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| |
| Lydall, Inc | Telephone 860-646-1233 |
| One Colonial Road | Facsimile 860-646-4917 |
| Manchester, CT 06042-2378 | www.lydall.com |
LYDALL ANNOUNCES FINANCIAL RESULTS
FOR THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2019
MANCHESTER, CT - February 25, 2020 - LYDALL, INC. (NYSE: LDL) today announced financial results for the fourth quarter and year ended December 31, 2019.
HIGHLIGHTS - Q4 2019 vs. Q4 2018
GAAP Financials
| |
| • | Net sales of $193.3 million, down 7.9% |
| |
| • | Gross margin of 14.5%, down 540 basis points |
| |
| • | Operating loss of ($68.5) million compared to operating income of $13.2 million |
| |
| – | Goodwill and other long-lived asset impairment charges of $64.2 million, or ($3.71) per share |
| |
| – | CEO transition and employee severance expenses of $4.2 million, or ($0.19) per share |
| |
| • | Loss per share of ($4.07), compared to earnings per share of $0.42 |
| |
| • | Cash generated from operations of $23.9 million, compared to $30.2 million |
Non-GAAP Financial Measures*
| |
| • | Organic sales decline of (8.3%) |
| |
| • | Adjusted gross margin of 15.1%, down 520 basis points |
| |
| • | Adjusted operating margin down 680 basis points |
| |
| • | Adjusted loss of ($0.17) per share, compared to adjusted earnings of $0.52 per share |
| |
| • | Adjusted EBITDA of $12.4 million, compared to $25.4 million |
*Reconciliations of the Non-GAAP financial measures to Lydall’s GAAP financial results are included at the end of this release. See also “Use of Non-GAAP Financial Measures” below.
Randall B. Gonzales, Executive Vice President and Chief Financial Officer, stated, "Fourth quarter results were disappointing, and included non-cash impairment charges of $64.2 million principally due to the under-performance of the Interface business in our Performance Materials segment.
"Organic sales declined 8.3% on further weakening of demand for fiber based gasket solutions in the Interface business, lower demand for industrial filtration products in China and Europe, and lower domestic automotive volumes attributable to the General Motors strike.
"Adjusted EBITDA was negatively impacted by manufacturing inefficiencies in the Thermal Acoustical Solutions segment and unfavorable mix and lower cost absorption in the Performance Materials segment. Despite lower sales volumes, the Technical Nonwovens segment reported improved adjusted EBITDA margin in the quarter compared to the fourth quarter of 2018.
"Overall, we were pleased with our cash flow from operations of $87 million in 2019, enabling us to pay down $52 million of debt."
Q4 2019 Results
Net sales decreased by $16.7 million, or 7.9%, to $193.3 million, compared to $209.9 million in the fourth quarter of 2018 primarily from lower sales in the Performance Materials ("PM") and the Technical Nonwovens ("TNW") business segments. On an organic basis, PM segment's net sales declined by 15.1% primarily from lower sealing and advanced solutions product sales. Weak demand for industrial filtration products in China and Europe, as well as lower sales of automotive rolled goods to the Thermal Acoustical Solutions ("TAS") segment, contributed to organic sales compression of 8.4% in the TNW business segment. Organic sales decline was 3.1% in the TAS segment predominantly due to the General Motors strike in October that negatively impacted net sales by approximately $3.2 million in the quarter.
Gross margin was 14.5%, compared to 19.9% in the fourth quarter of 2018, and on an adjusted basis, declined 520 basis points driven primarily by declines in the TAS and PM segments with relatively flat TNW gross margin. The TAS segment gross margin decline was due to manufacturing inefficiencies which drove increased labor, outsourcing and logistics costs at the Company's North American and European automotive facilities, as well as the unfavorable mix of lower acoustical parts sales. Lower gross margin from the PM segment was primarily driven by unfavorable product mix, increased overhead costs and unfavorable cost absorption on lower production.
Operating loss was ($68.5) million, compared to operating income of $13.2 in the fourth quarter of 2018. During the fourth quarter, the Company recorded non-cash impairment charges of $64.2 million, principally from goodwill impairment as the PM segment's book value exceeded its fair value. On an adjusted basis, operating income was $0.3 million compared to $14.7 million in the fourth quarter of 2018, and was lower due to reduced gross profit and incremental intangible assets amortization of $1.4 million. Adjusted EBITDA margin was 6.4%, compared to 12.1% in the fourth quarter of 2018.
Net loss was ($70.5) million, or ($4.07) per diluted share, compared to net income of $7.2 million, or $0.42 per diluted share in the fourth quarter of 2018. Adjusted loss per share were ($0.17) compared to adjusted earnings per share of $0.52 in the fourth quarter of 2018.
