GLATFELTER REPORTS THIRD-QUARTER 2015 RESULTS
YORK, Pennsylvania – November 3, 2015 – Glatfelter (NYSE: GLT) today reported third-quarter 2015 net income of $13.5 million, or $0.31 per diluted share, and adjusted earnings of $20.8 million, or $0.47 per diluted share. For the third quarter of 2014, net income was $30.4 million, or $0.69 per diluted share, and adjusted earnings were $30.8 million or $0.70 per diluted share.
Consolidated net sales totaled $420.0 million in the third quarter of 2015 compared with $465.1 million in the third quarter of 2014. The translation of non-U.S. dollar sales unfavorably impacted the year-over-year comparison by $25.2 million, reflecting a weaker Euro.
“At Glatfelter, we continue to take the steps necessary to manage controllable elements of our business, capitalize on near-term opportunities in our targeted markets and successfully execute our long-term growth strategy. While macro-level challenges continued to impact our company during the third quarter, we remain steadfast in our efforts to grow the business and we are confident in our outlook for long-term success,” said Dante C. Parrini, chairman and chief executive officer.
Mr. Parrini continued, “During the quarter, demand remained solid in most Composite Fibers’ market segments including tea, coffee and electrical, and we saw improving demand for Advanced Airlaid Materials’ products. We are also continuing to realize the benefits of previously announced cost reduction initiatives across our businesses, and remain on target to reach our goals for the year. These positives were offset by the ongoing instability in Russia and Ukraine, which has significantly impacted the nonwoven wallcover market, and weaker pricing and demand in our Specialty Papers markets. Despite the continuing macro level challenges, we expect solid demand for each of our businesses in the fourth quarter.”
The following table sets forth a reconciliation of net income on a GAAP basis to adjusted earnings, a non-GAAP measure:
The sum of individual per share amounts set forth above may not agree to adjusted earnings per share due to rounding.
Third-Quarter Business Unit Results
Net sales for this business unit declined $20.6 million, or 13.3 percent, primarily due to $18.8 million of unfavorable currency translation and $3.9 million from lower selling prices, partially offset by the inclusion of Spezialpapierfabrik Oberschmitten GmbH (SPO), which was acquired in the fourth quarter of 2014. Shipping volumes declined 3.0 percent due to a 23.2 percent decline in nonwoven wallcover.
Composite Fibers’ third-quarter 2015 operating income totaled $14.1 million, a $4.0 million decline compared to the year-ago period. The negative impact of lower selling prices and wallcover shipping volumes was partially offset by $2.2 million of improved operations and $1.2 million of lower raw material and energy costs. The change in foreign currency exchange rates negatively impacted results by $1.3 million.
Advanced Airlaid Materials
On a year-over-year basis, Advanced Airlaid Materials’ net sales decreased $11.2 million largely due to $6.4 million of unfavorable currency translation and a 5.8 percent decline in shipping volumes.
Third-quarter 2015 operating income declined $0.7 million compared to the same quarter a year-ago primarily due to approximately $1.7 million related to lower shipping volumes and downtime to align production with demand, partially offset by $1.5 million of lower raw material and energy costs.
On a year-over-year basis, Specialty Papers’ net sales decreased $13.4 million, or 5.7 percent, due to lower average selling prices totaling $5.7 million and a decline in shipping volumes.
Specialty Papers’ third-quarter 2015 operating income totaled $17.5 million, a $10.2 million decrease in the year-over-year comparison primarily due to lower selling prices, $3.1 million related to market downtime and $3.7 million from lower pulp production, partially offset by $2.9 million of lower raw material and energy costs.
Other Financial Information
Pension expense totaled $2.2 million and $1.7 million for the third quarters of 2015 and 2014, respectively. For 2015, the Company expects full year pension expense to be approximately $9.1 million compared to $6.7 million for all of 2014. Because the Company’s qualified plan remains overfunded, a cash contribution is not expected for the foreseeable future.
During the first nine months of 2015, the Company reduced its workforce by approximately 3.1 percent in connection with the global workforce efficiency and cost reduction program initiated earlier in the year. In connection with these actions, the Company recorded charges totaling, on a pre-tax basis, $2.2 million for severance and related costs, of which $0.3 million was recorded in the third quarter.
