Oct 29, 2014 8:00 AM
The following table summarizes the results for the third quarter and year-to-date 2014 and 2013 periods:
(millions of dollars, except earnings per share) | 3Q14 (2) | 3Q13 (2) | 3Q14 YTD (2) | 3Q13 YTD (2) | |||||||||||||||||||||||||||||
$ |
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$ |
Per |
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Per |
$ |
Per |
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Sales | $ | 254 | $ | 226 | $ | 710 | $ | 765 | |||||||||||||||||||||||||
Net income | $ | 19 | $ | 0.46 | $ | 40 | $ | 0.95 | $ | 55 | $ | 1.30 | $ | 169 | $ | 4.01 | |||||||||||||||||
One time separation & legal costs, net | 2 | 0.04 | — | — | 29 | 0.68 | 2 | 0.05 | |||||||||||||||||||||||||
Environmental reserve adjustment, net | 1 | 0.03 | — | — | 1 | 0.03 | — | — | |||||||||||||||||||||||||
Tax impact of AFMC/CBPC activity | — | — | — | — | (5 | ) | (0.11 | ) | (19 | ) | (0.45 | ) | |||||||||||||||||||||
Pro forma net income | $ | 22 | $ | 0.53 | $ | 40 | $ | 0.95 | $ | 80 | $ | 1.90 | $ | 152 | $ | 3.61 | |||||||||||||||||
EBITDA | $ | 66 | $ | 82 | $ | 153 | $ | 270 | |||||||||||||||||||||||||
Pro forma EBITDA (1) | $ | 70 | $ | 82 | $ | 197 | $ | 272 | |||||||||||||||||||||||||
(1) See pro forma EBITDA reconciliation on Schedule C. | |||||||||||||||||||||||||||||||||
(2) See Basis of Presentation described below | |||||||||||||||||||||||||||||||||
Third quarter 2014 sales of
Pro forma net income declined in third quarter 2014, as increased sales were more than offset by higher costs. Wood and energy costs have moderated since the first half of 2014, but continue to be above 2013 levels. Additionally, interest and corporate expenses increased as a result of being an independent company.
Year-to-date sales of
Cash provided by operating activities, for the nine-month period ending
Outlook
"As we finish the year, we continue to focus on operational excellence and producing the highest quality cellulose specialties. We recognize the current market dynamics and have embarked on initiatives to preserve and enhance profitability, protect and expand cellulose specialties sales, and grow outside our existing business. We are confident these initiatives will drive our profitability and shareholder value," stated Boynton.
Basis of Presentation
This is the first quarter for
Note Regarding Use of Non-GAAP Financial Measures
In this earnings release, the Company presents certain non-GAAP financial information, including pro forma net income, pro forma operating income, pro forma diluted net income per share, EBITDA, pro forma EBITDA and Segment EBITDA. Because these amounts are not in accordance with GAAP, reconciliations to amounts in accordance with GAAP are included in schedules at the end of this earnings release. The Company presents these non-GAAP amounts because management believes they assist investors and analysts in comparing the Company’s performance across reporting periods on a consistent basis by excluding items the Company does not believe are indicative of its core operating performance.
