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Neenah, Inc. (NYSE:NP) today reported third quarter 2020 results.
Third Quarter Highlights
*Net sales of $190.7 million increased 18 percent versus the second quarter with strong rebounds in each segment.
*Filtration revenues increased 9 percent versus the prior year and contributed to a $3 million year-on-year increase in Technical Products operating income.
*Consolidated operating income of $13.9 million compared with $19.0 million in the prior year. Excluding adjusting items of $2.0 million in 2020 and $2.5 million in 2019, operating income increased $15.4 million versus the second quarter, but declined from $21.5 million in 2019 to $15.9 million in 2020.
*Adjusted operating margins returned to double-digit levels in both segments.
*Cash generated from operations of $36.8 million increased from $33.4 million in the prior year as a result of actions in 2020 to carefully manage working capital and reduce spending.
*Liquidity of $182 million as of September 30, 2020 increased from $159 million as of June 30, 2020.
*Quarterly cash dividends paid of $0.47 per share increased 4 percent from $0.45 per share in the prior year.
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.
“I was pleased with third quarter results, as we significantly increased revenues from the second quarter and both segments returned to double-digit EBIT margins. As expected, Technical Products led the way, with profits up over 30% versus prior year. Our top line performance, exceptional cash generation and improved profit are a testament to the actions we’ve taken to drive revenue and manage costs and working capital,” said Julie Schertell, Chief Executive Officer. “Additionally, we continued to advance key initiatives that will create long-term shareholder value, including expanding in targeted growth platforms with innovative new products, and implementing a global manufacturing model expected to deliver over $20 million in annual savings. I’m encouraged by our progress and momentum, and as we head into 2021 we’ll remain focused on initiatives that accelerate growth and increase margins, while maintaining our commitment to a strong balance sheet and providing shareholders with an attractive dividend.”
Quarterly Consolidated Results
Consolidated net sales of $190.7 million in the third quarter of 2020 decreased 18 percent compared with $231.8 million in the third quarter of 2019. The decline in revenues resulted primarily from lower volumes caused by continued adverse impacts of COVID-19. Net sales declined 6% in Technical Products and 33% in Fine Paper and Packaging from the prior year period, with a more pronounced decline in the Fine Paper and Packaging segment due to reductions in end-use demand for commercial print papers used primarily in advertising and marketing campaigns. Impacts from lower net selling prices were partially offset by favorable currency effects. While down versus prior year, third quarter consolidated net sales increased 18% from the second quarter 2020.
Selling, general and administrative (SG&A) expense of $19.1 million in the third quarter of 2020 decreased $4.0 million compared with $23.1 million in the prior year. Costs in 2020 were lower due to the significant actions taken to manage spending and reduce costs this year in areas such as marketing, travel and payroll.
Operating income of $13.9 million in the third quarter of 2020 decreased compared to operating income of $19.0 million in 2019. Lower income in 2020 resulted from decreased volumes due to COVID-19 that could not be fully offset at a consolidated level by spending reductions. While Technical Products operating income increased, with reduced spending and a more profitable mix offsetting unfavorable volume impacts, a larger volume decline in Fine Paper and Packaging was only partly offset by spending reductions. Both segments benefited modestly from lower input prices net of selling price changes. Excluding adjusting items of $2.0 million and $2.5 million in 2020 and 2019, respectively, adjusted operating income of $15.9 million decreased $5.6 million from $21.5 million in the prior year.
Net interest expense of $3.6 million in the third quarter of 2020 was higher than the $2.8 million in the third quarter of 2019. In addition to higher debt and amortization expense, 2020 interest included an incremental $0.4 million due to an overlap in interest incurred in July on both our Senior Notes and Term Loan B, prior to the redemption of the 2021 Senior Notes on July 16, 2020.
In the third quarter of 2020 and 2019, the effective income tax rate was 23 percent and 11 percent, respectively. The tax rate in both periods benefited from the reversal of reserves for uncertain tax positions following expiration of statutes of limitation for audit. In 2020, this benefit was offset by an increase in the tax provision due to a change in the projected mix of income from higher tax rate jurisdictions.
GAAP earnings per diluted common share (E.P.S.) of $0.46 decreased from earnings of $0.84 per share in 2019. On an adjusted basis, E.P.S. of $0.55 in the quarter compared with $0.95 in the prior year period.
more detail at: https://ir.neenah.com/investors/press-releases/press-release-details/2020/Neenah-Reports-Third-Quarter-2020-Results/default.aspx