Neenah, Inc. (NYSE:NP) today reported 2020 fourth quarter and full year results.
Fourth Quarter Highlights
*Consolidated revenues of $206.9 million were 8 percent higher than the third quarter, but down 3 percent compared to the prior year. The sequential quarterly increase was due to a continued recovery in both segments with a pronounced rebound in Technical Products.
*Technical Products revenues of $137.1 million were up 11 percent from the prior year, with record fourth quarter adjusted operating income of $18.0 million driven by record sales in the filtration business.
*Consolidated operating income of $14.9 million compared with $22.1 million in the prior year. Operating income included adjusting items of $6.0 million in 2020 and $(1.2) million in 2019 as detailed further in this release. Excluding these items, adjusted operating income increased $5.0 million versus the third quarter, and equaled prior year at $20.9 million.
*Earnings per diluted common share of $0.59 compared to $0.92 in the fourth quarter of 2019.
*Adjusted earnings per share of $0.87 was equal with the prior year. Adjustments in 2020 were primarily for a non-cash impairment charge, pension and SERP settlements, costs associated with COVID-19, and income tax adjustments. In 2019, adjustments were primarily to eliminate a pension plan curtailment gain. Details on all adjusting items are included later in this release.
*Available liquidity of $176 million remained strong, with cash generated from operations of $13.0 million.
*Quarterly cash dividends of $0.47 per share increased 4 percent compared to $0.45 per share in the prior year.
Full Year Highlights
*Revenues of $792.6 million decreased 16 percent compared to 2019, as a result of lower volumes due to the COVID-19 pandemic.
*Both revenues and adjusted operating income for the Technical Products filtration businesses increased versus the prior year and included the successful commercialization of high performance face mask media in Europe.
*A loss per diluted common share in 2020 of ($0.96) compared to earnings of $3.26 per share in 2019. On an adjusted basis, earnings per share of $2.46 in 2020 compared with $3.47 per share in 2019.
*In addition to new protocols implemented to protect the health and safety of employees, the Company began implementation of the Neenah Operating System, which will deliver improvements in efficiencies and safety and provide over $20 million of annual cost savings when fully implemented.
*In April, the Company published its annual Corporate Sustainability Report, highlighting initiatives and progress in addressing Environmental, Social and Governance matters.
*In July, the Company successfully refinanced its Senior Notes and entered into a $200 million Term B Loan due in 2027.
*The Company maintained strong liquidity throughout 2020 with careful management of working capital and spending, and ended the year with cash and equivalents of $37 million and no borrowings against its $175 million revolving credit facility.
“In the fourth quarter, both business segments continued to deliver improving top and bottom line results, led by strong performance across our Technical Products businesses. Looking back over the past year, our teams have done a tremendous job rising to the unique challenges in 2020 as they focused on protecting the health and safety of our employees, serving the needs of our customers, and maintaining a strong financial position by successfully managing costs and working capital,” said Julie Schertell, Chief Executive Officer. “As we enter 2021, we’re building on this momentum with organic initiatives to drive sales growth and margin improvement as we expand in our four targeted growth platforms, and supplement this with a disciplined and robust M&A pipeline. I’m encouraged by our market and financial positions, our increasing capabilities and the opportunities ahead.”
Fourth Quarter Consolidated Results
Income Statement
Consolidated net sales of $206.9 million in the fourth quarter of 2020 decreased 3 percent compared with $213.6 million in the prior year. Revenues in Technical Products increased 11 percent, while revenues in Fine Paper & Packaging were 23 percent lower. The decrease in consolidated revenues resulted primarily from lower Fine Paper & Packaging volume, and lower net selling prices in both segments, partly offset by higher sales volume in Technical Products and favorable currency effects. While down versus the prior year, fourth quarter consolidated net sales increased 8% from the third quarter 2020.
Selling, general and administrative (SG&A) expense of $21.5 million in the fourth quarter of 2020 decreased $1.8 million compared with 2019 primarily as a result of the significant actions taken in 2020 to manage spending and reduce costs in areas such as marketing, travel and payroll.
Operating income of $14.9 million in 2020 decreased 33 percent compared with $22.1 million in the fourth quarter of 2019. In 2020, operating income included unfavorable adjusting items totaling $6.0 million and in 2019, operating income included favorable items totaling $1.2 million. Excluding these items, adjusted operating income of $20.9 million in 2020 was unchanged from 2019. Operating income in 2020 benefited from lower manufacturing and input costs, net of selling price reductions, and reduced SG&A spending, which were offset by lower Fine Paper & Packaging volumes.
Net interest expense of $3.1 million in the fourth quarter of 2020 increased from $2.8 million in the prior period primarily due to higher amortization expense in 2020 for deferred financing costs on the Term Loan B.
The effective tax rate in the fourth quarter of 2020 was 15 percent compared to a rate of 19 percent in the fourth quarter of 2019. In 2020, while excluded from adjusted earnings, the tax rate included a reduction in tax expense of $0.9 million from utilization of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). Among the benefits of the CARES Act was the ability to enhance the value of tax net operating losses (“NOLs”) by allowing the carryback of NOLs to tax years in which the U.S. federal statutory income tax rate was 35%. In addition to the income tax benefit of $0.9 million, a corresponding tax receivable of $8.0 million was recorded for this tax refund to be received during 2021.
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