Full Year 2019 Results
The Company reported net sales of $837.4 million in 2019 compared to $785.9 million in 2018. Organic sales declined 1.6%, with reductions in the PM and TNW segments and modest growth in the TAS segment. Gross margin was 18.1% in 2019 compared to 19.4% in 2018. The impairment charges of $64.2 million led to an operating loss of ($38.8) million in 2019 compared to operating income of $49.2 million in 2018. Adjusted operating margin was 3.8% in 2019 compared to 7.3% in 2018. Diluted loss per share in 2019 was ($4.08), and included $3.72 per share for the impairment charges and $0.86 per share for the pension settlement expenses, compared to diluted earnings of $2.02 per share in 2018. Adjusted earnings per share were $0.72 in 2019 compared to $2.43 in 2018. Adjusted EBITDA was $80.4 million in 2019 compared to $90.2 million in 2018.
Cash provided by operating activities was $86.9 million in 2019 compared to $44.7 million in 2018. During 2019, the Company paid down $52.2 million in debt.
Liquidity
Cash was $51.3 million at December 30, 2019, compared to $49.2 million at December 31, 2018. Net cash provided by operations was $23.9 million in the fourth quarter of 2019 compared to $30.2 million in the fourth quarter of 2018, and $86.9 million in 2019 compared to $44.7 million in 2018. In the fourth quarter of 2019, cash from operations was positively impacted by the factoring of select trade accounts receivable to a banking institution of approximately $15
million that would have normally been collected from customers in 2020. There was approximately $122 million of availability under the Company's credit facility at December 31, 2019.
Mr. Gonzales, concluded, "We completed a reduction-in-force program in the fourth quarter of 2019 that is expected to deliver approximately $4.5 million in savings in 2020. The Company remains focused on cash flow generation through corporate treasury activities and working capital optimization in our segments. We are now benefiting from a cross-currency swap to take advantage of interest rate differentials between the U.S. Dollar and Euro, which is expected to save the Company $1.3 million in interest expense in 2020."
2020 Outlook
Sara A. Greenstein, President and Chief Executive Officer, stated, "Early in my tenure, I have visited our major operations and am encouraged by the strong relationships with our customers, the quality of products we manufacture and the passion of our global workforce.
"While we have seen some recent stabilization in the end markets for Interface sealing products, weaker demand in European industrial markets is impacting all of our segments. In China, we are closely monitoring the impact of the coronavirus on the Company's businesses. We expect our first quarter and full year results will be negatively impacted, but are uncertain with regards to the severity and duration of the impact. Despite these headwinds, we expect first quarter 2020 adjusted EBITDA will improve sequentially from fourth quarter 2019 adjusted EBITDA results.
"We have started a strategic review, which we expect to conclude by the end of the second quarter of 2020, to evaluate our portfolio and end markets. The objective is to prioritize strategic actions that optimize capital allocation and drive long-term shareholder value. As part of the process, we are identifying specific near-term opportunities for improvement in commercial performance, cost structure and working capital."
Conference Call
Lydall will host a conference call on February 26, 2020, at 10:00 a.m. Eastern Time to discuss results for its fourth quarter and year ended December 31, 2019 as well as general matters related to its businesses and markets. The call may be accessed at (888) 338-7142, from within the U.S., or (412) 902-4181, internationally. In addition, the audio of the call will be webcast live and will be available for replay on the Company's website at www.lydall.com in the Investor Relations' Section. A recording of the call will be available from 12:00 p.m. Eastern Time on February 26, 2020 through 11:59 p.m. Eastern Time on March 4, 2020 at (877) 344-7529, from within the U.S., or (412) 317-0088, internationally, pass code 10139279. Additional information, including a presentation outlining key financial data supporting the conference call, can be found on the Company’s website www.lydall.com under the Investors Relations’ section.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (“GAAP”), the Company uses certain non-GAAP financial measures, including organic sales, adjusted gross profit, adjusted gross margin, adjusted operating income, adjusted operating margin, adjusted earnings per share, consolidated and segment EBITDA and adjusted EBITDA. The attached financial tables address the non-GAAP measures used in this press release and reconcile non-GAAP measures to the most directly comparable GAAP measures. The Company believes that the use of non-GAAP measures helps investors gain a better understanding of our core operating results and future prospects, consistent with how management measures and forecasts the Company's performance, especially when comparing such results to previous periods or forecasts. Adjusted segment EBITDA is used as a basis to internally evaluate the financial performance of the Company's segments because the Company believes it reflects current core operating performance and provides an indicator of the segment's ability to generate cash. Non-GAAP measures should be considered in addition to, and not as a replacement for or superior to, the corresponding GAAP measures, and may not be comparable to similarly titled measures reported by other companies.
