LDL - Earnings call transcript Q1 2020

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Operator

Good morning, and welcome to the Lydall Q1 2020 Earnings Call. [Operator Instructions].

Now I'd like to turn the conference over to Mr. Brendan Moynihan, Vice President of Investor Relations. Please go ahead.

Brendan Moynihan

morning. Good Nick. you, Thank and Lydall's everyone, Earnings Quarter Conference Call. welcome morning, First to XXXX Good

by today's discuss review Sara how of will remarks, COVID-XX President segment. follow quarter. our their call Chief business we'll on of drivers performance of of it key a the me second Joining are with the discussion through the the high-level see a midway addressing questions. the and Officer. will Sara overview Gonzales, with and conclude brief the call the Financial open impacts with call Executive quarter of Greenstein, of the will Randy Executive as the then we is end for At Chief the pandemic. Vice and business financial a Randy and the Sara state begin Lydall Officer; line and President dramatic

remotely. Please the conducting call note we that are

open Sara your So address when please so do accordingly. respond Randy, the can or we line, to directly questions they

Our filing today's XX-Q. QX section. of along the on be our with along and used conference for the earnings Relations quarterly which presentation, call, found call be at the as our lydall.com can with Form are available reference Both issued XXXX quarterly release can Investor earnings Relations Investor website was in

information. provision forward-looking that further XX-Q harbor on cautionary note Slide safe the forward-looking constitute may Lydall's statements Please statements call defined made comments to also within Form are securities conference the laws. noted As available to this X of any in this concerning for on refer made pursuant the presentation, as

I of financial the reconciliation call. can GAAP addition, be found presentation we to non-GAAP appendix measures the during conference will just A In referring be financials in the referenced. to

that, turn to the call I'll Sara. With over

Sara Greenstein

earnings and qualities develop of attracted morning, and talked value-added I believed everyone, that to for to employees Lydall would business position to unparalleled new as during whom late scaling In February, a Good joining the Lydall's community success. my me capable demands. engineered Brendan. I about you all thank unmatched what mentioned us. us to call filtration for and first our Lydall's solutions you, Thank great world, CEO, customers. specialty an the I the of and Lydall materials of highlighted ability commitment share throughout meet customers' And specific adapting I

X.X world has the changed previously as During changed. Lydall of not since, the my ways, unimaginable has in months view

these Lydall In our fact, I that am competitors. convinced more from qualities differentiate even

As our world, March, apparent felt the novel of industry impact the that safeguard across is the sustainability have acted deeply first global throughout global health When quickly no every global workforce it coronavirus, COVID-XX, business. became its in decisively escalated our into impact pandemic virtually was the a and Lydall and would on significant the and and a to of we well-being economy, COVID-XX exception.

a us created come policies measures, keep to long aggressively innovate thrive and the environment, precautionary they taking needed we all could in work ensured of that and who number with and so, them protected. to By work did, safe new to do procedures At a employees to have the compete, for is to in new we the time, environment, opportunities that Lydall opportunities to necessary same the enabled response term. over transformation that current strategic accelerate

Slide to Turning X.

position filtration As during Lydall solutions, in of engineered this and a market leader specialty unprecedented technical materials time. value-added is extraordinary an

care safeguard our and of a America responders health critical only We in of handful NXX first respirator producing masks and companies that layer of from of Europe helps one the workers COVID-XX. North filtration are capable

pads the respirators, HEPA- and medical felt media the and wipes, hospital addition, and bathing needlepunch used other In in manufacture surgical for machine-powered filtration by and HVAC we the medical, filtration and absorbent masks; ventilators materials systems; medical ULPA-grade gowns. general-use

proven Europe with U.S. and the in filtration contact Canada, As have technical the as fight leaders United expertise of with government levels capabilities, experts the as in in we COVID-XX. and our against the well production support in specialty regular Kingdom highest been trusted offer and solutions, to

the for to these supply products that sourced around be recognized are availability interests, and these world national are certainty governments their manufactured that As locally. of essential mandating and they products

Our global Canada, China. across with advantage a footprint United strategic regard, is in States, the and facilities this Europe

worked resources of to global forging these and Our large the team tirelessly our our shortage new facilities. contracts, production products and unmet need by has repurposing meet reallocating

major We filtration meltblown media secured production for NXX with supply long-term to a facilities. Honeywell their agreement mask

meltblown committed we production new capital line additional acquire demand. this a a satisfy related As to have and to result,

an the Technical especially as application COVID-XX new a segment to COVID-XX's our and In specialty COVID-XX on is serve other demand end City's used and be by nonwoven effect so global Solutions our materials important medical triggered shutdown a and automotive our The order Nonwovens has Thermal Emergency secured in from PPE doing, strong York The Technical economy. to business. for in Nonwovens segment, industry impact for Services. Performance markets on we more susceptible had New significant we filtration prove in Acoustical products Materials gowns, developed

