Delaware | 20-1308307 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3460 Preston Ridge Road Alpharetta, Georgia | 30005 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer x | Accelerated filer ¨ | |
Non-accelerated filer ¨ | Smaller reporting company ¨ | |
(Do not check if a smaller reporting company) | Emerging growth company ¨ |
Three Months Ended March 31, | ||||||||
'[ | 2018 | 2017 | ||||||
Net sales | $ | 266.5 | $ | 242.1 | ||||
Cost of products sold | 214.1 | 189.4 | ||||||
Gross profit | 52.4 | 52.7 | ||||||
Selling, general and administrative expenses | 26.8 | 24.6 | ||||||
SERP settlement charge | 0.8 | — | ||||||
Other expense - net (Note 2) | 0.7 | 1.1 | ||||||
Operating income | 24.1 | 27.0 | ||||||
Interest expense - net | 3.3 | 3.2 | ||||||
Income from continuing operations before income taxes | 20.8 | 23.8 | ||||||
Provision for income taxes | 4.6 | 6.2 | ||||||
Net income | $ | 16.2 | $ | 17.6 | ||||
Earnings Per Common Share | ||||||||
Basic | $ | 0.96 | $ | 1.04 | ||||
Diluted | $ | 0.95 | $ | 1.03 | ||||
Weighted Average Common Shares Outstanding (in thousands) | ||||||||
Basic | 16,847 | 16,779 | ||||||
Diluted | 17,006 | 17,025 | ||||||
Cash Dividends Declared Per Share of Common Stock | $ | 0.41 | $ | 0.37 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Net income | $ | 16.2 | $ | 17.6 | ||||
Unrealized foreign currency translation gain | 5.5 | 1.7 | ||||||
Reclassification of amortization of adjustments to pension and other postretirement benefit liabilities recognized in net periodic benefit cost (Note 8) | 1.6 | 2.0 | ||||||
Reclassification of pension settlement charge (Note 8) | 0.8 | — | ||||||
Net gain from pension and other postretirement benefit plans (Note 5) | 0.4 | — | ||||||
Unrealized gain on "available-for-sale" securities | — | 0.1 | ||||||
Income from other comprehensive income items | 8.3 | 3.8 | ||||||
Provision for income taxes | 1.0 | 0.8 | ||||||
Other comprehensive income | 7.3 | 3.0 | ||||||
Comprehensive income | $ | 23.5 | $ | 20.6 |
March 31, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 6.4 | $ | 4.5 | ||||
Accounts receivable (less allowances of $1.4 million and $1.3 million) | 133.6 | 115.7 | ||||||
Inventories | 144.5 | 143.5 | ||||||
Prepaid and other current assets | 19.5 | 21.5 | ||||||
Total Current Assets | 304.0 | 285.2 | ||||||
Property, Plant and Equipment | ||||||||
Property, Plant and Equipment, at cost | 862.2 | 850.5 | ||||||
Less accumulated depreciation | 435.4 | 425.3 | ||||||
Property, plant and equipment—net | 426.8 | 425.2 | ||||||
Deferred Income Taxes | 10.3 | 10.1 | ||||||
Goodwill | 87.7 | 85.3 | ||||||
Intangible Assets—net | 78.2 | 78.7 | ||||||
Other Noncurrent Assets | 16.6 | 19.9 | ||||||
TOTAL ASSETS | $ | 923.6 | $ | 904.4 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Debt payable within one year | $ | 1.4 | $ | 1.4 | ||||
Accounts payable | 64.4 | 65.7 | ||||||
Accrued expenses | 55.1 | 57.5 | ||||||
Total Current Liabilities | 120.9 | 124.6 | ||||||
Long-term Debt | 268.9 | 254.1 | ||||||
Deferred Income Taxes | 16.0 | 15.0 | ||||||
Noncurrent Employee Benefits | 98.3 | 100.3 | ||||||
Other Noncurrent Obligations | 7.4 | 10.5 | ||||||
TOTAL LIABILITIES | 511.5 | 504.5 | ||||||
Contingencies and Legal Matters (Note 11) | — | — | ||||||
TOTAL STOCKHOLDERS’ EQUITY | 412.1 | 399.9 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 923.6 | $ | 904.4 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 16.2 | $ | 17.6 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 9.4 | 7.8 | ||||||
Stock-based compensation | 1.8 | 2.5 | ||||||
Deferred income tax provision | 2.3 | 3.3 | ||||||
SERP settlement charge | 0.8 | — | ||||||
Non-cash effects of changes in liabilities for uncertain income tax positions | 0.1 | — | ||||||
Increase in working capital | (18.9 | ) | (11.3 | ) | ||||
Pension and other postretirement benefits | (3.5 | ) | 1.9 | |||||
Other | (0.1 | ) | 0.2 | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 8.1 | 22.0 | ||||||
INVESTING ACTIVITIES | ||||||||
Capital expenditures | (7.6 | ) | (11.5 | ) | ||||
Other | (0.3 | ) | (0.2 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (7.9 | ) | (11.7 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Long-term borrowings (Note 7) | 104.2 | 81.8 | ||||||
Repayments of long-term debt (Note 7) | (90.5 | ) | (76.9 | ) | ||||
Cash dividends paid | (7.0 | ) | (6.3 | ) | ||||
Shares purchased (Note 10) | (5.3 | ) | (6.8 | ) | ||||
Proceeds from exercise of stock options | 0.1 | 0.3 | ||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 1.5 | (7.9 | ) | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 0.2 | — | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 1.9 | 2.4 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 4.5 | 3.1 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 6.4 | $ | 5.5 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid during period for interest, net of interest expense capitalized | $ | 0.8 | $ | 0.6 | ||||
Cash paid during period for income taxes | $ | 2.4 | $ | 1.7 | ||||
Non-cash investing activities: | ||||||||
Liability for equipment acquired | $ | 3.0 | $ | 3.5 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Income from continuing operations | $ | 16.2 | $ | 17.6 | ||||
Amounts attributable to participating securities | (0.1 | ) | (0.1 | ) | ||||
Income from continuing operations available to common stockholders | 16.1 | 17.5 | ||||||
Loss from discontinued operations, net of income taxes | — | — | ||||||
Net income available to common stockholders | $ | 16.1 | $ | 17.5 | ||||
Weighted-average basic shares outstanding | 16,847 | 16,779 | ||||||
Continuing operations | $ | 0.96 | $ | 1.04 | ||||
Discontinued operations | — | — | ||||||
Basic earnings per share | $ | 0.96 | $ | 1.04 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Income from continuing operations | $ | 16.2 | $ | 17.6 | ||||
Amounts attributable to participating securities | (0.1 | ) | (0.1 | ) | ||||
Income from continuing operations available to common stockholders | 16.1 | 17.5 | ||||||
Loss from discontinued operations, net of income taxes | — | — | ||||||
Net income available to common stockholders | $ | 16.1 | $ | 17.5 | ||||
Weighted-average basic shares outstanding | 16,847 | 16,779 | ||||||
Add: Assumed incremental shares under stock compensation plans (a) | 159 | 246 | ||||||
Weighted-average diluted shares | 17,006 | 17,025 | ||||||
Continuing operations | $ | 0.95 | $ | 1.03 | ||||
Discontinued operations | — | — | ||||||
Diluted earnings per share | $ | 0.95 | $ | 1.03 |
March 31, 2018 | December 31, 2017 | |||||||||||||||
Carrying Value | Fair Value (a)(b) | Carrying Value | Fair Value (a)(b) | |||||||||||||
2021 Senior Notes (5.25% fixed rate) | $ | 175.0 | $ | 168.2 | $ | 175.0 | $ | 170.2 | ||||||||
Global Revolving Credit Facilities (variable rates) | 91.5 | 91.5 | 76.9 | 76.9 | ||||||||||||
German loan agreement (2.45% fixed rate) | 6.3 | 6.3 | 6.4 | 6.4 | ||||||||||||
Total debt | $ | 272.8 | $ | 266.0 | $ | 258.3 | $ | 253.5 |
Three Months Ended March 31, | ||||||
2018 | 2017 | |||||
Filtration | 44 | % | 43 | % | ||
Backings | 28 | % | 34 | % | ||
Specialty | 28 | % | 23 | % | ||
Total | 100 | % | 100 | % |
Three Months Ended March 31, | ||||||
2018 | 2017 | |||||
Graphic Imaging | 77 | % | 81 | % | ||
Packaging | 19 | % | 15 | % | ||
Filing/Office | 4 | % | 4 | % | ||
Total | 100 | % | 100 | % |
Three Months Ended March 31, | ||||||
2018 | 2017 | |||||
United States | 70 | % | 77 | % | ||
Germany | 23 | % | 22 | % | ||
Rest of Europe | 7 | % | 1 | % | ||
Total | 100 | % | 100 | % |
Three Months Ended March 31, 2017 | ||||
Net sales | $ | 252.6 | ||
Operating income | 27.8 | |||
Net income | 18.1 | |||
Earnings Per Common Share | ||||
Basic | $ | 1.07 | ||
Diluted | $ | 1.06 |
March 31, 2018 | December 31, 2017 | |||||||
Raw materials | $ | 37.0 | $ | 36.2 | ||||
Work in progress | 34.0 | 35.0 | ||||||
Finished goods | 82.1 | 79.2 | ||||||
Supplies and other | 3.3 | 3.6 | ||||||
156.4 | 154.0 | |||||||
Adjust FIFO inventories to LIFO cost | (11.9 | ) | (10.5 | ) | ||||
Total | $ | 144.5 | $ | 143.5 |
Net unrealized foreign currency translation gain (loss) | Net gain (loss) from pension and other postretirement liabilities (a) | Unrealized gain (loss) on "available-for-sale" securities | Accumulated other comprehensive income (loss) | |||||||||||||
