Ladies and gentlemen, thank you for standing by. And welcome to the Neenah Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to the speaker today, Bill McCarthy, Vice President, Investor Relations. Thank you. Please go ahead.

Great. Hello. And thank you for joining Neenah’s 2020 second quarter earnings call. With me today are Julie Schertell, Chief Executive Officer; and I have the pleasure of introducing for the first time, Paul DeSantis, our Chief Financial Officer. Julie and Paul will cover business activities and financial results for the quarter in detail, including impacts from the Coronavirus pandemic and actions we have taken to respond. In addition, we will share a few thoughts on our outlook for the rest of the year and following these prepared remarks, we will open up the call for questions. As usual, I will start with a few headlines. Sales in the quarter were $161 million down 36% versus prior year. This was in line with our communicated estimate of the drop in the U.S. economy. Operating income declined due to the lower sales, as well as from the impact of reduced operating schedules to manage inventories. On an adjusted basis, operating income was $0.5 million in the quarter down from $23 million last year. We booked $59 million of mostly non-cash adjusting items related to asset write-offs and impairments and other restructuring and non-routine costs. In the second quarter of last year, there were $3.5 million of non-routine charges. We will cover these items later in the call and complete details, along with a reconciliation to comparable GAAP figures, can be found in our press release. GAAP EPS in the quarter was negative $2.98. Excluding these adjusting items, EPS was negative $0.08 and compared to $0.95 in 2019. Lastly, I will note that our comments today include forward-looking statements and that actual results could differ from these statements due to the risks outlined in our website and in our SEC filings. With that, I’d like to turn things over to Julie.