X. to Slide Moving

TAS our As in States and we facilities in production quickly OEM operations shut ceased many first at of automotive late customers Europe. the the down quarter, our United

to social they realized places made lightly. have the take programs in action reside. impacted burden This and approximately down employees, Nonwovens We automotive ramped workforce. economic market. facilities that serve a decision we strived and select that we available end total in of X,XXX in of them this than our the was XX% production to this total, not In Technical which Lydall help our them also Performance on the more our countries lines advantage We Materials employees, the

existing operational last and our we reduction have instituting and force expenses to in salaried in additional reducing by reducing of action all measures quarter to preserve minimize permanent credit environment, taking all furloughs our nonessential taken our in by completed spending. this challenging $XX Additionally, TAS temporary employees, down workers, and a just the capital drawing eliminating week, business. In bolstered for cash, facility many liquidity travel, contract our noncritical including million from we first

our pension XXX(k) employer matching company and U.S. in our U.S. to contributions domestic are also through the deferring and deferring Act. payroll taxes We CARES the employees

decisions the All viable enacted of strong, healthy term. quickly and intent long for crisis emerging with and this of the were from these

that, will now over With to cover first I turn the call results. to quarter Randy

Randall Gonzales

Thank you, Sara.

Slide X. operating to highlights Turning the quarter key for our overview of then cover provide results. I'll briefly an some and segment first

adjusted adjusted earnings GAAP As numbers presentation. financial release to press we and discussing segment. will in provided a complete reminder, EBITDA A including the by comparable reconciliation metrics, be is

of results in the I'd in Materials the quarter to $XX.X Before the we segment. address first included like impairment continue, million Performance noncash charge

Given reassessed the and driven long-lived our in assets. by the sharp economy downturn overall COVID-XX, we goodwill

pandemic the assets $XX.X quarter, sealing While the by million. million segment performed Performance in automotive, long-lived in Goodwill negatively requiring $XX.X the was outlook the other and impacted impaired charge. well Materials impairment industrial end were and by first COVID-XX an markets, impaired

First sales $X.X Technical million X.X%. And down extent, foreign of our and from quarter sales, by $XXX.X dollar $XX.X business, Nonwovens in million the lesser X.X% million, on a or or to period consolidated Organically, Thermal XXXX $X.X net our decreased pandemic, driven strong sales sales or X% Acoustical by million same tooling million XXXX. principally in a reducing revenue or were business. headwind decreased The percentage in Solutions COVID-XX Thermal $XX.X the X was point.

X.X% X.X% and Advanced and Adjusted Materials first XX%, Geosol growing up divestitures Sealing of Nonwovens million by in Sales of divestiture decline and XXXX. or H&V the quarter Solutions. business XXXX. decreased $X.X contributed acquisitions in million up of million a period with in the from Performance first quarter offset business. EBITDA the offset with acquisition the XXX points by were in margin Performance Adjusted PM X.X%, EBITDA sales the from Net Materials, $XX the Technical same by basis in X% $X.X for the was filtration

to points, COVID-XX. force in actions XX%, and to million, With of consolidated XXX COVID-XX, and to the adjusted of in volumes reductions fourth EBITDA $X.X first quarter expanded completed TAS, XXXX, in to from improved fourth in accretive related of consolidated compressed by TAS XX% Sequentially, Materials. Performance adjusted productivity headwinds gains benefits margin EBITDA margins margin EBITDA Compared in up basis was flat incremental driven despite due XXXX. quarter quarter TNW XXXX

effective tax tax rate quarter rate impairment X.X% for charge of is impacted driven Adjusted was the the XX.X%, tax benefit items, tax goodwill not by by first recognized. first deductible. where non-GAAP was be that losses a quarter this jurisdictions The higher and other in cannot

Adjusted share, XX%. up tax of We to in from per down quarter from the $X.XX the XXXX. XXXX and expect first earnings XX% the of to quarter fourth $X.XX were XXXX rate sequentially of be range $X.XX

by sequentially million from flow $XX.X $X.X quarter, same quarter of was fourth last period the from Finally, $XX.X and in operations very year improved cash robust from the million XXXX. up million

