ALPHARETTA, Ga., May 8, 2020 /PRNewswire/ -- Neenah, Inc.
(NYSE: NP) today reported first quarter 2020 results.
First Quarter Highlights/Events
- Net sales of $233.6 million
decreased 3 percent compared with $239.7
million in the prior year. Technical Products segment sales
increased 2 percent while Fine Paper and Packaging revenues
declined 8 percent.
- Operating income of $23.6 million
($27.1 million adjusted) increased
$6.2 million ($9.7 million adjusted) compared to the prior
year. Adjusting items in 2020 consisted of COVID-19 costs,
restructuring and other non-routine costs and acquisition-related
expenses. There were no adjusting items in 2019.
- GAAP earnings per diluted common share (E.P.S.) of $0.97 compared with earnings of $0.69 per share in 2019. On an adjusted basis,
2020 quarterly E.P.S. of $1.12
increased from $0.69 in the prior
year period.
- Cash generated from operations of $14.2
million increased from $3.0
million in the first quarter of 2019 due to lower working
capital requirements and increased earnings.
- Global liquidity as of March 31,
2020 was $195 million,
comprised of $78 million of cash on
hand and available borrowing capacity of $117 million on existing credit facilities.
- Quarterly cash dividends paid of $0.47 per share increased 4 percent from
$0.45 per share in the prior
year.
- John O'Donnell announced his
retirement as CEO effective May 21,
Julie Schertell, COO, named as
successor.
- Multiple actions were initiated in response to the COVID-19
pandemic to keep employees safe and maintain financial
strength.
- Began commercial production of face mask media from filtration
operations in Germany.
Adjusted earnings is a non-GAAP measure used to enhance
understanding and comparability of year-on-year results. Details on
adjusting items and a reconciliation to comparable GAAP measures
are included later in this release.
"Our first quarter results were strong, with volume-driven
growth in Technical Products and continued improvements in margins
and profits across both segments. As the COVID-19 pandemic
accelerated, our focus quickly turned to ensuring the health
and safety of our employees and taking actions to mitigate the
financial impact from the coronavirus and maintain our strong
liquidity position", said Julie
Schertell, Chief Operating Officer. "Our crisis
management team developed and executed rapid response plans
that included multiple new operating protocols to safeguard
employees, such as enhanced sanitation, increased personal
protective equipment and remote working arrangements. In addition,
we implemented financial measures such as strict spending controls,
reduced capital expenditures, footprint optimization, enhanced
working capital efficiencies, and suspended share buyback and
acquisition activities. Our market reputation and competitive
standing coupled with our strong financial position should serve us
well, and I'm confident we'll emerge from this crisis
well-positioned to accelerate our strategies to increase our
profitable growth rate in a capital efficient manner, and provide
our shareholders an attractive return, including a meaningful
dividend."
Quarterly Consolidated Results
Income Statement
Consolidated net sales of $233.6
million in the first quarter of 2020 decreased 3 percent
compared with $239.7 million in the
first quarter of 2019. The decline in revenues resulted from lower
volumes in the Fine Paper and Packaging segment, including impacts
from the change from a major distributor, lower net selling prices
in both segments and unfavorable currency translation effects.
These items were only partly offset by increased volumes in
Technical Products. On a constant currency basis, net sales
declined 2 percent compared with the prior year.
Selling, general and administrative (SG&A) expense of
$26.6 million in the first quarter of
2020 increased from $25.3 million in
the prior year. Costs in 2020 included a higher provision for
uncollectible accounts receivable and incremental legal
expenses.
Operating income of $23.6 million
in the first quarter of 2020 increased $6.2
million compared to $17.4
million in 2019. The increase was primarily due to lower
input costs in both segments, and higher sales volumes and improved
manufacturing cost efficiencies in Technical Products. These items
were only partly offset by lower net selling prices, higher
SG&A expense and lower volume in Fine Paper and Packaging.
Excluding $3.5 million of adjustments
for 2020, adjusted operating income in 2020 of $27.1 million increased $9.7 million from the prior year. Adjusting items
included costs for a special payment to our mill operators due to
COVID-19 conditions, costs for a terminated acquisition, and other
restructuring and non-routine costs.
Net interest expense of $2.9
million in the first quarter of 2020 declined compared with
$3.2 million in the first quarter of
2019 as a result of lower average debt levels in 2020.