Thank you, Bill, and good morning, everyone. While we started out the year strong, there was no avoiding the significant impacts from the pandemic in the quarter, and I am very pleased with how our Neenah team has responded. In this time of great uncertainty, we responsibly managed operating schedules and inventories, aggressively reduced spending and delivered strong cash flows, all while continuing to support our customers with the highest level of quality and service. I am confident with the work we have done, we will emerge in a strong position. Last quarter, I shared our plans to address the pandemic covering five key areas: maintaining the health and safety of our employees; exceeding our customers’ expectations and working with them on future needs; driving operational excellence in manufacturing and reducing costs in all areas; preserving our strong liquidity position; and continuing to execute our long-term growth strategies. I will update you on our progress in each of these areas. Our top priority is always the health and safety of our employees. With enhanced protocols and practices, we have implemented numerous changes to the ways we operate. Our employees quickly adapted to these changes while remaining focused on delivering the high quality and service our customers expect from us. Most importantly, they have done all of this while working safely. In fact, we reduced injuries by almost 30% this year as we continue our progress to ensure that no one gets hurt while working at Neenah. Second, is serving the needs of our customers, who have also been impacted to various degrees by this year’s unpredictable environment. Neenah is known for our flexibility, speed, nimbleness, and responsiveness in the marketplace. During these times of increased volatility, our customers value these characteristics more than ever, and our global footprint has helped us effectively support customers with a local supply chain. At the same time, we continue to develop innovative new products for the long term. I mentioned in May our success in commercializing media for high performance face masks. Recently, we have also launched replacement filtration media for consumer-branded face masks. This business, while small today, continues to grow and we have accelerated efforts to increase throughput on our assets in Europe. In addition to face masks, we have grown our high efficiency HVAC applications and expanded our high performance industrial filtration media to address the needs for data storage. Growth in both of these markets continues to accelerate. While we have introduced proprietary, new, environmentally-friendly digital transfer products that expand our addressable market and provide increased customization and cost efficiencies for our customers. We are developing new tape backing applications to meet the increased demand for painting and other do-it-yourself home projects, and not to be outdone, our consumer fine paper team recently designed and launched new teacher tool products under our well-known ASTROBRIGHTS brand and began selling new SOUTHWORTH brand planners and journals. These products are available at major retailers both online and in stores and help extend our reach beyond the traditional paper category. A third area of focus has been operational excellence and cost management. In the quarter, our team significantly reduced costs, both temporarily in line with reduced operating schedules and also on an ongoing basis as a result of restructuring efforts. We reduced over $15 million of manufacturing costs in the quarter as we optimized capacity, restructured parts of our organization, improved asset yields and deferred spending in multiple areas. In addition, our procurement team did an excellent job negotiating lower prices and more favorable terms with many vendors. Our hard work extended beyond manufacturing, and SG&A was more than $6 million less than last year, with reduced payroll costs, lower travel expenses, and spending decreases in virtually all other areas. These reductions included nonrecurring savings above $1 million from furloughs. Additional initiatives included optimizing certain brands and SKUs, and as noted in May, idling a fine paper machine and reallocating its volume to other assets. While these efforts didn’t overcome the significant impact of under-absorbed fixed costs in the quarter, the changes we have made clearly set us up for more efficient operations as volume return and are expected to generate ongoing savings of around $7 million a year. Next, we focused on preserving our strong liquidity. Cash generated from operations in the quarter was almost $30 million. In addition to cost reductions, we reduced working capital, nonessential capital spending, and discretionary pension contributions. In May, I communicated a targeted cash flow improvement of $50 million versus our base plan to help mitigate impacts of lower volume. I am pleased to note we are on track to surpass this target. These efforts, as well as the successful refinancing of our debt helped us end the quarter on sound financial footing. Last but not least, we remain resolute in our efforts to create long-term value through executing strategies to invest efficiently in platforms that deliver attractive returns and enhance our growth rate. We have important foundational categories like fine paper and backings that generate meaningful cash flows that we can redeploy in four targeted growth areas: filtration, custom-engineered materials, premium packaging and design, and specialty coatings. We are continuing to act on organic opportunities in these areas while maintaining an active, but cautious M&A process and recognize it’s our ability to execute well while maintaining financial discipline that ultimately drives value. Before wrapping up, I’d like to comment on the one-time charges in the quarter. While these included costs for actions we have taken to restructure and optimize our business for the future, the largest impact resulted from lower near-term demand due to the pandemic, which triggered a partial impairment of our U.S. filtration asset. As we have noted in the past, qualification on some grades has taken longer than anticipated and we have also made investments in Germany that have provided incremental capacity. Our objective is to optimize total cost of this business; these items, now combined, with an additional slowdown due to the pandemic have extended the U.S. ramp-up curve. We continue to see transportation filtration as a strategic and attractive market. Our expectations are to fill the U.S. asset over the next several years and deliver our historic above market growth rate for this category. I can assure you, our teams remain very focused on this, and we view it as an important catalyst for growth at Neenah. I am sure it was no surprise that the quarter was challenging. As you have heard, we have acted aggressively to protect employees, support our customers, manage our costs, and improve our financial position. We remain well-positioned in our markets and have the organizational capabilities and financial strength to address short-term challenges and deliver on our long-term strategies. I have been encouraged by the sequential improvement in demand in the past few months, and we will talk more about our outlook later. I will now turn things over to Paul to cover our financial results in detail.