AOCI — December 31, 2017 | $ | (7.5 | ) | $ | (86.3 | ) | $ | (0.3 | ) | $ | (94.1 | ) | ||||
Other comprehensive income before reclassifications | 5.5 | 0.4 | — | 5.9 | ||||||||||||
Amounts reclassified from AOCI | — | 2.4 | — | 2.4 | ||||||||||||
Income from other comprehensive income items | 5.5 | 2.8 | — | 8.3 | ||||||||||||
Provision for income taxes | 0.3 | 0.7 | — | 1.0 | ||||||||||||
Other comprehensive income | 5.2 | 2.1 | — | 7.3 | ||||||||||||
Reclassification of unrealized loss on "available-for-sale" securities to retained earnings upon adoption of ASU 2016-01 (Note 2) | — | — | 0.3 | 0.3 | ||||||||||||
AOCI — March 31, 2018 | $ | (2.3 | ) | $ | (84.2 | ) | $ | — | $ | (86.5 | ) |
March 31, 2018 | December 31, 2017 | |||||||
2021 Senior Notes (5.25% fixed rate) due May 2021 | $ | 175.0 | $ | 175.0 | ||||
Global Revolving Credit Facilities (variable rates) due December 2019 | 91.5 | 76.9 | ||||||
German loan agreement (2.45% fixed rate) due in 32 equal quarterly installments ending September 2022 | 6.3 | 6.4 | ||||||
Deferred financing costs | (2.5 | ) | (2.8 | ) | ||||
Total debt | 270.3 | 255.5 | ||||||
Less: Debt payable within one year | 1.4 | 1.4 | ||||||
Long-term debt | $ | 268.9 | $ | 254.1 |
Pension Benefits | Postretirement Benefits Other than Pensions | ||||||||||||||||
Three Months Ended March 31, | |||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
Service cost | $ | 1.7 | $ | 1.3 | $ | 0.3 | $ | 0.3 | |||||||||
Interest cost | 4.0 | 3.7 | 0.3 | 0.4 | |||||||||||||
Expected return on plan assets (a) | (5.3 | ) | (4.8 | ) | — | — | |||||||||||
Recognized net actuarial loss | 1.3 | 1.9 | 0.2 | — | |||||||||||||
Amortization of prior service benefit | 0.1 | 0.1 | — | — | |||||||||||||
Amount of settlement loss recognized (b) | 0.8 | — | — | — | $ | — | |||||||||||
Net periodic benefit cost | $ | 2.6 | $ | 2.2 | $ | 0.8 | $ | 0.7 |
Options granted | 108,420 | ||
Per share weighted average exercise price | $ | 93.22 | |
Per share weighted average grant date fair value | $ | 15.00 |
Expected term in years | 5.7 | |
Risk free interest rate | 2.5 | % |
Volatility | 21.5 | % |
Dividend yield | 3.0 | % |
Options vested | 100,652 | ||
Aggregate grant date fair value of Options vested (in millions) | $ | 1.4 |
March 31, 2018 | December 31, 2017 | |||||||
Options outstanding | 537,246 | 464,958 | ||||||
Aggregate intrinsic value (in millions) | $ | 10.0 | $ | 16.3 | ||||
Per share weighted average exercise price | $ | 63.85 | $ | 55.60 | ||||
Exercisable Options | 307,043 | 241,944 | ||||||
Aggregate intrinsic value (in millions) | $ | 9.2 | $ | 12.1 | ||||
Unvested Options | 230,203 | 223,014 | ||||||
Per share weighted average grant date fair value | $ | 14.23 | $ | 13.87 |
Three Months Ended March 31, | ||||||||||||||
2018 | 2017 | |||||||||||||
Shares | Amount | Shares | Amount | |||||||||||
2018 Stock Purchase Plan | 66,724 | $ | 5.3 | — | $ | — | ||||||||
2017 Stock Purchase Plan | — | — | — | — | ||||||||||
2016 Stock Purchase Plan | — | — | 85,354 | 6.8 |
Contract Expiration Date | Location | Union | Number of Employees | |
January 2018 (c) | Whiting, WI (b) | USW | 198 | |
April 2018 (c) | Eerbeek, Netherlands | CNV, FNV | (a) | |
June 2018 | Neenah, WI (b) | USW | 264 | |
July 2018 | Munising, MI (b) | USW | 203 | |
February 2019 | Neenah Germany | IG BCE | (a) | |
May 2019 | Appleton, WI (b) | USW | 105 | |
August 2021 | Brattleboro, VT | USW | 89 | |
November 2021 | Lowville, NY | USW | 107 |
• | The Technical Products segment is an aggregation of the Company’s filtration and performance materials businesses which are similar in terms of economic characteristics, nature of products, processes, customer class and product distribution methods and is an international producer of fiber-formed, coated and/or saturated specialized media that delivers high performance benefits to customers. Included in this segment are transportation and other filtration media, tape and abrasives backings products, digital image transfer, durable label, and other specialty substrate products. |
• | The Fine Paper and Packaging segment is a leading supplier of premium printing and other high-end specialty papers, premium packaging and specialty office papers, primarily in North America. |
• | The Other segment is composed of papers sold to converters for end uses such as covering materials for datebooks, diaries, yearbooks and traditional photo albums. These product lines represent an operating segment which does not meet the quantitative threshold for a reportable segment, however, due to the dissimilar nature of these products, they are not managed as part of either the Fine Paper and Packaging or Technical Products segments. |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Net sales | ||||||||
Technical Products | $ | 149.0 | $ | 121.9 | ||||
Fine Paper and Packaging | 111.6 | 114.3 | ||||||
Other | 5.9 | 5.9 | ||||||
Consolidated | $ | 266.5 | $ | 242.1 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Operating income (loss) | ||||||||
Technical Products | $ | 17.5 | $ | 12.5 | ||||
Fine Paper and Packaging | 12.8 | 20.3 | ||||||
Other | — | (0.3 | ) | |||||
Unallocated corporate costs | (6.2 | ) | (5.5 | ) | ||||
Consolidated | $ | 24.1 | $ | 27.0 |
Three Months Ended March 31, | ||||||||||||||
2018 | 2017 | |||||||||||||
Net sales | ||||||||||||||
Technical Products | $ | 149.0 | 56 | % | $ | 121.9 | 51 | % | ||||||
Fine Paper and Packaging | 111.6 | 42 | % | 114.3 | 47 | % | ||||||||
Other | 5.9 | 2 | % | 5.9 | 2 | % | ||||||||
Consolidated | $ | 266.5 | 100 | % | $ | 242.1 | 100 | % |
Three Months Ended March 31, | Change in Net Sales Compared to Prior Period | |||||||||||||||||||||||
Change Due To | ||||||||||||||||||||||||
2018 | 2017 | Total Change | Volume | Net Price (a) | Currency | |||||||||||||||||||
Technical Products | $ | 149.0 | $ | 121.9 | $ | 27.1 | $ | 12.6 | $ | 5.9 | $ | 8.6 | ||||||||||||
Fine Paper and Packaging | 111.6 | 114.3 | $ | (2.7 | ) | (7.4 | ) | 4.7 | — | |||||||||||||||
Other | 5.9 | 5.9 | $ | — | (1.0 | ) | 1.0 | — | ||||||||||||||||
Consolidated | $ | 266.5 | $ | 242.1 | $ | 24.4 | $ | 4.2 | $ | 11.6 | $ | 8.6 |
• | Net sales in our technical products business increased $27.1 million (22%) from the prior year period. Revenue growth resulted from double-digit organic increases in filtration and other categories, acquired volume, as well as a higher-priced mix and favorable currency exchange effects due to a stronger euro. |
• | Net sales in our fine paper and packaging business decreased $2.7 million (2%) from the prior year period. Volume declines primarily for marginal, non-branded grades, were partly offset by higher selling prices and double-digit volume increases in premium packaging. |
Three Months Ended March 31, | ||||||
2018 | 2017 | |||||
Net sales | 100.0 | % | 100.0 | % | ||
Cost of products sold | 80.3 | 78.2 | ||||
Gross profit | 19.7 | 21.8 | ||||
Selling, general and administrative expenses | 10.1 | 10.2 | ||||
SERP settlement charge | 0.3 | — | ||||
Other expense - net (Note 2) | 0.3 | 0.5 | ||||
Operating income | 9.0 | 11.2 | ||||
Interest expense - net | 1.2 | 1.4 | ||||
Income from continuing operations before income taxes | 7.8 | 9.8 | ||||
Provision for income taxes | 1.6 | 2.5 | ||||
Income from continuing operations | 6.1 | % | 7.3 | % |
Change in Operating Income Compared to Prior Period | ||||||||||||||||||||||||||||||||
Three Months Ended March 31, | Change Due To | |||||||||||||||||||||||||||||||
Total | Net | Input | ||||||||||||||||||||||||||||||
2018 | 2017 | Change | Volume | Price (a) | Costs (b) | Currency | Other (c) | |||||||||||||||||||||||||
Technical Products | $ | 17.5 | $ | 12.5 | $ | 5.0 | $ | 3.5 | $ | 4.8 | $ | (1.7 | ) | $ | 1.5 | $ | (3.1 | ) | ||||||||||||||
Fine Paper and Packaging | 12.8 | 20.3 | (7.5 | ) | (2.0 | ) | 0.6 | (2.9 | ) | — | (3.2 | ) | ||||||||||||||||||||
Other | — | (0.3 | ) | 0.3 | (0.2 | ) | 0.5 | (0.1 | ) | — | 0.1 | |||||||||||||||||||||
Unallocated corporate costs | (6.2 | ) | (5.5 | ) | (0.7 | ) | — | — | — | — | (0.7 | ) | ||||||||||||||||||||
Consolidated | $ | 24.1 | $ | 27.0 | $ | (2.9 | ) | $ | 1.3 | $ | 5.9 | $ | (4.7 | ) | $ | 1.5 | $ | (6.9 | ) |