Thermal in providing results, our X, our engineered specializes our Slide discuss I'll powertrain underhood, global applications. and is to Acoustical This Solutions segment Moving underbody, with solutions that automotive segment. acoustical exhaust business starting for and vehicle thermal innovative

in the period to down X.X% prior sales year down quarter $XX.X compared were this with First million million, parts $X.X business organically. sales or

European with March. these over shutdowns regions impacted in up strong started through in sales and X% domestic sales While sales February, OEM parts COVID-XX-related

million Tooling down XXX by were million growth year, to points. $X.X $X.X reported basis compared sales sales prior of impacting

reduced Foreign points. $XXX,XXX exchange, basis growth segment euro, the or XX sales by primarily

volume from was by to EBITDA Solutions lost the Acoustical due Thermal segment in impacted negatively COVID-XX. ramp-downs factory

partially offset specifically mix, higher-margin by of commodity material costs lower product were unfavorable productivity. and pricing lower addition, products volumes acoustical In and

by despite compared XXXX, site COVID-XX-related at led fourth America. XXX importantly, sequential points segment margin every quarter a expansion shutdowns, to with More in improvements of the basis this North of operating efficiencies improved saw

had will $XXX,XXX million which of our a sealing X% compared comparison variety the by a end and to markets to top filtration were cover strong XXXX, I X.X%, and Advanced $XX.X decline Slide XXXX. of specialty industries difficult Performance segment, quarter of quarter Sales partially very offset sales, engineered led in globally. Solutions, first line and to X.X% in Moving solutions filtration X. up of by or a Materials provides a grew which which Sealing first to

and expected million quarter we rebound specialty with sequentially media $XX.X were for saw demand expanding used NXX last sales also up including quarter surgical million. products, on growth our masks. sequentially of respirator, posting strong in As from be a we filtration medical Solutions, for year-end XX.X% Filtration air to sales line and of that and for discussed would fourth sales trough the $XX.X call, Sealing Advanced XX.X% top

First quarter from basis productivity up specialty all favorable EBITDA result. quarter fourth the period. was mix contributed up and segment in reduction year filtration XXXX XXX sequential The margin higher-margin improvement of The prior products, XX% sequentially basis material use this for adjusted points XX%. EBITDA media force, to and value-added on XXX air points various of as in applications produces margins drove geosynthetics, products segment industrial This and segment. medical, specialty covers Slide incremental filtration other among automotive, liquid Nonwovens and of over well Technical others. in X volume filtration our as commercial as such and engineered

Solutions XX%, from driven to $XX.X in down year. Sales Adjusted Industrial despite in the Thermal sales China, sales items, Geosol sales Materials XX% wipes XX.X% for of XXX $XX XX.X%, prior of such first and COVID-XX-related due bed all these compared lower for grew XX regions, were pads. nonwoven were were sales up which absorbent as XX% down Acoustical $X.X divestiture. headwinds for Advanced demand Geosol million, driven quarter the the and Materials or basis million Adjusting XX%, million sales FX for to million demand across million and applications, prior of over healthy $X.X lower a year. by basis sales medical or were impacted points intercompany by but $X.X Advanced or organic shutdowns. to lower XXXX notably filtration down points was divestiture, down by most

losses profitability, first basis fourth adjusted EBITDA terms global COVID-XX XX for of In the from loss was EBITDA received. facilities are delivered of headwind quarter adjusted EBITDA will in pursuing when currently of U.K. quarter quarter driven XX.X% $X.X flat offset That from XXXX on concludes XX%, of million insurance which points point by we of for recovery of operations, and our adjusted flood-related of to our our the the likely review down compared XXXX, the margin the impacts Despite segment basis quarter and pandemic of growth we XXXX. results. the first first margins XXX sequentially

the improvement capital in pandemic, Turning receivable. quarters X. quarter a these improving for last strong cash off highlighted before and company's accounts fourth flow to significant several improvement showing Late XXXX with dividends working focused We've Slide initiative paid accounts in first in kicked now, on company-wide in the the payable, and quarter. efforts we year,

trade quarter cash first of XXXX. select factoring million million XX% flow of flow in free from free cash receivable first trailing in $XX to basis, prime quarter, first for of in XXXX of this expanded quarter expanded XX-month $XX On period. a accounts dramatically Adjusting in $XX million

results with $XX.X at from has the at cash efforts. quarter first million So drawdown, we Lydall's of the of are $XX.X earlier, million Along these referenced clearly seeing compared quarter million the grown Sara the balance fourth $XX to end the end XXXX. to

