Neenah Paper Reports 2012 Third Quarter Results

Neenah Paper, Inc. reported earnings from continuing operations of $0.55 per diluted common share in the third quarter of 2012 compared with earnings of $0.42 per share in the third quarter of 2011. After excluding costs of $0.01 per share ($0.3 million pre-tax) to integrate purchased fine paper brands, adjusted earnings in the third quarter of 2012 were $0.56 per share.

“Our teams continue to execute well, with both business segments delivering double-digit earnings growth and improved efficiencies. With working capital improving as expected, we generated record cash flow that was used to further reduce debt”

Net sales of $206.3 million in the third quarter of 2012 rose 18 percent compared to $174.9 million in the third quarter of 2011, while consolidated operating income increased 30 percent, growing to $16.3 million in the current quarter from $12.5 million in the third quarter of 2011. Results include the acquisition of selected fine paper brands from Wausau Paper Corporation in January 2012.

“Our teams continue to execute well, with both business segments delivering double-digit earnings growth and improved efficiencies. With working capital improving as expected, we generated record cash flow that was used to further reduce debt,” said John O’Donnell, Chief Executive Officer. “I am proud of the fact that we are delivering consistent top-line growth and margin improvement, both over the past few years and in the current environment. Our strategy going forward remains unchanged as we continue to grow in high value, performance-oriented Technical Products categories and pursue niche growth opportunities that complement the value of our Fine Paper business.”

Quarterly Segment and Other Financial Results

Technical Products net sales of $98.7 million in the third quarter of 2012 compared to $107.1 million in the third quarter of 2011. Revenues declined eight percent primarily due to currency, as the Euro weakened 12 percent relative to the U.S. Dollar. On a constant currency basis, revenues were flat as benefits from an improved mix were offset by a two percent decline in volume, which generally reflected softer economic conditions overseas.

Operating income increased 14 percent in 2012, growing to $6.4 million from $5.6 million in the prior year period. The higher income resulted primarily from a more profitable mix of products sold, as well as lower prices for some raw materials. Third quarter results include costs associated with planned maintenance shutdowns. Since these shutdowns occurred largely in the same quarter of 2011, there is minimal year-on-year impact on results.

Fine Paper net sales of $99.1 million in the third quarter increased 46 percent compared to $67.8 million in 2011. Higher sales in 2012 resulted from volume growth, primarily due to brands acquired from Wausau in January 2012 but also from double-digit gains in luxury packaging, labels and international markets.

Operating income of $12.8 million in the third quarter of 2012, which included $0.3 million of integration costs for the acquired brands, increased 35 percent compared to $9.5 million in the prior year. Income growth in 2012 reflected higher sales and manufacturing cost efficiencies, as well as lower pulp prices. Combined, these items more than offset higher selling and advertising costs related to increased sales from the acquired brands. Third quarter results include costs associated with planned maintenance shutdowns. Since these shutdowns occurred largely in the same quarter of 2011, there is minimal year-on-year impact on results.