Further 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; 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
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CONDENSED STATEMENTS OF CONSOLIDATED INCOME | ||||||||||||||||||||
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(millions of dollars, except per share information) | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
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2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||
NET SALES | ||||||||||||||||||||
Cellulose specialties | 222.6 | 200.7 | 200.1 | 629.7 | 680.1 | |||||||||||||||
Absorbent materials | 18.5 | 0.2 | 9.0 | 28.9 | 66.2 | |||||||||||||||
Commodity viscose and other | 12.6 | 11.6 | 16.4 | 51.1 | 18.6 | |||||||||||||||
Total net sales |
$ | 253.7 | $ | 212.5 | $ | 225.5 | $ | 709.7 | $ | 764.9 | ||||||||||
COST OF SALES | 198.0 | 160.2 | 158.1 | 546.9 | 515.8 | |||||||||||||||
GROSS MARGIN | 55.7 | 52.3 | 67.4 | 162.8 | 249.1 | |||||||||||||||
Selling and general expenses | 9.5 | 9.0 | 8.1 | 26.7 | 26.9 | |||||||||||||||
Other operating expense (income), net (a) | 4.5 | 37.1 | (0.1 | ) | 44.8 | 3.8 | ||||||||||||||
OPERATING INCOME | 41.7 | 6.2 | 59.4 | 91.3 | 218.4 | |||||||||||||||
Interest (expense) income, net | (9.6 | ) | (3.2 | ) | 0.3 | (12.8 | ) | 0.3 | ||||||||||||
INCOME BEFORE INCOME TAXES | 32.1 | 3.0 | 59.7 | 78.5 | 218.7 | |||||||||||||||
Income tax (expense) benefit (b) | (12.7 | ) | 1.6 | (19.7 | ) | (23.6 | ) | (49.7 | ) | |||||||||||
NET INCOME | 19.4 | 4.6 | 40.0 | 54.9 | 169.0 | |||||||||||||||
EARNINGS PER COMMON SHARE | ||||||||||||||||||||
BASIC EARNINGS PER SHARE | $ | 0.46 | $ | 0.11 | $ | 0.95 | $ | 1.30 | $ | 4.01 | ||||||||||
DILUTED EARNINGS PER SHARE | $ | 0.46 | $ | 0.11 | $ | 0.95 | $ | 1.30 | $ | 4.01 | ||||||||||
Pro forma net income per share (c) | $ | 0.53 | $ | 0.59 | $ | 0.95 | $ | 1.90 | $ | 3.61 | ||||||||||
Weighted Average Common | ||||||||||||||||||||
Shares used for determining (d) | ||||||||||||||||||||
Basic EPS | 42,167,014 | 42,176,565 | 42,176,565 | 42,160,559 | 42,176,565 | |||||||||||||||
Diluted EPS | 42,247,970 | 42,178,462 | 42,176,565 | 42,240,448 | 42,176,565 | |||||||||||||||
(a) Other expenses primarily consist of one-time separation and legal costs.
(b) Income tax expense for the nine months ended (c) Pro forma net income per share is a non-GAAP measure. See Schedule C 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 | $ | 28.2 | $ | — | |||
Other current assets | 270.4 | 246.1 | |||||
Property, plant and equipment, net | 844.4 | 846.3 | |||||
Other assets | 103.3 | 27.9 | |||||
$ | 1,246.3 | $ | 1,120.3 | ||||
Liabilities and Stockholders' (Deficit) Equity | |||||||
Current maturities of long-term debt | $ | 8.4 | $ | — | |||
Other current liabilities | 122.9 | 79.8 | |||||
Long-term debt | 938.5 | — | |||||
Non-current liabilities for disposed operations | 84.2 | — | |||||
Other non-current liabilities | 105.7 | 72.2 | |||||
Total stockholders' (deficit) equity | (13.4 | ) | 968.3 | ||||
$ | 1,246.3 | $ | 1,120.3 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars) |
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Nine Months Ended | ||||||||
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Cash provided by operating activities: | ||||||||
Net income | $ | 54.9 | $ | 169.0 | ||||
Depreciation and amortization | 62.1 | 51.1 | ||||||
Other items to reconcile net income to cash provided by operating activities | 33.6 | (0.2 | ) | |||||
Changes in working capital and other assets and liabilities | (22.9 | ) | (31.1 | ) | ||||
127.7 | 188.8 | |||||||
Cash used for investing activities: | ||||||||
Capital expenditures | (60.2 | ) | (81.5 | ) | ||||
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— | (137.4 | ) | |||||
Other | (15.6 | ) | (1.4 | ) | ||||
(75.8 | ) | (220.3 | ) | |||||
Cash (used for) provided by financing activities: | ||||||||