April $XX.X million. balance As was of XXXX, XX, company's cash the

In our one capital liquidity are repayment of longer in reduction to of to million terms we continues debt be priorities maximize $XX taken of capital allocation, the debt forecasting have term, allocation term, while we our actions in short position, and top XXXX.

demand new is capacity exceptional million of our million. anticipate in to This capital investments, $XX to million from which We will prior in of of investment meltblown $XX exclusive in expenditures million $XX our to business-critical down XXXX, meet markets. we to range reprioritized have $XX the for be filtration the the guidance

result the quarter out a subsequent one at and economic XXXX. expected As of of in to the company least compliance covenants of COVID-XX pandemic with of the its second slowdown, financial be

of banking loan of support a XX, The period agreement facility of amended our through entire million with of the amended million. required term charge is with result, net ratio above XXXX. of As agreement X.XX%. for of syndicate. leverage $XXX our X.X consists ending March a steps we maximum a a the the The ratio XX, to to fixed amendment credit debt facility, X.XX%. period change XXXX, and ending the the date maximum XXXX. The revolving increases fee adjusted August thereafter. down There's to of is applicable X.X rate which The a no is The margin maturity LIBOR June $XXX

company's of $X.X ratio X.Xx quarter, including credit million million leverage the end the the total and $XXX was for agreement. the as net credit debt At on of outstanding the facility drawdown of repayments in in adjusted million EBITDA a March, defined approximately $XX

address I'll crisis. they our how end In markets current the are and closing, current we serve on impacted by that thinking

in construction demand Solutions In stronger as the automotive higher the and other in NXX higher-grade driven will and the filtrations Performance respirators unfavorably impacted Materials, products. well be demand ULPA we applications The are subsegment, as significantly demand agriculture volumes filtration HEPA media Sealing by Advanced for lower softer business seeing for markets. critical by likely and and and

Advanced filtration for industrial Nonwovens and see In impacting our automotive driven applications for by global short anticipate demand. We we as in curtail lead Materials, capital will lower demand Technical term. geosynthetics, business, the activity, in upside by slower medical-related companies look industrial likely increased applications to tempered investment growth softer to demand

In increasing Finally, industry in Thermal the February, relatively Solutions, China, significantly a quick Acoustical we ramp-up weeks. be several auto shutdowns production after with will in global XXXX. over down in saw

forecasts. quarter, expect Europe below We pre-COVID see operations to the levels quarter, and of of but with ramp-up likely remainder a in in second North measured production stabilizing the third America the at in

in fixed our American as reduction better providing force a North operations a volumes, with to levels short-term cost second the lower As the in align Thermal cost our Acoustical while in performed production our Solutions grow. result, to flexibility quarter, leverage structure base we

I'll back closing Sara comments. now it to her turn for

Sara Greenstein

We from did while Thanks, to Randy. this reiterate, COVID-XX all in last the despite our quarter, and headwinds and demand able position. by facing automotive significant while created were enhancing our To a surges downturn growing managing strong demand. respond simultaneously to we cash of liquidity profitability this quarter

the the transformation the than more that And accelerated we Lydall COVID-XX. viable mid- needs earlier adaptation We this the to the market were come we rapid on and embarked has optimistic of out and year. crisis are strategic will had this stronger long-term of that over before

a from for normal XX like transition response Slide us. we may to outlines As operations, crisis what normal new look

Thermal business. standards First employees. for we remain of are in And to of committed light tunnel foremost, and Acoustical to end at our see starting safety Solutions enhanced upholding our the all we the

operations, to ramp come started OEM Our China slowly and sites have to up European customers as back are online. back normal our factories

May Ford, XX. production plans In and have restart to announced GM North on America, Chrysler Fiat

partner support ready them We agile their cost as with to leaner, a are structure. strategic and more

continue for filtration We strong specialty products. very demand see to

in to subsegment compared increased In fact, volumes XX% the in our April, previous Materials filtration year. Performance

mission imagined a to Lydall's safer years been has have safer XXX quieter mean the the could X would world past months world. of create for significance and is and not cleaner, We Lydall. ago a creating what for

We protect are for disease lightly, products this responsibility do Our not we COVID-XX and and from people save lives. task. the up the take

When I communication situation cannot for, barriers it can first ever business you operational A a your X global made prepare our that of. to pandemic, show down in expose also was foster like joined Lydall of November, you're what fully units. but can my and break back among priorities you one weaknesses,

I several months, that have intensity, my have seen collaboration, past and outcomes, of impact the a from Over level colleagues expectations. important, most far surpassed my

coming ways to and to teams with Our biggest the knowledge create of sharing resources are and solutions up world's working together, innovative new combining new challenges.

