Neenah Paper Reports 2013 First Quarter Results – Business Wire (press release)

ALPHARETTA, Ga.–(BUSINESS WIRE)–Neenah Paper, Inc. (NYSE:NP) today reported adjusted earnings from
continuing operations of $0.74 per diluted common share in the first
quarter of 2013 compared to adjusted earnings of $0.77 per share in the
first quarter of 2012. Without adjustments, reported earnings in the
first quarter of 2013 were $0.73 per diluted share and compared to $0.54
per share in the prior year period. Adjusted earnings excluded costs of
$0.01 per share in 2013 to integrate brands purchased from Southworth in
January 2013 and excluded costs of $0.23 per share in 2012 for
acquisition costs and a pension settlement charge. Adjusted earnings are
reconciled to comparable GAAP figures later in this release.

“We are executing against our strategies, and given
our competitive market positioning, solid balance sheet and cash flow
generation abilities, we are well-positioned to take advantage of
opportunities that can increase returns to our shareholders.”

Adjusted earnings per share of $0.74 in the first quarter of 2013
included the impact of $0.07 per share from a higher effective tax rate
in 2013. Adjusted operating income of $22.3 million was slightly above
prior year with increases in Fine Paper offsetting lower income in
Technical Products. The impact of the higher effective tax rate more
than offset benefits of higher operating income and lower interest
expense in 2013.

Net sales of $213.2 million in the first quarter of 2013 increased eight
percent compared with the first quarter of 2012. Revenues increased in
both segments, with growth in Fine Paper aided by additional volumes
from acquired brands.

“As we started the year, we are seeing benefits from optimizing our
expanded Fine Paper business and in Technical Products, while we knew it
would be a challenge surpassing last year’s record earnings given the
challenging conditions in Europe, we were able to grow our top line with
higher volumes and an improved mix,” said John O’Donnell, Chief
Executive Officer. “We are executing against our strategies, and given
our competitive market positioning, solid balance sheet and cash flow
generation abilities, we are well-positioned to take advantage of
opportunities that can increase returns to our shareholders.”

Quarterly Segment and Other Financial Results

Technical Products net sales were $107.0 million in the
first quarter of 2013, up one percent compared to the first quarter of
2012. Net revenue growth reflected increased volumes led by gains in
filtration and tape, a higher value mix and modest gains from a slightly
stronger Euro, partly offset by challenges in some categories in Europe.

Operating income for Technical Products of $9.7 million in the first
quarter of 2013 decreased compared with $12.5 million in the first
quarter of 2012. Lower income in 2013 primarily resulted from higher
input costs and less efficient manufacturing operations, which combined
offset benefits from increased sales and a higher value mix.

Fine Paper net sales of $99.4 million in the first quarter
of 2013 increased 15 percent compared with prior year sales of $86.4
million. Higher sales in 2013 resulted from volume growth primarily due
to acquired brands, but also from double-digit gains in sales of luxury
packaging and premium label products. Net average selling prices also
were higher as a result of an improved product mix and a selling price
increase in March 2013.

Operating income of $16.3 million in the first quarter of 2013 compared
to $10.8 million in 2012. After excluding $0.1 million in 2013 and $2.5
million in 2012 for costs to integrate acquired brands, operating income
increased 23 percent in 2013 as a result of volume growth, higher
average prices and lower manufacturing costs. Lower costs resulted
primarily from improved manufacturing efficiencies, as well as lower
pulp prices.

Other/Unallocated Corporate Costs include unallocated
corporate expense and sales and profits from acquired non-premium paper
grades. In the first quarter of 2013, sales for these products were $6.8
million, with operating income of $0.3 million; in 2012, sales were $5.8
million, with operating income of $0.7 million. Unallocated corporate
costs were $4.1 million in the first quarter of 2013 and $7.8 million in
2012. After excluding $3.5 million in 2012 for a pension settlement
charge, unallocated costs were $4.3 million in 2012.

Consolidated selling, general and administrative (SG&A) expense
was $21.0 million in the first quarter of 2013 compared to
$19.5 million in the first quarter of 2012. Higher spending in 2013
primarily reflected increased costs related to acquired Fine Paper
brands.

