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Neenah Paper Inc. Reports Operating Results (10-Q)

August 10, 2009 | About:

Neenah Paper Inc. (NP) filed Quarterly Report for the period ended 2009-06-30.

Neenah Paper manufactures and distributes a wide range of premium and specialty paper grades with well-known brands such as CLASSIC ENVIRONMENT KIMDURA and MUNISING LP. 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. Neenah Paper Inc. has a market cap of $160.7 million; its shares were traded at around $10.97 with a P/E ratio of 121.9 and P/S ratio of 0.2. The dividend yield of Neenah Paper Inc. stocks is 3.6%.

Highlight of Business Operations:

We recorded a consolidated operating loss of $10.5 million for the three months ended June 30, 2009 due to a pre-tax charge of $18 million for costs associated with permanently closing the Ripon Mill in May 2009. Closing the Ripon Mill reflects our strategy to drive consolidation in the premium fine paper category through leading brands and a cost efficient manufacturing platform. Excluding such closure costs and a gain of approximately $2.9 million in the second quarter of 2008 on the sale of certain assets acquired in the acquisition of Fox River, consolidated operating income of $7.5 million decreased $3.8 million compared to the prior year primarily due to lower volume and a commensurate reduction in paper machine operating schedules to control inventory. These unfavorable factors were only partially offset by lower manufacturing input costs, reduced spending due to initiatives to control operating costs and higher average selling prices.

For the three months ended June 30, 2009, we recognized pre-tax income from discontinued operations of $0.6 million compared to a pre-tax loss from operations of $8.9 million in the prior year period. The pre-tax operating loss in the prior year period was primarily due to scheduled maintenance downtime at the Pictou Mill. In addition, results for the three months ended June 30, 2008, include a pre-tax loss on disposal of $43.9 million. The loss on disposal was primarily due to recognition of a non-cash charge of $53.7 million for the reclassification from accumulated other comprehensive income of deferred adjustments related to pensions and other post-employment benefits in connection with the transfer of post-employment benefit plans for the Pictou Mill to Northern Pulp. In addition, we recognized pre-tax income of $9.8 million to adjust the estimated loss on transfer to the actual loss recognized upon closing the transaction.

· Net sales in our fine paper business of $61.3 million decreased $23.2 million or 27 percent primarily due to a 29 percent decrease in shipments. The lower volume reflected an unusually large decline in market demand for premium uncoated free sheet papers due to weaker economic conditions. The effect of lower volume was only partly offset by higher average net selling prices resulting from the realization of price increases implemented in 2008.

· Net sales in our fine paper business of $126.1 million decreased $55.4 million or 31 percent primarily due to a 33 percent decrease in shipments. The lower volume reflected an unusually large decline in market demand for premium uncoated free sheet papers in the first six months of 2009 due to weaker economic conditions and inventory destocking by customers. The effect of lower volume was only partly offset by higher average net selling prices resulting from the realization of price increases implemented in 2008 and a more favorable sales mix.

We reported a consolidated operating loss of $10.5 million for the three months ended June 30, 2009 primarily due to a pre-tax charge of $18 million related to the closure of the Ripon Mill. Excluding costs associated with closing the Ripon Mill and a gain of approximately $2.9 million in the second quarter of 2008 on the sale of certain assets acquired in the acquisition of Fox River, consolidated operating income of $7.5 million for the three months ended June 30, 2009 decreased $3.8 million compared to 2008 primarily due to lower volume and associated reductions in paper machine operating schedules to control inventory; that were only partially offset by lower manufacturing input costs, actions taken to reduce spending and higher average selling prices.

· Our fine paper business reported an operating loss of $10.0 million which was $21.7 million unfavorable to the prior year period. Excluding costs associated with closing the Ripon Mill and a gain of approximately $2.9 million in the second quarter of 2008 on the sale of certain assets acquired in the acquisition of Fox River, operating income for our fine paper business of $8.0 million decreased $0.8 million compared to the prior year primarily due to lower volume as a result of weaker economic conditions and the under absorption of fixed manufacturing costs due to reduced paper machine utilization. These unfavorable effects were largely offset by lower manufacturing input costs, principally for hardwood pulp, lower operating and administrative spending due to cost reduction initiatives and higher average net selling prices due to the realization of price increases implemented in 2008.

Read the The complete ReportNP is in the portfolios of John Keeley of Keeley Fund Management.

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