The effective income tax rate was 21 percent in the first
quarter of 2020 and 17 percent in the first quarter of 2019. The
rate for the three months ended March 31,
2019 was favorably impacted by a reduction to the reserve
for uncertain tax positions following completion of a German tax
audit.
Cash Flow and Balance Sheet Items
Cash provided from operations of $14.2
million in the first quarter of 2020 increased significantly
compared with $3.0 million in the
first quarter of 2019. The increase resulted primarily from lower
working capital requirements and higher earnings.
Capital spending of $4.8 million
in the first quarter of 2020 increased $0.5
million compared with $4.3
million in the prior year due to the timing of certain
projects. Capital spending in 2020 is projected to be approximately
half of the normal expected range of 2 to 4 percent of sales.
Cash and cash equivalents as of March 31, 2020 were
$77.5 million and compared to
$9.0 million as of December 31, 2019. Debt as of March 31, 2020
of $271.9 million increased
$71.1 million from $200.8 million as of December 31, 2019. Cash on hand was augmented
through borrowings against existing Global Revolving Credit
Facilities as a precautionary measure to protect against any
potential disruption in the banking system.
Quarterly Segment Results
Technical Products quarterly net sales of
$142.2 million in 2019 increased 2
percent from $140.0 million in the
prior year, and were up 3 percent on a constant currency basis. The
revenue increase resulted primarily from higher volumes in the
performance materials and filtration businesses, partly offset by
lower selling prices, a lower-priced mix and unfavorable foreign
currency effects.
Operating income of $16.2 million
in the first quarter of 2020 increased $4.9
million compared with prior year income of $11.3 million. Excluding adjusting items of
$0.8 million in 2020, adjusted
operating income of $17.0 million
increased $5.7 million from
$11.3 million in 2019. Operating
income increased as a result of lower input costs, higher sales
volumes and improved manufacturing costs, which more than offset
lower net selling prices and $1.3
million of higher SG&A expense due to increased
provisions for uncollectible accounts and legal costs.
Fine Paper and Packaging quarterly net sales
of $91.4 million in 2020 decreased 8
percent, from $99.7
million in the prior year. The decline was primarily due to
lower commercial print volume, reflecting unusually weak market
conditions and the impact of a change in the relationship with a
major distributor, along with lower selling prices and a less
favorable sales mix. These items were only partly offset by sales
growth in both premium packaging and the consumer channel.
Operating income of $14.8 million
in the first quarter of 2020 increased $2.9
million from $11.9 million in
the prior year. Excluding $1.4
million of adjusting items in 2020, adjusted operating
income of $16.2 million increased
$4.3 million from $11.9 million in the prior year as a result of
lower input costs and other cost improvements, partly offset by
lower sales volumes and lower net selling prices.
Unallocated Corporate costs in the first quarter
of 2019 of $7.4 million increased
$1.6 million from the prior year
period. Excluding 2020 adjustments of $1.3
million primarily related to acquisition and due diligence
costs, adjusted unallocated corporate expenses increased
$0.3 million.
Impact of COVID-19
Along with virtually all other companies, Neenah is dealing with
the outbreak and pandemic of the novel coronavirus, known as
"COVID-19". While it is currently too early to estimate the longer
term impact, as a result of significantly reduced global economic
activity and resulting customer demand, the Company expects the
pandemic to have a material adverse impact on its business and
financial results, including sales, earnings and cash flows in
upcoming quarters. Similar to expectations for gross domestic
product, the most significant impact of COVID-19 on customer demand
is expected in the second quarter, but it had already begun to
impact demand in March, especially in our fine paper and packaging
business.
Neenah has been designated as an "essential business" by global
governments and all facilities are operating. In addition, the
Company has not had any significant disruptions to the supply chain
or workforce and are actively managing these areas to support the
well-being of employees and business continuity.
Actions taken include:
- New operating protocols, enhanced sanitation and cleaning,
social distancing, restricted plant access, increased personal
protective equipment, and temperature checks at mill
facilities
- Remote working arrangements for all salaried employees
- Reductions in discretionary spending in areas like maintenance,
advertising and other SG&A expenses
- Significant decrease in capital spending
- Wage increase deferral and hiring freeze
- Idling a fine paper machine in Wisconsin and consolidating production onto
other assets
- Temporarily deferring acquisitions
- Suspending purchases under the 2020 Stock Purchase Plan
- Utilizing government-sponsored tax payment deferrals
- Decreasing discretionary pension contributions
- Close management of working capital and monitoring of
suppliers
- Increasing cash on balance sheet by almost $70 million by utilizing available revolving
credit facility capacity
- Beginning commercial production of face mask media from
filtration operations in Germany
The Company has developed various scenario plans and thresholds
for additional actions, if warranted based upon conditions, and
will continue to monitor the progress of the pandemic and its
potential impact on the business. Based on current management
expectations, the strong balance sheet and liquidity position,
along with actions taken to date, provide Neenah with the necessary
capital to address the COVID-19 pandemic for the foreseeable
future.
