GLATFELTER REPORTS FULL YEAR AND FOURTH QUARTER EARNINGS
YORK, Pennsylvania – February 9, 2016 – Glatfelter (NYSE: GLT) today reported 2015 full year adjusted earnings per diluted share of $1.34 (GAAP $1.47) compared with $1.55 per diluted share in 2014 (GAAP $1.57). For the 2015 fourth quarter Glatfelter reported adjusted earnings of $22.9 million, or $0.52 per diluted share, compared with $19.7 million, or $0.45 per diluted share, in the 2014 fourth quarter. On a GAAP basis, fourth quarter 2015 net income totaled $34.3 million, or $0.78 per diluted share, compared with $19.6 million, or $0.45 per diluted share, in the fourth quarter of 2014.
Consolidated net sales totaled $412.9 million in the fourth quarter of 2015 compared with $436.3 million in the fourth quarter of 2014. On a constant currency basis, net sales declined $5.1 million, or 1.2 percent.
“Our fourth-quarter 2015 financial results reflect a solid finish to a very challenging year,” said Dante C. Parrini, Chairman and Chief Executive Officer. “In the fourth quarter, we saw solid growth in key product lines within our Composite Fibers and Advanced Airlaid Materials businesses and earnings growth across all three of our business segments. We also delivered improved overall earnings and cash flow performance as the full effects of our previously announced continuous improvement and cost reduction initiatives were realized.
“Overall, I am pleased with how our team managed through the many challenges we faced in 2015 by capitalizing on improved demand for single-serve coffee, tea and Advanced Airlaid Materials products during the second half of the year, and withstanding the ongoing weakness in Russia and Ukraine and currency headwinds. Our performance during the year was also driven by our successful execution of cost reduction and continuous improvement initiatives which delivered full year savings of $31 million, exceeding our target for the year."
Mr. Parrini concluded, "As we enter 2016, we see growth opportunities in food and beverage, feminine hygiene, specialty wipes and electrical markets. At the same time, we remain mindful of weakness in Russia and Ukraine, which continues to impact the nonwoven wallcover market, as well as the effect of a weak Euro. Our efforts to continuously improve the safety, reliability and efficiency of our operations, manage costs, and bring new value-added products to market will continue to be critical to our success in 2016 and beyond."
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 $15.9 million, or 10.8 percent, primarily due to $13.7 million of unfavorable currency translation and $2.4 million from lower selling prices. Shipping volumes declined slightly due to a 13.9 percent decline in nonwoven wallcover which offset solid gains in all other market segments.
Composite Fibers’ fourth-quarter 2015 operating income totaled $15.9 million, a $2.3 million or 17.0 percent improvement compared to the year-ago period. The higher operating income was due to improved operating performance of $4.4 million driven by less market-related downtime, higher production rates, and other operating efficiencies and $2.5 million of lower raw material and energy prices. These benefits more than offset the adverse impact of lower selling prices and currency translation. The change in currency exchange rates negatively impacted results by $1.7 million.
Advanced Airlaid Materials
Advanced Airlaid Materials’ net sales decreased $3.9 million largely due to $4.6 million of unfavorable currency translation and a $1.5 million negative impact from lower selling prices which more than offset the benefit of higher shipping volumes.
Fourth-quarter 2015 operating income increased 4.5 percent compared to the same quarter a year ago as lower raw material and energy costs of $2.2 million more than offset the adverse impact of lower selling prices, downtime for incremental capacity expansion projects, other inflationary costs and a one-time benefit in the fourth quarter of 2014. Currency translation favorably impacted operating income by $0.8 million.
Specialty Papers’ net sales declined $3.6 million, or 1.6 percent, due to lower selling prices which negatively impacted the comparison by $4.9 million, of which $0.9 million was due to unfavorable currency impacts. Shipping volumes were up 3.5 percent, outperforming the broader uncoated free-sheet market for the quarter and for the eleventh consecutive year.
Operating income increased slightly in the year over year comparison as lower raw material and energy costs of $5.5 million and higher energy related sales were partially offset by the adverse impact of lower selling prices.
Other Financial Information
Pension expense totaled $2.5 million and $1.6 million for the fourth quarters of 2015 and 2014, respectively. For 2016, the Company expects full year pension expense to be approximately $4.6 million compared to $9.1 million for all of 2015. Because the Company’s qualified plan remains overfunded, a cash contribution was not required to be made in 2015 nor is a contribution expected in the foreseeable future.
During 2015, the Company reduced its workforce by approximately 3 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, $2.5 million for severance and related costs, of which $0.2 million was recorded in the fourth quarter of 2015.
The Company sold 14,230 acres of timberlands during the fourth quarter of 2015 for $22.0 million and realized an after-tax gain of $11.6 million.
In the 2015 fourth quarter, the Company recorded an income tax provision of $3.4 million on adjusted pre-tax earnings, an effective tax rate of 12.8 percent. In the comparable quarter a year ago, the income tax provision totaled $4.7 million and the effective tax rate was 19.3 percent. The lower tax rate in the 2015 fourth quarter reflects the timing of recognizing certain tax credits and related adjustments and the impact of a greater proportion of earnings generated in lower tax foreign jurisdictions relative to the U.S.
2015 Full Year Results
Net income for 2015 totaled $64.6 million, or $1.47 per diluted share, compared with $69.2 million, or $1.57 per diluted share, in 2014. Adjusted earnings totaled $58.9 million, or $1.34 per diluted share, compared with $68.5 million, or $1.55 per diluted share, in 2014. 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, 2015 were $1,661.1 million compared with $1,802.4 million for 2014. On a constant currency basis, net sales declined $40.3 million, or 2.2 percent. Shipping volumes declined less than one percent.
Balance Sheet and Other Information
Cash and cash equivalents totaled $105.3 million as of December 31, 2015, and net debt was $258.6 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 $99.9 million in 2015 compared with $66.0 million in 2014 including $26.9 million and $6.1 million, respectively, related to environmental compliance projects. For 2016, total capital expenditures are estimated at $150 million to $170 million, including approximately $40 million to $45 million related to Specialty Papers’ environmental compliance projects and $40 million to $45 million for Advanced Airlaid Materials’ new airlaid facility.
Adjusted free cash flow for the fourth quarter of 2015 was $42.7 million compared with $61.0 million in the same quarter of 2014. For the full year of 2015, adjusted free cash flow totaled $53.9 million compared with $38.2 million in 2014 primarily due to the improved use of working capital. (Refer to the calculation of these measures provided in this release.)
In the first quarter of 2016, Composite Fibers’ shipping volumes, selling prices and raw material and energy prices are expected to be in-line with the fourth quarter. Maintenance costs are expected to be approximately $1 million higher compared with the fourth quarter of 2015 and no benefit from currency hedging is expected in the first quarter of 2016.
Shipping volumes for Advanced Airlaid Materials in the first quarter of 2016 are expected to be similar to 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 2016 to be approximately 5 percent lower than the fourth quarter of 2015. Selling prices are expected to be slightly lower and input costs are expected to be similar compared to the fourth quarter.
The normalized tax rate for 2016 is expected to be approximately 24 percent.
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”, “plans”, and similar expressions to identify forward-looking statements. Any such statements are based on the Company’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, and market growth rates. 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, AMBU capacity expansion 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)