Cautionary Note Concerning Forward-Looking Statements
This press release contains “forward-looking statements” within the Private Securities Litigation Reform Act of 1995. Any statements contained in this press release that are not statements of historical fact, including statements about the outlook for 2020, expected savings from a reduction-in-force program, the expected impact of the coronavirus on the Company's businesses, and optimizing profit and cash flow generation may be deemed to be forward-looking statements. All such forward-looking statements are intended to provide management’s current expectations for the future operating and financial performance of the Company based on current expectations and assumptions relating to the Company’s business, the economy and other future conditions. Forward-looking statements generally can be identified through the use of words such as “believes,” “anticipates,” “may,” “should,” “will,” “plans,” “projects,” “expects,” “expectations,” “estimates,” “forecasts,” “predicts,” “targets,” “prospects,” “strategy,” “signs,” and other words of similar meaning in connection with the discussion of future operating or financial performance. Because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. Such risks and uncertainties which include, among others, worldwide economic or political changes that affect the markets that the Company’s businesses serve which could have an effect on demand for the Company’s products and impact the Company’s profitability, challenges encountered by the Company in the execution of restructuring programs, challenges in integrating acquired companies, disruptions in the global credit and financial markets, including diminished liquidity and credit availability, changes in international trade agreements, including tariffs and trade restrictions, disruptions in the Company's businesses from the coronavirus, foreign currency volatility, swings in consumer confidence and spending, unstable economic growth, raw material pricing and supply issues, fluctuations in unemployment rates, retention of key employees and the successful execution of the CEO transition, increases in fuel prices, and outcomes of legal proceedings, claims and investigations. Accordingly, the Company’s actual results may differ materially from those contemplated by these forward-looking statements. Investors, therefore, are cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in Lydall’s filings with the Securities and Exchange Commission, including the risks and uncertainties identified in Part I, Item 1A - Risk Factors of Lydall’s Annual Report on Form 10-K for the year ended December 31, 2019.
These forward-looking statements speak only as of the date of this press release, and Lydall does not assume any obligation to update or revise any forward-looking statement made in this press release or that may from time to time be made by or on behalf of the Company.
Lydall, Inc. is a New York Stock Exchange listed company, headquartered in Manchester, Connecticut with global manufacturing operations producing specialty engineered products for the thermal/acoustical and filtration/separation markets. For more information, visit http://www.lydall.com. 
is a registered trademark of Lydall, Inc. in the U.S. and other countries.
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| For further information: |
| Brendan Moynihan |
| Vice President, Financial Planning and Investor Relations |
| Telephone 860-646-1233 |
| Facsimile 860-646-4917 |
| info@lydall.com |
| www.lydall.com |
-More-
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| | | | | | | | | | | | | | | |
| Summary of Operations | | | | | | | |
| In thousands except per share data | | | | | | | |
| (Unaudited) | | | | | | | |
| | Quarters Ended | | Years Ended |
| | December 31, | | December 31, |
| | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | | | | |
| Net sales | $ | 193,288 |
| | $ | 209,938 |
| | $ | 837,398 |
| | $ | 785,897 |
|
| Cost of sales | 165,185 |
| | 168,066 |
| | 685,608 |
| | 633,252 |
|
| Gross profit | 28,103 |
| | 41,872 |
| | 151,790 |
| | 152,645 |
|
| | | | | | | | |
| Selling, product development and administrative expenses | 32,398 |
| | 28,702 |
| | 126,409 |
| | 103,457 |
|
| Impairment of goodwill and other long-lived assets | 64,206 |
| | — |
| | 64,206 |
| | — |
|
| Operating (loss) income | (68,501 | ) | | 13,170 |
| | (38,825 | ) | | 49,188 |
|
| | | | | | | | |
| Employee benefit plans settlement (income) expense | (454 | ) | | — |
| | 25,247 |
| | — |
|
| Interest expense | 3,237 |
| | 3,595 |
| | 14,262 |
| | 6,212 |
|
| Other expense (income), net | 102 |
| | (196 | ) | | (1,257 | ) | | (289 | ) |
| (Loss) income before income taxes | (71,386 | ) | | 9,771 |
