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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

 

FORM 10-Q

 

 

(Mark One)

 

x       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2015

 

OR

 

o          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from           to           

 

Commission File Number: 001-32240

 

NEENAH PAPER, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		20-1308307
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

 

(678) 566-6500

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  x		Accelerated filer  o
Non-accelerated filer  o		Smaller reporting company  o
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  x

 

As of October 23, 2015, there were approximately 16,745,000 shares of the Company’s common stock outstanding.

 

 

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TABLE OF CONTENTS

 

Part I — Financial Information
Item 1. Financial Statements	F-1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	F-23
Item 3. Quantitative and Qualitative Disclosure About Market Risk	F-30
Item 4. Controls and Procedures	F-30
Part II — Other Information
Item 1. Legal Proceedings	F-30
Item 1A. Risk Factors	F-30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	F-31
Item 6. Exhibits	F-31

 

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Part I—FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

NEENAH PAPER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share data)

(Unaudited)

 

		Three Months Ended Ended September 30,						Nine Months Ended September 30,
		2015			2014			2015			2014
Net sales		$	231.6		$	215.3		$	657.3		$	636.1
Cost of products sold		183.2			174.0			511.4			508.2
Gross profit		48.4			41.3			145.9			127.9
Selling, general and administrative expenses		21.2			18.7			61.6			56.4
Acquisition and restructuring costs		2.9			0.9			2.9			1.4
Other (income) expense - net		(0.1		)	—			0.9			0.5
Operating income		24.4			21.7			80.5			69.6
Interest expense - net		2.9			2.7			8.7			8.4
Income from continuing operations before income taxes		21.5			19.0			71.8			61.2
Provision for income taxes		8.0			5.6			25.8			20.4
Income from continuing operations		13.5			13.4			46.0			40.8
Income (loss) from discontinued operations		(0.2		)	0.3			0.4			1.4
Loss on sale		(6.9		)	—			(6.9		)	—
Income (loss) from discontinued operations before income taxes		(7.1		)	0.3			(6.5		)	1.4
Income tax provision		0.3			0.1			0.4			0.4
Income (loss) from discontinued operations, net of income taxes (Note 11)		(7.4		)	0.2			(6.9		)	1.0
Net income		$	6.1		$	13.6		$	39.1		$	41.8
Earnings (Loss) Per Common Share
Basic
Continuing operations		$	0.79		$	0.79		$	2.72		$	2.43
Discontinued operations		(0.43		)	0.02			(0.41		)	0.06
Basic		$	0.36		$	0.81		$	2.31		$	2.49
Diluted
Continuing operations		$	0.78		$	0.78		$	2.68		$	2.39
Discontinued operations		(0.43		)	0.02			(0.40		)	0.06
Diluted		$	0.35		$	0.80		$	2.28		$	2.45
Weighted Average Common Shares Outstanding (in thousands)
Basic		16,738			16,627			16,737			16,543
Diluted		16,949			16,913			16,991			16,831
Cash Dividends Declared Per Share of Common Stock		$	0.30		$	0.27		$	0.90		$	0.75

 

See Notes to Condensed Consolidated Financial Statements

 

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NEENAH PAPER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

 

		Three Months Ended Ended September 30,						Nine Months Ended September 30,
		2015			2014			2015			2014
Net income		$	6.1		$	13.6		$	39.1		$	41.8
Unrealized foreign currency translation gain (loss)		1.8			(14.0		)	(9.1		)	(15.7		)
Reclassification of amortization of adjustments to pension and other postretirement benefit liabilities recognized in net periodic benefit cost (Note 6)		1.8			1.1			5.4			3.4
Unrealized gain on “available-for-sale” securities		—			—			—			0.1
Income (loss) from other comprehensive income items		3.6			(12.9		)	(3.7		)	(12.2		)
Provision for income taxes		0.7			0.4			2.0			1.3
Other comprehensive income (loss)		2.9			(13.3		)	(5.7		)	(13.5		)
Comprehensive income		$	9.0		$	0.3		$	33.4		$	28.3

 

See Notes to Condensed Consolidated Financial Statements

 

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NEENAH PAPER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

 

		September 30, 2015			December 31, 2014
ASSETS
Current Assets
Cash and cash equivalents		$	5.5		$	72.6
Accounts receivable (less allowances of $2.1 million and $1.5 million)		115.4			84.7
Inventories		119.8			101.2
Deferred income taxes		19.9			15.8
Prepaid and other current assets		15.6			14.3
Assets held for sale (Note 11)		38.1			46.3
Total Current Assets		314.3			334.9
Property, Plant and Equipment
Property, Plant and Equipment, at cost		677.4			598.9
Less accumulated depreciation		366.7			357.2
Property, plant and equipment—net		310.7			241.7
Deferred Income Taxes		5.8			29.9
Goodwill		74.4			50.5
Intangible Assets—net		80.6			56.6
Other Assets		15.7			17.0
TOTAL ASSETS		$	801.5		$	730.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Debt payable within one year		$	1.3		$	1.4
Accounts payable		56.1			44.5
Accrued expenses		53.7			43.8
Liabilities related to facilities held for sale (Note 11)		27.4			27.3
Total Current Liabilities		138.5			117.0
Long-term Debt		244.9			232.9
Deferred Income Taxes		23.8			9.9
Noncurrent Employee Benefits		84.4			80.9
Other Noncurrent Obligations		2.5			1.2
TOTAL LIABILITIES		494.1			441.9
Contingencies and Legal Matters ( Note 10 )
TOTAL STOCKHOLDERS’ EQUITY		307.4			288.7
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	801.5		$	730.6