everyone is One them makes to of once steam. drive our proud, me so Our I Lydall visit become the across again, The can, tenacity forward day forward the when and our to thank spirit globe. at at and facilities and employees I'm moving full looking

for With call open let's questions. the that,

Operator

Instructions]. [Operator

question CJS. comes from Moore, Chris First

Christopher Moore

Yes. would the for be Maybe question first Sara.

three all obviously, So auto that markets. end ramp-down serve businesses in production the

evolve. which in employees, of one to get structure, the most of Just then say, as likely of how to sense they out look will to Trying XXXX, ramped whether of -- cost would terms nature? things trying they that a of into, size, And the of those different at this will times? sense up of kind kind half be first whether get a different looking

Sara Greenstein

Sure.

piece take Let that by piece. me of kind

to that did in those we markets our to directly the we countries. each ceasing end And of first basis, of operations. on signal related all, ramped down automotive So a country-by-country response in demand quickly

very came furloughed prepared ceasing As U.S. in across And and the it about and we quickly serve think the those market said, you employees we March. direct to U.S. was well I in short down Europe And our market in operations response that know, Europe customers the remarks, end automotive automotive very in sites in X,XXX the order came down that quickly. very end our

from as beginning the that slow the to demand the will have And come Now our I'm sure you there the hear the sync. is when that again, match match Europe. signal back in And we you And our on in current we customers. of think ramping workforce we ramp-up do. U.S., work result, will as keep about to in But that we XX. large up, news our a bring the and customers OEMs May is the workforce demands to back a

lower ramp that slow anticipating, and ramp-up our meet lower the our for end anyone to to of was structure the a XXXX? I But it. do terms their crystal future. demands all needs would argue, is you as foreseeable at if see up know, can back that I cost demand. -- pandemic a world is as we current that at anybody a the into be to year, we into it the the In it level will current come would SARs of manage have the currently the see worked to flex working coming customers expectation be we stay on What ball, reflect, to probably and course hard that would back over customers' we and our our to what assuming numbers level so and according between against what that produce very is they than we're work done now and has sustain probably able

Christopher Moore

feel some the filtration for -- uses opportunities sense in on terms just Got the like. in there? it. even the a might other ancillary the the other of -- NXX to media the that gears for more the about kind side might of talking switch in Maybe that Any of look market you're of NXX to and maybe respirators. That's what be some helpful. in that respirators, terms total addressable Just get what trying and of

Sara Greenstein

protect understand, is that filtration, which and supply. the there it to general, shift protect the And demand in you underway foremost, and what first demand Fully when I environment work. the will comes tell used structural now we Chris. to outweighs specialty people, but places expectation is to live And is right evolving and a in the

In demand countries in structural but shift also in forcing there's instances, where addition a PPE national as of what's as occurred, localization a shift, those particularly of to the is viewed significant supply chains some that countries, need. a because regions, security chain, more supply result even are

of a and regions more that size combination basis. and the are country-by-country, in that changed give the occurring, chain our that on the that demand and terms the the And we demand us strong. what supply shifts of that take the region-by-region the is supply So so, and countries great supply occurring a are when market of basis, need, global are to on are you demand shifts work is, structural in ongoing market confidence less ability the even than behaviors that underway

Christopher Moore

there's it's don't in it. that -- in a supply, time. specifics of Got this terms front? what at target? other Obviously, demand any sense outstripping on that but have I of no the number you guys is no number And specifics, point

Sara Greenstein

something It's is, -- right of try vague, I put it all is strong to that be of not to the is it so a I'm I to multiple, now. And more part It's is be trying wrong. around not right know part demand that now. would guardrails

sure are to just fair isn't doing fair imbalance to is, a that just what a term. also is to the this exists part is well up But the This the the short of changed it's So reality just agreements behavior. future signing and it's this into intend we but -- just not that us term. to in say yes, long people the long-term here, be positioned today for supply enable make we're that that

Christopher Moore

for Randy, actually. me I appreciate that. one A it. just is to Got last

facility. credit amended the On

as mean, like would in what that looks to high even the But it approach level? agreement. could happen have I to leverage as So X.Xx go

Randall Gonzales

Chris, max yes, is net financial terms so now covenant ratio, X.Xx. the leverage the of debt in

forecast the discussion But there's But going covenants. with So approaching lots the in be been for us pressure be that. the modified forecast our events, that and those has shows the downwards. not we're all that you not to based testing imagine, of banks can and been to as to adjusted breach comfortable on forecast we're going

Operator

Instructions]. [Operator

Our next question & of from comes Marshall Edward Company. Sidoti

Edward Marshall

and Randy Sara, I trust you you're how are and Brendan, well. healthy guys?

