ALPHARETTA, Ga., May 2, 2019 /PRNewswire/ -- Neenah, Inc. (NYSE:
NP) today reported first quarter 2019 results.
First Quarter Highlights
- Net sales of $239.7 million
decreased 10 percent compared with $266.5
million in the prior year. On a constant currency basis, and
excluding the impact of the December
2018 sale of the Brattleboro mill, net sales were down 5
percent.
- Earnings per diluted common share (E.P.S.) of $0.69 compared with earnings of $0.95 ($1.04
adjusted) per share in 2018.
- There were no adjustments to earnings in the first quarter of
2019. In 2018, adjusted earnings excluded a SERP settlement loss of
$0.04 per share and a $0.05 per share adjustment due to changes in
estimates related to the Tax Cuts and Jobs Act of 2017
("TCJA").
- Cash generated from operations of $3.0
million decreased from $8.1
million in the first quarter of 2018.
- Quarterly cash dividends of $0.45
per share compared with $0.41 per
share in the prior year period.
- Following the disposition of the Brattleboro mill in
December 2018, remaining products in
the Other business segment (with annual sales of approximately
$16 million) began being managed and
reported as part of the Technical Products business segment.
Comparable 2018 results for this remaining business have been
recast within the Technical Products segment.
"Adjusted E.P.S." is a non-GAAP measure used to enhance
understanding and comparability of year-on-year results and is
reconciled to GAAP figures later in this release.
"Expected higher year on year input costs and currency, as well
as soft global market conditions, significantly impacted first
quarter results. As promised, our teams have successfully
implemented pricing actions that will overcome both unrecovered
input cost increases from 2018 as well as higher costs expected
this year. At the same time, we're working to carefully manage our
costs and capacity in line with demand to improve operational
efficiencies and margins," said John
O'Donnell, Chief Executive Officer. "Our longer term growth
catalysts remain in place and we continue to look for additional
opportunities to add value as we invest in our strategies, maintain
a responsible balance sheet and provide shareholders with an
attractive dividend."
Quarterly Consolidated Results
Income Statement
Consolidated net sales of $239.7
million in the first quarter of 2019 decreased 10 percent
compared with $266.5 million in the
first quarter of 2018. Lower revenues resulted from the divestiture
of the Brattleboro mill in December
2018, unfavorable foreign currency effects in Technical
Products, and lower volumes in both segments reflecting weaker
global market conditions. These items were partly offset by
increased selling prices in both segments and a more favorable
Technical Products mix.
Selling, general and administrative (SG&A) expense of
$25.3 million in the first quarter of
2019 decreased from $26.8 million in
the prior year due to reduced spending, timing of costs, and lower
expense following the sale of the Brattleboro mill.
Operating income of $17.4 million
in the first quarter of 2019 decreased $6.7
million compared to $24.1
million in 2018. After excluding a $0.8 million SERP settlement loss in 2018,
adjusted operating income decreased $7.5
million. The decrease was due to $11.8 million of higher manufacturing costs,
comprised of $7.7 million of higher
input costs and $4.1 million of
operational cost inefficiencies mostly related to lower sales and
production volumes. These increased costs were partly offset by
higher selling prices, lower selling, general, and administrative
expenses and distribution costs, and a higher value sales mix.
Net interest expense of $3.2
million in the first quarter of 2019 was slightly below
$3.3 million in the first quarter of
2018.
The effective income tax rate was 17 percent in the first
quarter of 2019 and 22 percent in the first quarter of 2018. The
effective income tax rate for the three months ended March 31,
2018 included an unfavorable adjustment related to provisional
estimates of the impacts of the TCJA, while the rate in the first
quarter of 2019 reflected a favorable adjustment to the reserve for
uncertain tax positions following completion of a German tax audit.
The effective income tax rate in both periods reflected the benefit
of research and development tax credits and excess tax benefits
from stock compensation.
Cash Flow and Balance Sheet Items
Cash provided from operations in the first quarter of 2019 was
$3.0 million compared with
$8.1 million in the first quarter of
2018. The reduction in cash flows resulted primarily from lower
operating income. Both periods reflected expected seasonal
increases in working capital, as receivables and inventories grew
from year-end lows.