 

See Notes to Condensed Consolidated Financial Statements

 

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NEENAH PAPER, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

		Nine Months Ended September 30,
		2015			2014
OPERATING ACTIVITIES
Net income		$	39.1		$	41.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23.1			22.4
Stock-based compensation		4.5			4.1
Excess tax benefits from stock-based compensation (Note 7)		(1.1		)	(3.0		)
Deferred income tax provision		12.3			18.0
Asset impairment related to discontinued operations		5.5			—
Non-cash effects of changes in liabilities for uncertain income tax positions		(0.1		)	(2.3		)
(Gain) loss on asset dispositions		(0.1		)	0.1
(Increase) decrease in working capital, net of effect of acquisitions		(8.1		)	2.2
Pension and other postretirement benefits		3.9			(10.4		)
Other		0.5			(0.3		)
NET CASH PROVIDED BY OPERATING ACTIVITIES		79.5			72.6
INVESTING ACTIVITIES
Capital expenditures		(25.7		)	(15.2		)
Acquisitions (Note 3)		(118.2		)	(72.4		)
Purchase of equity investment		—			(2.9		)
Purchase of marketable securities		(0.1		)	(0.4		)
Other		0.5			(0.1		)
NET CASH USED IN INVESTING ACTIVITIES		(143.5		)	(91.0		)
FINANCING ACTIVITIES
Long-term borrowings		44.0			—
Repayments of long-term debt		(27.2		)	(5.2		)
Short-term borrowings		—			6.5
Repayments of short-term debt		—			(25.4		)
Shares purchased (Note 9)		(6.0		)	(0.5		)
Proceeds from exercise of stock options		0.9			3.5
Excess tax benefits from stock-based compensation (Note 7)		1.1			3.0
Cash dividends paid		(15.2		)	(12.6		)
NET CASH USED IN FINANCING ACTIVITIES		(2.4		)	(30.7		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(0.7		)	(0.3		)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(67.1		)	(49.4		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		72.6			73.4
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	5.5		$	24.0
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period for interest, net of interest expense capitalized		$	5.8		$	5.5
Cash paid during period for income taxes		$	12.2		$	5.1
Non-cash investing activities:
Liability for equipment acquired		$	6.0		$	1.9
Liability related to acquisition		$	0.3		$	—

 

See Notes to Condensed Consolidated Financial Statements

 

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NEENAH PAPER, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in millions, except as noted)

 

Note 1.  Background and Basis of Presentation

 

Background

 

Neenah Paper, 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. On January 1, 2015, we changed the name of our fine paper business to fine paper and packaging. The name change better reflects the increasing importance, and plans for continued growth, of our premium packaging products. 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 filtration media, tape and abrasives backings products, and durable label and specialty substrate products. The fine paper and packaging business is a supplier of branded premium printing, packaging and other high end specialty papers primarily in North America. The Company’s premium writing, text and cover papers, and specialty papers are used in commercial printing and imaging applications for corporate identity packages, invitations, personal stationery and high-end advertising, as well as premium labels and luxury packaging.

 

On July 1, 2015, the Company reorganized its internal management structure and, accordingly, addressed its segment reporting structure. As a result of this reorganization, the Other operating segment (composed of the non-premium Index, Tag and Vellum Bristol product lines acquired as part of the purchase of the Wausau brands) was combined with the Fine Paper and Packaging operating segment to reflect the manner in which this business is managed.  In addition, as part of the FiberMark acquisition, the Company acquired certain product lines composed of non-strategic papers sold to converters for end uses such as covering materials for datebooks, diaries, yearbooks and traditional photo albums.  Due to the non-strategic nature of these products, management decided that they would not be managed as part of either the existing Fine Paper and Packaging or Technical Material businesses.  As a result, effective August 1, 2015, these product lines represent an operating segment which does not meet the quantitative threshold  for a reportable segment and are accordingly reported as an Other operating segment.  See Note 12, “Business Segment Information.”

 

On September 7, 2015, the Company reached an agreement for the sale of its paper mill located in Lahnstein, Germany (the “Lahnstein Mill”) to the Kajo Neukirchen Group (the “Buyer”) for cash proceeds of approximately $9 million.  The sale was completed on October 31, 2015.  For the three and nine months ended September 30, 2015, discontinued operations reported on the condensed consolidated statements of operations reflect the results of operations and the estimated loss on sale of the Lahnstein Mill. The condensed consolidated statements of operations for the three and nine months ended September 30, 2014 have been restated to report results of the Lahnstein Mill as discontinued operations.  As of September 30, 2015 and December 31, 2014, the assets and liabilities of the Lahnstein Mill are classified as assets held for sale on the condensed consolidated balance sheet.  See Note 11, “Discontinued Operations and Assets Held for Sale.”