Thanks, Julie, and good morning, everyone. I’d like to start off by saying how pleased I am to be here at Neenah. Although starting in the middle of an unprecedented pandemic is not ideal, I have been impressed with the can-do attitude of the team and how well Neenah has responded to the crisis. I am confident we are on the right path. As I go through each segment’s results, I think you will hear it’s a pretty consistent story. Significantly reduced demand due to COVID, coupled with our efforts to responsibly manage operating schedules and reduce inventories, lowered results. And we partially offset this with a broad range of cost improvements and benefits from lower input costs. We also focused on initiatives to deliver our targeted $50 million of cash flow benefits by the end of the year. A very important element of this has been working capital management; our efforts resulted in cash generation of almost $30 million from operations for the quarter and further contributed to our sound liquidity position. As Julie mentioned, we recorded $59 million in impairments and other non-routine charges, almost all non-cash. This was primarily triggered by the COVID impact on demand, which extended our U.S. filtration ramp-up curve. If you are not aware, in determining impairment, the accounting treatment is to measure cash flows over a fixed period weighted to near-term results. To be clear, it’s a great business for us, and our expectations continue to reflect filling this asset with profitable business. A list of adjusting items by segment is included in our earnings release. So I’d like to review segment results excluding these and then discuss a few overall items including liquidity and our recent refinancing. In Technical Products, net sales of $106 million were down 28% as the global pandemic reduced end-use demand. There were several bright spots, however, with revenue growth in some key markets, including industrial filtration products, face mask media, and medical packaging. Net sales prices were down slightly, reflecting price adjusters for certain grades and a modestly lower price/mix of products sold. Currency was also slightly unfavorable, with the euro averaging $1.10 in the quarter. Adjusted operating income was $5 million, compared with $13 million in 2019. While the decline in operating income was $8 million, the combined impact from lower sales volumes and manufacturing fixed cost absorption was over $17 million, so that gives you an idea of the impressive amount of cost savings and improvement that we delivered in the quarter. Benefits from lower input costs, net of selling price changes, accounted for about $3 million. In Fine Paper and Packaging, the year-on-year decline in revenues as expected was steeper. Net sales of $55 million were down from $107 million in 2019. The decline was virtually all due to lower volume. Sales in the second quarter of last year were the highest of the year. In addition, since supply chains in this business are shorter, the impact from customer inventory destocking occurs more quickly. A meaningful end market for commercial print is high-end advertising and marketing, which typically declines quickly in tough economic times. Sales for Premium Packaging and Consumer performed relatively better, and we continue to grow in labels, which are used primarily for wine and other spirits. Turning to the bottom line, adjusted operating profit was $0.5 million, down from $16 million last year. The combined impact of lower sales volume and unabsorbed fixed costs in the quarter was $19 million, and this was partially offset by cost reductions and benefits from lower input costs net of selling prices. Turning to corporate items, consolidated SG&A was $21 million, down $6 million from an exceptionally high quarter last year. Like in manufacturing, we acted aggressively to take out costs in this area and did so through a number of actions, including headcount reductions, wage freezes, furloughs and pay cuts, and reduced travel. We expect consolidated SG&A to average around $22 million per quarter for the remainder of the year. This is down from a historical run rate of $25 million and also below our previous quarterly guidance of $23 million. Unallocated corporate costs on an adjusted basis were $4.7 million, down from $5.5 million last year. These costs are expected to average around $4.5 million per quarter in the second half of the year. Quarterly net interest expense was $3 million in both 2020 and 2019. In June, we entered into a new $200 million Term Loan B facility with an initial interest rate of 5%. Proceeds from this facility were used to pay down borrowings on our revolver and fully redeem the $175 million of outstanding 2021 senior notes on July 16. As a result of the overlap of borrowings in July, third quarter interest expense is expected to be $3.7 million before dropping down to a projected quarterly rate of $3.3 million. Our tax rate in the quarter was a benefit of 19%, which was reduced by a $4 million increase in our valuation allowance against existing deferred tax assets, primarily due to the non-cash impairment charges. We continue to project our ongoing tax rate at approximately 22%. We ended the quarter with cash of $203 million and debt of $381 million. However, both of these numbers were inflated due to cash received from the new term loan at quarter end. Reducing both balances by $75 million to reflect the redemption, cash would have been $28 million and debt $206 million. I mentioned that cash generated from operations in the quarter was very strong, with careful attention to inventory levels, operating schedules, and supplier terms we generated over $20 million of cash from reduced working capital. I am comfortable with the quality of our receivables and inventory, especially in this environment, and know that our teams are continuing to focus on further efficiency improvements in these areas. Capital spending was $3 million, down from $5 million last year. Year-to-date, we have spent $8 million and currently expect full year spending of around $15 million. This is about half of what we consider our normal level, as we have cut noncritical items while continuing to fund projects that deliver meaningful cost savings or are key to long-term growth initiatives. I’d like to wrap up with a few comments on our sound liquidity position. Neenah’s credit facilities are in good shape, starting with the new Term Loan B facility that replaced our 2021 senior notes. We like the Term Loan B in this environment as it’s highly flexible and we continue to maintain our $175 million global revolving credit facility, which today is undrawn. Both of our credit facilities are with high quality lenders and with terms we consider to be reasonable and covenant light. Overall, I am comfortable with our financial position. We ended the quarter with almost $30 million of cash on hand, $130 million of availability on our revolver and strong processes in place to control cash during this pandemic. Thanks to Bonnie, Neenah has an excellent finance team and a proven history of financial discipline while driving growth. I can assure you that will continue. I am looking forward to being part of Neenah's future and to sharing our success with you. With that, I will turn it back to Julie.

