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Jan 28, 2015 8:00 AM
For the full year, the Company reported net income of
“As expected, market conditions remained challenging in the fourth
quarter of 2014,” said
Fourth Quarter and Full Year Results
In the fourth quarter of 2014, sales were
The Company incurred an operating loss of
For the full year, sales were
Full year operating income was
Interest Expense, Net
Interest expense, net of interest income, was
Income Tax Expense
The fourth quarter tax benefit reflects the Company's loss before income taxes which is primarily due to the environmental reserves adjustment. The full year effective tax rate was 21.8 percent. It was below the federal rate of 35 percent primarily due to the benefit of domestic manufacturing tax deductions and the reversal of a tax reserve related to the cellulosic biofuel producer credit.
Cash Flow and Liquidity
Since the separation, the Company generated
Outlook
The Company expects the 2015 cellulose specialties market to face a
combination of industry oversupply and weaker end-market demand. The
Company’s cellulose specialties volumes in 2015 are forecasted to be
comparable to the last couple years with prices 7 to 8 percent below
2014. Despite the difficult environment and aggressive pricing offered
by competitors, the Company maintained its volume and increased its
share of customers' requirements. This success is largely due to the
Company’s differentiated, high-quality product and long-term customer
relationships. The Company expects to generate pro forma EBITDA between
“We are actively responding to unfavorable market conditions by
implementing actions that will lower our cost position, enhance cash
flows and improve overall competitiveness,” said Boynton. “These actions
include
"We have set forth aggressive initiatives and have put in place a management team with the energy and expertise required to achieve the necessary results. And when the markets do improve, we will not only be the leader, but the clear winner, in the cellulose specialties arena,” said Boynton.
Environmental Reserves Adjustment
The Company maintains reserves for environmental liabilities associated with its disposed operations relating to former dissolving wood pulp mills and wood treating sites. The reserves are largely based on internal and third-party information relating to the nature and severity of the conditions, the interpretation of applicable laws and regulations, projected outcomes of negotiations to determine appropriate remedial actions and the associated estimated costs.
In the fourth quarter of 2014, the Company's environmental reserves for
the assessment, remediation and long-term monitoring and maintenance of
its disposed operations were increased by
Nearly 80 percent of the increase is related to four sites for which, in
the fourth quarter, remediation plans were legally required or whose
previous plans changed meaningfully due to commercial and/or legal
reasons. The remaining change to the reserve was spread over an
additional 13 sites based upon the Company's update of estimated costs
for ongoing remediation, monitoring and maintenance over the next 20
years on an undiscounted basis. To put this in perspective, the changes
represent an average increase in costs of approximately
The site of its former pulp mill in
The Company believes that its reserves represent the best estimate at this time of the costs required to clean up the identified sites. Although the adjustment to the reserves is significant, the associated spend will be spread over 20 years. These changes are not anticipated to have a material impact on the Company’s cash flows in 2015. (Please refer to the 2014 Form 10-K for further disclosure relating to environmental liabilities.)