Randall Gonzales

thank you. yes, you. Same Ed, to

Edward Marshall

look and the -- demand can So is I XQ? first if at I want the maybe when was general I in to impact discuss secondly, what my guess, outweighs PPE, And you I thought the price. hear size supply,

that in each you could of comment sell QX? just appreciate much it -- how size much -- you If did And it. of those, I'd how mean, I on

Randall Gonzales

subsegment on QX, and in So Ed, increase based for specified within Performance year-over-year the numbers by filtrations the we subsegment. Materials the

Asian were Some large orders of from that customers. at there. we that And in time, impact is seeing reflected

Now it's shifted.

more discussed, America just shifted towards now and it customers. North Sara As U.S.-based

to the QX with year-over-year April with in So fact and the of we is we going are results reflective equation I saw forward, think securing anticipate customers. long-term what that and you what the and supply-demand to especially the year-over-year agreements see the increase reference

Edward Marshall

So how in was the it much quarter?

Brendan Moynihan

Yes.

that Performance quarter-to-quarter. is filtration Materials put million. Randy $X quarter, color just the up within around said. year-over-year, some about which So Ed, to to is subsegment triangulate the was And X% data another In point what

QX, QX we $X.X or were XX.X% up million. to So about

talking of here. driven that what we're So increase by was about the bulk

Edward Marshall

right. Right,

with that trying add than this less could have, then timing that declines say size, we that what and, for offset other that segments? meltblown is we ultimately, be today to get the trying we just in Will Or the opportunity machines? as and business to Okay. million to then to $X this growing see are we I'm ultimately, additional as Lydall? machine scale

Randall Gonzales

of that. PPE I the But offset and offset, see and in for ramp completely PPE PPE the shutdown -- been online, in of certainly filtration the be the and automotive have back specialty lost volume where for think, to QX, is I will automotive. partially it regards we facility, the a sales and going with with all operations, in come first increased we to the yes, than and mean sales, slower the that's to filtration part definitely general, automotive I to filtration exception as of think, QX, particularly it and but start will China April the partially anticipate, offset not Well, May, is going demand the -- starting

So a partially what going on seeing it's end to certainly tailwind automotive that the is exposure. we're market offset

Edward Marshall

Just to that due to So business kind NXX number? picture can't setting your talk of get the reason the any sales of kind size are a the you unable for within we reasons Or you're contracts other about there that that of curious. of up? clearer are

Randall Gonzales

I think tried we've it. to define

year-over-year the we So also increase was mentioned the Materials, in April, in filtrations subsegment of XX%. Performance

So...

Edward Marshall

trying to. I'm number base the to get work That's from? to What's what Okay.

Randall Gonzales

number base itself? for April The

Edward Marshall

was you're -- saying number the was it's for the it's year's What year-over-year. NXX? based the XX% for Well, off? up What number last

Randall Gonzales

I at but mean, Yes. in of Ed, front we're I filtration that million. sales, were $XX don't have a rate. me, directly number run QX

$X a month, out, and we're little per million, on So would about XX% be up if million $X that. over that you divide that

Edward Marshall

Got it, got it.

machine, you Okay, so CapEx about when I the the $XX for million, think said of I NXX. project associated with, think, the meltblown exclusive $XX to Randy, million

timing Is So adding? I'm talk secondly, and was line maybe clarification point about, What it project what that there the you're is you you deck, I just in guess, in for. release, the securing is press probably sure. but And just thing, Honeywell. with I want said the contract the to looking That said of you're see be it And multiple there? a a can you we may make you lines? kind one secured. of could

Randall Gonzales

the has of Honeywell with capital contract timing. been and the the the executed. amount regards to So With

additional end So line the we have production anticipate be ordered of by yes, we online this and that commissioned an year. will

of but that -- CapEx from payback be it range specified, but be So the will will we incremental, period short. very

Edward Marshall

How much to the project? spend going you for more are

Randall Gonzales

this think amount don't publicly disclose we're CapEx what the the I going to At is. Ed, of point,

Edward Marshall

to maybe volume, cost tooling. a acceleration Thermal that that I'm maybe just If previously get performance much cost increased Acoustical as of switching you that Can revised reduced and it. you sequential structure, costs? about talk maybe basis. planning I basis. improvement gears start-up increased Got Solutions. a a the How a think to on sequential on lower of were margin structure of The sense trying just -- is to

Randall Gonzales

Yes.

to Ed, year? you're basis go-forward So be on a the looking rest for so just of you're -- clear, the

Edward Marshall

from volume. trying out tooling, a to I called those drove called the about then to QX looking I maybe you and severance ultimately, don't a to that increased as cost. sense QX revised what structure. QX, the out to if just I'm then called there, QX, improvement lower get QX? I I'm out margin, cost there. buckets a mind. also QX comparison and on

Randall Gonzales

Yes.