Capital spending of $4.3 million
in the first quarter of 2019 decreased from $7.6 million in the prior year.
Debt as of March 31, 2019 was $246.1
million compared to $239.1
million as of December 31,
2018, while cash and cash equivalents as of March 31,
2019 were $7.6 million compared to
$9.9 million as of December 31, 2018.
Quarterly Segment Results
Technical Products net sales of $140.0 million in the first quarter decreased 9
percent, from $153.5 million in the
prior year, and were down 5 percent on a constant currency basis.
The revenue decline resulted from lower volumes due to weaker
global market conditions and negative foreign currency impacts,
partly offset by higher net selling prices and a higher value
mix.
Operating income of $11.3 million
in the first quarter of 2019 decreased $6.2
million compared with prior year income of $17.5 million. Operating income decreased as
increased selling prices and a higher-value mix were more than
offset by the impacts of lower sales and $7.1 million of higher manufacturing costs,
including equal amounts of higher input costs and operational
inefficiencies mostly related to lower volumes. Negative foreign
currency impacts due to a weaker euro additionally reduced
operating income by $0.7 million.
Fine Paper and Packaging net sales of
$99.7 million in the first quarter of
2019 decreased 11 percent, from $111.6
million in the prior year. Approximately half of the decline
was due to the sale of Brattleboro, with the remainder mostly due
to lower commercial print volume. These items were partly offset by
higher selling prices.
Operating income of $11.9 million
in the first quarter of 2019 decreased $0.9
million from $12.8 million in
the prior year, due to $4.1 million
of higher input costs that were mostly offset by benefits from
higher selling prices, lower SG&A and distribution costs, and
the sale of the Brattleboro mill.
Unallocated Corporate and Other costs in the first
quarter of 2019 were $5.8 million
compared with $6.2 million in the
prior year period. Costs in 2018 included a $0.8 million SERP settlement loss.
Reconciliation to GAAP Measures
The Company will report adjustments to GAAP figures when they
are believed to improve the comparability and understanding of
results. In these instances, a reconciliation of adjusted income
measures to comparable GAAP measures will be provided, as shown
below:
There were no adjustments in the first quarter of 2019. In the
first quarter of 2018, there was a $0.8
million SERP settlement adjustment to operating income, and
a $0.9 million tax adjustment related
to the TCJA.
|
First Quarter
|
Continuing Operations
($ Millions)
|
2019
|
2018
|
GAAP Operating
Income
|
$
17.4
|
$
24.1
|
SERP settlement loss
|
-
|
0.8
|
Adjusted Operating
Income
|
$
17.4
|
$
24.9
|
|
|
|
GAAP
Income
|
$
11.8
|
$
16.2
|
SERP settlement
loss
|
-
|
0.6
|
Tax
adjustments
|
-
|
0.9
|
Adjusted
Income
|
$
11.8
|
$
17.7
|
|
|
|
GAAP Earnings per
Diluted Common Share
|
$
0.69
|
$
0.95
|
SERP settlement loss
|
-
|
0.04
|
Tax
adjustments
|
-
|
0.05
|
Adjusted Earnings per
Share
|
$
0.69
|
$
1.04
|
|
|
|
Diluted
Shares
|
16,921
|
17,006
|
Conference Call
A conference call and webcast to discuss first quarter earnings
and other matters of interest will be held as noted below. To
participate actively in the call, parties should use the telephone
dial-in numbers.
Date: Friday, May 3, 2019
Time: 11:00 AM (EDT)
Dial-In #: (877) 444-2208 Toll Free or (412) 317-5236
International
To be joined into: Neenah Call
Interested parties are invited to listen to the call live via
webcast by visiting www.neenah.com and clicking
on Investor Relations. Supplemental Information can be found on the
Company's web site under the Investor Relations - Presentations
& Events section. An archive of the webcast will be available
on the Company's web site until June 7,
2019.
A replay of the call will be available until May 10, 2019, with dial-in numbers of (877)
344-7529 in the U.S., (855) 669-9658 in Canada, and (412) 317-0088 international,
using conference ID 10130717.