Changes in debt, net of issuance costs | 932.5 | — | ||||||
Proceeds from the issuance of common stock | 0.5 | — | ||||||
Common stock repurchased | (0.1 | ) | — | |||||
Net payments from (to) Parent | (956.6 | ) | 31.5 | |||||
(23.7 | ) | 31.5 | ||||||
Cash and cash equivalents: | ||||||||
Change in cash and cash equivalents | 28.2 | — | ||||||
Balance, beginning of year | — | — | ||||||
Balance, end of period | $ | 28.2 | $ | — | ||||
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 | Nine Months Ended | ||||||||||||||
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Net income | $ | 19.4 | $ | 40.0 | $ | 54.9 | $ | 169.0 | ||||||||
Depreciation and amortization | 23.9 | 22.3 | 62.1 | 51.1 | ||||||||||||
Interest, net | 9.6 | (0.3 | ) | 12.8 | (0.3 | ) | ||||||||||
Income tax expense | 12.7 | 19.7 | 23.6 | 49.7 | ||||||||||||
EBITDA | $ | 65.6 | $ | 81.7 | $ | 153.4 | $ | 269.5 | ||||||||
One-time separation and legal costs | 2.8 | (0.2 | ) | 41.9 | 2.8 | |||||||||||
Environmental reserve adjustment | 1.5 | — | 1.5 | — | ||||||||||||
Pro forma EBITDA | $ | 69.9 | $ | 81.5 | $ | 196.8 | $ | 272.3 | ||||||||
Corporate costs | 6.1 | 3.5 | 14.0 | 12.5 | ||||||||||||
Segment EBITDA | $ | 76.0 | $ | 85.0 | $ | 210.8 | $ | 284.8 | ||||||||
ADJUSTED FREE CASH FLOW (b): | Nine Months Ended | ||||||||||||||
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Cash provided by operating activities | $ | 127.7 | $ | 188.8 | |||||||||||
Capital expenditures (c) | (60.2 | ) | (81.5 | ) | |||||||||||
Tax benefit due to exchange of AFMC for CBPC | — | (19.0 | ) | ||||||||||||
Adjusted Free Cash Flow | $ | 67.5 | $ | 88.3 | |||||||||||
PRO FORMA OPERATING INCOME AND NET INCOME (d): | ||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||
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$ |
Per |
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Per |
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Per |
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Per |
$ |
Per |
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Operating income | $ | 41.7 | $ | 6.2 | $ | 59.4 | $ | 91.3 | $ | 218.4 | ||||||||||||||||||||||||||||||
One-time separation and legal costs | 2.8 | 36.3 | (0.2 | ) | 41.9 | 2.8 | ||||||||||||||||||||||||||||||||||
Environmental reserve adjustment | 1.5 | — | — | 1.5 | — | |||||||||||||||||||||||||||||||||||
Pro forma operating income | $ | 46.0 | $ | 42.5 | $ | 59.2 | $ | 134.7 | $ | 221.2 | ||||||||||||||||||||||||||||||
Net income | $ | 19.4 | $ | 0.46 | $ | 4.6 | $ | 0.11 | $ | 40.0 | $ | 0.95 | $ | 54.9 | $ | 1.30 | $ | 169.0 | $ | 4.01 | ||||||||||||||||||||
One-time separation and legal costs, net of tax | 2.0 | 0.04 | 25.0 | 0.59 | — | — | 29.0 | 0.68 | 1.9 | 0.05 | ||||||||||||||||||||||||||||||
Environmental reserve adjustment, net of tax | 1.0 | 0.03 | — | — | — | — | 1.0 | 0.03 | — | — | ||||||||||||||||||||||||||||||
Reversal of reserve related to the taxability of the CBPC | — | — | (4.8 | ) | (0.11 | ) | — | — | (4.8 | ) | (0.11 | ) | — | — | ||||||||||||||||||||||||||
Tax benefit due to exchange of AFMC for CBPC | — | — | — | — | — | — | — | — | (19.0 | ) | (0.45 | ) | ||||||||||||||||||||||||||||
Pro forma net income | $ | 22.4 | $ | 0.53 | $ | 24.8 | $ | 0.59 | $ | 40.0 | $ | 0.95 | $ | 80.1 | $ | 1.90 | $ | 151.9 | $ | 3.61 | ||||||||||||||||||||
(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 nine
months ended (d) Pro Forma Operating Income is defined as operating income adjusted for one-time separation and legal costs and environmental reserve adjustments. Pro Forma Net Income is defined as net income adjusted for one-time separation and legal costs, net of tax, environmental reserve adjustments, net of tax 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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C |
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