Glatfelter Posts Improved Second Quarter 2014 Earnings
"Our second quarter results reflect the continued progress of our growth businesses [Composite Fibers and Advanced Airlaid Materials]. . ." — Dante C. Parrini, Chairman and CEO, Glatfelter.
July 29, 2014 – Glatfelter (NYSE: GLT) today reported second quarter 2014 net income of $4.7 million, or $0.11 per diluted share, and adjusted earnings of $3.8 million, or $0.09 per diluted share. For the second quarter of 2013, net income was $0.9 million, or $0.02 per diluted share, and adjusted earnings were $5.1 million or $0.12 per diluted share.
Consolidated net sales totaled $445.3 million in the second quarter of 2014, a 4.5 percent increase compared with $426.0 million in the second quarter of 2013 primarily driven by the Dresden acquisition and foreign currency translation.
“Our second quarter results reflect the continued progress of our growth businesses as Composite Fibers and Advanced Airlaid Materials reported operating income increases of 5 percent and 17 percent, respectively,” said Dante C. Parrini, chairman and chief executive officer. “Specialty Papers’ revenue increased slightly reflecting the realization of announced price increases and we successfully completed the expanded annual maintenance outages in May and June in-line with expectations.”
Mr. Parrini continued, “As we move into the second half of the year, we look forward to sustaining improved operating performance in Specialty Papers and returning earnings to a more normalized level.
"In our Advanced Airlaid Materials business, demand has been strong all year and we expect it to continue.
"In Composite Fibers, certain product segments are experiencing challenging market conditions. However, the steps we have taken to improve productivity and reduce costs are expected to allow us to continue generating solid profitability. While pockets of market uncertainty exist, I believe our leadership positions in key growth markets and focus on operating execution and cost control will lead to improved operating results throughout the balance of the year.”
SECOND QUARTER BUSINESS UNIT RESULTS
Net sales for this business unit increased $14.4 million, or 10.1 percent, primarily due to the inclusion of a full quarter of Dresden’s results in 2014. Foreign currency translation favorably impacted the year-over-year net sales comparison by $6.0 million.
Composite Fibers’ second-quarter 2014 operating income increased $0.9 million to $17.3 million. Selling prices were down $3.4 million due to increased market competition for wallcover and metalized products. A full quarter of shipments from the Dresden acquisition and a positive mix shift improved operating income by $2.6 million. Improved operating efficiencies and lower input costs combined benefited earnings by $1.4 million.
Advanced Airlaid Materials
On a year-over-year basis, Advanced Airlaid Materials’ net sales increased $4.0 million, or 6.1 percent, primarily due to a 4.0 percent increase in shipping volumes. Foreign currency translation favorably impacted the year-over-year net sales comparison by $2.0 million.
Second quarter 2014 operating income increased $0.9 million, or 17.4 percent, compared with the year-ago quarter, primarily due to higher shipments of hygiene products and $0.7 million from currency translation. These favorable factors were partially offset by cost inflation and higher freight costs to meet North American customer demand from our European facility.
On a year-over-year basis, Specialty Papers’ net sales increased $0.9 million, or 0.4 percent primarily due to a $6.0 million benefit from higher average selling prices offset by lower shipping volumes.
For the second quarter of 2014, Specialty Papers’ operating loss increased to $7.2 million compared with $3.9 million in the second quarter of 2013. The Company completed annually scheduled maintenance outages at its Chillicothe, OH and Spring Grove, PA facilities which adversely impacted results by $28.2 million and $21.7 million in the second quarters of 2014 and 2013, respectively. The $6.5 million increase reflects a broader scope of work and increased purchased pulp consumption. In addition, higher prices for raw materials and energy negatively impacted operating results by $1.7 million.
Other Financial Information
Pension expense totaled $1.8 million and $3.2 million for the second 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. Because the Company’s qualified plan remains overfunded, a cash contribution is not required to be made in 2014 nor is a contribution expected in the foreseeable future.
During the second-quarter 2013, the Company incurred acquisition and integration related costs totaling $4.8 million, pre-tax or $4.0 million after-tax. All such costs are excluded from the determination of non-GAAP adjusted earnings. Approximately $1.1 million, pre-tax, was related to the step-up in fair value of acquired inventory existing at the acquisition date and sold during the second quarter and is recorded as a component of costs of products sold and the remaining costs are included in selling, general and administrative expenses in the accompanying consolidated statements of income.
Interest expense totaled $4.8 million and $4.5 million in the second quarters of 2014 and 2013, respectively.
The Company completed the sale of 437 acres of timberlands during the second quarter of 2014 for an after-tax gain of $0.9 million.
The Company recorded an income tax provision of $1.0 million on adjusted pre-tax earnings resulting in an effective tax rate of 20.5 percent compared with an effective tax rate of 28.2 percent in the same quarter a year ago. The effective tax rate in the second quarter of 2014 reflects a greater proportion of earnings generated in lower tax foreign jurisdictions relative to the U.S.
In the third quarter of 2014, Composite Fibers’ shipping volumes are expected to be slightly higher than the second quarter of 2014. Selling prices and raw material and energy costs are expected to be in line with the second quarter of 2014.
Shipping volumes for Advanced Airlaid Materials in the third quarter of 2014 are expected to be slightly higher than the second quarter of 2014. Average raw material prices are expected to be slightly higher than the second quarter of 2014 resulting in higher selling prices consistent with our pass-through arrangements.
For Specialty Papers, the Company expects shipping volumes in the third quarter of 2014 to be approximately 5 percent higher than the second quarter of 2014 reflecting normal seasonal patterns. Overall selling prices are expected to be slightly higher in the third quarter as previously announced price increases are implemented. Input costs are expected to be in-line with the second quarter of 2014.
Headquartered in York, Pennsylvania, Glatfelter is a global manufacturer of specialty papers and fiber-based engineered materials. U.S. operations include facilities in Spring Grove, Pennsylvania and Chillicothe and Fremont, Ohio. 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. Glatfelter’s sales approximate $1.8 billion annually.To learn more, please visit: www.glatfelter.com.