 

On August 1, 2015, the Company purchased all of the outstanding equity of ASP FiberMark, LLC (“FiberMark”) from ASP FiberMark Holdings, LLC (“American Securities”) for a purchase price of approximately $120 million (the “FiberMark Acquisition”). The purchase price of $120 million, subject to adjustments for acquired cash and a working capital true up, resulted in a cash payment of $123 million at closing, and was financed through $80 million of cash on hand and the balance from available borrowing capacity on the Company’s revolving credit facility. FiberMark is a specialty coatings and finishing company with a strong presence in luxury packaging and technical products. In September 2015, the Company announced the planned closure of the acquired Fitchburg, Massachusetts mill (the “Fitchburg Mill”) in the fourth quarter of 2015 to consolidate its manufacturing footprint.  As of September 30, 2015, the assets and liabilities of the Fitchburg Mill are classified as Assets Held for Sale on the condensed consolidated balance sheet.  See Note 3, “Acquisitions” and Note 11, “Discontinued Operations and Assets Held for Sale.”

 

On July 1, 2014, the Company purchased all of the outstanding equity of Crane Technical Materials, Inc. from Crane & Co., Inc. for approximately $72 million. The acquired technical materials business provides performance-oriented wet laid nonwovens media for filtration end markets as well as environmental, energy and industrial uses. The technical materials business has two manufacturing facilities in Pittsfield, Massachusetts. The results of this business are reported in the Technical Products segment from the date of acquisition. See Note 3, “Acquisitions.”

 

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.

 

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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. All significant intercompany balances and transactions have been eliminated from the condensed consolidated financial statements.

 

Earnings per Share (“EPS”)

 

The Company’s restricted stock units (“RSUs”) are paid non-forfeitable common stock dividends and thus meet the criteria of participating securities. Accordingly, EPS has been calculated using the two-class method, under which earnings are allocated to both common stock and participating securities.  Basic EPS has been computed by dividing net income allocated to common stock by the weighted average common shares used in computing basic EPS. For the computation of basic EPS, weighted average RSUs outstanding have been excluded from the calculation of weighted average shares outstanding.

 

Diluted EPS has been computed by dividing net income allocated to common stock by the weighted average number of common shares used in computing basic EPS, further adjusted to include the dilutive impact of the exercise or conversion of common stock equivalents, such as stock options, stock appreciation rights (“SARs”) and target awards of Restricted Stock Units with performance conditions (“Performance Units”), into shares of common stock as if those securities were exercised or converted.  For the three and nine months ended September 30, 2015, approximately 90,000 and 45,000 potentially dilutive options, respectively, were 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 for the respective three month and nine month periods during which the options were outstanding. For the three and nine months ended September 30, 2014, approximately 5,000 and 20,000 potentially dilutive options, respectively, were 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 for the respective three month and nine month periods during which the options were outstanding.

 

The following table presents the computation of basic and diluted EPS (dollars in millions except per share amounts, shares in thousands):

 

Earnings (Loss) Per Basic Common Share

 

		Three Months Ended Ended September 30,						Nine Months Ended September 30,
		2015			2014			2015			2014
Income from continuing operations		$	13.5		$	13.4		$	46.0		$	40.8
Distributed and undistributed amounts allocated to participating securities		(0.2		)	(0.2		)	(0.5		)	(0.5		)
Income from continuing operations available to common stockholders		13.3			13.2			45.5			40.3
Income (loss) from discontinued operations, net of income taxes		(7.4		)	0.2			(6.9		)	1.0
Undistributed amounts allocated to participating securities		0.1			—			0.1			—
Net income available to common stockholders		$	6.0		$	13.4		$	38.7		$	41.3
Weighted-average basic shares outstanding		16,738			16,627			16,737			16,543
Basic earnings (loss) per share
Continuing operations		$	0.79		$	0.79		$	2.72		$	2.43
Discontinued operations		(0.43		)	0.02			(0.41		)	0.06
		$	0.36		$	0.81		$	2.31		$	2.49

 

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Earnings (Loss) Per Diluted Common Share

 

		Three Months Ended Ended September 30,						Nine Months Ended September 30,
		2015			2014			2015			2014
Income from continuing operations		$	13.5		$	13.4		$	46.0		$	40.8
Distributed and undistributed amounts allocated to participating securities		(0.2		)	(0.2		)	(0.5		)	(0.5		)
Income from continuing operations available to common stockholders		13.3			13.2			45.5			40.3
Income (loss) from discontinued operations, net of income taxes		(7.4		)	0.2			(6.9		)	1.0
Undistributed amounts allocated to participating securities		0.1			—			0.1			—
Net income available to common stockholders		$	6.0		$	13.4		$	38.7		$	41.3
Weighted-average basic shares outstanding		16,738			16,627			16,737			16,543
Add: Assumed incremental shares under stock compensation plans		211			286			254			288
Weighted-average diluted shares		16,949			16,913			16,991			16,831
Diluted earnings (loss) per share
Continuing operations		$	0.78		$	0.78		$	2.68		$	2.39
Discontinued operations		(0.43		)	0.02			(0.40		)	0.06
		$	0.35		$	0.80		$	2.28		$	2.45

 

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 asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques attempt to maximize the use of observable inputs and minimize the use of unobservable inputs.