About Neenah
Neenah is a leading global specialty materials company, focused
on premium niche markets that value performance and image. Key
products and markets include advanced filtration media, specialized
performance substrates used for digital transfer, tape and abrasive
backings, labels and other products, and premium printing and
packaging papers. The Company is headquartered in Alpharetta, Georgia and its products are sold
in over 80 countries worldwide from manufacturing operations in
the United States, Europe and the United Kingdom. Additional
information can be found at the Company's web site,
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 U.S. Securities and Exchange Commission
("SEC"), 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 and
we caution investors that any forward-looking statements we make
are not guarantees or indicative of future performance. These
forward-looking statements rely on a number of assumptions
concerning future events and are subject to risks, uncertainties
and other factors, many of which are outside of our control and
could cause actual results to materially differ from such
statements. Such risks, uncertainties and other factors include,
but are not necessarily limited to, those set forth under the
captions "Cautionary Note Regarding Forward-Looking Statements"
and/or "Risk Factors" of our latest Form 10-K filed with the
SEC as periodically updated by subsequently filed Form 10-Qs
(these securities filings can be located on our website at
www.neenah.com). Unless specifically required by law, we assume no
obligation to update or revise these forward-looking statements to
reflect new events or circumstances. 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, INC.
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In millions, except share and per share
data)
(Unaudited)
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
2018
|
Net
sales
|
$
239.7
|
$
266.5
|
Cost of products
sold
|
196.0
|
214.1
|
Gross
profit
|
43.7
|
52.4
|
Selling, general and
administrative expenses
|
25.3
|
26.8
|
SERP settlement loss
|
-
|
0.8
|
Other expense -
net
|
1.0
|
0.7
|
Operating
income
|
17.4
|
24.1
|
Interest expense -
net
|
3.2
|
3.3
|
Income from
continuing operations before income taxes
|
14.2
|
20.8
|
Provision for income
taxes
|
2.4
|
4.6
|
Net
income
|
$
11.8
|
$
16.2
|
|
|
|
Earnings Per
Common Share
|
|
|
Basic
|
$
0.70
|
$
0.96
|
Diluted
|
$
0.69
|
$
0.95
|
|
|
|
Weighted Average
Common Shares Outstanding (in
thousands)
|
|
|
Basic
|
16,862
|
16,847
|
Diluted
|
16,921
|
17,006
|
|
|
|
NEENAH, INC.
AND SUBSIDIARIES BUSINESS SEGMENT DATA (In
millions)
(Unaudited)
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
2018
|
Net
Sales:
|
|
|
Technical
Products
|
$
140.0
|
$
153.5
|
Fine Paper and
Packaging
|
99.7
|
111.6
|
Other
|
-
|
1.4
|
Consolidated
|
$
239.7
|
$
266.5
|
|
|
|
Operating
Income:
|
|
|
Technical
Products
|
$
11.3
|
$
17.5
|
Fine Paper and
Packaging
|
11.9
|
12.8
|
Other
|
-
|
-
|
Unallocated corporate
costs
|
(5.8)
|
(6.2)
|
Consolidated
|
$
17.4
|
$
24.1
|
RECONCILIATION OF
SEGMENT OPERATING INCOME
|
(In millions)
(Unaudited)
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
2018
|
Technical
Products
|
|
|
GAAP Operating
Income
|
$
11.3
|
$
17.5
|
Adjustments
|
-
|
-
|
Adjusted Operating
Income
|
11.3
|
17.5
|
|
|
|
Fine Paper and
Packaging
|
|
|
GAAP Operating
Income
|
11.9
|
12.8
|
Adjustments
|
-
|
-
|
Adjusted Operating
Income
|
11.9
|
12.8
|
|
|
|
Other/Unallocated
Corporate
|
|
|
GAAP Operating
Loss
|
(5.8)
|
(6.2)
|
SERP settlement
loss
|
-
|
0.8
|
Adjusted Operating
Loss
|
(5.8)
|
(5.4)
|
|
|
|
Consolidated
|
|
|
GAAP Operating
Income
|
17.4
|
24.1
|
SERP settlement
loss
|
-
|
0.8
|
Adjusted Operating
Income
|
$
17.4
|
$
24.9
|
NEENAH, INC.