Thanks, Paul. I will wrap up with a few comments on our outlook. As everyone knows, the global situation is still very fluid. However, there are some things that have more visibility and many areas under our control. So I will start with those. First, as usual, we will take our annual maintenance downs in the third and fourth quarters. While we continue to carefully manage spending, this work is required to ensure our assets continue to operate safely and efficiently; maintenance expense in the third and fourth quarters will each be about $1.5 million more than the second quarter. As global economies recover, input costs are projected to rise modestly and favorable year-on-year comparisons will diminish. The euro has strengthened recently and this will benefit us from a translation standpoint, with each $0.05 change moving quarterly sales by $2.5 million and operating income by $0.5 million. As a reminder, currency impacts are almost all in Technical Products due to our large European presence. Recent rates of around $1.18 compare to a rate of $1.10 in the second quarter. While those items are a bit easier to predict, the pace of demand recovery is more challenging, including impacts of seasonality and back-to-school demand. As noted earlier, I have been encouraged by the steady improvement in both segments that we have seen over the past few months. Third quarter sales will still be below prior year, but the percentage decline should be much improved. Transportation filtration is improving in Europe as their economies recover and miles driven increases and other Technical Products categories are picking up as well. Fine Paper and Packaging is also bouncing back from the steep decline in the second quarter, helped by their short supply chain. Looking beyond that, I expect the sequential improvement to continue. Technical Products is a growing and resilient segment and we expect sales to fully recover to pre-pandemic levels. Fine Paper and Packaging is likely to lag Technical Products in timing of recovery and while Packaging should continue to grow, the rebound in commercial print will depend more on improving economies and as companies resume spending on marketing and other high end print needs. During this time of uncertainty, you have seen that we have addressed challenges head-on by aggressively managing costs, while continuing to build on what’s made Neenah successful: deep customer relationships, superior product performance, and disciplined decision-making. These values won’t change, nor will our commitment to providing a return to shareholders through a meaningful dividend. I am very encouraged by how we are executing. We are collaborating with customers to develop and launch innovative new products, implementing a Neenah operating system to create long-term sustainable manufacturing improvements, leveraging the strength of our local footprint and supply chain, and pursuing opportunities in targeted growth platforms. You will hear more about this as we continue to execute our strategy to extend our technologies and capabilities in these growth platforms through both organic and inorganic opportunities that add value for our stakeholders and position us more strongly for the future. None of this would be possible without our talented and dedicated employees. Their ability to work safely through the recent challenges and changes while providing customers with the highest quality products and service and finding ways to significantly reduce costs has been remarkable. As I said in May, I am excited to be part of this team and I look forward to growing our company together in the years ahead. Thank you for your interest today, and I will now open up the call for questions.

Our first question comes from Jon Tanwanteng with CJS Securities. Your line is open.

Hey. Good morning. Thank you for taking my questions.

Good morning.

Maybe first off, I was wondering if you could talk about the inventory situation and your customers. I know you mentioned supply chains in paper are short. But just, overall, did you see restocking tailwinds heading out of Q2 or into Q3, and if so, how long that may be sustainable for?