 

The Company’s investments in marketable securities are accounted for as “available-for-sale securities” in accordance with ASC Topic 320, Investments — Debt and Equity Securities (“ASC Topic 320”). Pursuant to ASC Topic 320, marketable securities are reported at fair value on the condensed consolidated balance sheet and temporary unrealized holding gains and losses are reported in other comprehensive income until realized upon sale.  As of September 30, 2015, the Company had $3.2 million in marketable securities classified as “Other Assets” on the condensed consolidated balance sheet. The cost of such marketable securities was $3.2 million. Fair value for the Company’s marketable securities was estimated from Level 1 inputs. The Company’s marketable securities are restricted to the payment of certain post-retirement benefits.

 

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. The following table presents the carrying value and the fair value of the Company’s debt.

 

		September 30, 2015						December 31, 2014
		Carrying Value			Fair Value (a)			Carrying Value			Fair Value (a)
2021 Senior Notes (5.25% fixed rate)		$	175.0		$	173.8		$	175.0		$	169.6
Global Revolving Credit Facilities (variable rates)		62.3			62.3			48.7			48.7
Second German Loan Agreement (2.5% fixed rate)		8.9			8.7			10.6			9.0
Total debt		$	246.2		$	244.8		$	234.3		$	227.3

 

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(a)          The fair value for all debt instruments was estimated from Level 2 measurements.

 

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Note 2.  Accounting Standard Changes

 

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (“ASC Topic 606”). ASU 2014-09 supersedes the revenue recognition guidance in ASC Topic 605, Revenue Recognition. The core principle of the guidance in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in the exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016; however, in August 2015, the FASB issued ASU No. 2015-14, Revenue From Contracts With Customers (Topic 606) (“ASU No. 2015-14”) which affirmed its previously proposed one year deferral of the effective date for ASU 2014-09 to annual reporting periods and the interim periods within those years beginning after December 15, 2017. The Company is still evaluating the impact of adopting ASU 2014-09, but the adoption of ASU 2014-09 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

 

In April 2015, the FASB issued ASU No. 2015-03,  Interest-Imputation of Interest (“ASU 2015-03”). ASU 2015-03 requires that unamortized debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts or premiums. ASU 2015-03 is effective for fiscal years, and the interim periods within those years, beginning after December 15, 2015. In August 2015, the FASB issued ASU No. 2015-15,  Imputation of Interest (Subtopic 835-30) (“ASU No. 2015-15”). ASU No. 2015-15 updates the changes in ASU No. 2015-03 based on an announcement of the staff of the U.S. Securities and Exchange Commission. ASU No. 2015-15 provides an exception to ASU No. 2015-03 allowing debt issuance costs related to line-of-credit arrangements to continue to be presented as an asset regardless of whether there are any outstanding borrowings under such arrangement. The adoption of ASU 2015-03 and ASU No. 2015-15 is not expected to have a material impact on the Company’s consolidated financial position.

 

In July 2015, the FASB issued ASU No. 2015-11,  Inventory (Topic 330) (“ASU No. 2015-11”). ASU No. 2015-11 makes changes to the subsequent measurement of inventory. Currently, an entity is required to measure its inventory at the lower of cost or market, whereby market can be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. ASU No. 2015-11 requires that inventory be measured at the lower of cost and net realizable value, thereby eliminating the use of the other two market methodologies. Net realizable value is defined as the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. These changes do not apply to inventories measured using LIFO (last-in, first-out) or the retail inventory method. Currently, the Company applies the net realizable value market option to measure non-LIFO inventories at the lower of cost or market. ASU No. 2015-11 is effective for fiscal years, and the interim periods within those years, beginning after December 15, 2016. The adoption of ASU No. 2015-11 is not expected to have a material impact on the Company’s consolidated financial position.

 

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805) - Simplifying the Accounting for Measurement-Period Adjustments (“ASU No. 2015-16”).  ASU No. 2015-16 changes the accounting for measurement-period adjustments related to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the acquiree recognized at the acquisition date with a corresponding adjustment to goodwill during the measurement period, as well as revise comparative information for prior periods presented within financial statements as needed, including revising income effects, such as depreciation and amortization, as a result of changes made to the balance sheet amounts of the acquiree. Such adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). ASU No. 2015-16 eliminates the requirement to make such retrospective adjustments, and, instead requires the acquiring entity to record these adjustments in the reporting period they are determined. Additionally, the changes require the acquiring entity to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period income by line item that would have been recorded in previous reporting periods if the adjustment to the balance sheet amounts had been recognized as of the acquisition date. ASU No. 2015-16 is effective for fiscal years, and the interim periods within those years, beginning after December 15, 2015.  The Company is still evaluating the impact of adopting ASU 2015-16 on its consolidated financial position, results of operations and cash flows.

 

As of September 30, 2015, no other amendments to the ASC had 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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Note 3.  Acquisitions

 

Acquisition of FiberMark

 

On August 1, 2015, the Company purchased all of the outstanding equity of ASP FiberMark, LLC (“FiberMark”) from ASP FiberMark Holdings, LLC (“American Securities”) for approximately $123 million. FiberMark is a specialty coatings and finishing company with a strong presence in luxury packaging and technical products. In September 2015, the Company announced the planned closure of the acquired Fitchburg Mill in the fourth quarter of 2015 to consolidate its manufacturing footprint.  As of September 30, 2015, the assets and liabilities of the Fitchburg Mill are classified as Assets Held for Sale on the condensed consolidated balance sheet.  See Note 11, “Discontinued Operations and Assets Held for Sale.”