Conference Call Information
A conference call will be held on
About
Forward-Looking Statements
Certain statements in this document regarding anticipated financial,
business, legal or other outcomes, including business and market
conditions, outlook and other similar statements relating to
Such risks and uncertainties include, but are not limited to:
competitive pressures in the markets in which we operate; customer
concentration and cellulose specialties product prices; raw material and
energy prices; international operations; changes in global economic
conditions, including currency; the Chinese dumping duties currently in
effect for commodity viscose pulps; litigation with the Altamaha
Riverkeeper relating to our permitted
Other important factors that could cause actual results or events to
differ materially from those expressed in forward-looking statements
that may have been made in this document are described or will be
described in our filings with the
|
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(millions of dollars, except per share information) |
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| Three Months Ended | Year Ended | |||||||||||||||||||
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| 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||
| NET SALES | ||||||||||||||||||||
| Cellulose specialties | 213.8 | 222.6 | 249.9 | 843.5 | 929.9 | |||||||||||||||
| Commodity products and other | 34.2 | 31.1 | 31.8 | 114.2 | 116.7 | |||||||||||||||
| Total net sales | $ | 248.0 | $ | 253.7 | $ | 281.7 | $ | 957.7 | $ | 1,046.6 | ||||||||||
| COST OF SALES | 187.0 | 198.0 | 198.2 | 734.0 | 714.0 | |||||||||||||||
| GROSS MARGIN | 61.0 | 55.7 | 83.5 | 223.7 | 332.6 | |||||||||||||||
| Selling and general expenses | 13.2 | 9.5 | 8.9 | 40.0 | 35.8 | |||||||||||||||
| Other operating expense, net (a) | 76.1 | 4.5 | 4.4 | 120.7 | 8.2 | |||||||||||||||
| OPERATING (LOSS) INCOME | (28.3 | ) | 41.7 | 70.2 | 63.0 | 288.6 | ||||||||||||||
| Interest and other (expense) income, net |
(9.8 |
) | (9.6 | ) | — | (22.5 | ) | 0.3 | ||||||||||||
| (LOSS) INCOME BEFORE INCOME TAXES |
(38.1 |
) | 32.1 | 70.2 | 40.5 | 288.9 | ||||||||||||||
| Income tax benefit (expense) (b) | 14.8 | (12.7 | ) | (19.4 | ) | (8.8 | ) | (69.1 | ) | |||||||||||
| NET (LOSS) INCOME | (23.3 | ) | 19.4 | 50.8 | 31.7 | 219.8 | ||||||||||||||
| EARNINGS PER COMMON SHARE | ||||||||||||||||||||
| BASIC EARNINGS PER SHARE | $ | (0.55 | ) | $ | 0.46 | $ | 1.20 | $ | 0.75 | $ | 5.21 | |||||||||
| DILUTED EARNINGS PER SHARE | $ | (0.55 | ) | $ | 0.46 | $ | 1.20 | $ | 0.75 | $ | 5.21 | |||||||||
| Pro forma net income per share (c) | $ | 0.61 | $ | 0.53 | $ | 1.25 | $ | 2.51 | $ | 4.86 | ||||||||||
| Weighted Average Common | ||||||||||||||||||||
| Shares used for determining (d) | ||||||||||||||||||||
| Basic EPS | 42,185,223 | 42,167,014 | 42,176,565 | 42,166,629 | 42,176,565 | |||||||||||||||
| Diluted EPS | 42,185,223 | 42,247,970 | 42,176,565 | 42,239,682 | 42,176,565 | |||||||||||||||
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(a) Other expenses primarily consist of environmental, one-time separation and legal costs.
(b) Income tax expense for the year ended
(c) Pro forma net income per share is a non-GAAP measure. See Schedule D for a reconciliation to the nearest GAAP measure.