• | Operating income for our technical products business increased $5.0 million (40%) from the prior year period. Increased income resulted from higher sales volumes, a higher-value mix, lack of downtime costs incurred in Germany in 2017, and favorable currency effects. These items more than offset higher input and distribution costs. |
• | Operating income for our fine paper and packaging business decreased $7.5 million (37%) from the prior year period. The decrease was primarily due to higher distribution and input costs, as well as reduced operational efficiencies and lower sales volumes, partly offset by higher selling prices. Distribution costs increased significantly in the second half of 2017 as a result of a U.S. regulatory change that requires electronic logging devices to monitor miles and hours driven by freight carriers. |
• | Unallocated corporate expenses for the three months ended March 31, 2018 of $6.2 million increased from prior year period due to an $0.8 million SERP settlement charge in 2018. |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Operating income | ||||||||
Technical Products | $ | 17.5 | $ | 12.5 | ||||
Fine Paper and Packaging | 12.8 | 20.3 | ||||||
Other | — | (0.3 | ) | |||||
Unallocated corporate costs | (6.2 | ) | (5.5 | ) | ||||
Operating Income as Reported | $ | 24.1 | $ | 27.0 | ||||
Adjustments to Reported Operating Income | ||||||||
Unallocated corporate costs | ||||||||
SERP settlement charge | 0.8 | — | ||||||
Total Adjustments to Reported Operating Income | 0.8 | — | ||||||
Operating Income as Adjusted | $ | 24.9 | $ | 27.0 |
• | SG&A expense of $26.8 million for the three months ended March 31, 2018 was $2.2 million higher than SG&A expense of $24.6 million in the prior year period due to acquired SG&A from the Coldenhove Acquisition. For the three months ended March 31, 2018, SG&A expense as a percent of sales decreased to 10.1 percent from 10.2 percent in the prior year period. |
• | For the three months ended March 31, 2018, we incurred net interest expense of $3.3 million which was slightly higher than the $3.2 million for prior year period, primarily due to higher debt to finance the acquisition of Coldenhove. |
• | Historically, our effective tax rate has differed from the U.S. statutory tax rate primarily due to the proportion of pre-tax income in jurisdictions with marginal tax rates that differ from the U.S. statutory tax rate, research and development and other tax credits and excess tax benefits from stock compensation. For the three months ended March 31, 2018 and 2017, we recorded an income tax provision of $4.6 million and $6.2 million, respectively. The effective income tax rate was 22 percent for the three months ended March 31, 2018 and 26 percent for the three months ended March 31, 2017. The decrease in income tax expense for the three months ended March 31, 2018 was primarily due to the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), which reduced the U.S. federal statutory corporate tax rate from 35% to 21% effective January 1, 2018. The income tax expense for the three months ended March 31, 2017 was lower than the 35% statutory corporate tax rate primarily due to excess tax benefits which reduced the income tax expense. During the three months ended March 31, 2018, the Company recorded a measurement-period tax benefit of $0.5 million related to the effects of the statutory corporate tax rate reduction and a measurement-period tax expense of $0.8 million from the mandatory one-time U.S. federal tax on the accumulated earnings of its foreign subsidiaries and related state income tax impacts. As the Company analyzes any additional guidance issued by the U.S. Treasury Department, the IRS and other standard-setting bodies, adjustments to the provisional amounts may be required. In addition, adjustments to the provisional amounts may be needed to reflect legislative actions by the various U.S.- states related to application of the Tax Act provisions on 2017 state tax returns. These adjustments could significantly impact the Company’s provision for income taxes in the period in which the adjustments are made. |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Net cash flow provided by (used in): | ||||||||
Operating activities | $ | 8.1 | $ | 22.0 | ||||
Investing activities: | ||||||||
Capital expenditures | (7.6 | ) | (11.5 | ) | ||||
Other investing activities | (0.3 | ) | (0.2 | ) | ||||
Total | (7.9 | ) | (11.7 | ) | ||||
Financing activities: | ||||||||
Net borrowings of long-term debt | 13.7 | 4.9 | ||||||
Other financing activities | (12.2 | ) | (12.8 | ) | ||||
Total | 1.5 | (7.9 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | 0.2 | — | ||||||
Net increase in cash and cash equivalents | $ | 1.9 | $ | 2.4 |
• | Cash provided by operating activities of $8.1 million for the three months ended March 31, 2018 was $13.9 million lower than cash provided by operating activities of $22.0 million in the prior year period. The unfavorable comparison was due to improved payment terms with certain vendors that began in 2017, and in 2018, accelerated contributions for pension and postretirement benefit plans, a SERP payment and an increase in accounts receivable commensurate with higher sales. |
• | For the three months ended March 31, 2018 and 2017, cash used by investing activities was $7.9 million and $11.7 million, respectively. For the full year 2018, we expect aggregate annual capital expenditures to be within our normal range of approximately 3 to 5 percent of net sales. |
• | For the three months ended March 31, 2018 and 2017, cash provided by (used in) financing activities was $1.5 million and $(7.9) million, respectively. Cash provided by (used in) financing activities consists primarily of net borrowings of long-term debt, dividends paid, and share repurchases. |
• | Availability under our revolving credit facility varies over time depending on the value of our inventory, receivables and various capital assets. As of March 31, 2018, we had $91.5 million outstanding under our Global Revolving Credit Facilities and $79.2 million of available credit (based on exchange rates at March 31, 2018). |
• | We have required debt principal payments through March 31, 2019 of $1.4 million for principal payments on the German loan agreement. |
• | For the three months ended March 31, 2018, cash and cash equivalents increased $1.9 million to $6.4 million at March 31, 2018 from $4.5 million at December 31, 2017. Total debt increased $14.8 million to $270.3 million at March 31, 2018 from $255.5 million at December 31, 2017. Net debt (total debt minus cash and cash equivalents) increased by $12.9 million. |
• | As of March 31, 2018, our cash balance of $6.4 million consists of $0.3 million in the U.S. and $6.1 million held at entities outside of the U.S. As of March 31, 2018, there were no restrictions regarding the repatriation of our non-U.S. cash. |
• | In November 2017, our Board of Directors approved a 11 percent increase in the quarterly dividend on our common stock, to $0.41 per share, effective with the March 2018 dividend payment. For the three months ended March 31, 2018 and 2017, we paid cash dividends of $0.41 per common share or $7.0 million and $0.37 per common share or $6.3 million, respectively. |
• | Purchases under the 2018 Stock Purchase Plan will be made from time to time in the open market or in privately negotiated transactions in accordance with the requirements of applicable law. The timing and amount of any purchases will depend on share price, market conditions and other factors. The 2018 Stock Purchase Plan does not require us to purchase any specific number of shares and may be suspended or discontinued at any time. For the three months ended March 31, 2018 and 2017, we repurchased approximately 66,724 shares of Common Stock at a cost of $5.3 million and 85,400 shares of Common Stock at a cost of $6.8 million, respectively. For further details on our Stock Purchase Plans refer to Note 10, "Stockholders' Equity." |
• | As of March 31, 2018, we had $43.2 million of state net operating losses ("NOLs"). Our state NOLs may be used to offset approximately $2.6 million in state income taxes. If not used, substantially all of the state NOLs will expire in various amounts between 2018 and 2036. In addition, as of March 31, 2018, we had $16.1 million of U.S. federal and $6.9 million of U.S. state research and development tax credits ("R&D Credits") which, if not used, will expire between 2030 and 2038 for the U.S. federal R&D Credits and between 2020 and 2033 for the state R&D Credits. |