Yeah. So it’s a little bit different by segment. I would say customer inventories have right-sized for the most part. Where we see probably some inventories that are still a little bit heavy at our customers would be in our backings category and performance materials and so the recovery there might lag just a little bit as we head into Q3. But for the most part, I think our customers have righ-sized their inventory levels at this point.

Got it. Thank you. And then just in terms of general trends, have you seen any places where demand is still sluggish, maybe, like you said, backings inventories might still be high versus the general improvement that you have seen in many other places?

Well, I think the first place that is, I would talk to you about is probably commercial print. The nice part about Fine Paper and Packaging is we have nice diversity even within Fine Paper and Packaging. So we have a commercial print part of that business and it’s driven by advertising. And as you recognize, as soon as the economies start to be challenged, many companies reduced their advertising budgets and we are feeling that. And so when economies start to open up and advertising budgets start to open up, we expect that to rebound back. But in commercial or in Fine Paper and Packaging, we also have our consumer business, which goes to large retailers like Amazon and Target and office superstores, and that’s driven by school and crafting and teachers. Our packaging, premium packaging, both of those have been more resilient. So, commercial print is probably a little bit more challenged. The diversity gives us more opportunity to rebound because of the end-use markets and we have the leading position in the space, both in the B2B channel and the B2C channel, but that’s probably where we are feeling the most pressure. And then backings, as I mentioned, just from what we talked about the customer stocking and from an inventory standpoint, I think that’s timing as much as anything.

Got it. Thank you. And that’s a good set for my next question. In prior calls, I think you discussed the possibility of demand destruction in the commercial print business, depending on how long the pandemic lasts. Are you seeing any evidence of that so far as companies are relying more on a digital offering, and/or is it maybe too early to tell there?

I think it’s too early to speculate at this point. I think the longer the duration and the deeper the decline, the greater the risk of just what you described moving to different advertising modes, and that would be mostly from a commercial print standpoint. Like I said, what I like about our business is the diversity within Fine Paper and Packaging, that we have the consumer side that is healthier and rebounding a little bit quicker and the packaging side, which is a nice growth platform for us. We are also aggressively supporting customers to help with new products and programs to drive demand. And I think the other thing that’s important to us is that fine paper as a category has been under the pressure of secular decline since the mid-90s. So that’s nothing new to us. We know how to manage this business and we know how to manage it well and it generates a lot of strong cash flows that we then invest into other growth platforms and we will continue to manage it in that way so that it adds value for Neenah and for our shareholders.

Got it. And nice job on the cash flow. That was impressive work. One last one for me, just given the scale of cost reductions, both on the SG&A and on the manufacturing. How should we think of your incremental margins here as volumes recover?

Yeah. Hi, Jon. I will take that question. So a couple of things, one of the things we quoted was about $7 million of permanent cost savings that we expect to get on an annual run rate going forward. I think we actually quoted three sets of numbers. So we have $15 million worth of cost coming out of manufacturing and that was a combination of variable costs and some fixed costs that we really drove out. So that variable cost will stay out while volume is down; we are going to continue to control the fixed cost where we can. But one of the reasons when you look at our overall margin in the second quarter of this year from last year is unabsorbed fixed cost, and so it’s still a big number when volume is down as much as we are. So as we start to move up in volume, which we are expecting to do, we are going to see some margin improvement in that. So then talking about some of the things we have learned on a sustainable basis. One of the numbers we have talked about was $7 million of benefit. Of that, we think about $4 million of that is permanent in SG&A, and we think about the other $3 million is going to be permanent up in manufacturing above cost of goods sold. We didn’t experience a lot of that in the quarter because a lot of that got implemented during the quarter. So we will get some benefit from that as we roll forward, but the primary driver really in seeing margin improvement when we are down as much as we are is improvements in volume.

Got it. I appreciate the color. Thank you.