(d) On |
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A |
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CONDENSED CONSOLIDATED BALANCE SHEETS
(millions of dollars) |
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| 2014 | 2013 | ||||||
| Assets | |||||||
| Cash and cash equivalents | $ | 66.0 | $ | — | |||
| Other current assets | 254.0 | 246.1 | |||||
| Property, plant and equipment, net | 843.4 | 846.3 | |||||
| Other assets | 141.3 | 27.9 | |||||
| $ | 1,304.7 | $ | 1,120.3 | ||||
| Liabilities and Stockholders' (Deficit) Equity | |||||||
| Current maturities of long-term debt | $ | 8.4 | $ | — | |||
| Other current liabilities | 123.0 | 79.8 | |||||
| Long-term debt | 936.4 | — | |||||
| Non-current liabilities for disposed operations | 149.5 | — | |||||
| Other non-current liabilities | 151.2 | 72.2 | |||||
| Total stockholders' (deficit) equity | (63.8 | ) | 968.3 | ||||
| $ | 1,304.7 | $ | 1,120.3 | ||||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars) |
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Year Ended |
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| 2014 | 2013 | |||||||
| Cash provided by operating activities: | ||||||||
| Net income | $ | 31.7 | $ | 219.8 | ||||
| Depreciation and amortization | 85.6 | 74.4 | ||||||
| Increase in liabilities for disposed operations | 88.5 | — | ||||||
| Disposed operations impairment charge | 7.2 | — | ||||||
| Other items to reconcile net income to cash provided by operating activities |
(13.7 |
) | (14.9 | ) | ||||
| Changes in working capital and other assets and liabilities |
(11.5 |
) | (21.3 | ) | ||||
| 187.8 | 258.0 | |||||||
| Cash used for investing activities: | ||||||||
| Capital expenditures | (74.8 | ) | (96.0 | ) | ||||
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— | (141.1 | ) | |||||
| Other | (15.7 | ) | (13.5 | ) | ||||
| (90.5 | ) | (250.6 | ) | |||||
| Cash used for financing activities: | ||||||||
| Changes in debt, net of issuance costs | 930.4 | — | ||||||
| Dividends paid | (5.9 | ) | — | |||||
| Proceeds from the issuance of common stock | 0.6 | — | ||||||
| Excess tax benefits on stock-based compensation | 0.3 | — | ||||||
| Common stock repurchased | (0.1 | ) | — | |||||
| Net payments to Parent | (956.6 | ) | (7.4 | ) | ||||
| (31.3 | ) | (7.4 | ) | |||||
| Cash and cash equivalents: | ||||||||
| Change in cash and cash equivalents | 66.0 | — | ||||||
| Balance, beginning of year | — | — | ||||||
| Balance, end of period | $ | 66.0 | $ | — | ||||
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B |
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RECONCILIATION OF NON-GAAP MEASURES
(millions of dollars except per share information) |
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| EBITDA (a): | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
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| Net (loss) income | $ | (23.3 | ) | $ | 50.8 | $ | 31.7 | $ | 219.8 | |||||||
| Depreciation and amortization | 23.5 | 23.3 | 85.6 | 74.4 | ||||||||||||
| Interest, net | 9.7 | — | 22.3 | (0.3 | ) | |||||||||||
| Income tax (benefit) expense | (14.8 | ) | 19.4 | 8.8 | 69.1 | |||||||||||
| EBITDA | $ | (4.9 | ) | $ | 93.5 | $ | 148.4 | $ | 363.0 | |||||||
| One-time separation and legal costs | 2.2 | 3.2 | 44.1 | 6.0 | ||||||||||||
| Environmental reserve and impairment adjustments | 75.6 | — | 77.1 | — | ||||||||||||
| Insurance settlement | (2.9 | ) | — | (2.9 | ) | — | ||||||||||
| Pro forma EBITDA | $ | 70.0 | $ | 96.7 | $ | 266.7 | $ | 369.0 | ||||||||
| Corporate costs | 9.7 | 4.1 | 23.9 | 16.6 | ||||||||||||
| Segment EBITDA | $ | 79.7 | $ | 100.8 | $ | 290.6 | $ | 385.6 | ||||||||
| ADJUSTED FREE CASH FLOW (b): | ||||||||
| Year Ended | ||||||||
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| Cash provided by operating activities | $ | 187.8 | $ | 258.0 | ||||
| Capital expenditures (c) | (74.8 | ) | (96.0 | ) | ||||
| Tax benefit due to exchange of AFMC for CBPC | — | (19.0 | ) | |||||
| Adjusted Free Cash Flow | $ | 113.0 | $ | 143.0 | ||||
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(a) Earnings before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined by the
(b) Adjusted Free Cash Flow is defined as cash provided by operating activities adjusted for capital expenditures excluding strategic capital and subsequent tax benefits to exchange the AFMC for the CBPC. Adjusted Free Cash Flow is a non-GAAP measure of cash generated during a period that is available for dividend distribution, repurchase of the Company's common stock, debt reduction and strategic acquisitions. Adjusted Free Cash Flow is not necessarily indicative of the Adjusted Free Cash Flow that may be generated in future periods.