• | changes in market demand for our products due to global economic and political conditions; |
• | the impact of competition, both domestic and international, changes in industry production capacity, including the construction of new mills or new machines, the closing of mills and incremental changes due to capital expenditures or productivity increases; |
• | the loss of current customers or the inability to obtain new customers; |
• | increases in commodity prices, (particularly for pulp, energy and latex) due to constrained global supplies or unexpected supply disruptions; |
• | our ability to control costs, including transportation, and implement measures designed to enhance operating efficiencies; |
• | the availability of raw materials and energy; |
• | the enactment of adverse state, federal or foreign tax or other legislation or changes in government policy or regulation, including the recent Tax Act; |
• | unanticipated expenditures related to the cost of compliance with environmental and other governmental regulations; |
• | fluctuations in (i) exchange rates (in particular changes in the U.S. dollar/Euro currency exchange rates) and (ii) interest rates; |
• | increases in the funding requirements for our pension and postretirement liabilities; |
• | our ability to successfully integrate acquired businesses into our existing operations; |
• | changes in asset valuations including write-downs of assets including property, plant and equipment; inventory, accounts receivable, deferred tax assets or other assets for impairment or other reasons; |
• | loss of key personnel; |
• | strikes, labor stoppages and changes in our collective bargaining agreements and relations with our employees and unions; |
• | capital and credit market volatility and fluctuations in global equity and fixed-income markets; |
• | our existing and future indebtedness; |
• | our net operating losses may not be available to offset our tax liability and other tax planning strategies may not be effective; and |
• | other risks that are detailed from time to time in reports we file with the SEC. |
Months in 2018 | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plans or Programs (a) | ||||||||||
January | — | $ | — | — | $ | 25,000,000 | ||||||||
February | 62,669 | $ | 79.78 | 62,669 | $ | 20,000,267 | ||||||||
March | 4,201 | $ | 79.13 | 4,055 | $ | 19,679,266 |
Exhibit Number | Exhibit | ||
31.1 | |||
31.2 | |||
32.1 | |||
32.2 | |||
101.INS | XBRL Instance Document (filed herewith). | ||
101.SCH | XBRL Taxonomy Extension Schema Document (filed herewith). | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith). | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document (filed herewith). | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document (filed herewith). | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith). |
NEENAH, INC. | ||
By: | /s/ John P. O'Donnell | |
John P. O’Donnell | ||
President, Chief Executive Officer and Director | ||
(Principal Executive Officer) | ||
/s/ Bonnie C. Lind | ||
Bonnie C. Lind | ||
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) | ||
/s/ Larry N. Brownlee | ||
Larry N. Brownlee | ||
Vice President — Controller (Principal Accounting Officer) | ||
May 10, 2018 |
Date: May 10, 2018 | |
/s/ John P. O’Donnell | |
John P. O’Donnell | |
President, Chief Executive Officer, and Director (Principal Executive Officer) |
Date: May 10, 2018 | |
/s/ Bonnie C. Lind | |
Bonnie C. Lind | |
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) |
/s/ John P. O’Donnell | |
John P. O’Donnell | |
President, Chief Executive Officer and Director | |
(Principal Executive Officer) | |
Date: May 10, 2018 |
/s/ Bonnie C. Lind | |
Bonnie C. Lind | |
Senior Vice President, Chief Financial Officer and Treasurer | |
(Principal Financial Officer) | |
Date: May 10, 2018 |
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Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 02, 2018 |
|
Document and Entity Information | ||
Entity Registrant Name | Neenah Inc | |
Entity Central Index Key | 0001296435 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 16,813,846 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Thousands, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Income Statement [Abstract] | ||
Net sales | $ 266.5 | $ 242.1 |
Cost of products sold | 214.1 | 189.4 |
Gross profit | 52.4 | 52.7 |
Selling, general and administrative expenses | 26.8 | 24.6 |
SERP settlement charge | 0.8 | 0.0 |
Other expense - net (Note 2) | 0.7 | 1.1 |
Operating income | 24.1 | 27.0 |
Interest expense - net | 3.3 | 3.2 |
Income from continuing operations before income taxes | 20.8 | 23.8 |
Provision for income taxes | 4.6 | 6.2 |
Net income | $ 16.2 | $ 17.6 |
Basic | ||
Basic earnings per share (in dollars per share) | $ 0.96 | $ 1.04 |
Diluted | ||
Diluted (in dollars per share) | $ 0.95 | $ 1.03 |
Weighted Average Common Shares Outstanding (in thousands) | ||
Basic (in shares) | 16,847 | 16,779 |
Diluted (in shares) | 17,006 | 17,025 |
Cash dividends declared per share of common stock (in usd per share) | $ 0.41 | $ 0.37 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 16.2 | $ 17.6 |
Unrealized foreign currency translation gain | 5.5 | 1.7 |
Reclassification of amortization of adjustments to pension and other postretirement benefit liabilities recognized in net periodic benefit cost (Note 8) | 1.6 | 2.0 |
Reclassification of pension settlement charge (Note 8) | 0.8 | 0.0 |
Net gain from pension and other postretirement benefit plans (Note 5) | 0.4 | 0.0 |
Unrealized gain on available-for-sale securities | 0.0 | 0.1 |
Income from other comprehensive income items | 8.3 | 3.8 |
Provision for income taxes | 1.0 | 0.8 |
Other comprehensive income | 7.3 | 3.0 |
Comprehensive income | $ 23.5 | $ 20.6 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowances | $ 1.4 | $ 1.3 |
Background and Basis of Presentation |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Background and Basis of Presentation | Background and Basis of Presentation Background Neenah, Inc. ("Neenah" or the "Company"), is a Delaware corporation incorporated in April 2004. The Company has two primary operations: its technical products business and its fine paper and packaging business. See Note 12, "Business Segment Information." Basis of Consolidation and Presentation These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Management believes that the disclosures made are adequate for a fair presentation of the Company’s results of operations, financial position and cash flows. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of operations, financial position and cash flows for the interim periods presented herein. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make extensive use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year. The condensed consolidated financial statements of Neenah and its subsidiaries included herein are unaudited. The condensed consolidated financial statements include the financial statements of the Company and its wholly owned and majority owned subsidiaries. Intercompany balances and transactions have been eliminated. Earnings per Share ("EPS") The following table presents the computation of basic and diluted EPS (dollars in millions except per share amounts, shares in thousands): Earnings Per Basic Common Share
Earnings Per Diluted Common Share
(a) For the three months ended March 31, 2018 and 2017, there were 197,200 and 72,000 potentially dilutive options, respectively, excluded from the computation of dilutive common shares because the exercise price of such options exceeded the average market price of the Company’s common stock. Fair Value of Financial Instruments The Company measures the fair value of financial instruments in accordance with Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("ASC Topic 820") which establishes a framework for measuring fair value. ASC Topic 820 provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The following table presents the carrying value and the fair value of the Company’s debt.
