Search

GLATFELTER REPORTS THIRD QUARTER 2011 RESULTS

Consolidated Net Sales Climb to Record $416.5 Million; Rising Input Costs Adversely Impact EPS by $0.20; Continued Profit Growth from Composite Fibers and Advanced Airlaid Materials

YORK, Pennsylvania – November 1, 2011 – Glatfelter (NYSE: GLT) today reported financial results for the third quarter ended September 30, 2011, with sales increasing 10 percent to a record $416.5 million, versus $379.1 million a year ago.
 
Adjusted earnings were $12.8 million, or $0.28 per diluted share, compared with $16.7 million, or $0.36 per diluted share, in the third quarter of 2010.  On a GAAP basis, third-quarter 2011 net income was $13.0 million, or $0.28 per diluted share, versus $39.4 million or $0.85 per diluted share, in the same period of 2010.  The 2010-third quarter GAAP-basis results benefited from cellulosic biofuel production credits totaling $23.1 million, or $0.50 per diluted share.
 
“Our strong top-line growth in the third quarter reflects the continued success of our Composite Fibers and Advanced Airlaid Materials businesses, the global growth engines for Glatfelter,” said Dante C. Parrini, chairman and chief executive officer.  “Composite Fibers delivered a 20 percent increase in revenue led by growth in the single-serve coffee and tea markets, while Advanced Airlaid Materials grew revenue by 14 percent driven by the feminine hygiene market.  Likewise, we are pleased with the continued progress the Advanced Airlaid Materials business is making to improve its profitability.  This was accomplished while also constructing and beginning the start-up of a second proprietary festooning line in Gatineau, Canada.”
 
Mr. Parrini continued, “Significant input cost inflation of $15 million impacted results for the quarter, especially for our Specialty Papers business which was also impacted by severe weather conditions associated with Tropical Storm Lee and higher maintenance costs to improve paper machine reliability.  We are, however, seeing a pull back of input costs especially for purchased pulp which we expect will help us in the fourth quarter.” 

Adjusted earnings is a non-GAAP measure that excludes from the Company’s GAAP-based results certain non-core business items.  The following table sets forth a reconciliation of results determined in accordance with accounting principles generally accepted in the United States of America to non-GAAP adjusted earnings discussed herein:
 
Adjusted Earnings
 
2011 Third-Quarter Business Unit Results
 
Specialty Papers
Specialty Papers Results
 
On a year-over-year basis, Specialty Papers’ net sales increased $8.1 million primarily due to a $4.6 million benefit from higher selling prices and a 2.2 percent increase in shipping volumes.  Specialty Papers’ shipments continued its seven-year track record of outperforming the broader uncoated free sheet market, which was down 3.6 percent in the year-over-year comparison.
 
Specialty Papers’ 2011 third-quarter operating income declined $6.0 million compared to the 2010-third quarter primarily due to the unfavorable impact of rising input costs outpacing benefits of higher selling prices. Input costs increased an aggregate $8.4 million in the year-over-year comparison. Operations in Spring Grove, PA were interrupted during the quarter by Tropical Storm Lee, which caused unplanned downtime and excess costs aggregating $1.1 million.  In addition, maintenance-related costs were higher in the comparison to 2010 due to spending incurred to improve paper machine reliability.

Composite Fibers
Composite Fibers Results
Composite Fibers’ net sales increased $21.1 million, or 20.4 percent reflecting a 5.5 percent increase in shipping volume led by single-serve coffee and tea products.  In addition, higher average selling prices added $2.7 million and foreign currency translation contributed $7.7 million.
 
Composite Fibers’ third-quarter 2011 operating income increased 3.7 percent or $0.4 million.  The benefit from higher selling prices was more than offset by $3.8 million of higher raw material and energy costs, primarily related to abaca and synthetic fiber prices.  The results include $0.4 million of costs incurred related to recently announced initiatives to expand its inclined-wire production capacity to support the growing single-serve coffee and tea markets.  Adjusted to exclude these non-recurring strategic costs, operating income increased 7.3 percent in the comparison.
 
Advanced Airlaid Materials
Advanced Airlaid Results
Advanced Airlaid Materials’ net sales increased $8.2 million, or 14.1 percent reflecting a 4.5 percent increase in shipping volume, a $2.9 million benefit from higher selling prices and $2.7 million from foreign currency translation.   
 
Operating income was $4.1 million in the third-quarter 2011, the third consecutive quarter of higher profitability and nearly a three-fold improvement from results in the same quarter of 2010.  During the third quarter, selling price increases outpaced higher input costs of $2.4 million.  In addition, this business’s overall performance benefited from previously outlined improvement initiatives including supply chain synergies, waste reduction and higher machine output. 
 

2011 Year-to-Date Results
 
For the first nine months of 2011, on a GAAP basis, the Company reported net income of $33.0 million or $0.71 per diluted share, compared with $39.2 million or $0.85 per diluted share in the same period of 2010.  The following table sets forth a reconciliation of net income on a GAAP basis to adjusted earnings:
 
Year to Date Results
 
Consolidated net sales for the first nine months of 2011 were $1,211.2 million, a 12.2 percent increase compared with $1,079.2 million for the same period of 2010, reflecting generally stronger shipping volume in all of our businesses, higher selling prices and the favorable impact from foreign currency translation.  In addition, the 2011 amount includes nine months of the Advanced Airlaid Materials business unit compared with seven and one half months in 2010.