Reconciliation to GAAP Measures
The Company will report adjustments to GAAP figures when they
are believed to improve the comparability and understanding of
results. In assessing COVID-19 impacts, only costs which were
unusual, incremental and directly attributable to mitigating the
effects COVID-19 on operations were excluded.
A reconciliation of adjusted income measures to comparable GAAP
measures is provided below:
|
|
|
|
|
First
Quarter
|
Continuing Operations
($ Millions, except share and per share data)
|
2020
|
|
2019
|
GAAP Operating
Income
|
$
23.6
|
|
$17.4
|
COVID-19
costs
|
1.1
|
|
-
|
Restructuring and
other non-routine costs
|
1.0
|
|
-
|
Acquisition and due
diligence costs
|
1.0
|
|
-
|
2016-19 indirect tax
costs
|
0.4
|
|
-
|
Adjusted Operating
Income
|
$
27.1
|
|
$
17.4
|
|
|
|
|
GAAP
Income
|
$
16.4
|
|
$
11.8
|
COVID-19
costs
|
0.8
|
|
-
|
Restructuring and
other non-routine costs
|
0.7
|
|
-
|
Acquisition and due
diligence costs
|
0.8
|
|
-
|
2016-19 indirect tax
costs
|
0.3
|
|
-
|
Adjusted
Income
|
$
19.0
|
|
$
11.8
|
|
|
|
|
GAAP Earnings per
Diluted Common Share
|
$
0.97
|
|
$
0.69
|
COVID-19
costs
|
0.05
|
|
-
|
Restructuring and
other non-routine costs
|
0.04
|
|
-
|
Acquisition and due
diligence costs
|
0.04
|
|
-
|
2016-19 indirect tax
costs
|
0.02
|
|
-
|
Adjusted Earnings per
Share
|
$
1.12
|
|
$
0.69
|
|
|
|
|
Diluted Shares (in
thousands)
|
16,850
|
|
16,921
|
Conference Call
A conference call and webcast to discuss first quarter earnings
and other matters of interest will be held as noted below. To
participate actively in the call, parties should use the telephone
dial-in numbers.
Date: Monday, May 11,
2020
Time: 11:00 AM (EDT)
Dial-In #: (877) 444-2208 Toll Free or (412) 317-5236
International
To be joined into: Neenah Call
Interested parties are invited to listen to the call live via
webcast by visiting www.neenah.com and clicking on
Investor Relations. Supplemental Information can be found on the
Company's web site under the Investor Relations - Presentations
& Events section. An archive of the webcast will be available
on the Company's web site until June 8,
2020.
A replay of the call will be available until May 18, 2020 and can be accessed as follows:
Dial-In #: (877) 344-7529 Toll
Free or (412) 317-0088 International
Replay Access Code: 10143127
About Neenah
Neenah is a leading global specialty materials company focused
on premium niche markets that value performance and image. Key
products and markets include advanced filtration media, specialized
performance substrates used for digital transfer, tape and abrasive
backings, labels and other products, and premium printing and
packaging papers. The Company is headquartered in Alpharetta, Georgia and its products are sold
worldwide from manufacturing operations in the United States, Europe and the United Kingdom. Additional
information can be found at the Company's web site,
www.neenah.com.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release may constitute
"forward-looking" statements as defined in Section 27A of the
Securities Act of 1933 (the "Securities Act"), Section 21E of
the Securities Exchange Act of 1934 (the "Exchange Act"), the
Private Securities Litigation Reform Act of 1995 (the "PSLRA"), or
in releases made by the U.S. Securities and Exchange Commission
("SEC"), all as may be amended from time to time. Statements
contained in this press release that are not historical facts may
be forward-looking statements within the meaning of the PSLRA and
caution is given to investors that any forward-looking statements
are not guarantees or indicative of future performance. These
forward-looking statements rely on a number of assumptions
concerning future events and are subject to risks, uncertainties
and other factors, many of which are outside the Company's control
and could cause actual results to materially differ from such
statements. Such risks, uncertainties and other factors include,
but are not necessarily limited to, those set forth under the
captions "Cautionary Note Regarding Forward-Looking Statements"
and/or "Risk Factors" of the latest Form 10-K filed with the
SEC as periodically updated by subsequently filed Form 10-Qs
(these securities filings can be located at www.neenah.com). Unless
specifically required by law, the Company assumes no obligation to
update or revise these forward-looking statements to reflect new
events or circumstances. These cautionary statements are
being made pursuant to the Securities Act, the Exchange Act and the
PSLRA with the intention of obtaining the benefits of the "safe
harbor" provisions of such laws.