(a) The fair value for all debt instruments was estimated from Level 2 measurements. (b) The fair value of short and long-term debt is estimated using rates currently available to the Company for debt of the same remaining maturities. As of March 31, 2018, the Company had $3.6 million in marketable securities classified as "Other Assets" on the condensed consolidated balance sheet. The cost of such marketable securities was $4.1 million. Fair value for the Company’s marketable securities was estimated from Level 1 inputs. The Company’s marketable securities are designated for the payment of benefits under its supplemental employee retirement plan ("SERP"). As of March 31, 2018, Neenah Germany had investments of $1.7 million that were restricted to the payment of certain post-retirement employee benefits of which $0.6 million and $1.1 million are classified as "Prepaid and other current assets" and "Other Assets", respectively, on the condensed consolidated balance sheet. |
Accounting Standard Changes |
3 Months Ended |
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Mar. 31, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
Accounting Standard Changes | Accounting Standard Changes In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This guidance specifies how and when an entity will recognize revenue arising from contracts with customers and requires entities to disclose information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has subsequently issued additional, clarifying standards to address issues arising from implementation of the new revenue recognition standard. The Company adopted the new standards using the modified retrospective method as of January 1, 2018, and there was no impact from adoption on its consolidated financial statements. The Company also presented the required additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. See Note 3, "Revenue from Contracts with Customers" for further information. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. Changes to the current GAAP model primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The Company adopted this ASU as of January 1, 2018. As a result of the adoption, the Company reclassified $0.3 million of unrealized losses (net of $0.1 million tax) on "available-for-sale" securities to beginning retained earnings. There was no other material impact on its consolidated financial statements due to the adoption. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current lease accounting. The amendments in this ASU are effective January 1, 2019, and must be adopted using a modified retrospective approach that applies the new lease requirements at the beginning of the earliest period presented in the financial statements. The FASB has proposed a change that would allow a company to elect an optional transition method that applies the new lease requirements through a cumulative-effect adjustment in the period of adoption. The Company expects to adopt the standard on January 1, 2019 using the proposed optional transition method if finalized in its current form. The Company is currently assessing the impact of the adoption of ASU 2016-02 on its consolidated financial statements. The Company currently believes the most significant change will be related to the recognition of right-of-use assets and lease liabilities on its consolidated balance sheet. In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). ASU 2017-07 requires entities to (1) disaggregate the current service-cost component from the other components of net benefit cost (the "other components") and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if such a subtotal is presented. In addition, only the service-cost component of net benefit cost is eligible for capitalization inventories. The Company adopted this ASU as of January 1, 2018. As a result of the adoption, the Company reclassified $1.0 million of net cost for three months ended March 31, 2017, of other components of net benefit cost from "Cost of Products Sold" and "Selling, General and Administrative expenses" to "Other Expense - net" on the condensed consolidated statements of operations. There was no other material impact on its consolidated financial statements due to the adoption. On January 1, 2018, the Company implemented ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other Than Inventory. As of December 31, 2017, the Company early-adopted ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220)-Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. See Note 6, "Income Taxes" for further discussion of these topics. As of March 31, 2018, no other amendments to the ASC have been issued that will have or are reasonably likely to have a material effect on the Company’s financial position, results of operations or cash flows. |
Revenue From Contracts With Customers |
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Revenues [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contracts with Customers | Revenue from Contracts with Customers The Company recognizes sales revenue at a point in time following the transfer of control of the product to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Sales are reported net of allowable discounts and estimated returns. Reserves for cash discounts, trade allowances and sales returns are estimated using historical experience. The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill our promise to transfer the associated products. Accordingly, the Company records customer payments of shipping and handling costs as a component of net sales, and classifies such costs as a component of cost of sales. The Company excludes tax amounts assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers from our measurement of transaction prices. Accordingly, such tax amounts are not included as a component of net sales or cost of sales. The following tables represent a disaggregation of segment revenue from contracts with customers for the three months ended March 31, 2018 and 2017. The technical products business is an international producer of fiber-formed, coated and/or saturated specialized media that delivers high performance benefits to customers. Included in this segment are transportation and other filtration media ("Filtration"), tape and abrasives backings products ("Backings"), digital image transfer, durable label, and other specialty substrate products ("Specialty").
The fine paper and packaging business is a leading supplier of premium printing and other high end specialty papers ("Graphic Imaging"), premium packaging ("Packaging") and specialty office papers ("Filing/Office") primarily in North America.
The following tables represent a disaggregation of revenue from contracts with customers by location of the selling entities for the three months ended March 31, 2018 and 2017.
The Company considers each transaction/shipment as a separate performance obligation. Neenah recognizes revenue when the title transfers to the customer. As such, the remaining performance obligations at period end are not considered significant. Sales terms in the technical products business vary depending on the type of product sold and customer category. In general, sales are collected in approximately 45 to 55 days. Extended credit terms of up to 120 days are offered to customers located in certain international markets. Fine paper and packaging sales terms range between 20 and 30 days with discounts of zero to two percent for customer payments, with discounts of one percent and 20-day terms used most often. Extended credit terms are offered to customers located in certain international markets. |
Acquisitions |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions Acquisition of Coldenhove On November 1, 2017, the Company purchased all of the outstanding equity of Coldenhove for approximately $45 million. The Company also paid approximately $3 million to extinguish Coldenhove's existing debt and certain other liabilities. Coldenhove is a specialty materials manufacturer based in the Netherlands, with a leading position in digital transfer media and other technical products. The Company accounted for the transaction using the acquisition method in accordance with ASC Topic 805, Business Combinations ("ASC Topic 805"). The preliminary allocation of the purchase price was based on estimates of the fair value of assets acquired and liabilities assumed as of November 1, 2017, and certain inventory and income tax balances are subject to adjustment as additional information is obtained. The Company has up to 12 months from the closing of the acquisition to finalize its valuations. During the three months ended March 31, 2018, management evaluated additional information and determined that the preliminary valuation of inventory at the acquisition date should have been determined using fair value assumptions that would have resulted in the fair value of inventory being lower that originally estimated primarily due to changes in the assumptions related to inventory margins of the acquired business. Accordingly, an adjustment was made to reduce the carrying value of inventories by $1.0 million with a corresponding increase to the value of goodwill. Additional changes to the valuation of inventory or income tax assets and liabilities acquired may result in adjustments to the carrying value of these assets and liabilities acquired or goodwill. In conjunction with the acquisition, the Company assumed a contingent liability of $2.3 million related to the acquisition of direct customer relationships by Coldenhove, which amount is contingent on the growth of sales from these customer relationships. As of March 31, 2018, the liability amount is unchanged. The following selected unaudited pro forma consolidated statement of operations data for the three months ended March 31, 2017, was prepared as though the Coldenhove Acquisition had occurred as of the beginning of 2017. The information does not reflect events that occurred after December 31, 2017 or any operating efficiencies or inefficiencies that may result from the Coldenhove Acquisition. Therefore, the information is not necessarily indicative of results that would have been achieved had the businesses been combined during the period presented or the results that the Company will experience going forward.
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Supplemental Balance Sheet Data |
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Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Balance Sheet Data | Supplemental Balance Sheet Data The following table presents inventories by major class:
The FIFO values of inventories valued on the LIFO method were $122.3 million and $120.1 million as of March 31, 2018 and December 31, 2017, respectively. For the three months ended March 31, 2018, income from continuing operations before income taxes was reduced by less than $0.1 million due to a decrease in certain LIFO inventory quantities. The following table presents changes in accumulated other comprehensive income (loss) ("AOCI") for the three months ended March 31, 2018:
(a) For the three months ended March 31, 2018, the Company recorded a $0.8 million SERP settlement loss, and a related remeasurement gain of $0.4 million in other comprehensive income. For the three months ended March 31, 2018 and 2017, the Company reclassified $1.6 million and $2.0 million, respectively, of costs from accumulated other comprehensive income to other expense - net, on the condensed consolidated statements of operations. For the three months ended March 31, 2018 and 2017, the Company recognized an income tax benefit of $0.4 million and $0.7 million, related to such reclassifications classified as "Provision for income taxes" on the condensed consolidated statements of operations. |
Income Taxes |
3 Months Ended |
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Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Income tax expense represented 22 percent and 26 percent of income from continuing operations before income taxes for the three months ended March 31, 2018 and 2017, respectively. The decrease in income tax expense for the three months ended March 31, 2018 was primarily due to the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), which reduced the U.S. federal statutory corporate tax rate from 35% to 21% effective January 1, 2018. The income tax expense for the three months ended March 31, 2017 was lower than the 35% statutory corporate tax rate primarily due to excess tax benefits which reduced the income tax expense. As of March 31, 2018, the Company has not completed its determination of the accounting implications of the Tax Act on its tax accruals. However, the Company reasonably estimated the effects of the Tax Act and recorded provisional amounts in the financial statements. Pursuant to guidance issued by the Securities Exchange Commission ("SEC"), as codified in ASU 2018-05, Income Taxes (Topic 740)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, which provides for a measurement period of one year from the enactment date to finalize the accounting for effects of the Tax Act, the Company provisionally recorded in December 2017 and during the three months ended March 31, 2018 a cumulative net income tax benefit of $6.2 million related to the Tax Act. This amount is comprised of a $10.8 million tax benefit from the remeasurement of federal net deferred tax liabilities resulting from the reduction in the U.S. statutory corporate tax rate to 21% from 35%, less $4.6 million of tax expense from the mandatory one-time U.S. federal tax on certain previously untaxed accumulated earnings and profits ("E&P) of its foreign subsidiaries and related state income tax impacts. During the three months ended March 31, 2018, the Company recorded a measurement-period tax benefit of $0.5 million related to the effects of the statutory corporate tax rate reduction and a measurement-period tax expense of $0.8 million from the mandatory one-time U.S. federal tax on accumulated E&P of its foreign subsidiaries and related state income tax impacts. As the Company analyzes any additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service ("IRS") and other standard-setting bodies, adjustments to the provisional amounts may be required. In addition, adjustments to the provisional amounts may be needed to reflect legislative actions by the various U.S. states related to application of the