ALPHARETTA, Ga.-- Neenah, Inc. (NYSE:NP) today reported second quarter 2021 results.
Second Quarter Highlights
- Net sales of $269.3 million were up 67 percent from prior year, with strong rebounds in each segment. Excluding the effects of the Itasa acquisition, net sales were 46 percent higher than prior year and up 4 percent from first quarter.
- Record net sales in Technical Products were led by organic growth in all product categories. Net sales were up 79 percent from prior year and 24 percent from first quarter, primarily from the Itasa acquisition. Excluding the acquisition, quarterly sales were up 1% from a strong first quarter.
- Net sales in Fine Paper and Packaging were up 48 percent from prior year and 10 percent higher than first quarter, the latter increase driven by growth in premium packaging and consumer products.
- Adjusted operating margins for both segments were impacted by higher input costs and lower value mix, partly offset by higher volumes and manufacturing efficiencies.
- Liquidity was strong at $196 million as of June 30, 2021 and consistent with March 31, 2021, in spite of higher working capital and capital expenditures.
- Our largest North American facility was one of 12 recipients of the 2021 Energy Efficiency Excellence Award from Focus on Energy®. The facility earned the award for its energy management systems and efforts to continuously improve energy performance.
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.
"Neenah’s sales momentum continued in the second quarter, and demand for our products is strong, with improving conditions in our end-markets, share gains, and new product wins with key customers. Like most companies, we are facing pressures from rising input costs and supply chain disruptions, and we have taken pricing and other actions to address this challenging environment. We expect to offset these impacts over time, as we have demonstrated historically," said Julie Schertell, Chief Executive Officer. "We also took several strategic steps in the quarter to drive revenue growth and margins, including the successful acquisition of Itasa, announcement of $13 million of new capacity for the release liner business to support continued growth, restarting of an idled asset to support demand in Fine Paper and Packaging, and the closure of the Appleton facility from which we expect approximately $7-8 million per year profit improvement. Combined with early progress with the Neenah Operating System and our renewed innovation efforts, we are executing our strategy and positioning the business to achieve our goals of mid-single digit revenue growth and attractive mid-teen operating margins."
Quarterly Consolidated Results
Consolidated net sales of $269.3 million in the second quarter of 2021 increased 67 percent compared with $161.4 million in the second quarter of 2020. The increase includes strong volume growth in both segments, including net sales from the Itasa acquisition of $33.2 million. The impact from lower net selling prices was mostly offset by favorable currency effects. Excluding the Itasa acquisition, net sales grew 4% from the first quarter of 2021.
Selling, general and administrative (SG&A) expense of $27.5 million in the second quarter of 2021 increased $6.7 million compared with $20.8 million in the prior year. The majority of the increase was due to additional SG&A from the Itasa acquisition. Costs in 2020 were lower due to the significant actions taken to manage spending and temporarily reduce costs in areas such as marketing, travel and payroll.
Operating loss of $32.6 million in the second quarter of 2021 decreased compared to operating loss of $58.5 million in 2020. The operating loss of $32.6 million in 2021 resulted primarily from non-routine charges of $51.9 million, including asset restructuring costs resulting from the Appleton Mill closure, loss on debt extinguishment, acquisition and integration costs, pension settlement losses and other restructuring items as detailed in the GAAP reconciliation table. Operating loss of $58.5 million in 2020 resulted primarily from the $59.0 million of mostly non-cash costs for impairments and write-offs due to Appleton impairment and COVID-19 impacts. Excluding adjusting items in both years, adjusted operating income of $19.3 million increased $18.8 million from $0.5 million in the prior year. The increase was driven by strong sales volume growth in both segments, including the effects of the Itasa acquisition and higher manufacturing efficiencies, partly offset by higher input costs and lower value sales mix in Technical Products. Refer to the GAAP reconciliation table later in this release for details of adjusting items.
Net interest expense of $4.8 million in the second quarter of 2021 was higher than the $3.0 million in the second quarter of 2020, due to the higher borrowing under the upsized Term Loan B (as discussed below) and amortization of the associated deferred financing costs.
The effective income tax rate benefit applied to the pre-tax loss was (21) percent and (19) percent in the second quarter of 2021 and 2020, respectively. The tax benefit was reduced in 2021 by a $2.9 million charge resulting from the elimination of certain deferred tax assets due to the Appleton Mill closure. The 2020 tax rate reflected a $4.0 million charge to increase the valuation allowance against the deferred tax asset for state tax credits and net operating losses.
The GAAP loss per diluted common share of $(1.76) in 2021 compared to $(2.98) in 2020. On an adjusted basis, earnings per share of $0.65 in the 2021 quarter increased from $(0.08) in the prior year period, reflecting our sales recovery and the accretive benefits of the Itasa acquisition.
Legal Notice: Paper Advance is not responsible for the accuracy or availability of content on external websites.