The Company recorded a $10 million pre-tax charge to increase its reserve for potential costs associated with the Fox River environmental matter. The increase in reserve reflects estimated costs associated with interim funding of remediation activities in the river during 2016.
During the third quarters of 2015 and 2014, the Company recorded non-cash asset impairment charges of $1.2 million and $3.3 million, respectively, related to a trade name intangible asset acquired in connection with the 2013 Dresden acquisition. The charges were due to change in the estimated fair value of the trade name, primarily driven by lower forecasted revenues associated with the business, and higher discount rates due to the political and economic instability in the Russian and Ukrainian region.
2015 Year-to-date Results
On a GAAP basis, the Company reported net income of $30.3 million, or $0.69 per diluted share, for the first nine months of 2015 compared with $49.7 million, or $1.13 per diluted share, in the first nine months of 2014. Adjusted earnings totaled $36.0 million, or $0.82 per diluted share in 2015, compared with $48.7 million, or $1.11 per diluted share, in 2014. The following table sets forth a reconciliation of results determined on a GAAP basis to adjusted earnings:
Consolidated net sales for the first nine months of 2015 were $1,248.2 million compared with $1,366.2 million for the same period of 2014. The translation of non-U.S. dollar sales unfavorably impacted the year-over-year comparison by $82.7 million.
Balance Sheet and Other Information
Cash and cash equivalents totaled $73.7 million as of September 30, 2015, and net debt was $315.5 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 $74.3 million in the first nine months of 2015 compared with $47.0 million in the same period of 2014. Capital expenditures during the first nine months of 2015 and 2014, include $19.0 million and $2.9 million, respectively, related to environmental compliance projects. For 2015, total capital expenditures are estimated at $105 million to $115 million, including approximately $35 million related to Specialty Papers’ environmental compliance projects.
Adjusted free cash flow for the third quarter of 2015 was $23.8 million compared with $27.6 million in the same period of 2014. For the first nine months of 2015, adjusted free cash flow was $11.2 million compared with a use of $22.7 million in the same period of 2014. (Refer to the calculation of this measure provided in the tables at the end of this release.)
In October 2015, the Company completed the sale of 9,803 acres of timberlands for $17.0 million in cash. The after-tax gain on the transaction totaled approximately $9.1 million.
Composite Fibers’ shipping volumes and selling prices in the fourth quarter are expected to approximate the third quarter of 2015 levels. Raw material and energy prices are expected to be slightly higher than the third quarter.
Shipping volumes for Advanced Airlaid Materials in the fourth quarter of 2015 are expected to be down slightly compared with the third quarter. Average selling prices and raw material prices in the fourth quarter are expected to be in-line with the third quarter.
For Specialty Papers, the Company expects shipping volumes in the fourth quarter of 2015 to be in-line with the third quarter. Overall, selling prices are expected to decline slightly in the fourth quarter compared to the third quarter due to continued pressure on commodity products and input costs are expected to be in line with the third quarter of 2015. The Company does not expect any market downtime in Specialty Papers in the fourth quarter.
As previously announced, the Company will hold a conference call at 11:00 a.m. (Eastern) today to discuss its third-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, 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. 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.
Glatfelter is a global supplier of specialty papers and fiber-based engineered materials, offering innovation, world-class service and over a century and a half of technical expertise. Headquartered in York, PA, the company serves customers in over 100 countries. U.S. operations include facilities in Pennsylvania and Ohio. International operations include facilities in Canada, Germany, France, the United Kingdom and the Philippines, and sales and distribution offices in China and Russia. Glatfelter’s sales approximate $1.7 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.
The sum of individual amounts set forth above may not agree to the consolidated financial statements included herein due to rounding.
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, environmental related charges, asset impairment charges, 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, environmental related charges, asset impairment charges, 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.
Glatfelter is a global supplier of specialty papers and engineered materials, offering innovation, world-class service and over a century and a half of technical expertise. Headquartered in York, PA, the Company employs approximately 4,200 people and serves customers in over 100 countries. U.S. operations include facilities in Arkansas, Pennsylvania and Ohio. International operations include facilities in Canada, Germany, France, the United Kingdom and the Philippines, and sales and distribution offices in China and Russia. Glatfelter’s sales approximate $1.6 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.
Corporate Headquarters (York, PA)