Your next question comes from Steve Chercover with D.A. Davidson. Your line is open.

Thanks. Good morning, everyone. So the decline in paper is obviously a source of concern, and I have heard you say that demand for commercial print should recover. But is there anything you can do to accelerate the migration towards printing, sorry, towards packaging and other uses, labels, or is that kind of pushing on a rope if you try and accelerate things?

Well, no, not accelerating growth towards those end-use applications isn’t pushing on a rope. We really focus on the end user. And so as we think about, particularly in Packaging, we are selling to the brand manager. So if you think about that iconic Tiffany’s Blue brand that everyone knows or that maker smart label. We are selling to that end brand user because it’s their image that matters and that pulls demand. And so our selling process, how we go to market, the supply chain we use, the capabilities we have for colors and textures and supporting their brand imagery, that’s what really matters for Packaging. And just recently within the last few years, we implemented a design center within Neenah that helps create prototypes and designs to help demonstrate for those brand users, specifically in packaging, how we can support their brand imagery, which is where they gained equity in value. So there’s definitely effort that we can continue to drive from a Packaging standpoint. I think the pushing on the rope would be more if we tried to pretend there wasn’t secular decline in commercial print. And then there’s also additional effort as we focus on plastic replacement alternatives. And I would tell you, even more so during this time of COVID, where health is of major concern that oftentimes leads into environmental concerns very quickly for people, and so plastic replacement alternatives, which Neenah is often the preferred alternative, has been an innovation focus area for us as well.

Well, an effort you had against plastics. Good luck there. And then can you tell us about the financial opportunity within European face mask filtration? Can you quantify the size of the market?

For us, it’s not a significant amount of revenue, likely up to $20 million annually, and this is based on our existing assets in Europe, as we have not invested in new assets there. What this has really shown is our technical capabilities and how swiftly we developed and qualified an N95-equivalent face mask product in Europe to meet demand. We have also increased throughput through organic projects to expand that area. The positive aspect of this business for us is twofold: it’s significantly more profitable in terms of net income, even with its top-line impact, and it helps accelerate our growth in air purification, which is a developing market for us. This area is very defensible, as we have long-term contracts to ensure it remains with us. Overall, it has been a good achievement for Neenah, but I don’t see it as a major market opportunity for us in the future.

Okay. And then with respect to the North American automotive filtration, I assume you are talking about Appleton; well, I think, I know you are talking about Appleton?

Yeah.

Will you in the long run be able to achieve the original financial goals? I mean, when you take a charge, does that mean it’s no longer attainable, or it’s just a longer ramp?

It’s really driven by the longer ramp. So we manage our filtration business like we do any business where we have redundant capabilities and we optimize the system versus optimizing a particular asset or facility. And so over the last few years, as we have unlocked latent capacity in our European facility and we have worked on responsibly managing entry into the U.S. and qualifications has extended, we have optimized the profitability in that system versus a particular asset by loading some on our lower cost assets in Germany. Now I would tell you then what happened was when COVID hit, and the decline in the market became more significant, we did an accounting impairment test; it barely triggered the accounting impairments level. And then from an accounting standpoint, once you trigger that, it changes the calculation to an NPV calculation, and then the number became much larger. But putting that accounting part aside, the important part for us is we are still bullish on the market, on the geography, on the asset, the footprint, our technologies, and the customer support and engagement that we have. We hit a timing challenge because the ramp-up has extended, and then COVID hit. But it’s a strong business for Neenah and a catalyst for growth, and we expect to grow to the original sales of $70 million plus that we had and with attractive margins that support our overall Technical Products margins.

Okay. And the last two, I guess we will call on housekeeping just because I am a slow writer. Do you say maintenance in Q3 and Q4 is $1.5 million higher each quarter than it was in the first half of the year?

Yes. That’s correct.

And then the FX benefit, sorry, just repeat what you said there I guess?

Yeah. What we said was for every $0.05 change, we would pick up $2.5 million of sales and $0.5 million of profitability in the quarter in which that occurs.