 

The Company accounted for the transaction using the acquisition method in accordance with ASC Topic 805 “Business Combinations.”  The preliminary allocation of the purchase price is based on estimates of the fair value of assets acquired and liabilities assumed as of August 1, 2015 and 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.  Changes to the valuation of assets and liabilities acquired may result in adjustments to the carrying value of assets and liabilities acquired or goodwill.  The Company has not identified any material unrecorded pre-acquisition contingencies.  Prior to the end of the one-year purchase price allocation period, if information becomes available which would indicate it is probable that such events had occurred as of the acquisition date and the amounts can be reasonably estimated, such items will be included in the final purchase price allocation and may result in an adjustment to the carrying value of assets and liabilities acquired or goodwill. The Company did not recognize any in-process research and development assets as part of the acquisition.

 

The following table summarizes the preliminary allocation of the purchase price to the estimated fair value of the assets acquired and liabilities, including $0.3 million of estimated amounts to be paid as part of the true-up of working capital, assumed:

 

Assets Acquired
Cash and cash equivalents		$	4.8
Accounts receivable		13.7
Inventories		25.6
Deferred income taxes		2.3
Prepaid and other current assets		1.9
Property, plant and equipment		68.9
Non-amortizable intangible assets		1.4
Amortizable intangible assets		25.5
Acquired goodwill		26.7
Total assets acquired		170.8
Liabilities Assumed
Accounts payable		8.0
Accrued expenses		6.1
Deferred income taxes		23.6
Noncurrent employee benefits		9.8
Total liabilities assumed		47.5
Net assets acquired		$	123.3

 

The Company estimated the preliminary fair value of the assets and liabilities acquired in accordance with ASC Topic 820, Fair Value Measurements and Disclosures.  The preliminary fair value of amortizable and non-amortizable intangible assets was estimated by applying a royalty rate to projected revenue, net of tax impacts and adjusted for present value considerations.  The Company estimated the preliminary fair value of acquired property, plant and equipment using a combination of cost and market approaches.  In general, the preliminary fair value of other acquired assets and liabilities was estimated using the cost basis of the acquired FiberMark business.

 

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The excess of the purchase price over the preliminary estimated fair value of the tangible net assets and identifiable intangible assets acquired was recorded as acquired goodwill. The factors contributing to the amount of goodwill recognized are based on several strategic and synergistic benefits that are expected to be realized from the acquisition of FiberMark. These benefits include entry into profitable new markets for premium packaging, performance materials and specialty papers with new capabilities and recognized brands, synergies from combining the business with Neenah’s existing infrastructure, and the opportunity to accelerate sales growth in areas like premium packaging. None of the goodwill recognized as part of the FiberMark acquisition will be deductible for income tax purposes.  However, the Company did acquire all of the tax attributes associated with the FiberMark assets and liabilities, including an insignificant amount of tax deductible goodwill.  Approximately $19.7 million, $6.5 million and $0.5 million of the goodwill acquired in the FiberMark acquisition is allocated to the Technical Products, Fine Paper and Packaging and Other segments, respectively.

 

For the three and nine months ended September 30, 2015, the Company incurred $2.0 million of acquisition and integration costs.  The Company expects to incur an additional $3.2 million of integration costs during the fourth quarter. For the three months ended September 30, 2015, net sales and income from operations before income taxes for the acquired businesses were $24.1 million and $0.8 million (excluding the acquisition related costs described above), respectively.

 

The following selected pro forma consolidated statements of operations data for the nine months ended September 30, 2015 and 2014 was prepared as though the FiberMark acquisition had occurred on January 1, 2014.  The information does not reflect future events that may occur after September 30, 2015 or any operating efficiencies or inefficiencies that may result from the FiberMark acquisition. Therefore, the information is not necessarily indicative of results that would have been achieved had the businesses been combined during the periods presented or the results that the Company will experience going forward.

 

		Nine Months Ended September 30,
		2015			2014
Net sales		$	753.6		$	761.8
Operating income		82.8			77.8
Income from continuing operations		47.2			45.3
Income (loss) from discontinued operations		(6.9		)	1.0
Net income		40.3			46.3
Earnings (Loss) Per Common Share
Basic
Continuing operations		$	2.79		$	2.70
Discontinued Operations		(0.41		)	0.06
		$	2.38		$	2.76
Diluted
Continuing operations		$	2.75		$	2.65
Discontinued Operations		(0.40		)	0.06
		$	2.35		$	2.71

 

Acquisition of Crane Technical Materials

 

On July 1, 2014, the Company purchased all of the outstanding equity of the Crane Technical Materials business for approximately $72 million.  The acquired technical materials business provides performance-oriented wet laid nonwovens media for filtration end markets as well as environmental, energy and industrial uses.  The results of this business are reported in the Technical Products segment from the date of acquisition.

 

The Company accounted for the transaction using the acquisition method in accordance with ASC Topic 805 “Business Combinations.” The allocation of the purchase price is based on the fair value of assets acquired and liabilities assumed as of July 1, 2014. The Company did not identify any material unrecorded pre-acquisition contingencies. The Company did not acquire any in-process research and development assets as part of the acquisition .

