Industry Press Releases

Glatfelter Reports First Quarter 2015 Earnings

Wednesday, May 06, 2015
Pressreleases

Glatfelter today reported first-quarter 2015 net income of $13.9 million, or $0.32 per diluted share, and adjusted earnings of $13.4 million, or $0.30 per diluted share.  For the first quarter of 2014, net income was $14.6 million, or $0.33 per diluted share, and adjusted earnings were $14.1 million or $0.32 per diluted share.
 
Consolidated net sales totaled $417.5 million in the first quarter of 2015 compared with $455.7 million in the first quarter of 2014.  Currency translation adjustments unfavorably impacted the year-over-year comparison by $28 million reflecting a significantly stronger U.S. dollar.
 
“The first quarter of 2015 began with a number of challenges including the significant weakening of the Euro, the market situation in Russia and the operational cost penalties in Specialty Papers.” said Dante C. Parrini, chairman and chief executive officer.  “Considering these circumstances, we generated solid results in the first quarter with adjusted earnings slightly below a year ago.  More importantly, we are continuing to position the company to capitalize on opportunities in our key markets and to withstand the ongoing macroeconomic headwinds.  Our planned and purposeful efforts include introducing new, more competitive products in the Russian market and gaining additional U.S. dollar denominated business.  We also remain focused on implementing our cost control measures and are on pace to achieve our targets of a 3% to 5% workforce reduction and $25 million to $30 million of cost savings in 2015.”
 
Mr. Parrini continued, “Based on the progress we made implementing our key initiatives in the first quarter and our plans for the rest of the year, I believe our business is well prepared to address the challenges we are facing and deliver on our 2015 growth opportunities and long-term business strategy.”

The following table sets forth a reconciliation of net income on a GAAP basis to adjusted earnings, a non-GAAP measure:

   
    Three months ended March 31
    2015   2014
In thousands, except per share  

After tax
amounts

  Diluted EPS  

After tax
amounts

  Diluted EPS
                 
Net income   $ 13,925     $ 0.32     $ 14,648     $ 0.33  
Timberland sales and related costs     (1,617 )     (0.04 )     (507 )     (0.01 )
Workforce efficiency charges     953       0.02       -       -  
Acquisition and integration related costs     113       -       -       -  
Adjusted earnings   $ 13,374     $ 0.30     $ 14,141     $ 0.32

 

The sum of individual per share amounts set forth above may not agree to adjusted earnings per share due to rounding.

First-Quarter Business Unit Results

Composite Fibers

             
    Three months ended March 31          
Dollars in thousands     2015       2014     Change
                     
Tons shipped     37,960       39,978       (2,018 )      

(5.1

)%

Net sales   $ 135,294     $ 158,577     $ (23,283 )       (14.7 )%
Operating income     14,653       19,255       (4,602 )       (23.9 )%
Operating margin     10.8 %     12.1 %  

Net sales for this business unit declined $23.3 million, or 14.7 percent, due to $20.4 million of unfavorable currency translation together with lower shipping volumes and $2.8 million from lower selling prices, partially offset by the inclusion of Spezialpapierfabrik (SPO), which was acquired in the fourth quarter of 2014. Shipping volumes declined 5.1 percent primarily due to reduced demand for nonwoven wall cover, which is directly impacted by the geopolitical and currency instabilities in Russia and Ukraine.

Composite Fibers’ first-quarter 2015 operating income decreased $4.6 million to $14.7 million compared to the year-ago period. The decline in operating income was primarily related to unfavorable foreign currency translation, which negatively impacted results by $2.8 million, the impact of lower selling prices and a $1.3 million impact from lower production to manage inventory levels. These factors were partially offset by a $3.0 million benefit from lower raw material and energy prices.

Advanced Airlaid Materials

               
    Three months ended March 31            
Dollars in thousands     2015       2014     Change
                     
Tons shipped     24,060       25,096       (1,036 )       (4.1 )%
Net sales   $ 62,299     $ 71,313     $ (9,014 )       (12.6 )%
Operating income     5,262       5,854       (592 )       (10.1 )%
Operating margin     8.4 %     8.2 %  

On a year-over-year basis, Advanced Airlaid Materials’ net sales decreased $9.0 million largely due to $7.2 million of unfavorable foreign currency translation and a 4.1 percent decline in shipping volumes which more than offset a $1.7 million benefit from higher selling prices.