Contact: Neenah, Inc.
Bill
McCarthy
Vice President — Investor Relations
678-518-3278
NEENAH, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In
millions, except share and per share data)
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2020
|
|
2019
|
Net
sales
|
|
$
233.6
|
|
$
239.7
|
Cost of products
sold
|
|
179.6
|
|
196.0
|
Gross
Profit
|
|
54.0
|
|
43.7
|
Selling, general and
administrative expenses
|
|
26.6
|
|
25.3
|
COVID-19
costs
|
|
1.1
|
|
-
|
Restructuring and
other non-routine costs
|
|
1.4
|
|
-
|
Acquisition and due
diligence costs
|
|
1.0
|
|
-
|
Other expense -
net
|
|
0.3
|
|
1.0
|
Operating
Income
|
|
23.6
|
|
17.4
|
Interest expense -
net
|
|
2.9
|
|
3.2
|
Income from
continuing operations before income taxes
|
|
20.7
|
|
14.2
|
Provision for income
taxes
|
|
4.3
|
|
2.4
|
Net
income
|
|
$
16.4
|
|
$
11.8
|
|
|
|
|
|
Earnings Per
Common Share
|
|
|
|
|
Basic
|
|
$
0.97
|
|
$
0.70
|
Diluted
|
|
$
0.97
|
|
$
0.69
|
|
|
|
|
|
Weighted Average
Common Shares Outstanding (in thousands)
|
|
|
|
|
Basic
|
|
16,817
|
|
16,862
|
Diluted
|
|
16,850
|
|
16,921
|
NEENAH, INC.
AND SUBSIDIARIES BUSINESS SEGMENT DATA (In
millions)
(Unaudited)
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2020
|
|
2019
|
Net
Sales:
|
|
|
|
Technical
Products
|
$
142.2
|
|
$
140.0
|
Fine Paper and
Packaging
|
91.4
|
|
99.7
|
Consolidated
|
$
233.6
|
|
$
239.7
|
|
|
|
|
Operating
Income:
|
|
|
|
Technical
Products
|
$
16.2
|
|
$
11.3
|
Fine Paper and
Packaging
|
14.8
|
|
11.9
|
Unallocated Corporate
Costs
|
(7.4)
|
|
(5.8)
|
Consolidated
|
$
23.6
|
|
$
17.4
|
RECONCILIATION OF
SEGMENT OPERATING INCOME
(In millions)
(Unaudited)
|
|
|
|
|
Three Months Ended
March 31,
|
|
2020
|
|
2019
|
Technical
Products
|
|
|
|
GAAP Operating
Income
|
$
16.2
|
|
$
11.3
|
COVID-19
costs
|
0.6
|
|
-
|
Restructuring and
other non-routine costs
|
0.2
|
|
-
|
Adjusted Operating
Income
|
17.0
|
|
11.3
|
|
|
|
|
Fine Paper and
Packaging
|
|
|
|
GAAP Operating
Income
|
14.8
|
|
11.9
|
COVID-19
costs
|
0.5
|
|
-
|
Restructuring and
other non-routine costs
|
0.5
|
|
-
|
2016-19 indirect tax
costs
|
0.4
|
|
-
|
Adjusted Operating
Income
|
16.2
|
|
11.9
|
|
|
|
|
Unallocated
Corporate Costs
|
|
|
|
GAAP Operating
Loss
|
(7.4)
|
|
(5.8)
|
Restructuring and
other non-routine costs
|
0.3
|
|
-
|
Acquisition and due
diligence costs
|
1.0
|
|
-
|
Adjusted Operating
Loss
|
(6.1)
|
|
(5.8)
|
|
|
|
|
Consolidated
|
|
|
|
GAAP Operating
Income
|
23.6
|
|
17.4
|
COVID-19
costs
|
1.1
|
|
-
|
Restructuring and
other non-routine costs
|
1.0
|
|
-
|
Acquisition and due
diligence costs
|
1.0
|
|
-
|
2016-19 indirect tax
costs
|
0.4
|
|
-
|
Adjusted Operating
Income
|
$
27.1
|
|
$
17.4
|
NEENAH, INC.
