a result of continued weak market demand for premium writing, text and cover papers. The 2009 second quarter operating loss of $10.0 million, including $19 million of costs for the Ripon mill closure and other restructuring activities, compared to income of $11.7 million in 2008, including approximately $3 million of gains on asset sales. Excluding these unusual items, operating income of approximately $9 million in 2009 was equal to prior year despite the lower sales level in 2009. Benefits from lower input prices, cost savings and improved operational efficiencies, and higher net realized pricing offset the impact of lower volumes and reduced operating schedules in 2009.
Technical Products net sales of $73.9 million in the second quarter of 2009 compared to $110.0 million in the second quarter of 2008. The decline resulted primarily from lower volumes due to weaker market demand in most markets and associated destocking by customers, as well as currency translation resulting from a weaker Euro in 2009. Operating income was $3.3 million in the second quarter of 2009 and compared to $6.0 million in the same period in 2008. The impact of lower volumes and reduced operating schedules in 2009 was only partly offset by benefits from lower input prices, cost savings and improved operational efficiencies, and higher net realized pricing.
Consolidated selling, general and administrative (SG&A) expense of $16.6 million in the second quarter 2009 was below the prior year level of $17.6 million primarily due to cost reduction initiatives implemented in 2009. Unallocated corporate expense was $3.8 million in the second quarter of 2009 and $3.5 million in the second quarter of 2008.
Net interest expense of $5.3 million in the second quarter of 2009 compared to $6.1 million in the prior year. The lower interest expense in 2009 was the result of reduced debt levels, as well as a decline in interest rates. The effective tax rate for the second quarter of 2009 increased primarily as a result of the Ripon mill closure and associated restructuring charges. The rate in the current period was 46 percent and compared with a rate of 23 percent in the second quarter of 2008.
Cash flow from operations in the second quarter of 2009 was $5.8 million, after deducting cash payments of over $6 million related to the Ripon mill closure and other restructuring costs. Also in the current quarter, capital spending was $1.4 million. In the second quarter of 2008, cash from operations was $11.1 million and capital spending was $10.7 million. Free cash flow (cash from operations less capital spending) of $4.4 million in 2009 increased from $0.4 million in 2008 as a result of lower capital expenditures in 2009. Free cash flow continues to be used to reduce debt, which was $338 million at June 30, 2009, down from $341 million at March 31, 2009 and $365 million at December 31, 2008.
Year to Date
Year to date net sales of $269.3 million in 2009 compared with sales of $400.1 million in 2008. Sales in both Fine Paper and Technical Products were lower in 2009 due to reduced volumes resulting from the global economic downturn and resulting weaker market demand.
Operating losses of $5.6 million in 2009 compared to income of $32.1 million in 2008. Losses in 2009 included $18.0 million for restructuring charges associated with the May shutdown of the Ripon mill. Earnings per diluted common share were a loss of $0.63 in 2009 and income of $0.99 in 2008. Excluding restructuring and tax effects in 2009 and gains on asset sales in 2008, adjusted earnings of $0.16 in 2009 compared to earnings of $0.87 in 2008. Lower income in 2009 resulted from reductions in volumes and operating schedules that were only partly offset by lower input prices, cost reduction initiatives and higher net realized selling prices.
Year to date cash from operations was $35.2 million in 2009 and $0.7 million for the same period of 2008. Year to date capital spending of $4.2 million in 2009 compared to $17.8 million in the prior year. Higher net cash flows in 2009 resulted from decreases in working capital, including a $10.9 million tax refund in the first quarter, and lower capital spending.
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