| | (77,077 | ) | | 43,265 |
|
| | | | | | | | |
| Income tax (benefit) expense | (897 | ) | | 2,599 |
| | (6,416 | ) | | 8,453 |
|
| Income from equity method investment | (28 | ) | | (12 | ) | | (148 | ) | | (132 | ) |
| Net (loss) income | $ | (70,461 | ) | | $ | 7,184 |
| | $ | (70,513 | ) | | $ | 34,944 |
|
| | | | | | | | |
| (Loss) earnings per share: | | | | | | | |
| Basic | $ | (4.07 | ) | | $ | 0.42 |
| | $ | (4.08 | ) | | $ | 2.03 |
|
| Diluted | $ | (4.07 | ) | | $ | 0.42 |
| | $ | (4.08 | ) | | $ | 2.02 |
|
| | | | | | | | |
| Weighted average number of common shares outstanding | 17,293 |
| | 17,239 |
| | 17,271 |
| | 17,204 |
|
| Weighted average number of common shares and equivalents outstanding | 17,293 |
| | 17,302 |
| | 17,271 |
| | 17,330 |
|
|
| | | | | | | | | | | | | | | | |
| Summary of Segment Information | | | | | | | | |
| and Corporate Office Expenses | | | | | | | | |
| In thousands | | | | | | | | |
| (Unaudited) | | | | | | | | |
| | | Quarters Ended | | Years Ended |
| | | December 31, | | December 31, |
| | | 2019 | | 2018 | | 2019 | | 2018 |
| Net Sales | | | | | | | | |
| | | | | | | | | |
| Performance Materials Segment (1) | | $ | 55,798 |
| | $ | 65,570 |
| | $ | 245,480 |
| | $ | 169,217 |
|
| Technical Nonwovens Segment (2),(3) | | 56,750 |
| | 64,747 |
| | 255,346 |
| | 277,071 |
|
| Thermal Acoustical Solutions | | 86,066 |
| | 85,610 |
| | 361,577 |
| | 365,427 |
|
| Eliminations and Other (3) | | (5,326 | ) | | (5,989 | ) | | (25,005 | ) | | (25,818 | ) |
| Consolidated Net Sales | | $ | 193,288 |
| | $ | 209,938 |
| | $ | 837,398 |
| | $ | 785,897 |
|
| | | | | | | | | |
| Operating Income | | | | | | | | |
| | | | | | | | | |
| Performance Materials Segment (1) | | $ | (65,278 | ) | | $ | 5,096 |
| | $ | (59,804 | ) | | $ | 13,139 |
|
| Technical Nonwovens Segment (2),(3) | | 3,152 |
| | 3,928 |
| | 22,895 |
| | 21,323 |
|
| Thermal Acoustical Solutions | | 1,720 |
| | 8,728 |
| | 23,590 |
| | 38,085 |
|
| Corporate Office Expenses | | (8,095 | ) | | (4,582 | ) | | (25,506 | ) | | (23,359 | ) |
| Consolidated Operating (Loss) Income | | $ | (68,501 | ) | | $ | 13,170 |
| | $ | (38,825 | ) | | $ | 49,188 |
|
(1) The Performance Materials segment reports the results of Interface and PCC for the periods following the date of acquisitions of August 31, 2018 and July 12, 2018, respectively, and included $1.5 million and $12.7 million of incremental intangible assets amortization for the quarter and year ended December 31, 2019, respectively.
(2) The Technical Nonwovens segment reports the results of Geosol through the date of disposition of May 9, 2019.
(3) Included in the Technical Nonwovens segment and Eliminations and Other is $4.4 million and $5.1 million in intercompany sales to the Thermal Acoustical Solutions segment for the quarters ended December 31, 2019 and 2018, respectively, and $21.0 million and $22.2 million for the years ended December 31, 2019 and 2018, respectively.
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| | | | | | | | |
| Financial Position | | | | |
| In thousands except ratio data | | | | |
| (Unaudited) | | | | |
| | | December 31, 2019 | | December 31, 2018 |
| | | | | |
| Cash and cash equivalents | | $ | 51,331 |
| | $ | 49,237 |
|
| Working capital | | $ | 153,739 |
| | $ | 195,732 |
|
| Total debt | | $ | 272,641 |
| | $ | 324,813 |
|
| Stockholders' equity | | $ | 318,420 |
| | $ | 369,275 |
|
| Total capitalization | | $ | 591,061 |
| | $ | 694,088 |
|
| Total debt to total capitalization | | 46.1 | % | | 46.8 | % |
|
| | | | | | | | | | | | | | | | |
| Cash Flows | | | | | | | | |
| In thousands | | Quarters Ended | | Years Ended |
| (Unaudited) | | December 31, | | December 31, |
| | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | | | | | |
| Net cash provided by operating activities | | $ | 23,898 |
| | $ | 30,241 |
| | $ | 86,862 |
| | $ | 44,739 |
|
| Net cash used for investing activities | | $ | (8,613 | ) | | $ | (11,184 | ) | | $ | (32,385 | ) | | $ | (300,965 | ) |
| Net cash (used for) provided by financing activities | | $ | (13,697 | ) | | $ | (13,082 | ) | | $ | (51,927 | ) | | $ | 247,476 |
|
| Depreciation and amortization | | $ | 12,318 |
| | $ | 10,720 |
| | $ | 49,000 |
| | $ | 33,162 |
|
| Capital expenditures | | $ | (8,614 | ) | | $ | (11,200 | ) | | $ | (35,850 | ) | | $ | (31,291 | ) |
|
| | | | | | | | |
| Common Stock Data | | | | |
| | | Quarters Ended December 31, |
| | | 2019 | | 2018 |
| | | | | |
| High | | $ | 25.84 |
| | $ | 44.03 |
|
| Low | | $ | 17.93 |
| | $ | 18.47 |
|
| Close | | $ | 20.52 |
| | $ | 20.31 |
|
During the fourth quarter of 2019, 9,283,443 shares of Lydall common stock (LDL) were traded on the New York Stock Exchange.