(c) Capital expenditures exclude strategic capital. For the year
ended |
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C |
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RECONCILIATION OF NON-GAAP MEASURES (Continued)
(millions of dollars except per share information) |
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| PRO FORMA OPERATING INCOME AND NET INCOME (a): | ||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||||||||||||||||||||||||
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| $ |
Per |
$ |
Per |
$ |
Per |
$ |
Per |
$ |
Per |
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| Operating (loss) income | $ | (28.3 | ) | $ | 41.7 | $ | 70.2 | $ | 63.0 | $ | 288.6 | |||||||||||||||||||||||||||||
| One-time separation and legal costs | 2.2 | 2.8 | 3.2 | 44.1 | 6.0 | |||||||||||||||||||||||||||||||||||
| Environmental reserve and impairment adjustments | 75.6 | 1.5 | — | 77.1 | — | |||||||||||||||||||||||||||||||||||
| Insurance settlement | (2.9 | ) | — | — | (2.9 | ) | — | |||||||||||||||||||||||||||||||||
| Pro forma operating income | $ | 46.6 | $ | 46.0 | $ | 73.4 | $ | 181.3 | $ | 294.6 | ||||||||||||||||||||||||||||||
| Net (loss) income | $ | (23.3 | ) | $ | (0.55 | ) | $ | 19.4 | $ | 0.46 | $ | 50.8 | $ | 1.20 | $ | 31.7 | $ | 0.75 | $ | 219.8 | $ | 5.21 | ||||||||||||||||||
| One-time separation and | ||||||||||||||||||||||||||||||||||||||||
| legal costs, net of tax | 1.6 | 0.04 | 2.0 | 0.04 | 2.1 | 0.05 | 30.6 | 0.73 | 4.0 | 0.10 | ||||||||||||||||||||||||||||||
| Environmental reserve and | ||||||||||||||||||||||||||||||||||||||||
| impairment adjustments, | ||||||||||||||||||||||||||||||||||||||||
| net of tax | 49.3 | 1.17 | 1.0 | 0.03 | — | — | 50.3 | 1.19 | — | — | ||||||||||||||||||||||||||||||
| Insurance settlement, net of tax | (2.0 | ) | (0.05 | ) | — | — | — | — | (2.0 | ) | (0.05 | ) | — | — | ||||||||||||||||||||||||||
| Reversal of reserve related to | ||||||||||||||||||||||||||||||||||||||||
| the taxability of the CBPC | — | — | — | — | — | — | (4.8 | ) | (0.11 | ) | — | — | ||||||||||||||||||||||||||||
| Tax benefit due to exchange of | ||||||||||||||||||||||||||||||||||||||||
| AFMC for CBPC | — | — | — | — | — | — | — | — | (19.0 | ) | (0.45 | ) | ||||||||||||||||||||||||||||
| Pro forma net income | $ | 25.6 | $ | 0.61 | $ | 22.4 | $ | 0.53 | $ | 52.9 | $ | 1.25 | $ | 105.8 | $ | 2.51 | $ | 204.8 | $ | 4.86 | ||||||||||||||||||||
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(a) Pro Forma Operating Income is defined as operating income adjusted for one-time separation and legal costs, environmental reserve and impairment adjustments, and insurance settlement. Pro Forma Net Income is defined as net income adjusted net of tax for one-time separation and legal costs, environmental reserve and impairment adjustments, and insurance settlement and for tax benefits from the reversal of reserve related to the taxability of the CBPC and the subsequent tax benefits to exchange the AFMC for the CBPC. |
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D |
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