And did you say that the euro delta was $0.08?

Yeah. So we closed the quarter at $1.10 million, and so right now, the euro is trading in the $1.18-ish range. So if that were to continue through the entire quarter, then there would be $0.08 over $0.05 and you can do the math I guess.

Got it. Okay. Thank you. Be safe.

Sure. Thank you.

Thanks.

Our next question comes from Chris McGinnis with Sidoti & Company. Your line is open.

Good morning. Thanks for taking my question.

Good morning.

I was just wondering if there are more opportunities you're seeing, similar to the face masks, and if there are other chances that the pandemic has opened up for you that you haven't mentioned. Can you consider whether you need to add more to your product line, or if there are opportunities to grow to offset the current marketplace challenges?

Yeah. I think there are a couple of things, a couple of opportunities that the pandemic has opened up, and we have been really focused on ensuring we don’t waste the crisis, both short-term and long-term. We talked about face masks, and then more broadly, I think that category of air filtration, where our technologies lend themselves well to expanding into greater air purification efforts, whether that’s HVAC or industrial air, I think I mentioned a couple of those in my prepared remarks. Those are accelerating in demand. Those are for data storage is one of the end-use applications there. And then the other one that I think is worth mentioning is just what I touched on earlier, it’s the trend towards when health efforts and health concerns become larger share of mind, it’s quickly followed by environmental concerns. And Neenah is often the preferred alternative and so we are working closely to ensure we have the right paper-based gift cards, styrene alternatives, packaging and label applications to meet that demand. And then lastly, there’s been this acceleration of people wanting to customize, whether that’s for their in-home use and apparel and furniture and things like that, and our digital transfer products and new innovative products that we have launched on the natural fibers, which is a proprietary technology. That is an application that lends itself very well into those markets as well. So some of the macro trends have been accelerants that have been helpful and that will be helpful for Neenah in the longer term.

Great. I appreciate that. And I guess just with the expectation, hopefully things start to normalize a little bit. I know you took out some capacity or made some rationalization in Q1, just kind of given the run rate, where would you need to do another step down or another round of rationalization to the network depending on where trends go on the client purpose there?

We are constantly assessing our operations, and as I mentioned, we are currently implementing a Neenah operating system with a strong focus on enhancing productivity. One of the main mills where we are starting this implementation is one of our major Fine Paper and Packaging mills, which involves numerous variables. However, we have recognized that if we reach a point where we need to rationalize another asset, it is regrettable from an employee perspective, but it has proven beneficial for Neenah’s financial performance. This allows us to shift volume to assets where we have overlapping capacity and capabilities. We will keep a close eye on this process, and as I stated earlier, we understand how to manage a business that is experiencing a decline. We have been cautious about moving assets in and out of the system, and we have even restarted certain assets when it was advantageous to do so.

Okay. Great. No, I appreciate that. Thanks for taking my question and good luck in Q3.

Thank you.

Our next question comes from Adam Silver with ArrowMark Partners. Your line is open.

Hey, guys. Just a housekeeping item in terms of revolver. I don’t know if I missed this during the call, but what was the balance at the end of the second quarter, how much LCs were drawn, what was the availability, and then did I hear that right that it’s been paid down since?

Yeah. So the balance was around $10 million at the end of the quarter, and it’s been paid down through liquidity that we generated in the month of July, so the balance is zero now.

Okay. What was the LCs at the end of the quarter?

The lines of credit at the end of the quarter, I will have to look that up; I don’t have that number handy right now.

Very low.

Very low, I would think. Yeah.

There are no further questions at this time. I will now turn the call back over to Bill McCarthy for closing remarks.

Okay. Well, once again, thank you for your time today. Please reach out to me if you have any questions and we hope to have the opportunity to talk to many of you at upcoming virtual conferences hosted by Jefferies, D.A. Davidson, and Sidoti. Thank you again.

This concludes today’s conference call. You may now disconnect.