GLATFELTER REPORTS FULL YEAR AND FOURTH QUARTER EARNINGS
YORK, Pennsylvania – February 5, 2015 – Glatfelter (NYSE: GLT) today reported 2014 full year adjusted earnings per diluted share of $1.55 (GAAP $1.57) compared with $1.40 per diluted share in 2013 (GAAP $1.52). For the 2014 fourth quarter Glatfelter reported adjusted earnings of $19.7 million, or $0.45 per diluted share, compared with $15.0 million, or $0.34 per diluted share, in the 2013 fourth quarter. On a GAAP basis, fourth quarter 2014 net income totaled $19.6 million, or $0.45 per diluted share, compared with $16.5 million, or $0.37 per diluted share, in the fourth quarter of 2013. Consolidated net sales totaled $436.3 million in the fourth quarter of 2014 compared with $434.8 million in the fourth quarter of 2013.
“Our fourth-quarter adjusted earnings were 32 percent higher than the same period a year ago, but fell short of our expectations,” said Dante C. Parrini, chairman and chief executive officer. “In Composite Fibers, near-term macro-level challenges, including the fluid economic and political situation in Russia and Ukraine, weak economic growth in Europe as well as increased competitive pressures, impacted results for the business. Specialty Papers reported improved performance over the same period a year ago, although its results were weaker than anticipated mainly due to production and medical costs being higher than expected. Advanced Airlaid Materials delivered another solid quarter, and we continue to evaluate capacity expansion opportunities for this business.”
Mr. Parrini continued, “Looking ahead in 2015, we expect to see strong performance and growth opportunities in Advanced Airlaid Materials. However, Composite Fibers, in particular the wallcovering business, is likely to continue to face economic headwinds in Europe and Russia, where weaker currencies and political uncertainty are impacting our business. We expect Specialty Papers to again outperform the uncoated free-sheet market and we continue to focus our efforts to improve the reliability and efficiency of our pulp and paper operations.
“We remain confident in our long-term business strategy and opportunities in targeted growth markets. We are focused on solid execution in key areas such as operational excellence, continuous improvement, innovation and customer service – all of which will help advance our strategic objectives. With the near term headwinds the business is facing, we are also committed to significantly reducing costs throughout our organization by accelerating our continuous improvement initiatives and implementing a number of cost cutting measures including broad based workforce reductions of approximately 3 percent to 5 percent of our global workforce. These continuous improvement and cost reduction efforts are expected to improve operating profit by $25 million to $30 million in 2015,” Mr. Parrini concluded.
The following table sets forth a reconciliation of net income on a GAAP basis to adjusted earnings, a non-GAAP measure:
Fourth-Quarter Business Unit Results
Net sales for this business unit declined $2.7 million, or 1.8 percent, as the benefits of higher shipping volumes primarily from the Spezialpapierfabrik Oberschmitten (SPO) acquisition were more than offset by $8.9 million of unfavorable currency translation and $3.6 million from lower selling prices.
Composite Fibers’ fourth-quarter 2014 operating income decreased $1.9 million to $13.6 million compared to the year-ago period. The decline primarily reflects the impact of lower selling prices and a $2.9 million impact from machine downtime to reduce inventory levels. This was partially offset by $1.7 million of credits for energy efficiency improvements and by lower maintenance spending.
Advanced Airlaid Materials
On a year-over-year basis, Advanced Airlaid Materials’ net sales decreased $0.8 million largely due to unfavorable foreign currency translation which more than offset the impact of higher selling prices.
Fourth-quarter 2014 operating income declined $2.0 million compared to the same quarter a year. This was primarily due to recognizing a full year of energy related rebates in the fourth quarter of 2013 resulting in a $1.4 million reduction in operating profit in the comparison. In addition, the business incurred $0.5 million of costs in the fourth quarter of 2014 associated with temporarily taking a line down to complete a project to increase production capacity.
Other Financial Information
Pension expense totaled $1.6 million and $3.6 million for the fourth quarters of 2014 and 2013, respectively. The decline reflects the benefit of higher discount rates and the amortization of deferred actuarial gains related to higher returns on assets in 2013. For 2015, the Company expects full year pension expense to increase to approximately $11.5 million largely due to lower discount rates and a change in mortality assumptions. Because the Company’s qualified plan remains overfunded, a cash contribution was not required to be made in 2014 nor is a contribution expected in the foreseeable future.
The Company completed the sale of 723 acres of timberlands during the fourth quarter of 2014 for $1.1 million and realized an after-tax gain of $0.6 million.