First-quarter 2015 operating income declined $0.6 million compared to the same quarter a year-ago as the benefit from higher selling prices was more than offset by $0.9 million from higher raw material and energy prices and $1.2 million from the adverse impact of foreign currency translation.

Specialty Papers

               
    Three months ended March 31            
Dollars in thousands     2015       2014     Change
                     
Tons shipped     198,673       202,227       (3,554 )       (1.8 )%
Net sales   $ 219,876     $ 225,831     $ (5,955 )       (2.6 )%
Energy and related sales, net     2,068       5,262       (3,194 )       (60.7 )%
Operating income     9,462       2,410       7,052         292.6 %
Operating margin     4.3 %     1.1 %  

On a year-over-year basis, Specialty Papers’ net sales decreased $6.0 million, or 2.6 percent due to lower shipping volumes and mix changes partially offset by a $1.8 million benefit from higher average selling prices.

Operating income increased $7.1 million in the year-over-year comparison including the impact of higher selling prices and $2.6 million from lower raw material and energy prices. In 2015, problems with a power boiler in Pennsylvania and an evaporator upset in Ohio negatively impacted earnings by $9 million. In 2014, operating income was negatively impacted by $16 million due to evaporator issues in Ohio and excess costs resulting from severe weather conditions. Energy and related sales decreased $3.2 million in the comparison as severe weather conditions in 2014 resulted in higher selling prices for excess power.

Other Financial Information

Pension expense totaled $2.8 million and $1.5 million for the first quarters of 2015 and 2014, respectively. The increase reflects the impact of lower discount rates and changes to mortality assumptions. For 2015, the Company expects full year pension expense to increase to approximately $11.5 million. Because the Company’s qualified plan remains overfunded, a cash contribution is not expected for the foreseeable future.

The Company completed the sale of 1,370 acres of timberlands during the first quarter of 2015 for $3.0 million and realized an after-tax gain of $1.6 million.

During the first quarter of 2015, the Company eliminated approximately 1.3 percent of its workforce in connection with the global workforce efficiency and cost reduction program initiated earlier in the year and recorded charges totaling, on a pre-tax basis, $1.3 million for severance and related costs.

The Company recorded an income tax provision of $4.3 million on adjusted pre-tax earnings resulting in an effective tax rate of 24.5 percent compared with an effective tax rate of 16.5 percent in the same quarter a year ago. The effective tax rate in the first quarter of 2014 reflects a $2.2 million tax benefit related to the reduction of deferred tax liabilities in connection with the restructuring of non-U.S. legal entities.

Balance Sheet and Other Information

Cash and cash equivalents totaled $71.6 million as of March 31, 2015, and net debt was $315.1 million compared with $304.8 million at the end of 2014. (Refer to the calculation of this measure provided in the tables at the end of this release.)

Capital expenditures totaled $21.7 million in the first quarter of 2015 compared with $14.4 million in the same period of 2014. For 2015, total capital expenditures are estimated at $110 million to $120 million, including approximately $40 million related to Specialty Papers’ environmental compliance projects.

Adjusted free cash flow for the first quarter of 2015 was a use of $18.4 million compared with a use of $24.2 million in the same quarter of 2014. (Refer to the calculation of these measures provided in this release.)

Outlook

Composite Fibers’ shipping volumes are expected to be approximately 10 percent higher in the second quarter than the first quarter of 2015. Selling prices and raw material and energy prices are expected to be in-line with the first quarter.

Shipping volumes for Advanced Airlaid Materials in the second quarter of 2015 are expected to be in line with the first quarter. Average raw material prices and selling prices are also expected to be in-line with the first quarter.

For Specialty Papers, the Company expects shipping volumes in the second quarter of 2015 to decline slightly compared with the first quarter. Overall selling prices are expected to be in-line with the first quarter of 2015 and input costs are expected to decrease slightly. The Company also plans to complete the annual maintenance outages at its facilities in the second quarter of 2015. The outages are expected to adversely impact operating profit by approximately $34 million, pre-tax, compared with $28 million in the second quarter of 2014 due to an expanded scope of work.