AND SUBSIDIARIES SELECTED BALANCE SHEET DATA (In
millions)
(Unaudited)
|
|
|
|
|
|
|
|
March 31,
2019
|
December 31,
2018
|
ASSETS
|
|
|
Current
Assets
|
|
|
Cash and cash
equivalents
|
$
7.6
|
$
9.9
|
Accounts receivable -
net
|
126.5
|
114.8
|
Inventories
|
135.3
|
131.6
|
Prepaid and other
current assets
|
16.4
|
21.6
|
Total Current
Assets
|
285.8
|
277.9
|
Property, Plant
and Equipment - net
|
389.5
|
396.2
|
Lease Right-of-Use
Assets
|
16.2
|
-
|
Deferred Income
Taxes
|
15.6
|
16.4
|
Goodwill and Other
Intangibles - net
|
152.7
|
154.7
|
Other Noncurrent
Assets
|
16.1
|
16.0
|
Total
Assets
|
$
875.9
|
$
861.2
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
Current
Liabilities
|
|
|
Debt payable within
one year
|
$
2.7
|
$
2.3
|
Lease liabilities
payable within one year
|
3.1
|
-
|
Accounts
payable
|
59.6
|
63.3
|
Accrued
expenses
|
49.3
|
55.2
|
Total Current
Liabilities
|
114.7
|
120.8
|
Long-term
Debt
|
243.4
|
236.8
|
Deferred Income
Taxes
|
14.1
|
14.4
|
Noncurrent
Employee Benefits
|
91.5
|
92.9
|
Noncurrent Lease
Liabilities
|
13.9
|
-
|
Other Noncurrent
Obligations
|
4.1
|
6.1
|
Total
liabilities
|
481.7
|
471.0
|
Stockholders'
Equity
|
394.2
|
390.2
|
Total Liabilities
and Stockholders' Equity
|
$
875.9
|
$
861.2
|
NEENAH, INC.
AND SUBSIDIARIES SELECTED CASH FLOW DATA (In
millions)
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
2018
|
Operating
Activities
|
|
|
Net income
|
$
11.8
|
$
16.2
|
Depreciation and
amortization
|
8.8
|
9.4
|
Stock-based
compensation
|
1.9
|
1.8
|
Deferred income tax
provision
|
0.5
|
2.3
|
SERP settlement
loss
|
-
|
0.8
|
Non-cash effects of
changes in liabilities for uncertain income tax
positions
|
(0.4)
|
0.1
|
Increase in working
capital
|
(20.9)
|
(18.9)
|
Pension and other
postretirement benefits
|
1.5
|
(3.5)
|
Other
|
(0.2)
|
(0.1)
|
Net cash provided by
operating activities
|
3.0
|
8.1
|
|
|
|
Investing
Activities
|
|
|
Capital
expenditures
|
(4.3)
|
(7.6)
|
Purchase of
marketable securities
|
(0.2)
|
-
|
Other
|
(0.2)
|
(0.3)
|
Cash used in
investing activities
|
(4.7)
|
(7.9)
|
|
|
|
Financing
Activities
|
|
|
Long-term
borrowings
|
62.9
|
104.2
|
Repayment of
debt
|
(55.5)
|
(90.5)
|
Debt issuance
costs
|
(0.2)
|
-
|
Cash dividends
paid
|
(7.6)
|
(7.0)
|
Shares
purchased
|
(0.3)
|
(5.3)
|
Proceeds from
exercise of stock options
|
-
|
0.1
|
Cash provided by
(used in) financing activities
|
(0.7)
|
1.5
|
|
|
|
Effect of exchange
rates on cash and cash equivalents
|
0.1
|
0.2
|
Net increase
(decrease) in cash and cash equivalents
|
(2.3)
|
1.9
|
Cash and cash
equivalents, beginning of the year
|
9.9
|
4.5
|
Cash and cash
equivalents, end of period
|
$
7.6
|
$
6.4
|
Contact: Neenah, Inc.
Bill McCarthy
Vice President — Investor Relations
678-518-3278
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SOURCE Neenah, Inc.