Tax Act provisions on 2017 state tax returns. These federal and state adjustments could significantly impact the Company’s provision for income taxes in the period in which the adjustments are made. As of December 31, 2017, the Company was not yet able to reasonably estimate the effects for the Global Intangible Low-Taxed Income ("GILTI") provisions of the Tax Act, therefore no provisional effects were recorded. Also, at that time, the Company had not made a policy decision regarding whether to record deferred taxes on GILTI or use the period cost method. During the three months ended March 31, 2018, the Company elected an accounting policy to record GILTI tax expense as a period cost, if and when incurred. Also, the Company was able to reasonably estimate the annual effects of GILTI and recorded in its annual effective tax rate a provisional estimate of the 2018 annual impact of GILTI of $1.9 million of tax expense. In accordance with SEC guidance noted above, this provisional amount may be refined as a result of additional guidance from, and interpretations by, the U.S. Treasury Department or the IRS. The Company has also included a provisional estimate of the annual impact of state taxation of foreign earnings of $0.1 million in the annual effective tax rate. This amount could change from further legislative actions by the various U.S. states. During the three months ended March 31, 2018, the Company completed an assessment of its existing accounting assertion with regard to the indefinite reinvestment of undistributed foreign earnings, considering the effects of the Tax Act and U.S. state and foreign tax legislation on future repatriations. After consideration of the effects of the mandatory one-time U.S. federal tax and GILTI provisions and its foreign investment strategy, the Company is no longer asserting indefinite reinvestment of its unrepatriated German E&P. On January 1, 2018, the Company implemented ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other Than Inventory. The standard requires the recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. For the Company, the tax effects related to a 2017 transfer of intellectual property are affected by this standard. The standard was applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of January 1, 2018. The Company recorded a $2.9 million deferred tax asset in the U.S. and eliminated a $3.6 million prepaid tax asset in Germany, each with offsets to retained earnings. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income (Topic 740), to address issues related to the application of ASC 740 to certain provisions of the Tax Act. This ASU provides an option for entities to make a one-time reclassification from AOCI to retained earnings for stranded tax effects resulting from the newly enacted tax rates for deferred tax assets and liabilities related to items within AOCI. The Company early adopted ASU 2018-02 as of December 31, 2017 and accordingly reclassified $10.9 million related to stranded tax effects resulting from the Tax Act from AOCI to retained earnings. |
Debt |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Long-term debt consisted of the following:
2021 Senior Notes In May 2013, the Company completed an underwritten offering of eight-year senior unsecured notes (the "2021 Senior Notes") at a face amount of $175 million. The 2021 Senior Notes contain terms, covenants and events of default with which the Company must comply, which the Company believes are ordinary and standard for notes of this nature. As of March 31, 2018, the Company was in compliance with all terms of the indenture for the 2021 Senior Notes. Amended and Restated Secured Revolving Credit Facility In December 2014, the Company amended and restated its existing credit facility by entering into the Third Amended and Restated Credit Agreement (the "Third Amended Credit Agreement"). The Third Amended Credit Agreement contains covenants with which the Company and its subsidiaries must comply during the term of the agreement, which the Company believes are ordinary and standard for agreements of this nature. As of March 31, 2018, the Company was in compliance with all terms of the Third Amended Credit Agreement. Availability under the Global Revolving Credit Facilities varies over time depending on the value of the Company’s inventory, receivables and various capital assets. As of March 31, 2018, the Company had $91.5 million of borrowings and $0.9 million in letters of credit outstanding under the Global Revolving Credit Facilities and $79.2 million of available credit (based on exchange rates at March 31, 2018). As of March 31, 2018, the weighted-average interest rate on outstanding Global Revolving Credit Facility borrowings was 2.6 percent per annum. As of December 31, 2017, the weighted-average interest rate under the Global Revolving Credit Facilities was 2.7 percent per annum. Under the terms of the 2021 Senior Notes and the Third Amended Credit Agreement, the Company has limitations on its ability to repurchase shares of and pay dividends on its Common Stock. These limitations are triggered depending on the Company’s credit availability under the Third Amended Credit Agreement and leverage levels under the Senior Notes. As of March 31, 2018, none of these covenants were restrictive to the Company’s ability to repurchase shares of and pay dividends on its Common Stock. For additional information about our debt agreements, see Note 7 of the Notes to Consolidated Financial Statements in our 2017 Form 10-K. Borrowings and Repayments of Long-Term Debt The condensed consolidated statements of cash flows present borrowings and repayments under the Global Revolving Credit Facilities using a gross approach. This approach presents not only discrete borrowings for transactions such as a business acquisition, but also reflects all borrowings and repayments that occur as part of daily management of cash receipts and disbursements. For the three months ended March 31, 2018, the Company made scheduled debt repayments of $0.3 million and net long-term debt borrowings of $14.0 million related to daily cash management activities. For the three months ended March 31, 2017, the Company made scheduled debt repayments of $0.3 million and net long-term debt repayments of $5.2 million related to daily cash management activities. |
Pension and Other Postretirement Benefits |
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Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Postretirement Benefits | Pension and Other Postretirement Benefits Pension Plans Substantially all active employees of the Company’s U.S. operations participate in defined benefit pension plans and/or defined contribution retirement plans. The Company has defined benefit plans for substantially all its employees in Germany, the Netherlands and the United Kingdom. In addition, the Company maintains a SERP which is a non-qualified defined benefit plan and a supplemental retirement contribution plan (the "SRCP") which is a non-qualified, unfunded defined contribution plan. The Company provides benefits under the SERP and SRCP to the extent necessary to fulfill the intent of its retirement plans without regard to the limitations set by the Internal Revenue Code on qualified and non-qualified retirement benefit plans. The following table presents the components of net periodic benefit cost for the Company’s defined benefit plans and postretirement plans other than pensions: Components of Net Periodic Benefit Cost for Defined Benefit Plans
(a) The expected return on plan assets is determined by multiplying the fair value of plan assets at the prior year-end (adjusted for estimated current year cash benefit payments and contributions) by the expected long-term rate of return.The Dutch pension plan is funded through an insurance contract, and the expected return on plan assets is calculated based on the discount rate of the insured obligations. (b) For the three months ended March 31, 2018, the Company recognized a settlement loss of $0.8 million related to SERP. The Company records the service cost component of net periodic benefit cost as part of cost of sales and selling, general and administrative expenses; and the non-service cost components of net periodic benefit cost (i.e., interest cost, expected return on plan assets, net actuarial gains or losses, and amortization of prior service cost or credits) as part of other expense - net, on the condensed consolidated statements of operations. The Company expects to make aggregate contributions to qualified and nonqualified defined benefit pension trusts and to pay pension benefits for unfunded pension and other postretirement benefit plans of approximately $17.1 million in calendar 2018. For the three months ended March 31, 2018, the Company made $5.9 million of such payments. The Company made similar payments of $1.2 million and $18.1 million for the three months ended March 31, 2017 and for the year ended December 31, 2017, respectively. |
Stock Compensation Plan |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Compensation Plan | Stock Compensation Plan Stock Options and Stock Appreciation Rights ("Options") The following table presents information regarding Options awarded during the three months ended March 31, 2018:
The weighted-average grant date fair value for Options granted during the three months ended March 31, 2018 was estimated using the Black-Scholes option valuation model with the following assumptions:
The following table presents information regarding Options that vested during the three months ended March 31, 2018:
The following table presents information regarding outstanding Options:
Performance Share Units ("PSUs") and Restricted Share Units ("RSUs") For the three months ended March 31, 2018, the Company granted target awards of 40,747 PSUs. The measurement period for three fourths of the PSUs is January 1, 2018 through December 31, 2018, and for the remaining fourth of the PSUs is January 1, 2018 through December 31, 2020. The PSUs vest on December 31, 2020. Common Stock equal to not less than 40 percent and not more than 200 percent of the PSUs target will be awarded based on the Company’s return on invested capital, consolidated revenue growth, EPS and total return to shareholders relative to the companies in the Russell 2000® Value small cap index. The Company’s return on invested capital, consolidated revenue growth and EPS are adjusted for certain items as further described in the Performance Share Award Agreement. The market price on the date of grant for the PSUs was $93.21 per share. For the three months ended March 31, 2018, the Company awarded 2,030 RSUs to certain employees. The weighted average grant date fair value of such awards was $80.15 per share and the awards vest one year from the date of grant. During the vesting period, the holders of the RSUs are entitled to dividends, but the RSUs do not have voting rights and are forfeited in the event the holder is no longer an employee on the vesting date. |
Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Common Stock As of March 31, 2018 and December 31, 2017, the Company had 16,823,111 shares and 16,870,000 shares of Common Stock outstanding, respectively. In November 2017, our Board of Directors authorized a program for the purchase of up to $25 million of outstanding common stock effective January 1, 2018 (the "2018 Stock Purchase Plan"). The program does not require the Company to purchase any specific number of shares and may be suspended or discontinued at any time. Purchases under the 2018 Stock Purchase Plan will be made from time to time in the open market or in privately negotiated transactions in accordance with the requirements of applicable law. The timing and amount of any purchases will depend on share price, market conditions and other factors. In May 2017, the Company’s Board of Directors authorized a program that would allow the Company to repurchase up to $25 million of its outstanding Common Stock, which expired on December 31, 2017 (the "2017 Stock Purchase Plan"). The Company also had a $25 million repurchase program in place during the preceding 12 months that expired in May 2017 (the "2016 Stock Purchase Plan"). The following table shows shares purchased and value ($ in millions) under the respective stock purchase plans:
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Contingencies and Legal Matters |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contingencies and Legal Matters | Contingencies and Legal Matters Litigation The Company is involved in certain legal actions and claims arising in the ordinary course of business. While the outcome of these legal actions and claims cannot be predicted with certainty, it is the opinion of management that the outcome of any such claim which is pending or threatened, either individually or on a combined basis, will not have a material effect on the consolidated financial condition, results of operations or cash flows of the Company. Income Taxes The Company periodically undergoes examination by the IRS, as well as various state and foreign jurisdictions. These tax authorities routinely challenge certain deductions and credits reported by the Company on its income tax returns. No significant tax audit findings are being contested at this time with either the IRS or any state or foreign tax authority. Employees and Labor Relations The Company’s U.S. union employees are represented by the United Steelworkers Union (the "USW"). Approximately 50 percent of salaried employees and 80 percent of hourly employees of Neenah Germany are eligible to be represented by the Mining, Chemicals and Energy Trade Union, Industriegewerkschaft Bergbau, Chemie and Energie (the "IG BCE"). In the Netherlands, most of our employees are eligible to be represented by the Christelijke Nationale Vakbond ("CNV") and the Federatie Nederlandse Vakvereniging ("FNV"). Under Dutch law, union membership is voluntary and does not need to be disclosed to the Company. The Company is currently in negotiations with USW, CNV and FNV, with a new contract expected to be signed in 2018. As of March 31, 2018, the Company had approximately 665 U.S. employees covered under collective bargaining agreements that will expire in the next 12 months. The following table shows the expiration dates of the Company’s various bargaining agreements and the number of employees covered under each of these agreements.
