Glatfelter Reports Improved 2nd Quarter Earnings
Aug. 2, 2011 - Glatfelter today reported 2011 second quarter adjusted earnings of $3.1 million, or $0.07 per diluted share, compared with $0.9 million, or $0.02 per diluted share, in the 2010 second quarter. Adjusted earnings for the 2011 second quarter benefited $0.06 per share from favorable tax adjustments. On a GAAP basis, second quarter 2011 net income totaled $2.5 million, or $0.05 per share, compared with $0.1 million, or $0.00 per share, in the second quarter of 2010. Consolidated net sales increased 9.7 percent in the year-to-year comparison and totaled $398.0 million.
“Our businesses continue to generate strong top-line growth and we made significant progress improving Advanced Airlaid Materials’ performance with net sales increasing by 25 percent and operating profit nearly doubling in comparison to last year,” said Dante C. Parrini, chairman and chief executive officer. “While our other business units also reported higher revenue, their results were below our expectations.
"In Composite Fibers, we experienced operating inefficiencies resulting from downtime to manage inventory levels, opportunistic maintenance spend, and challenges qualifying new grades. We incurred higher production costs as we made changes to our machine loading to create capacity to support our customers in the growing single-serve coffee market.
"In Specialty Papers, results were impacted by operating difficulties in our Spring Grove pulp mill and recovery boiler as well as increased costs of the annual maintenance outages. Our focus on operational excellence has been a key driver of our earnings growth over the last several quarters and I am confident that the operational issues experienced during the second quarter have been addressed and are now behind us.
"For the remainder of the year, we expect market conditions to remain generally favorable including continued growth in our tea, coffee and feminine hygiene product lines. We are also focused on improving our operating performance and executing our continuous improvement initiatives which positions us well for a solid second half of the year," Parrini said.
2011 SECOND-QUARTER BUSINESS UNIT RESULTS
Specialty Papers. On a year-over-year basis, Specialty Papers’ net sales increased $8.0 million primarily due to a $7.4 million benefit from higher selling prices and a 2.1 percent increase in shipping volumes. During this same period, the broader uncoated free sheet market was down 3.2 percent.
During the second quarters of 2011 and 2010, the Company completed annually scheduled maintenance outages at its Chillicothe, OH and Spring Grove, PA facilities. These maintenance outages adversely impacted operating income by $20.6 million in the second quarter of 2011, compared with $19.6 million in the same quarter a year ago. These required annual outages negatively affect second-quarter results when compared with other quarters.
Specialty Papers’ 2011 second-quarter operating income decreased $2.8 million primarily due to the unfavorable impact of higher raw material, fuel and energy costs which totaled $6.5 million and higher maintenance and other operating costs that, together, more than offset the impact of higher selling prices and shipping volumes.
Composite Fibers. Composite Fibers’ net sales increased $14.4 million, or 14.1 percent reflecting a $3.6 million benefit from higher selling prices and $10.4 million from foreign currency translation. The mix of products sold was favorable as growth in tea and coffee products offset weaker demand for metallized and composite laminate products.
Composite Fibers’ second-quarter 2011 operating income increased 3.8 percent or $0.3 million. The benefit from higher selling prices was more than offset by $4.9 million of higher raw material and energy costs, primarily related to fiber prices. In addition, operating income benefited $0.1 million from a stronger Euro. While Composite Fibers was impacted in the second quarter by a few production inefficiencies, the overall operating performance of this business was a benefit of $0.5 million when compared to the same quarter of 2010.
Advanced Airlaid Materials. Advanced Airlaid Materials’ net sales increased $12.9 million, or 24.7 percent reflecting a $3.9 million benefit from higher selling prices and $4.7 million from foreign currency translation. Net sales also benefited from a 10.8 percent increase in shipments.
Operating income was $3.7 million in the second-quarter 2011, nearly doubling results from the second quarter of 2010. During the second quarter, selling price increases slightly outpaced higher input costs of $3.5 million. In addition, this unit’s overall performance benefited from previously outlined improvement initiatives including supply chain synergies, waste reduction and higher machine output. Operating income also benefited $0.3 million from currency translation due to a more favorable Euro offset somewhat by a stronger Canadian dollar.
Other Financial Information
In the second quarter of 2011, the Company recorded a $2.9 million income tax benefit on a pretax loss of $0.4 million. The benefit was primarily due to the resolution of certain foreign tax audits, partially offset by adjustments to the carrying value of deferred taxes in connection with changes in state tax laws.
For Specialty Papers, the Company expects shipping volumes in the third quarter of 2011 to be approximately five percent ahead of the second quarter and selling prices are expected to increase at a faster pace than input costs. During the second quarter the business completed its annual maintenance outages at a cost of $20.6 million and during the current quarter the business will complete normal third quarter maintenance outages with an estimated cost of $2.5 million.
For Composite Fibers, the Company anticipates shipping volumes to be approximately five percent higher than the second quarter including shipments of tea and coffee products increasing approximately ten percent. Selling prices for the third quarter are expected to be in-line with the second quarter with input costs rising modestly which is largely attributable to a timing lag between price realization and input cost changes.
Shipping volumes for the Advanced Airlaid Materials business unit in the third quarter of 2011 are expected to increase by approximately five percent compared with the second quarter. Selling prices and input costs are expected to be largely in-line with the second quarter levels.
During the third quarter of 2011, the Company will record a $2.0 million one-time pre-tax charge for the normal pension accounting expense associated with the retirement of the Company’s former CEO.
Headquartered in York, PA, Glatfelter is a global manufacturer of specialty papers and fiber-based engineered materials, offering over a century of experience, technical expertise and world-class service. 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, a representative office in China and a sales and distribution office in Russia.