 

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Note 4.  Supplemental Balance Sheet Data

 

The following table presents inventories by major class:

 

		September 30, 2015			December 31, 2014
Raw materials		$	31.0		$	26.1
Work in progress		34.2			16.8
Finished goods		61.7			65.8
Supplies and other		4.5			6.5
		131.4			115.2
Adjust FIFO inventories to LIFO cost		(11.6		)	(14.0		)
Total		$	119.8		$	101.2

 

The FIFO values of inventories valued on the LIFO method were $117.4 million and $95.7 million as of September 30, 2015 and December 31, 2014, respectively.

 

The following table presents changes in accumulated other comprehensive income (“AOCI”) for the nine months ended September 30, 2015:

 

		Unrealized foreign currency translation loss			Net gain (loss) from pension and other postretirement liabilities			Accumulated other comprehensive income (loss)
AOCI — December 31, 2014		$	(5.8	)	$	(62.6	)	$	(68.4	)
Other comprehensive loss before reclassifications		(9.1		)	—			(9.1		)
Amounts reclassified from AOCI		—			5.4			5.4
Income (loss) from other comprehensive income items		(9.1		)	5.4			(3.7		)
Provision for income taxes		—			2.0			2.0
Other comprehensive income (loss)		(9.1		)	3.4			(5.7		)
AOCI — September 30, 2015		$	(14.9	)	$	(59.2	)	$	(74.1	)

 

For the three and nine months ended September 30, 2015, the Company reclassified $1.8 million and $5.4 million of costs, respectively, from accumulated other comprehensive income to cost of products sold and selling, general and administrative expenses on the condensed consolidated statements of operations. For the three and nine months ended September 30, 2015, the Company recognized an income tax benefit of $0.7 million and $2.0 million, respectively, related to such reclassifications classified as Provision for income taxes on the condensed consolidated statements of operations.

 

For the three and nine months ended September 30, 2014, the Company reclassified $1.1 million and $3.4 million, respectively, of costs from accumulated other comprehensive income to cost of products sold and selling, general and administrative expenses on the condensed consolidated statements of operations. For the three and nine months ended September 30, 2014, the Company recognized an income tax benefit of $0.4 million and $1.3 million, respectively, related to such reclassifications classified as Provision for income taxes on the condensed consolidated statements of operations.

 

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Note 5.  Debt

 

Long-term debt consisted of the following:

 

		September 30, 2015			December 31, 2014
2021 Senior Notes (5.25% fixed rate) due May 2021		$	175.0		$	175.0
Global Revolving Credit Facilities (variable rates) due December 2019		62.3			48.7
Second German Loan Agreement (2.5% fixed rate) due in 32 equal quarterly installments ending September 2022		8.9			10.6
Total debt		246.2			234.3
Less: Debt payable within one year		1.3			1.4
Long-term debt		$	244.9		$	232.9

 

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 bear interest at a rate of 5.25%, payable in arrears on May 15 and November 15 of each year, commencing on November 15, 2013, and mature on May 15, 2021. The 2021 Senior Notes are fully and unconditionally guaranteed by substantially all of the Company’s domestic subsidiaries. The 2021 Senior Notes were sold in a private placement transaction, have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold absent registration or an applicable exemption from registration requirements.

 

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 September 30, 2015, 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 and Restated Credit Agreement”) by and among the Company and certain of its domestic subsidiaries as the “Domestic Borrowers”, Neenah Services GmbH & Co. KG (“Neenah Services”) and certain of its German subsidiaries as the “German Borrowers”, certain other subsidiaries as the “German Guarantors”, the financial institutions signatory to the Third Amended and Restated Credit Agreement as lenders (the “Lenders”), and JPMorgan Chase Bank, N.A., as agent for the Lenders.

 

The Third Amended and Restated Credit Agreement, among other things: (1) provides for a secured revolving credit facility for the Domestic Borrowers in the maximum principal amount of $125 million (the “U.S. Revolving Credit Facility”); (2) provides a secured, multicurrency, revolving credit facility for the German Borrowers in the maximum principal amount of $75 million (the “German Revolving Credit Facility,” and together with the U.S. Revolving Credit Facility, the “Global Revolving Credit Facilities”); (3) causes the Company and the other Domestic Borrowers to guarantee, among other things, the obligations of the German Borrowers arising under the German Revolving Credit Facility; (4) provides for the Global Revolving Credit Facilities to mature on December 18, 2019; and (5) provides for an accordion feature permitting one or more increases in the Global Revolving Credit Facilities in an aggregate principal amount not exceeding $50 million, such that the aggregate commitments under the Global Revolving Credit Facilities do not exceed $250 million. In addition, the Domestic Borrowers may request letters of credit under the U.S. Revolving Credit Facility in an aggregate face amount not to exceed $20 million outstanding at any time, and the German Borrowers may request letters of credit under the German Revolving Credit Facility in an aggregate face amount not to exceed $2 million outstanding at any time.

 

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 September 30, 2015, the Company had $62.3 million outstanding under the Global Revolving Credit Facilities and $126.6 million of available credit (based on exchange rates at September 30, 2015). As of September 30, 2015, the weighted-average interest rate on outstanding Global Revolving Credit Facility borrowings was 1.90 percent per annum As of December 31, 2014, the Company had $48.7 million outstanding under the Global Revolving Credit Facilities at a weighted-average interest rate of 1.8 percent per annum .