QX of the sequentially North weeks we America right, impact So in to we quarter QX from the sales did last by quarter, obviously, the have, COVID-XX. in were in and And some China. within impacted QX, X earlier Europe on had

all related lower terms last that But helped certainly, costs. a QX in the was in North -- terms of units flat America well. we're of business pickup driver within have It been quarter we remove think overall, is the force, in and in of to TAS, specifically efficiency what roughly overhead that you key would roughly in fixed year, TAS, helped. top the took the line. other seeing, reduction I labor quarter. would nice in And if also terms actions be those, the in in But as a

Operator

Neuberger. from comes question Rand next Our Gesing,

Rand Gesing

important you driver helpful that? to more to it. to the In guys we doubling if I'm and sort we're guys? it the is here doubling club. not essence, the out should be? could lot early sort looking big Or really flush sort in this production opportunity think about term? of have doing fully. capacity? in the trying you're figure of on micro-cap it is it's are -- how you Obviously, really line, near company, of sure People How Or you obviously, it the getting X Welcome could solving we're of of what for you So a SARS-CoV-X could and be days, be a are hearing out who debacle questions forward how

Sara Greenstein

I'm team So will the in let and me here. kick start, sure

in it to of days. quickly hit. meet pandemic, right, the a shutdown the a of a again, needs significant We way. while completely automotive in surge had We the bifurcated demand reacted matter So almost market

we the up So critical that specialty product and and that filtration capability capacity capable making stood could. have of we that's we took everywhere

it nature serving and is it keep is of coming running; many of able keep go healthy; just and to we have Honeywell; demand. What enduring Some high running, of we contracts, mentioned demand into is that of capable all geared we as have as securing in EFE-rated make while the the to material the NXX. everybody to the with have we we filtration of keep done make And machines to work; masks. adding everybody as long-term can, like that confidence capacity and able

that is it less capacity mentioned order is we honest that in, we to to these And we a in continue demand right supply-demand by is XXx, in be Randy the and the ramp So environment there to what I'm the the now tell far greater supply cash-smart manage Xx, capability you in is to reason profitable, our it very that answer Xx, the is the for is place not machine is, the continue will we're understanding able current equation up we because than year. that filtration and demand products. getting that And is, place specialty it have end have, than most tightly, our way. additional will are in putting demand and the of

countries all addition now That, reality the of supply leaders go supply any I'll premature. on viable, and this market when consideration. resources chains even sustainable in our you all and to about are have right technical absolutely products away doing importing up being are do, how setting to of there. all need the pause and being regions and as to what real, is And make are local from adaptations. and/or countries and chain towards informing scarce, they moving contributing in sizing experts viewed part to that We

Rand Gesing

-- I is the question, if whether risk there. you time, that you position stood competitors of do obviously, and supply of I how -- of Yes, is capital wonder, super -- sustainable think over capital chain like get -- the that know days, will this a and do know of this of that just agree securing risk all securing downstream, up seems to, they of sort out lot your Honeywell how long-term that But early, while flow of feel and wonder for up. in whole you what a early people things long-term the space. is, great. from the I here And others feel -- fact a there's very silly I position the that but -- is and into super industry chance a do other this How going sort be do do like come there's capacity it's And could it's state? can it's nations. Okay, it Honeywell, are that but lot I to the that there's a one foundation I given going you a and critical --

Sara Greenstein

So I right. it's demand And XXX. hey, is attuned are agree that. with to we very you, of and economics mean, supply all I

new is material do that come us? a is, positioned, are Do talking And there's Absolutely. Yes. science core room putting on? that to just I we with will into right goes is The and why it's have think we that going and that that along goes how Do decades sustainable into that other But at that? products There's this. Technical Yes. Lydall goes is I engineering for in. it with been. There's well we're who play think our than in complicated think just There's Nonwovens of always that reason this. capacity extend machine for So and along application about the PPE. has more now a I it's specialty experience environment, this. beyond of PPE and that filtration this

know-how, customers. we and we've continuity us how called with because and have position this invest in in that innovate believe Because to and sustain legacy, of continue of who's to that us agreements a firmly puts to X our of weeks, us because gives our itself because I our of So position, partners. responded in good and past long-term why required the the with

Randall Gonzales

engineering Rand, you well. capabilities it's supply-and-demand this Lydall backlog near I'll meltblown And make that And of they line goes made also to equipment. are we meltblown term, a world imagine, there's has capabilities. only able for as works for get in that, the that which the the that to this have of as asset add, such, NXX the what equation a secured technical a the manufacturers to well. with across important the that of be product a place companies equipment that as the into few in understand can make have fine-fiber respirators, that as manufacturers can order and to the this asset

Rand Gesing

capacity Remind me have globally, where guys you which the locations?

