Glatfelter Reports Third Quarter 2014 Earnings
"Our third-quarter adjusted earnings were strong and an all-time quarterly record of $0.70 per share." Dante Parrini, Chairman and CEO, Glatfelter.
Nov. 4, 2014 - Glatfelter (NYSE: GLT) today reported third-quarter 2014 net income of $30.4 million, or $0.69 per diluted share, and adjusted earnings of $30.8 million, or $0.70 per diluted share. For the third quarter of 2013, net income was $34.1 million, or $0.77 per diluted share, and adjusted earnings were $24.4 million or $0.55 per diluted share.
Consolidated net sales totaled $465.1 million in the third quarter of 2014, a 1.8 percent increase compared with $456.6 million in the third quarter of 2013.
“Our third-quarter adjusted earnings were strong and an all-time quarterly record of $0.70 per share,” said Dante C. Parrini, chairman and chief executive officer. “Specialty Papers delivered significantly improved results led by excellent operational performance and top-line growth. Advanced Airlaid Materials continues to perform very well, aided by strong demand and production efficiencies and Composite Fibers had a solid quarter when considering the market and economic pressures it is facing.”
Mr. Parrini continued, “As we look at the fourth quarter, we expect to build on the momentum of operational excellence across all of our businesses. We believe Specialty Papers is well-positioned to deliver stable, reliable cash generation for the company. Demand for our Advanced Airlaid Materials products is consistently strong, driven by global growth in adult hygiene markets. Composite Fibers is operating well overall, but it continues to be impacted by economic uncertainty in Europe and the fluid economic and political situation in Russia and Ukraine.
"On balance, we are pleased with our progress throughout 2014 and our leading market positions, while remaining mindful of the near-term macro-level challenges.”
THIRD-QUARTER BUSINESS UNIT RESULTS
Net sales for this business unit declined $6.9 million, or 4.3 percent, primarily due to $4.9 million from lower selling prices. Foreign currency translation favorably impacted the year-over-year net sales comparison by $1.2 million.
Composite Fibers’ third-quarter 2014 operating income decreased $0.8 million to $18.1 million compared to the year-ago period. The adverse impact from lower selling prices was substantially offset by improved operating performance including the impact of market related downtime taken to reduce inventories.
Advanced Airlaid Materials
On a year-over-year basis, Advanced Airlaid Materials’ net sales increased $4.9 million, or 7.0 percent, primarily due to a 5.9 percent increase in shipping volumes.
Third-quarter 2014 operating income increased $3.6 million, nearly double the year-ago quarter. The third-quarter 2013 results were adversely impacted by $1.7 million of costs, net of insurance, related to fires at this business unit’s facilities. Excluding these costs from the quarter-over-quarter comparison, 2014 operating income increased $1.9 million primarily due to higher shipping volumes and lower raw material and energy costs.
On a year-over-year basis, Specialty Papers’ net sales increased $10.5 million, or 4.7 percent primarily due to an $8.3 million benefit from higher average selling prices together with higher shipping volumes. This business unit’s growth in shipping volumes again outperformed the broader uncoated free-sheet market which was down 8.0 percent in the third quarter of 2014 compared to the third quarter of 2013.
Operating income increased $9.7 million, or 53.6 percent primarily due to higher selling prices together with significant improvements in operating performance, including record quarterly pulp production, partially offset by higher incentive compensation and normal cost inflation.
OTHER FINANCIAL INFORMATION
During the quarter, the Company recorded a $3.3 million non-cash asset impairment charge related to a trade name intangible asset acquired in connection with the 2013 Dresden acquisition. The charge was due to a change in the estimated fair value of the trade name, primarily driven by a substantial increase in discount rates related to Dresden’s business in Russia and Ukraine and this region’s political instability.
Pension expense totaled $1.7 million and $3.6 million for the third 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.
The Company completed the sale of 1,095 acres of timberlands during the third quarter of 2014 for $1.7 million and realized an after-tax gain of $1.0 million.
In the third quarter of 2014, the Company recorded an income tax provision of $10.4 million on adjusted pre-tax earnings resulting in an effective tax rate of 25.2 percent. In the comparable quarter a year ago, the income tax provision totaled $4.8 million and the effective tax rate was 16.3 percent. The lower effective tax rate in 2013 was primarily due to changes in valuation allowances and the reduction of statutory tax rates in a foreign jurisdiction.
Adjusted earnings in the third quarters of 2014 and 2013 excludes a benefit of $1.0 million and $9.9 million, respectively, from the release of tax reserves related to alternative fuel mixture credits earned in 2009, due to the lapse of the applicable statutes of limitation.
In the fourth quarter of 2014, Composite Fibers’ shipping volumes are expected to be approximately 5 percent lower than the third quarter of 2014 primarily due to seasonality. Selling prices and raw material and energy prices are expected to be in-line with the third quarter. The impact of downtime to reduce inventory levels in the fourth quarter is estimated to be $1 million to $2 million higher compared to the third quarter.
Shipping volumes for Advanced Airlaid Materials in the fourth quarter of 2014 are expected to decline by approximately 5 percent compared with the third quarter due to seasonality. Average raw material prices are expected to be slightly higher than the third quarter of 2014 resulting in higher selling prices consistent with our pass-through arrangements. In order to increase the production capacity of a line in Falkenhagen, the Company expects to incur approximately $1 million of costs related to lost production time from temporarily taking the line down.
For Specialty Papers, the Company expects shipping volumes in the fourth quarter of 2014 to decline by approximately 5 percent compared to the third quarter due to seasonality. Overall selling prices are expected to be slightly lower than the third quarter of 2014 and input costs are expected to increase slightly. Maintenance costs are expected to be approximately $2 million higher in the fourth quarter compared with the third quarter due to normal variations in the timing of certain work.
Celebrating its 150th anniversary in 2014, Glatfelter is a global supplier of specialty papers and fiber-based engineered materials, offering innovation, technical expertise and world-class service. To learn more, please visit: www.glatfelter.com.