Non-GAAP Measures
In thousands except ratio and per share data
(Unaudited)
The following tables address the non-GAAP measures used in this press release and reconcile the non-GAAP measures to the most directly comparable GAAP measures:
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| | | | | | | | | | | | | | | | |
| | | Quarters Ended December 31, | | Years Ended December 31, |
| | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | | | | | |
| Net sales | | $ | 193,288 |
| | $ | 209,938 |
| | $ | 837,398 |
| | $ | 785,897 |
|
| Net sales, adjusted | | $ | 193,288 |
| | $ | 209,938 |
| | $ | 837,398 |
| | $ | 785,897 |
|
| | | | | | | | | |
| Gross profit, as reported | | $ | 28,103 |
| | $ | 41,872 |
| | $ | 151,790 |
| | $ | 152,645 |
|
| TNW restructuring expenses | | 150 |
| | 169 |
| | 630 |
| | 1,894 |
|
| Inventory step-up purchase accounting adjustments | | — |
| | 585 |
| | — |
| | 1,975 |
|
| Reduction-in-force severance expenses | | $ | 987 |
| | $ | — |
| | $ | 987 |
| | $ | — |
|
| Gross profit, adjusted | | $ | 29,240 |
| | $ | 42,626 |
| | $ | 153,407 |
| | $ | 156,514 |
|
| | | | | | | | | |
| Gross margin, as reported | | 14.5 | % | | 19.9 | % | | 18.1 | % | | 19.4 | % |
| Gross margin, adjusted | | 15.1 | % | | 20.3 | % | | 18.3 | % | | 19.9 | % |
| | | | | | | | | |
| Operating (loss) income, as reported | | $ | (68,501 | ) | | $ | 13,170 |
| | $ | (38,825 | ) | | $ | 49,188 |
|
| Strategic initiatives expenses | | 210 |
| | 594 |
| | 1,456 |
| | 3,631 |
|
| TNW restructuring expenses | | 177 |
| | 358 |
| | 767 |
| | 2,296 |
|
| Inventory step-up purchase accounting adjustments | | — |
| | 585 |
| | — |
| | 1,975 |
|
| Impairment of long-lived assets | | 64,206 |
| | — |
| | 64,206 |
| | — |
|
| CEO transition expenses | | 2,259 |
| | — |
| | 2,259 |
| | — |
|
| Reduction-in-force severance expenses | | 1,943 |
| | — |
| | 1,943 |
| | — |
|
| Operating income, adjusted | | $ | 294 |
| | $ | 14,707 |
| | $ | 31,806 |
| | $ | 57,090 |
|
| | | | | | | | | |
| Operating margin, as reported | | (35.4 | )% | | 6.3 | % | | (4.6 | )% | | 6.3 | % |
| Operating margin, adjusted | | 0.2 | % | | 7.0 | % | | 3.8 | % | | 7.3 | % |
| | | | | | | | | |
| (Loss) earnings per share, as reported | | $ | (4.07 | ) | | $ | 0.42 |
| | $ | (4.08 | ) | | $ | 2.02 |
|
| Strategic initiatives expenses | | $ | 0.01 |
| | $ | 0.03 |
| | $ | 0.09 |
| | $ | 0.21 |
|
| TNW restructuring expenses | | $ | 0.01 |
| | $ | 0.02 |
| | $ | 0.04 |
| | $ | 0.13 |
|
| Inventory step-up purchase accounting adjustments | | $ | — |
| | $ | 0.03 |
| | $ | — |
| | $ | 0.11 |
|
| Impairment of long-lived assets | | $ | 3.71 |
| | $ | — |
| | $ | 3.71 |
| | $ | — |
|
| CEO transition expenses | | $ | 0.13 |
| | $ | — |
| | $ | 0.13 |
| | $ | — |
|
| Reduction-in-force severance expenses | | $ | 0.11 |
| | $ | — |
| | $ | 0.11 |
| | $ | — |
|
| Employee benefit plans settlement expenses | | $ | (0.03 | ) | | $ | — |
| | $ | 1.46 |
| | $ | — |
|
| Gain on sale from a divestiture | | $ | — |
| | $ | — |
| | $ | (0.08 | ) | | $ | — |
|
| Tax effect of above adjustments | | $ | (0.04 | ) | | $ | — |
| | $ | (0.66 | ) | | $ | (0.06 | ) |
| Discrete tax adjustments | | $ | — |
| | $ | 0.02 |
| | $ | — |
| | $ | 0.02 |
|
| Diluted (loss) earnings per share, adjusted | | $ | (0.17 | ) | | $ | 0.52 |
| | $ | 0.72 |
| | $ | 2.43 |
|
This press release reports adjusted results for the quarters and years ended December 31, 2019 and 2018, which excludes strategic initiatives expenses, restructuring expenses in the Technical Nonwovens segment, purchase accounting adjustments related to inventory step-up in the Performance Materials segment, impairment charges in the Performance Materials segment, corporate office CEO transition expenses, reduction-in-force severance expenses, employee benefit plans settlement expenses (income), gain on sale from a divestiture and discrete tax adjustments.