Conference Call

As previously announced, the Company will hold a conference call at 11:00 a.m. (Eastern) today to discuss its first-quarter results. The Company’s earnings release and an accompanying financial supplement, which includes significant financial information to be discussed on the conference call, will be available on Glatfelter’s Investor Relations website at the address indicated below. Information related to the conference call is as follows:

What:   Glatfelter’s 1st Quarter 2015 Earnings Release Conference Call
       
  When:   Tuesday, May 5, 2015, 11:00 a.m. (ET)
       
  Number:   US dial 888.335.5539
      International dial 973.582.2857
       
  Conference ID:   23493734
       
  Webcast:  

http://www.glatfelter.com/about_us/investor_relations/default.aspx

       
  Rebroadcast Dates:  

May 5, 2015, 2:00 p.m. through May 19, 2015, 11:59 p.m.

       
  Rebroadcast Number:   Within US dial 855.859.2056
      International dial 404.537.3406
       
  Conference ID:   23493734

About Glatfelter

Glatfelter is a global supplier of specialty papers and fiber-based engineered materials, offering innovation, technical expertise, and world-class service. Headquartered in York, PA, U.S. operations include facilities in Spring Grove, PA and Chillicothe and Fremont, OH. International operations include facilities in Canada, Germany, France, the United Kingdom and the Philippines, and sales and distribution offices in Russia and China. Glatfelter’s sales approximate $1.8 billion annually and its common stock is traded on the New York Stock Exchange under the ticker symbol GLT. Additional information may be found at www.glatfelter.com.

P. H. Glatfelter Company and subsidiaries
Consolidated Statements of Income
(unaudited)
     
    Three months ended

March 31

In thousands, except per share     2015       2014  
         
Net sales   $ 417,469     $ 455,721  
Energy and related sales, net     2,068       5,262  
Total revenues     419,537       460,983  
Costs of products sold     367,429       405,943  
Gross profit     52,108       55,040  
         
Selling, general and administrative expenses     31,272       33,551  

Gains on dispositions of plant, equipment and timberlands, net

    (2,654 )     (809 )
Operating income     23,490       22,298  
Non-operating income (expense)        
Interest expense     (4,508 )     (4,812 )
Interest income     65       61  
Other, net     (187 )     211  

Total other expense

    (4,630 )     (4,540 )
Income before income taxes     18,860       17,758  
Income tax provision     4,935       3,110  
Net income   $ 13,925     $ 14,648  
         
Earnings per share        
Basic   $ 0.32     $ 0.34  
Diluted     0.32       0.33  
         

Cash dividends declared per common share

  $ 0.11     $ 0.11  
         
Weighted average shares outstanding        
Basic     43,252       43,366  
Diluted     43,949       44,360  
                         
Business Unit Financial Information
(unaudited)
                         

Three months ended March 31

                       

Dollars in millions

  Composite Fibers   Advanced Airlaid Materials   Specialty Papers   Other and Unallocated   Total
      2015     2014     2015     2014     2015     2014     2015       2014       2015       2014  
Net sales   $ 135.3   $ 158.6   $ 62.3   $ 71.3   $ 219.9   $ 225.8   $ -     $ -     $ 417.5     $ 455.7  
Energy and related sales, net     -     -     -     -     2.1     5.3     -       -       2.1       5.3  
Total revenue     135.3     158.6     62.3     71.3     222.0     231.1     -       -       419.5       461.0  
Costs of products sold     109.0     126.0     55.1     63.1     200.4     215.0     2.9       1.8       367.4       405.9  
Gross profit (loss)     26.3     32.6     7.2     8.2     21.6     16.1     (2.9 )     (1.8 )     52.1       55.0  
SG&A     11.6     13.3     1.9     2.3     12.1     13.7     5.6       4.3       31.3       33.6  

Gains on dispositions of plant, equipment and timberlands, net

    -     -     -     -     -     -     (2.7 )     (0.8 )     (2.7 )     (0.8 )
Total operating income (loss)     14.7     19.3     5.3     5.9     9.5     2.4     (5.8 )     (5.2 )     23.5       22.3  
Non operating expense     -     -     -     -     -     -     (4.6 )     (4.5 )     (4.6 )     (4.5 )
Income (loss) before income taxes   $ 14.7   $ 19.3   $ 5.3   $ 5.9   $ 9.5   $ 2.4   $ (10.4 )   $ (9.8 )   $ 18.9     $ 17.8  
                                         