 

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Terms, Covenants and Events of Default. In general, borrowings under the Global Revolving Credit Facilities will bear interest at LIBOR (which cannot be less than zero percent) plus an applicable margin ranging from 1.50% to 2.00%, depending on the amount of availability under the Third Amended and Restated Credit Agreement.  In addition, the Company may elect an Alternate Borrowing Rate (“ABR”) for borrowings under the Global Revolving Credit Facilities. ABR borrowings under the Global Revolving Credit Facilities will bear interest at the highest interest rate shown in the following table:

 

		Applicable Margin
		U.S. Revolving Credit Facility		German Revolving Credit Facility
Prime rate		0.00% - 0.50%		Not applicable
Federal funds rate +0.50%		0.00% - 0.50%		Not applicable
Monthly LIBOR (which cannot be less than zero percent) +1.00%		1.50% - 2.00%		Not applicable
Overnight LIBOR (which cannot be less than zero percent)		Not applicable		1.50% - 2.00%

 

The Company is also required to pay a monthly commitment fee on the unused amounts available under the Global Revolving Credit Facilities at a per annum rate of 0.25%.

 

Subject to certain conditions, the Third Amended and Restated Credit Agreement permits the Company to make up to $10 million in cash repurchases of its outstanding common stock during each fiscal year, beginning in 2015, and to pay up to $25 million in cash dividends to its stockholders during any period of 12 consecutive months; however, such stock repurchases can be made, and such cash dividends can be paid, on an unlimited basis if pro forma aggregate availability under the Global Revolving Credit Facilities is greater than or equal to the greater of (i) $25 million and (ii) 12.5% of the aggregate commitment under the Global Revolving Credit Facilities, at all times during the 60-day period ending on the date of such repurchase or dividend payment.

 

The Third Amended and Restated 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. If the aggregate availability under the Global Revolving Credit Facilities is less than the greater of (i) $25 million and (ii) 12.5% of the maximum aggregate commitments under the Global Revolving Credit Facilities as then in effect, the Company will be subject to increased reporting obligations and controls until such time as availability is more than the greater of (a) $35 million and (b) 17.5% of the maximum aggregate commitments under the Global Revolving Credit Facilities as then in effect.

 

If aggregate availability under the Global Revolving Credit Facilities is less than the greater of (i) $20 million and (ii) 10% of the maximum aggregate commitments under the Global Revolving Credit Facilities as then in effect, the Company is required to comply with a fixed charge coverage ratio (as defined in the Third Amended Credit agreement) of not less than 1.1 to 1.0 for the preceding four-quarter period, tested as of the end of each quarter. As of September 30, 2015, aggregate availability under the Global Revolving Credit Facilities exceeded the minimum required amount, and the Company is not required to comply with such fixed charge coverage ratio.

 

The Company’s ability to pay cash dividends on its common stock is limited under the terms of both the Third Amended and Restated Credit Agreement and the 2021 Senior Notes. As of September 30, 2015, the Company’s ability to pay cash dividends on its common stock under the most restrictive terms of its debt agreements was limited to a total of $25 million in a 12-month period. However, the Company can pay dividends in excess of $25 million in a 12-month period by utilizing “restricted payment baskets” as defined in the indenture for the 2021 Senior Notes and the Third Amended and Restated Credit Agreement.

 

Other Debt

 

As of September 30, 2015, Neenah Germany had €7.9 million ($8.9 million, based on exchange rates at September 30, 2015) outstanding under a project financing agreement (the “Second German Loan Agreement”).  The Second German Loan Agreement matures in September 2022 and principal is repaid in equal quarterly installments beginning in December 2014.

 

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Note 6.  Pension and Other Postretirement Benefits

 

Pension Plans

 

Except as described below for the FiberMark acquisition, substantially all active employees of the Company’s U.S. operations participate in defined benefit pension plans and/or defined contribution retirement plans. In addition, the Company maintains a supplemental retirement pension plan (“SERP”) which is a non-qualified defined benefit plan and a supplemental retirement contribution plan (“SRCP”) which is a non-qualified defined contribution benefit plan. The Company provides benefits under the SERP and the SRCP to the extent necessary to fulfill the intent of its defined benefit and defined contribution retirement plans without regard to the limitations set by the Internal Revenue Code on qualified defined benefit and defined contribution plans. Neenah Germany has defined benefit plans designed to provide a monthly pension upon retirement for substantially all its employees in Germany. There is no legal or governmental obligation to fund Neenah Germany’s benefit plans and as such the Neenah Germany defined benefit plans are currently unfunded. As of September 30, 2015, Neenah Germany had investments of $1.7 million that were restricted to the payment of certain post-retirement employee benefits. As of September 30, 2015, $0.6 million and $1.1 million of such investments are classified as prepaid and other current assets and other assets, respectively, on the condensed consolidated balance sheet.

 

FiberMark Acquisition

 

Defined benefit plans

 

FiberMark sponsors a qualified defined benefit plan covering certain U.S. employees. During 2009, FiberMark fully froze this plan so that additional benefits cannot be earned as a result of additional years of service or increases in annual earnings.  Plan assets are invested principally in equity, government, corporate debt securities and other fixed income mutual funds. FiberMark sponsors a defined benefit plan covering all U.K. employees, which is designed to provide a monthly pension upon retirement.  This plan became fully frozen during 2011 and plan assets are primarily invested in equity mutual funds.

 

Multi-Employer plan

 

The hourly employees at the Lowville, New York facility are covered by a multi-employer defined benefit plan.  FiberMark’s expense under this plan was $0.1 million for the year ended December 31, 2014.