Balance Sheet and Other
 
Capital expenditures totaled $44.6 million in the first nine months of 2011 compared with $23.3 million in the same period of 2010.  Capital expenditures are expected to be approximately $60 million to $65 million for 2011.
 
Cash and cash equivalents totaled $98.3 million at September 30, 2011 and net debt, excluding cash collateralized borrowings, was $197.8 million, a decrease of $2.7 million compared with year-end 2010.  Free cash flow (cash provided by operations less capital expenditures) was $36.5 million for the first nine months of 2011 and $100.1 million for the comparable period of 2010.  Free cash flow in 2011 and 2010 included $17.8 million and $54.9 million, respectively, of cash tax benefits related to cellulosic biofuel and alternative fuel mixture credits.  (Net debt and free cash flow are non-GAAP measures.  Refer to the calculation of these measures provided in this release). 
 
In April 2011, the Company announced a $50 million share buyback program authorized by its Board of Directors.  Through September 30, 2011, the Company repurchased 2.0 million shares of common stock for approximately $27.5 million reducing 2011-third quarter average diluted shares outstanding by 908,260 shares.  The Company is not obligated to repurchase any particular amount of common stock and the program may be modified or suspended at any time at the Board’s discretion.
 
In the 2011-third quarter the Company recorded an after-tax charge of $1.2 million, or $0.03 per share, associated with the retirement of the Company’s former chief executive officer.  Such costs are not allocated to a business unit and are reported as “Other and Unallocated” in our table of Business Unit Financial Information.
 

Outlook
 
For Specialty Papers, the Company expects shipping volumes in the fourth quarter of 2011 to be approximately five percent less than the third quarter reflecting normal seasonality; selling prices are expected to be in line with the third quarter.  Input costs are expected to be in line with the third quarter, with the exception of significantly lower purchased pulp prices.  The Company expects full year 2011 operating income for this unit to approximate full year 2010.
 
For Composite Fibers, the Company anticipates shipping volumes to be slightly lower in the fourth quarter compared to the 2011 third quarter reflecting seasonality in the metallized papers market.  Selling prices and input costs are expected to be largely in line with the third quarter.
 
Shipping volumes for the Advanced Airlaid Materials business unit in the fourth quarter of 2011 are expected to decline approximately five percent compared to third quarter levels due to normal seasonality.  In addition, selling prices and input costs are expected to be largely in-line with the third quarter levels.  The benefits from continuous improvement initiatives and efficiency gains should offset the impact of lower volumes.
 

Conference Call
 
As previously announced, the Company will hold a conference call at 11:00 a.m. (Eastern) today to discuss its second-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 web site at the address indicated below.  Information related to the conference call is as follows:
What: 
Glatfelter’s 3rd Quarter 2011 Earnings Release Conference Call
When:
Tuesday, November 1, 2011, 11:00 a.m. Eastern Time
Number:
 US dial 888.335.5539 
 International dial 973.582.2857
Conference ID:
17582471
Webcast:  
Rebroadcast Dates: 
November 1, 2011 14:00 ET through November 15, 2011 23:59 ET
Rebroadcast Number: 
Within US dial 855.859.2056
International dial 404.537.3406
Conference ID: 
17582471
 
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.  These statements are based on management’s current expectations and are subject to numerous risks, uncertainties and other unpredictable or uncontrollable factors which may cause actual results or performance to differ materially from the Company’s expectations.  Various risks and factors that could cause future results to differ materially from those expressed in forward-looking statements include, but are not limited to: changes in industry, business, market, political and economic conditions in the U.S. and other countries in which Glatfelter does business, demand for or pricing of its products, changes in tax legislation, governmental laws, regulations and policies, initiatives of regulatory authorities, acquisition integration risks, technological changes and innovations, market growth rates, cost reduction initiatives, and other factors.  In light of these risks, uncertainties and other factors, the forward-looking events 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.

Income Statement
 
Business Unit Information
 
Selected Financial Information
 
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 overhead, and operating margins, among others.  Gains on the sale of timberlands, acquisition and integration related costs, charges for environmental reserves and shutdown and restructuring charges 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 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 provide 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.

Free cash flow and net debt are also non-GAAP financial measures, however, the calculation of each is derived directly from information included in the Company’s GAAP based consolidated financial statements.  The Company believes these provide meaningful measures of the Company’s financial position and of its ability to generate sufficient levels of cash flow to support its business strategies. 
 
The following tables set forth the calculations of free cash flow and net debt.
 
Cash Flow and Net Debt
 
Non-GAAP adjusted earnings, free cash flow and net debt should not be considered in isolation from, or as substitutes 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 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)
York, PA
Contacts:
Investors
John P. Jacunski
(717) 225-2794
john.jacunski@glatfelter.com

Media
William T. Yanavitch
(717) 225-2747
william.yanavitch@glatfelter.com

Learn More
Investor Relations