Net interest expense of $2.6 million in the first quarter
of 2013 compared to $3.6 million in the same quarter of 2012. Reduced
interest expense in 2013 resulted from a lower average interest rate
following the early redemptions of Senior Notes in 2012 financed with
lower cost short-term borrowings. An additional redemption of $20
million of Senior Notes will occur in the second quarter.

The effective income tax rate of 38 percent for the first
quarter of 2013 compared to a rate of 29 percent in the first quarter of
2012. Changes in German tax laws enacted in 2013, as well higher taxes
associated with increased cash repatriation to the U.S. in 2013
contributed to the higher rate.

Cash flow generated from operations in the first quarter
of 2013 was $2.4 million and compared to a $13.6 million use of cash in
the first quarter of 2012. Increased cash generation in 2013 primarily
resulted from higher income and fewer unusual items, which in 2012
included $6.9 million for one-time pension payments and $4.7 million for
excess tax benefits on stock compensation. In both years, cash flows in
the first quarter reflected additional investments in working capital
due to increases in receivables and inventory levels versus year end.
Capital spending of $4.7 million in the first quarter of 2013 compared
with $3.5 million in the prior year period.

Debt as of March 31, 2013 was $186.5 million compared to
$182.3 million as of December 31, 2012. Cash and equivalents as of March
31, 2013 were $3.8 million compared to $7.8 million as of year-end 2012.
Higher debt and lower cash balances in the first quarter of 2013
compared to year end was primarily due to a payment of $7.0 million for
Fine Paper brands acquired from Southworth.

Reconciliation to GAAP Measures

Adjustments to GAAP figures are reported when it is believed to be
helpful to more clearly communicate results of ongoing operations. In
these instances, a reconciliation of adjusted income measures to
comparable GAAP measures will be provided, as shown below:

Discontinued Operations

Income from discontinued operations was $2.6 million in 2013 and
compared to less than $0.1 million in 2012. In the first quarter of
2013, income was recorded after receiving approval for a refund of
excess payments made to the pension plan of Neenah’s former Canadian
pulp operations.

Conference Call

A webcast will be held to discuss first quarter earnings and other
matters of interest at 11:00 a.m. Eastern time on Thursday, May 9, 2013.
Stockholders and other interested parties are invited either to listen
live to the webcast via the Neenah internet site at www.neenah.com
by clicking on the Investors tab and going to the Events page or
participate actively in the call by dialing (888) 893-0989 from the U.S.
and Canada or (706) 758-4223 for other locations. All participants
should use conference ID 52787765.

A replay of the call will be available through the company’s web site
until June 10, 2013 and may also be accessed by dialing (855) 859-2056
in the U.S. or (404) 537-3406 internationally, using conference ID
52787765.

About Neenah Paper, Inc.

Neenah is a leader in premium image and performance-based products,
including filtration, specialized substrates used for tapes, labels and
other products, and high-end printing papers. Products are marketed
under well-known brands such as CLASSIC®, ASTROBRIGHTS®, ENVIRONMENT®,
CRANE®, ROYAL SUNDANCE®, Southworth® KIMDURA®, Gessner®, JET-PRO®
SofStretch(TM) and varitess®. Corporate headquarters are located in
Alpharetta, Georgia and products are sold in over 70 countries worldwide
from manufacturing operations in the United States and Germany.
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
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: (i) unexpected challenges
associated with the integration of the Wausau premium business; (ii)
changes in prices for pulp, energy, latex and other raw materials, (iii)
worldwide economic conditions, (iv) U.S. dollar/euro and other exchange
rates, (v) significant capital and credit market volatility, (vi) the
availability of raw materials, (vii) unanticipated expenditures related
to the cost of compliance with environmental and other governmental
regulations and (viii) the ability of the company to realize anticipated
cost savings. These and other factors that could cause or contribute to
actual results differing materially from any forward-looking statements
are discussed in more detail in our other filings with the Securities
and Exchange Commission. 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.