AND SUBSIDIARIES
SELECTED BALANCE SHEET DATA (In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$
77.5
|
|
$
9.0
|
Accounts receivable -
net
|
118.6
|
|
102.6
|
Inventories
|
131.4
|
|
122.8
|
Prepaid and other
current assets
|
16.5
|
|
18.3
|
Total Current
Assets
|
344.0
|
|
252.7
|
Property, Plant
and Equipment - net
|
374.5
|
|
380.6
|
Lease Right-of-Use
Assets
|
21.8
|
|
13.9
|
Deferred Income
Taxes
|
11.6
|
|
13.4
|
Goodwill and Other
Intangibles - net
|
147.5
|
|
149.8
|
Other Noncurrent
Assets
|
16.9
|
|
17.4
|
Total
Assets
|
$
916.3
|
|
$
827.8
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
Liabilities
|
|
|
|
Debt payable within
one year
|
$
3.3
|
|
$
2.6
|
Lease liabilities
payable within one year
|
2.7
|
|
1.9
|
Accounts
payable
|
57.8
|
|
48.9
|
Accrued
expenses
|
48.0
|
|
47.0
|
Total Current
Liabilities
|
111.8
|
|
100.4
|
Long-term
Debt
|
268.6
|
|
198.2
|
Noncurrent Lease
Liabilities
|
20.2
|
|
13.0
|
Noncurrent
Employee Benefits
|
89.8
|
|
93.1
|
Deferred Income
Taxes
|
12.0
|
|
12.9
|
Other Noncurrent
Obligations
|
4.1
|
|
3.9
|
Total
Liabilities
|
506.5
|
|
421.5
|
Stockholders'
Equity
|
409.8
|
|
406.3
|
Total Liabilities
and Stockholders' Equity
|
$
916.3
|
|
$
827.8
|
NEENAH, INC.
AND SUBSIDIARIES SELECTED CASH FLOW DATA (In
millions)
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2020
|
|
2019
|
Operating
Activities
|
|
|
|
Net income
|
$
16.4
|
|
$
11.8
|
Depreciation and
amortization
|
8.6
|
|
8.8
|
Stock-based
compensation
|
1.5
|
|
1.9
|
Deferred income tax
provision
|
1.1
|
|
0.5
|
Provision for
uncollectible accounts receivable
|
1.0
|
|
-
|
Non-cash effects of
changes in liabilities for uncertain income tax
positions
|
-
|
|
(0.4)
|
Increase in working
capital
|
(13.7)
|
|
(20.9)
|
Pension and other
postretirement benefits
|
(0.4)
|
|
1.5
|
Other
|
(0.3)
|
|
(0.2)
|
Net cash provided by
operating activities
|
14.2
|
|
3.0
|
|
|
|
|
Investing
Activities
|
|
|
|
Capital
expenditures
|
(4.8)
|
|
(4.3)
|
Purchase of
marketable securities
|
-
|
|
(0.2)
|
Other
|
(0.1)
|
|
(0.2)
|
Cash used in
investing activities
|
(4.9)
|
|
(4.7)
|
|
|
|
|
Financing
Activities
|
|
|
|
Long-term
borrowings
|
88.7
|
|
62.9
|
Repayments of
long-term debt
|
(17.0)
|
|
(55.5)
|
Debt issuance
costs
|
(0.5)
|
|
(0.2)
|
Cash dividends
paid
|
(8.0)
|
|
(7.6)
|
Shares
purchased
|
(3.8)
|
|
(0.3)
|
Cash provided by
(used in) financing activities
|
59.4
|
|
(0.7)
|
|
|
|
|
Effect of exchange
rates on cash and cash equivalents
|
(0.2)
|
|
0.1
|
Net increase
(decrease) in cash and cash equivalents
|
68.5
|
|
(2.3)
|
Cash and cash
equivalents, beginning of the year
|
9.0
|
|
9.9
|
Cash and cash
equivalents, end of period
|
$
77.5
|
|
$
7.6
|
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SOURCE Neenah, Inc.