2014 Full Year Results
Net income for 2014 totaled $69.2 million, or $1.57 per diluted share, compared with $67.2 million, or $1.52 per diluted share, in the same period of 2013. Adjusted earnings totaled $68.5 million, or $1.55 per diluted share, compared with $61.8 million, or $1.40 per diluted share, in 2013. The following table sets forth a reconciliation of results determined on a GAAP basis to adjusted earnings, a non-GAAP measure:
Consolidated net sales for year ended December 31, 2014 were $1,802.4 million, a 4.6 percent increase compared with $1,722.6 million for 2013.
Balance Sheet and Other Information
Cash and cash equivalents totaled $99.8 million as of December 31, 2014, and net debt was $304.8 million compared with $319.4 million at the end of 2013. (Refer to the calculation of this measure provided in the tables at the end of this release.)
Capital expenditures totaled $66.0 million in 2014 compared with $103.0 million in 2013 which included $33.6 million for Composite Fibers’ capacity expansion project. For 2015, total capital expenditures are estimated at $120 million to $130 million, including approximately $40 million related to Specialty Papers’ environmental compliance projects.
Adjusted free cash flow for the fourth quarter of 2014 was $61.0 million compared with $62.6 million in the same quarter of 2013. For the full year of 2014, adjusted free cash flow declined to $38.2 million compared with $94.3 million in 2013 due to an increase in working capital and cash paid for income taxes. (Refer to the calculation of these measures provided in this release.)
During 2014, the Company repurchased 464,190 shares of common stock for $12.2 million under its share repurchase program. On May 1, 2014, the Company announced that its Board of Directors approved a $25 million increase to the share repurchase program and extended the expiration date to May 1, 2016. Under the revised program, the Company may repurchase up to $50 million of its outstanding common stock, of which $16.6 million had been utilized through December 31, 2014.
In the first quarter of 2015, Composite Fibers’ shipping volumes are expected to be approximately 5 percent higher than the fourth quarter of 2014 primarily due to seasonality. Selling prices and raw material and energy prices are expected to be in-line with the fourth quarter. The impact of lower downtime in the first quarter is expected to be largely offset by lower energy efficiency credits realized in the first quarter of 2015 than in the fourth quarter of 2014.
Shipping volumes for Advanced Airlaid Materials in the first quarter of 2015 are expected to increase slightly compared with the fourth quarter. Average raw material prices and selling prices are expected to be in-line with the fourth quarter.
For Specialty Papers, the Company expects shipping volumes in the first quarter of 2015 to be in-line with the fourth quarter. Overall selling prices are expected to be in-line with the fourth quarter of 2014 and input costs are expected to decrease slightly. First quarter operating profit will be negatively impacted by approximately $10 million primarily from a significant boiler outage at its Spring Grove, Pennsylvania facility.
As previously announced, the Company will hold a conference call at 11:00 a.m. (Eastern) today to discuss its fourth-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:
Interested persons who wish to hear the live webcast should go to the website prior to the starting time to register, download and install any necessary audio software.
Caution Concerning Forward-Looking Statements
Any statements included in this press release which pertain to future financial and business matters are “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. The Company uses words such as “anticipates”, “believes”, “expects”, “future”, “intends” and similar expressions to identify forward-looking statements. Any such statements are based on management’s current expectations and are subject to numerous risks, uncertainties and other unpredictable or uncontrollable factors that could cause future results to differ materially from those expressed in the forward-looking statements including, but not limited to: changes in industry, business, market, political and economic conditions in the U.S. and other countries in which the Company does business, ability to successfully integrate Spezialpapierfabrik Oberschmitten Gmbh (SPO) and achieve the expected results of it’s the acquisition, including, without limitation, the acquisition being accretive, demand for or pricing of its products, changes in tax legislation, governmental laws, regulations and policies, initiatives of regulatory authorities, technological changes and innovations, market growth rates, and cost reduction initiatives. In light of these risks, uncertainties and other factors, the forward-looking matters discussed in this press release may not occur and readers are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date of this press release and Glatfelter undertakes no obligation, and does not intend, to update these forward-looking statements to reflect events or circumstances occurring after the date of this press release. More information about these factors is contained in Glatfelter’s filings with the U.S. Securities and Exchange Commission, which are available at www.glatfelter.com.
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 impairment 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 impairment 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.
Glatfelter (NYSE: GLT) is a leading global supplier of engineered materials. The Company’s high-quality, innovative and customizable solutions are found in tea and single-serve coffee filtration, personal hygiene and packaging products as well as home improvement and industrial applications. Headquartered in York, PA, the Company’s net sales approximate $950 million annually with customers in over 100 countries and approximately 2,300 employees worldwide. Operations include eleven manufacturing facilities located in the United States, Canada, Germany, France, the United Kingdom and the Philippines. Additional information about Glatfelter may be found at www.glatfelter.com.
Corporate Headquarters (York, PA)