 

FiberMark contributes to the multi-employer pension plan under a collective bargaining agreement which provides retirement benefits for its various union employees.  The risks of participating in multi-employer plans are different from single employer plans as assets contributed are available to provide benefits to employees of other employers and unfunded obligations from an employer that discontinues contributions are the responsibility of all remaining employers. In addition, in the event of a plan’s termination or FiberMark’s withdrawal from the plan, FiberMark may be liable for a portion of the plan’s unfunded vested benefits. FiberMark does not anticipate withdrawal from the plan, nor is it aware of any expected plan terminations.

 

The most recent Pension Protection Act zone status available in 2014 is for the plan’s year-end at December 31, 2014. The zone status is based on information that the Company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded, and plans in the green zone are at least 80% funded.  Information for the multi-employer pension plan in which FiberMark participates is shown below.  The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented.  For the year ended December 31, 2014, FiberMark’s contributions to this plan were less than 5% of total plan contributions.

 

Pension

FIP/RP

Date of

Zone

Status

Collective

Pension

EIN/Pension

Status

Pending or

Contributions

Surcharge

Bargaining

Fund

Plan Number

2014

Implemented

2014

Imposed

Agreement

PACE Industry Union Management Pension Fund

11-6166763

Red

Implemented

$0.1 million

Yes

11/9/16

 

Defined contribution plans

 

FiberMark has several qualified defined contribution plans covering certain hourly and salaried employees.  The plans permit employee salary deferrals, with the Company match ranging from 0% to 3% of salary, depending on the plan and the level of employee deferral.

 

The following table presents the components of net periodic benefit cost:

 

Components of Net Periodic Benefit Cost for Defined Benefit Plans

 

		Pension Benefits						Postretirement Benefits Other than Pensions
		Three Months Ended Ended September 30,
		2015			2014			2015			2014
Service cost		$	1.5		$	1.3		$	0.5		$	0.4
Interest cost		3.7			3.8			0.4			0.4
Expected return on plan assets (a)		(5.0		)	(4.1		)	—			—
Recognized net actuarial loss		1.6			1.0			—			—
Amortization of prior service cost (benefit)		0.1			0.1			(0.1		)	—
Net periodic benefit cost		1.9			2.1			0.8			0.8
Less: Costs related to discontinued operations		0.2			0.2			0.1			0.1
Net periodic benefit cost related to continuing operations		$	1.7		$	1.9		$	0.7		$	0.7

 

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		Pension Benefits						Postretirement Benefits Other than Pensions
		Nine Months Ended September 30,
		2015			2014			2015			2014
Service cost		$	4.4		$	4.0		$	1.3		$	1.2
Interest cost		10.4			11.5			1.2			1.4
Expected return on plan assets (a)		(14.1		)	(12.6		)	—			—
Recognized net actuarial loss		5.0			3.2			0.1			0.1
Amortization of prior service cost (benefit)		0.2			0.2			(0.2		)	(0.1		)
Net periodic benefit cost		5.9			6.3			2.4			2.6
Less: Costs related to discontinued operations		0.7			0.6			0.2			0.3
Net periodic benefit cost related to continuing operations		$	5.2		$	5.7		$	2.2		$	2.3

 

---

(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 Company expects to make aggregate contributions to qualified and nonqualified defined benefit pension trusts and to pay pension benefits for unfunded pension plans of approximately $5 million (based on exchange rates at September 30, 2015) in calendar 2015.  For the nine months ended September 30, 2015, the Company made $1.3 million of such payments.

 

Note 7.  Stock Compensation Plan

 

The Company established the 2004 Omnibus Stock and Incentive Plan (the “2004 Omnibus Plan”) in December 2004 and reserved 3,500,000 shares of $0.01 par value common stock (“Common Stock”) for issuance under the Omnibus Plan. Pursuant to the terms of the 2004 Omnibus Plan, the compensation committee of the Company’s Board of Directors may grant various types of equity-based compensation awards, including incentive and nonqualified stock options, SARs, restricted stock, restricted stock units, restricted stock units with performance conditions and performance units, in addition to certain cash-based awards.

 

At the 2013 Annual Meeting of Stockholders, the Company’s stockholders approved an amendment and restatement of the 2004 Omnibus Plan (as amended and restated the “Omnibus Plan”). The amendment and restatement authorized the Company to reserve an additional 1,577,000 shares of Common Stock for future issuance. As of September 30, 2015, the Company had 1,295,000 shares of Common Stock reserved for future issuance under the Omnibus Plan.  The Company accounts for stock-based compensation pursuant to the fair value recognition provisions of ASC Topic 718, Compensation—Stock Compensation (“ASC Topic 718”).

 

Valuation and Expense Information

 

Substantially all stock-based compensation expense is recorded in selling, general and administrative expenses on the condensed consolidated statements of operations.  The following table summarizes stock-based compensation expense and related income tax benefits.

 

		Three Months Ended Ended September 30,						Nine Months Ended September 30,
		2015			2014			2015			2014
Stock-based compensation expense		$	1.0		$	1.1		$	4.5		$	4.1
Income tax benefit		(0.5		)	(0.5		)	(1.8		)	(1.6		)
Stock-based compensation, net of income tax benefit		$	0.5		$	0.6		$	2.7		$	2.5

 

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