CONSOLIDATED AND SEGMENT EBITDA/ADJUSTED EBITDA
In thousands except ratio data
(Unaudited)
The following tables report consolidated and segment earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA for the quarters and years ended December 31, 2019 and 2018. The Company uses segment operating income (loss) for the purpose of calculating segment EBITDA and adjusted EBITDA. Adjusted EBITDA excludes strategic initiatives expenses, restructuring expenses, non-cash impairment charges, purchase accounting adjustments related to inventory step-up, CEO transition expenses, reduction-in-force severance expenses, employee benefit plans settlement expenses (income) and gain on sale from a divestiture.
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the Quarter Ended December 31, 2019 |
| | | Segments | | | | |
| | | Performance
Materials | | Technical
Nonwovens | | Thermal Acoustical Solutions | | Total | | Corporate Office | | Consolidated Lydall |
| | | | | | | | | | | | | |
| Net loss | | | | | | | | | | | | $ | (70,461 | ) |
| Employee benefits plans settlement income | | | | | | | | | | | | (454 | ) |
| Interest expense | | | | | | | | | | | | 3,237 |
|
| Income tax benefit | | | | | | | | | | | | (897 | ) |
| Other expense, net | | | | | | | | | | | | 102 |
|
| Income from equity method investment | | | | | | | | | | | | (28 | ) |
| Operating (loss) income | | $ | (65,278 | ) | | $ | 3,152 |
| | $ | 1,720 |
| | $ | (60,406 | ) | | $ | (8,095 | ) | | $ | (68,501 | ) |
| Depreciation and amortization | | 6,329 |
| | 3,176 |
| | 2,552 |
| | 12,057 |
| | 148 |
| | 12,205 |
|
| Employee benefits plans settlement income | | — |
| | — |
| | — |
| | — |
| | (454 | ) | | (454 | ) |
| Other expense, net | | — |
| | — |
| | — |
| | — |
| | 102 |
| | 102 |
|
| Income from equity method investment | | — |
| | (28 | ) | | — |
| | (28 | ) | | — |
| | (28 | ) |
| EBITDA | | $ | (58,949 | ) | | $ | 6,356 |
| | $ | 4,272 |
| | $ | (48,321 | ) | | $ | (7,595 | ) | | $ | (55,916 | ) |
| % of net sales | | (105.6 | )% | | 11.2 | % | | 5.0 | % | | (24.3 | )% | | | | (28.9 | )% |
| | | | | | | | | | | | | |
| Strategic initiatives expenses | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 210 |
| | $ | 210 |
|
| TNW restructuring expenses | | $ | — |
| | $ | 177 |
| | $ | — |
| | $ | 177 |
| | $ | — |
| | $ | 177 |
|
| Impairment of long-lived assets | | 64,206 |
| | — |
| | — |
| | 64,206 |
| | — |
| | 64,206 |
|
| CEO transition expenses | | — |
| | — |
| | — |
| | — |
| | 2,259 |
| | 2,259 |
|
| Reduction-in-force severance expenses | | 295 |
| | 253 |
| | 1,386 |
| | 1,934 |
| | 9 |
| | 1,943 |
|
| Employee benefit plans settlement income | | — |
| | — |
| | — |
| | — |
| | (454 | ) | | (454 | ) |
| EBITDA, adjusted | | $ | 5,552 |
| | $ | 6,786 |
| | $ | 5,658 |
| | $ | 17,996 |
| | $ | (5,571 | ) | | $ | 12,425 |
|
| % of net sales | | 10.0 | % | | 12.0 | % | | 6.6 | % | | 9.1 | % | | | | 6.4 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the Quarter Ended December 31, 2018 |
| | | Segments | | | | |
| | | Performance
Materials | | Technical
Nonwovens | | Thermal Acoustical Solutions | | Total | | Corporate Office | | Consolidated Lydall |
| | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | $ | 7,184 |
|
| Interest expense | | | | | | | | | | | | 3,595 |
|
| Income tax expense | | | | | | | | | | | | 2,599 |
|
| Other income, net | | | | | | | | | | | | (196 | ) |
| Income from equity method investment | | | | | | | | | | | | (12 | ) |
| Operating income (loss) | | $ | 5,096 |
| | $ | 3,928 |
| | $ | 8,728 |
| | $ | 17,752 |
| | $ | (4,582 | ) | | $ | 13,170 |
|