(a) Under German and Dutch laws, union membership is voluntary and does not need to be disclosed to the Company. As a result, the number of employees covered by the collective bargaining agreement with the IG BCE, and CNV and FNV cannot be determined. (b) The Whiting, Neenah, Munising and Appleton mills have bargained jointly with the USW on pension matters. The current agreements related to pension matters will remain in effect until September 2019. (c) The Company is currently in negotiations with the USW, and CNV and FNV and a new contract is expected to be signed in 2018. Until a new contract is signed, the terms of the previous contract still apply. The Company’s United Kingdom salaried and hourly employees are eligible to participate in Unite the Union ("UNITE") on an individual basis, but not under a collective bargaining agreement. |
Business Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment Information | Business Segment Information The Company’s reportable operating segments consist of Technical Products, Fine Paper and Packaging and Other.
Each segment employs different technologies and marketing strategies. Disclosure of segment information is on the same basis that management uses internally for evaluating segment performance and allocating resources. Transactions between segments are eliminated in consolidation. The costs of shared services, and other administrative functions managed on a common basis, are allocated to the segments based on usage, where possible, or other factors based on the nature of the activity. General corporate expenses that do not directly support the operations of the business segments are shown as Unallocated corporate costs. The following table summarizes the net sales and operating income for each of the Company’s business segments.
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Subsequent Event |
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Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event Subsequent to March 31, 2018, management completed and reviewed with the Board of Directors a broad scope analysis of various initiatives to improve margins and optimize the portfolio of products and manufacturing footprint in the Fine Paper & Packaging segment. This review included an evaluation of multiple options, including capital investment, manufacturing cost reduction and distribution cost minimization initiatives, repositioning of the product portfolio and asset divestiture. Included in this analysis was consideration of divestiture of a manufacturing facility located in Brattleboro, Vermont. Historically, the Brattleboro mill has manufactured products primarily for the office supply category, and more recently has been adversely impacted by manufacturing inefficiencies due to changes in product category and grade complexity. Following the review, it was determined that this facility is not a strategic part of the Fine Paper & Packaging manufacturing footprint, given the nature of the office supply category. On April 24, 2018, the Board of Directors authorized the CEO to initiate a process to sell the Brattleboro mill and associated research and office facilities. In May 2018, the disposal group of assets and liabilities will be separately reported on the balance sheet and classified as Held for Sale. Upon classifying the disposal group as Held for Sale, the Company will test the individual assets of the disposal group for possible impairment. The disposal group will be measured at fair value, less costs to sell. The amount of any impairment charge is subject to determination of the potential sales price and value of the disposal group. The preliminary estimate of such non-cash charge could be in the range of $30 to $40 million. The disposal group and any impairment charge will be reported primarily within the Fine Paper and Packaging business segment and a lesser amount in the Other business segment. |
Background and Basis of Presentation (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Consolidation and Presentation | Basis of Consolidation and Presentation These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Management believes that the disclosures made are adequate for a fair presentation of the Company’s results of operations, financial position and cash flows. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the results of operations, financial position and cash flows for the interim periods presented herein. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make extensive use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year. The condensed consolidated financial statements of Neenah and its subsidiaries included herein are unaudited. The condensed consolidated financial statements include the financial statements of the Company and its wholly owned and majority owned subsidiaries. Intercompany balances and transactions have been eliminated. |
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Earnings per Share (“EPS”) | Earnings per Share ("EPS") The following table presents the computation of basic and diluted EPS (dollars in millions except per share amounts, shares in thousands): Earnings Per Basic Common Share
Earnings Per Diluted Common Share
(a) For the three months ended March 31, 2018 and 2017, there were 197,200 and 72,000 potentially dilutive options, respectively, excluded from the computation of dilutive common shares because the exercise price of such options exceeded the average market price of the Company’s common stock. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company measures the fair value of financial instruments in accordance with Accounting Standards Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures ("ASC Topic 820") which establishes a framework for measuring fair value. ASC Topic 820 provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). |
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Accounting Standard Changes | Accounting Standard Changes In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This guidance specifies how and when an entity will recognize revenue arising from contracts with customers and requires entities to disclose information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has subsequently issued additional, clarifying standards to address issues arising from implementation of the new revenue recognition standard. The Company adopted the new standards using the modified retrospective method as of January 1, 2018, and there was no impact from adoption on its consolidated financial statements. The Company also presented the required additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. See Note 3, "Revenue from Contracts with Customers" for further information. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. Changes to the current GAAP model primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The Company adopted this ASU as of January 1, 2018. As a result of the adoption, the Company reclassified $0.3 million of unrealized losses (net of $0.1 million tax) on "available-for-sale" securities to beginning retained earnings. There was no other material impact on its consolidated financial statements due to the adoption. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current lease accounting. The amendments in this ASU are effective January 1, 2019, and must be adopted using a modified retrospective approach that applies the new lease requirements at the beginning of the earliest period presented in the financial statements. The FASB has proposed a change that would allow a company to elect an optional transition method that applies the new lease requirements through a cumulative-effect adjustment in the period of adoption. The Company expects to adopt the standard on January 1, 2019 using the proposed optional transition method if finalized in its current form. The Company is currently assessing the impact of the adoption of ASU 2016-02 on its consolidated financial statements. The Company currently believes the most significant change will be related to the recognition of right-of-use assets and lease liabilities on its consolidated balance sheet. In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). ASU 2017-07 requires entities to (1) disaggregate the current service-cost component from the other components of net benefit cost (the "other components") and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if such a subtotal is presented. In addition, only the service-cost component of net benefit cost is eligible for capitalization inventories. The Company adopted this ASU as of January 1, 2018. As a result of the adoption, the Company reclassified $1.0 million of net cost for three months ended March 31, 2017, of other components of net benefit cost from "Cost of Products Sold" and "Selling, General and Administrative expenses" to "Other Expense - net" on the condensed consolidated statements of operations. There was no other material impact on its consolidated financial statements due to the adoption. On January 1, 2018, the Company implemented ASU 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other Than Inventory. As of December 31, 2017, the Company early-adopted ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220)-Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. See Note 6, "Income Taxes" for further discussion of these topics. As of March 31, 2018, no other amendments to the ASC have been issued that will have or are reasonably likely to have a material effect on the Company’s financial position, results of operations or cash flows. |
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Revenue From Contract With Customer | The Company recognizes sales revenue at a point in time following the transfer of control of the product to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Sales are reported net of allowable discounts and estimated returns. Reserves for cash discounts, trade allowances and sales returns are estimated using historical experience. The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill our promise to transfer the associated products. Accordingly, the Company records customer payments of shipping and handling costs as a component of net sales, and classifies such costs as a component of cost of sales. The Company excludes tax amounts assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers from our measurement of transaction prices. Accordingly, such tax amounts are not included as a component of net sales or cost of sales. |
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Acquisitions | The Company accounted for the transaction using the acquisition method in accordance with ASC Topic 805, Business Combinations ("ASC Topic 805"). The preliminary allocation of the purchase price was based on estimates of the fair value of assets acquired and liabilities assumed as of November 1, 2017, and certain inventory and income tax balances are subject to adjustment as additional information is obtained. The Company has up to 12 months from the closing of the acquisition to finalize its valuations. |
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Business Segment Information | The Company’s reportable operating segments consist of Technical Products, Fine Paper and Packaging and Other.