Supplementary Data                                        
Net tons sold (thousands)     38.0     40.0     24.1     25.1     198.7     202.2     -       -       260.7       267.3  
Depreciation, depletion and amortization   $ 6.7   $ 7.6   $ 2.2   $ 2.3   $ 6.6   $ 8.3   $ 0.5     $ 0.5     $ 16.0     $ 18.6  
Capital expenditures     5.9     6.0     1.3     1.5     13.2     6.2     1.3       0.8       21.7       14.4  
                                         

The sum of individual amounts set forth above may not agree to the consolidated financial statements included herein due to rounding.

     
Selected Financial Information
(unaudited)
     
    Three months ended March 31
In thousands     2015       2014  
         
Cash Flow Data        
Cash provided (used) by:        
Operating activities   $ 2,155     $ (10,210 )
Investing activities     (20,623 )     (13,596 )
Financing activities     (7,190 )     (24,328 )
         
Depreciation, depletion and amortization     15,975       18,615  
Capital expenditures     21,749       14,435  
         
    March 31   December 31
      2015       2014  
Balance Sheet Data        
Cash and cash equivalents   $ 71,570     $ 99,837  
Total assets     1,487,257       1,561,504  
Total debt     386,642       404,612  
Shareholders’ equity     622,869       649,109  
                 

Reconciliation of GAAP Financial Information to Non-GAAP Financial Information

This press release includes a discussion of earnings before the effects of certain specifically identified items, which is referred to as adjusted earnings, a non-GAAP measure. The Company uses non-GAAP adjusted earnings to supplement the understanding of its consolidated financial statements presented in accordance with GAAP. Non-GAAP adjusted earnings is meant to present the financial performance of the Company’s core operations, which consists of the production and sale of specialty papers, composite fibers papers and airlaid non-woven materials. Management and the Company’s Board of Directors use non-GAAP adjusted earnings to evaluate the performance of the Company’s fundamental business in relation to prior periods. The performance of the Company’s operations is evaluated based upon numerous items such as tons sold, average selling prices, gross margins and overhead, among others. Gains on the sale of timberlands, acquisition and integration related costs, and workforce efficiency charges, among others, are excluded from the Company’s calculation of non-GAAP adjusted earnings because management believes each of these items is unique and not part of the Company’s core business, and will only impact the Company’s financial results for a limited period of time. Gains from timberland sales are distinct from revenues generated from product sales. Unlike items such as cost of raw materials and overhead costs, acquisition and integration related costs, and workforce efficiency charges, are unique items that do not represent direct costs incurred in the manufacture and sale of the Company’s products.

Unlike net income determined in accordance with GAAP, non-GAAP adjusted earnings does not reflect all charges and gains recorded by the Company for the applicable period and, therefore, does not present a complete picture of the Company’s results of operations for the respective period. However, non-GAAP adjusted earnings provides a measure of how the Company’s core operations are performing, which management believes is useful to investors because it allows comparison of such operations from period to period. Non-GAAP adjusted earnings should not be considered in isolation from, or as a substitute for, measures of financial performance prepared in accordance with GAAP.

     
Calculation of Adjusted Free Cash Flow   Three months ended March 31
In thousands     2015       2014  
         
Cash from operations   $ 2,155     $ (10,210 )
Less: Capital expenditures     (21,749 )     (14,435 )
Add back: BART/MACT environmental compliance     5,286       452  
Exclude: Cellulosic biofuel/Alternative fuel mixture credits     (4,065 )     -  
Adjusted free cash flow   $ (18,373 )   $ (24,193 )
         
         
Net Debt   March 31   December 31
In thousands     2015       2014  
         
Current portion of long-term debt   $ 6,885     $ 5,734  
Long term debt     379,757       398,878  
Total     386,642       404,612  
Less: Cash     (71,570 )     (99,837 )
Net Debt   $ 315,072     $ 304,775  
         

Contacts

Glatfelter
Investors:
John P. Jacunski, 717-225-2794
or
Media:
William T. Yanavitch, 717-225-2747

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