| Depreciation and amortization | | 4,634 |
| | 3,309 |
| | 2,369 |
| | 10,312 |
| | 175 |
| | 10,487 |
|
| Other income, net | | — |
| | — |
| | — |
| | — |
| | (196 | ) | | (196 | ) |
| Income from equity method investment | | — |
| | (12 | ) | | — |
| | (12 | ) | | — |
| | (12 | ) |
| EBITDA | | $ | 9,730 |
| | $ | 7,249 |
| | $ | 11,097 |
| | $ | 28,076 |
| | $ | (4,211 | ) | | $ | 23,865 |
|
| % of net sales | | 14.8 | % | | 11.2 | % | | 13.0 | % | | 13.0 | % | | | | 11.4 | % |
| | | | | | | | | | | | | |
| Strategic initiatives expenses | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 594 |
| | $ | 594 |
|
| TNW restructuring expenses | | — |
| | 358 |
| | — |
| | 358 |
| | — |
| | 358 |
|
| Inventory step-up purchase accounting adjustments | | 585 |
| | — |
| | — |
| | 585 |
| | — |
| | 585 |
|
| EBITDA, adjusted | | $ | 10,315 |
| | $ | 7,607 |
| | $ | 11,097 |
| | $ | 29,019 |
| | $ | (3,617 | ) | | $ | 25,402 |
|
| % of net sales | | 15.7 | % | | 11.7 | % | | 13.0 | % | | 13.4 | % | | | | 12.1 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the Year Ended December 31, 2019 |
| | | Segments | | | | |
| | | Performance
Materials | | Technical
Nonwovens | | Thermal Acoustical Solutions | | Total | | Corporate Office | | Consolidated Lydall |
| | | | | | | | | | | | | |
| Net loss | | | | | | | | | | | | $ | (70,513 | ) |
| Employee benefit plans settlement expenses | | | | | | | | | | | | 25,247 |
|
| Interest expense | | | | | | | | | | | | 14,262 |
|
| Income tax benefit | | | | | | | | | | | | (6,416 | ) |
| Other income, net | | | | | | | | | | | | (1,257 | ) |
| Income from equity method investment | | | | | | | | | | | | (148 | ) |
| Operating income (loss) | | $ | (59,804 | ) | | $ | 22,895 |
| | $ | 23,590 |
| | $ | (13,319 | ) | | $ | (25,506 | ) | | $ | (38,825 | ) |
| Depreciation and amortization | | 25,118 |
| | 12,702 |
| | 10,168 |
| | 47,988 |
| | 635 |
| | 48,623 |
|
| Employee benefit plans settlement expenses | | — |
| | — |
| | — |
| | — |
| | 25,247 |
| | 25,247 |
|
| Other income, net | | — |
| | — |
| | — |
| | — |
| | (1,257 | ) | | (1,257 | ) |
| Income from equity method investment | | — |
| | (148 | ) | | — |
| | (148 | ) | | — |
| | (148 | ) |
| EBITDA | | $ | (34,686 | ) | | $ | 35,745 |
| | $ | 33,758 |
| | $ | 34,817 |
| | $ | (48,861 | ) | | $ | (14,044 | ) |
| % of net sales | | (14.1 | )% | | 14.0 | % | | 9.3 | % | | 4.0 | % | | | | (1.7 | )% |
| | | | | | | | | | | | | |
| Strategic initiatives expenses | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,456 |
| | $ | 1,456 |
|
| TNW restructuring expenses | | — |
| | 767 |
| | — |
| | 767 |
| | — |
| | 767 |
|
| Impairment of long-lived assets | | 64,206 |
| | — |
| | — |
| | 64,206 |
| | — |
| | 64,206 |
|
| CEO transition expenses | | — |
| | — |
| | — |
| | — |
| | 2,259 |
| | 2,259 |
|
| Reduction-in-force severance expenses | | 295 |
| | 253 |
| | 1,386 |
| | 1,934 |
| | 9 |
| | 1,943 |
|
| Employee benefit plans settlement expenses | | — |
| | — |
| | — |
| | — |
| | 25,247 |
| | 25,247 |
|
| Gain on sale from a divestiture | | — |
| | — |
| | — |
| | — |
| | (1,459 | ) | | (1,459 | ) |
| EBITDA, adjusted | | $ | 29,815 |
| | $ | 36,765 |
| | $ | 35,144 |
| | $ | 101,724 |
| | $ | (21,349 | ) | | $ | 80,375 |
|
| % of net sales | | 12.1 | % | | 14.4 | % | | 9.7 | % | | 11.8 | % | | | | 9.6 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the Year Ended December 31, 2018 |
| | | Segments | | | | |
| | | Performance
Materials | | Technical
Nonwovens | | Thermal Acoustical Solutions | | Total | | Corporate Office | | Consolidated Lydall |
| | | | | | | | | | | | | |