Randall Gonzales

have we our Hampshire, Materials Performance in So facility. Rochester, New

meltblown We also in Saint-Rivalain, produce France.

Rand Gesing

Okay.

So filtration, there's but you to meltblown in obviously, China, no the broader need? other there have serve capacity

Randall Gonzales

Correct.

Sara Greenstein

Correct.

Operator

Company. we from question Edward a follow-up Next, & of Sidoti have Marshall

Edward Marshall

just order book today, talk for think I'm following want new just just about on meltblown order -- what Rand were -- you was with your an on. you curious, Can I a when you'd the for machine you get to do supplier? if lead place times to Sara, in maybe touching

Sara Greenstein

I'd So these you publicly. we've that and long, I you as day. And dictated, accordingly longstanding with that the at to. disclose relationship. not be we to can That's needed times are that every also as long I able assure a something folks prefer demand can time and something needed to tell we that we a look but I for lead is expensive, navigate we think have to, worked would

Edward Marshall

decisions demand you curious, supply, making the purchase or second When goes we supply will take in machineries of have we CapEx a about of the you and question. will the that dynamics hand? I'm if approach back contract to come? And only about talked are Or they it. if new Got you to in market. order and these part you the outweighing talked earlier build the it,

Sara Greenstein

that date, have have long-term would dictate it and a this how have and very we that agreements So to cash been the we environment, demand risk-mitigated purposeful very deployed we've in the was decision. that about signal we

Lydall we each sure value evaluating additional we of we for manner on each decision to we're are based appropriate our that make investors. decisions the and As day will in make drive in the environment unfolds, an day terms and literally, unfolds, that in demand, most

Edward Marshall

manufacturer? guess, on, any as know-how of a that and advantage the supplier like NXX technical least for course, That's of at wide fair. you you I the fair. That's getting It sounds a have competitive choice make machinery would such then, well

Sara Greenstein

the And I to we we every the we're done have how I I and develop know we And don't and are I and this, reality are that if think, grow. have mean, have -- the think the it it, continuing that's doing that we now, occasion is day. and rising we're the we doing have to contracts reality partners

putting today weren't in would with and are place So a yes, and that you straightforward this, come than said. certainly as isn't regulations all There required. There's stricter new be are doesn't of agree before certifications it as what will machine. in it I yet that entrants, There are easy.

that as So realized. more quickly get is people that think into I this,

who -- have need highlighting of again, Lydall our the and that cornerstone it mean believe do decades, filtration done the for to I goes is -- we I it. expertise specialty it's this for and are. in So we pandemic

Edward Marshall

margin and to And look capacity available really factor, and optimally Got quick were customer? how benefit both I'm fast, to limiting to and it. the with could footprint, with how sticks if your ultimately, assuming and, everything you you the to going and but the get be I machinery, is a quickly, existing not the if your how today, fast get operating mortar in place footprint, how

Sara Greenstein

Yes.

-- as So ahead. yes, Randy go -- we're

Randall Gonzales

capacity, to capacity meltblown we anticipate be Rochester over going so meltblown just very last in year ago. Remember, a we added I'll take significant it's just that Ed, that. quick. April,

is And capital being very time, so deployment budget. very, the executed well, business And was that on on exceeded. case

Edward Marshall

running And is way, utilization, more? Or Rochester? that at by XXX% the

Randall Gonzales

It is.

Edward Marshall

customers' people That's have will in needs. I'm you Rochester rooms what additional there And meet to to are kind understand fast kind there, -- The as meet as additional trying footage footage of where able kind mean, how -- what's that's the of of other, square or the square who certifications, or floor the do the the there, was I well. space, at. I be getting

Sara Greenstein

Yes. for is That us. not limiting a factor

Operator

Thank for attending you concluded. presentation. you. today's has The Thank now conference

disconnect. now You may

Lydall (LDL) 12 May 202020 Q1 Earnings call transcript