Each segment employs different technologies and marketing strategies. Disclosure of segment information is on the same basis that management uses internally for evaluating segment performance and allocating resources. Transactions between segments are eliminated in consolidation. The costs of shared services, and other administrative functions managed on a common basis, are allocated to the segments based on usage, where possible, or other factors based on the nature of the activity. General corporate expenses that do not directly support the operations of the business segments are shown as Unallocated corporate costs. |
Background and Basis of Presentation (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of computation of basic and diluted EPS | The following table presents the computation of basic and diluted EPS (dollars in millions except per share amounts, shares in thousands): Earnings Per Basic Common Share
Earnings Per Diluted Common Share
(a) For the three months ended March 31, 2018 and 2017, there were 197,200 and 72,000 potentially dilutive options, respectively, excluded from the computation of dilutive common shares because the exercise price of such options exceeded the average market price of the Company’s common stock. |
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Schedule of the carrying value and fair value of the Company's debt | The following table presents the carrying value and the fair value of the Company’s debt.
(a) The fair value for all debt instruments was estimated from Level 2 measurements. (b) The fair value of short and long-term debt is estimated using rates currently available to the Company for debt of the same remaining maturities. |
Revenue From Contracts With Customers (Tables) |
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Revenues [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following tables represent a disaggregation of segment revenue from contracts with customers for the three months ended March 31, 2018 and 2017. The technical products business is an international producer of fiber-formed, coated and/or saturated specialized media that delivers high performance benefits to customers. Included in this segment are transportation and other filtration media ("Filtration"), tape and abrasives backings products ("Backings"), digital image transfer, durable label, and other specialty substrate products ("Specialty").
The fine paper and packaging business is a leading supplier of premium printing and other high end specialty papers ("Graphic Imaging"), premium packaging ("Packaging") and specialty office papers ("Filing/Office") primarily in North America.
The following tables represent a disaggregation of revenue from contracts with customers by location of the selling entities for the three months ended March 31, 2018 and 2017.
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Acquisitions (Tables) |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition, Pro Forma Information | The following selected unaudited pro forma consolidated statement of operations data for the three months ended March 31, 2017, was prepared as though the Coldenhove Acquisition had occurred as of the beginning of 2017. The information does not reflect events that occurred after December 31, 2017 or any operating efficiencies or inefficiencies that may result from the Coldenhove Acquisition. Therefore, the information is not necessarily indicative of results that would have been achieved had the businesses been combined during the period presented or the results that the Company will experience going forward.
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Supplemental Balance Sheet Data (Tables) |
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Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventories by major class | The following table presents inventories by major class:
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Schedule of changes in accumulated other comprehensive income | The following table presents changes in accumulated other comprehensive income (loss) ("AOCI") for the three months ended March 31, 2018:
(a) For the three months ended March 31, 2018, the Company recorded a $0.8 million SERP settlement loss, and a related remeasurement gain of $0.4 million in other comprehensive income. |
Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | Long-term debt consisted of the following:
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Pension and Other Postretirement Benefits (Tables) |
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Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of net periodic benefit cost for defined benefit plans and postretirement plans other than pensions | Components of Net Periodic Benefit Cost for Defined Benefit Plans
(a) The expected return on plan assets is determined by multiplying the fair value of plan assets at the prior year-end (adjusted for estimated current year cash benefit payments and contributions) by the expected long-term rate of return.The Dutch pension plan is funded through an insurance contract, and the expected return on plan assets is calculated based on the discount rate of the insured obligations. (b) For the three months ended March 31, 2018, the Company recognized a settlement loss of $0.8 million related to SERP. |
Stock Compensation Plan (Tables) |
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Schedule of stock options awarded | The following table presents information regarding Options awarded during the three months ended March 31, 2018:
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Schedule of assumptions used to determine the grant date fair value of options granted | The weighted-average grant date fair value for Options granted during the three months ended March 31, 2018 was estimated using the Black-Scholes option valuation model with the following assumptions:
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Schedule of stock options vested during the period | The following table presents information regarding Options that vested during the three months ended March 31, 2018:
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Schedule of outstanding stock options | The following table presents information regarding outstanding Options:
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Stockholders' Equity (Tables) |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of shares purchased under the respective stock purchase plans | The following table shows shares purchased and value ($ in millions) under the respective stock purchase plans:
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Contingencies and Legal Matters (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of bargaining agreements | The following table shows the expiration dates of the Company’s various bargaining agreements and the number of employees covered under each of these agreements.
(a) Under German and Dutch laws, union membership is voluntary and does not need to be disclosed to the Company. As a result, the number of employees covered by the collective bargaining agreement with the IG BCE, and CNV and FNV cannot be determined. (b) The Whiting, Neenah, Munising and Appleton mills have bargained jointly with the USW on pension matters. The current agreements related to pension matters will remain in effect until September 2019. (c) The Company is currently in negotiations with the USW, and CNV and FNV and a new contract is expected to be signed in 2018. Until a new contract is signed, the terms of the previous contract still apply. |
Business Segment Information (Tables) |
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of net sales and operating income for each of the Company's business segment | The following table summarizes the net sales and operating income for each of the Company’s business segments.
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Background and Basis of Presentation - Marketable Securities (Details) $ in Millions |
Mar. 31, 2018
USD ($)
|
---|---|
Marketable securities | |
Cost of marketable securities | $ 4.1 |
Pension Benefits | |
Held to maturity | |
Investments restricted to the payment of post-retirement employee benefits | 1.7 |
Other Assets | Pension Benefits | |
Held to maturity | |
Investments restricted to the payment of post-retirement employee benefits | 1.1 |
Prepaid Expenses and Other Current Assets | Pension Benefits | |
Held to maturity | |
Investments restricted to the payment of post-retirement employee benefits | 0.6 |
Fair Value | Level 1 | Other Assets | |
Marketable securities | |
Fair value of marketable securities | $ 3.6 |
Accounting Standard Changes - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Jan. 01, 2018 |
Mar. 31, 2017 |
|
Accounting Standards Update 2016-01 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Affect on retained earnings due to adoption of new accounting guidance, net of tax | $ 0.3 | |
Affect on retained earnings due to adoption of new accounting guidance, tax | $ 0.1 | |
Accounting Standards Update 2017-07 | Cost Of Products Sold And Selling, General and Administrative Expenses | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Net periodic benefit cost | $ (1.0) | |
Accounting Standards Update 2017-07 | Other Expense (Income) | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Net periodic benefit cost | $ 1.0 |
Acquisitions - Narrative (Details) - Coldenhove - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Nov. 01, 2017 |
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Business Acquisition [Line Items] | |||
Business combination, consideration transferred | $ 45.0 | ||
Payment for debt extinguishment or debt prepayment cost | $ 3.0 | ||
Inventory purchase accounting adjustments | $ 1.0 | ||
Goodwill, purchase accounting adjustment | $ 1.0 | ||
Contingent liability | $ 2.3 |
Acquisitions - Proforma Information (Details) - Coldenhove $ / shares in Units, $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2017
USD ($)
$ / shares
| |
Business Acquisition [Line Items] | |
Net sales | $ 252.6 |
Operating income | 27.8 |
Net income | $ 18.1 |
Earnings per Share (EPS) | |
Basic (in usd per share) | $ / shares | $ 1.07 |
Diluted (in usd per share) | $ / shares | $ 1.06 |
Supplemental Balance Sheet Data - Inventories (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Inventories by major class: | ||
Raw materials | $ 37.0 | $ 36.2 |
Work in progress | 34.0 | 35.0 |
Finished goods | 82.1 | 79.2 |
Supplies and other | 3.3 | 3.6 |
Inventories, gross | 156.4 | 154.0 |
Adjust FIFO inventories to LIFO cost | (11.9) | (10.5) |
Total | 144.5 | 143.5 |
FIFO values of inventories valued on the LIFO method | 122.3 | $ 120.1 |
Maximum | ||
Inventories by major class: | ||
Decrease in LIFO inventory (less than) | $ 0.1 |
Business Segment Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Business segment | ||
Net sales | $ 266.5 | $ 242.1 |
Operating income (loss) | 24.1 | 27.0 |
Unallocated corporate costs | ||
Business segment | ||
Operating income (loss) | (6.2) | (5.5) |
Technical Products | Operating segments | ||
Business segment | ||
Net sales | 149.0 | 121.9 |
Operating income (loss) | 17.5 | 12.5 |
Fine Paper and Packaging | Operating segments | ||
Business segment | ||
Net sales | 111.6 | 114.3 |
Operating income (loss) | 12.8 | 20.3 |
Other | Operating segments | ||
Business segment | ||
Net sales | 5.9 | 5.9 |
Operating income (loss) | $ 0.0 | $ (0.3) |
Subsequent Event (Details) - Disposal Group, Held-for-sale, Not Discontinued Operations - Scenario, Forecast - Brattleboro Mill And Associated Research And Office Facilities - Subsequent Event $ in Millions |
Apr. 24, 2018
USD ($)
|
---|---|
Minimum | |
Subsequent Event [Line Items] | |
Non-cash impairment charge on disposal of assets | $ 30 |
Maximum | |
Subsequent Event [Line Items] | |
Non-cash impairment charge on disposal of assets | $ 40 |
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