| Net income | | | | | | | | | | | | $ | 34,944 |
|
| Interest expense | | | | | | | | | | | | 6,212 |
|
| Income tax expense | | | | | | | | | | | | 8,453 |
|
| Other income, net | | | | | | | | | | | | (289 | ) |
| Income from equity method investment | | | | | | | | | | | | (132 | ) |
| Operating income (loss) | | $ | 13,139 |
| | $ | 21,323 |
| | $ | 38,085 |
| | $ | 72,547 |
| | $ | (23,359 | ) | | $ | 49,188 |
|
| Depreciation and amortization | | 9,006 |
| | 13,877 |
| | 9,190 |
| | 32,073 |
| | 658 |
| | 32,731 |
|
| Other income, net | | — |
| | — |
| | — |
| | — |
| | (289 | ) | | (289 | ) |
| Income from equity method investment | | — |
| | (132 | ) | | — |
| | (132 | ) | | — |
| | (132 | ) |
| EBITDA | | $ | 22,145 |
| | $ | 35,332 |
| | $ | 47,275 |
| | $ | 104,752 |
| �� | $ | (22,412 | ) | | $ | 82,340 |
|
| % of net sales | | 13.1 | % | | 12.8 | % | | 12.9 | % | | 12.9 | % | | | | 10.5 | % |
| | | | | | | | | | | | | |
| Strategic initiatives expenses | | $ | 233 |
| | $ | — |
| | $ | — |
| | $ | 233 |
| | $ | 3,398 |
| | $ | 3,631 |
|
| TNW restructuring expenses | | — |
| | 2,296 |
| | — |
| | 2,296 |
| | — |
| | 2,296 |
|
| Inventory step-up purchase accounting adjustments | | 1,975 |
| | — |
| | — |
| | 1,975 |
| | — |
| | 1,975 |
|
| EBITDA, adjusted | | $ | 24,353 |
| | $ | 37,628 |
| | $ | 47,275 |
| | $ | 109,256 |
| | $ | (19,014 | ) | | $ | 90,242 |
|
| % of net sales | | 14.4 | % | | 13.6 | % | | 12.9 | % | | 13.5 | % | | | | 11.5 | % |
Organic Sales
(Unaudited)
|
| | | | | | | | | | | | |
| | | Quarter Ended December 31, 2019 |
| | | Performance
Materials | | Technical
Nonwovens | | Thermal Acoustical Solutions | | Consolidated |
| Sales growth, as reported | | (14.9 | )% | | (12.4 | )% | | 0.5 | % | | (7.9 | )% |
| Acquisitions and divestitures | | 0.8 | % | | (3.3 | )% | | — | % | | (0.7 | )% |
| Change in tooling sales | | — | % | | — | % | | 4.7 | % | | 1.9 | % |
| Foreign currency translation | | (0.6 | )% | | (0.7 | )% | | (1.1 | )% | | (0.8 | )% |
| Organic sales growth | | (15.1 | )% | | (8.4 | )% | | (3.1 | )% | | (8.3 | )% |
| | | | | | | | | |
| | | Year Ended December 31, 2019 |
| | | Performance
Materials | | Technical
Nonwovens | | Thermal Acoustical Solutions | | Consolidated |
| Sales growth, as reported | | 45.1 | % | | (7.8 | )% | | (1.1 | )% | | 6.6 | % |
| Acquisitions and divestitures | | 52.3 | % | | (2.5 | )% | | — | % | | 10.4 | % |
| Change in tooling sales | | 0.1 | % | | — | % | | (0.4 | )% | | (0.1 | )% |
| Foreign currency translation | | (1.5 | )% | | (2.6 | )% | | (1.8 | )% | | (2.1 | )% |
| Organic sales growth | | (5.8 | )% | | (2.7 | )% | | 1.1 | % | | (1.6 | )% |
This press release provides information regarding organic sales change, defined as net sales change excluding (1) sales from acquired and divested businesses (2) the impact of foreign currency translation and (3) tooling sales. Management believes that the presentation of organic sales change is useful to investors because it enables them to assess, on a consistent basis, sales trends related to the Company selling products to customers, without the impact of foreign currency rate changes that are not under management's control and do not reflect the performance of the Company and management. Tooling sales are excluded because tooling revenue is not generated from selling the Company's products to customers, but rather is reimbursement from our customers for the design and production of tools used by the Company in our manufacturing processes. Tooling sales can be sporadic and may mask underlying business conditions and obscure business trends.
