Glatfelter Reports Third Quarter Results
"During the quarter, demand remained solid in most Composite Fibers' market segments including tea, coffee and electrical, and we saw improving demand for Advanced Airlaid Materials' products." – Dante Parrini, Chairman and CEO, Glatfelter.
Nov. 3, 2015 - Glatfelter (GLT) today reported third-quarter 2015 net income of $13.5 million, or $0.31 per diluted share, and adjusted earnings of $20.8 million, or $0.47 per diluted share. For the third quarter of 2014, net income was $30.4 million, or $0.69 per diluted share, and adjusted earnings were $30.8 million or $0.70 per diluted share.
Consolidated net sales totaled $420.0 million in the third quarter of 2015 compared with $465.1 million in the third quarter of 2014. The translation of non-U.S. dollar sales unfavorably impacted the year-over-year comparison by $25.2 million, reflecting a weaker Euro.
“At Glatfelter, we continue to take the steps necessary to manage controllable elements of our business, capitalize on near-term opportunities in our targeted markets and successfully execute our long-term growth strategy. While macro-level challenges continued to impact our company during the third quarter, we remain steadfast in our efforts to grow the business and we are confident in our outlook for long-term success,” said Dante C. Parrini, Chairman and Chief Executive Officer.
Mr. Parrini continued, “During the quarter, demand remained solid in most Composite Fibers' market segments including tea, coffee and electrical, and we saw improving demand for Advanced Airlaid Materials' products. We are also continuing to realize the benefits of previously announced cost reduction initiatives across our businesses, and remain on target to reach our goals for the year. These positives were offset by the ongoing instability in Russia and Ukraine, which has significantly impacted the nonwoven wallcover market, and weaker pricing and demand in our Specialty Papers markets. Despite the continuing macro level challenges, we expect solid demand for each of our businesses in the fourth quarter.”
THIRD-QUARTER BUSINESS UNIT RESULTS
Net sales for this business unit declined $20.6 million, or 13.3 percent, primarily due to $18.8 million of unfavorable currency translation and $3.9 million from lower selling prices, partially offset by the inclusion of Spezialpapierfabrik Oberschmitten GmbH (SPO), which was acquired in the fourth quarter of 2014. Shipping volumes declined 3.0 percent due to a 23.2 percent decline in nonwoven wallcover.
Composite Fibers' third-quarter 2015 operating income totaled $14.1 million, a $4.0 million decline compared to the year-ago period. The negative impact of lower selling prices and wallcover shipping volumes was partially offset by $2.2 million of improved operations and $1.2 million of lower raw material and energy costs. The change in foreign currency exchange rates negatively impacted results by $1.3 million.
Advanced Airlaid Materials
On a year-over-year basis, Advanced Airlaid Materials' net sales decreased $11.2 million largely due to $6.4 million of unfavorable currency translation and a 5.8 percent decline in shipping volumes.
Third-quarter 2015 operating income declined $0.7 million compared to the same quarter a year-ago primarily due to approximately $1.7 million related to lower shipping volumes and downtime to align production with demand, partially offset by $1.5 million of lower raw material and energy costs.
On a year-over-year basis, Specialty Papers' net sales decreased $13.4 million, or 5.7 percent, due to lower average selling prices totaling $5.7 million and a decline in shipping volumes.
Specialty Papers' third-quarter 2015 operating income totaled $17.5 million, a $10.2 million decrease in the year-over-year comparison primarily due to lower selling prices, $3.1 million related to market downtime and $3.7 million from lower pulp production, partially offset by $2.9 million of lower raw material and energy costs.
Other Financial Information
Pension expense totaled $2.2 million and $1.7 million for the third quarters of 2015 and 2014, respectively. For 2015, the Company expects full year pension expense to be approximately $9.1 million compared to $6.7 million for all of 2014. Because the Company's qualified plan remains overfunded, a cash contribution is not expected for the foreseeable future.
During the first nine months of 2015, the Company reduced its workforce by approximately 3.1 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, $2.2 million for severance and related costs, of which $0.3 million was recorded in the third quarter.
The Company recorded a $10 million pre-tax charge to increase its reserve for potential costs associated with the Fox River environmental matter. The increase in reserve reflects estimated costs associated with interim funding of remediation activities in the river during 2016.
During the third quarters of 2015 and 2014, the Company recorded non-cash asset impairment charges of $1.2 million and $3.3 million, respectively, related to a trade name intangible asset acquired in connection with the 2013 Dresden acquisition. The charges were due to change in the estimated fair value of the trade name, primarily driven by lower forecasted revenues associated with the business, and higher discount rates due to the political and economic instability in the Russian and Ukrainian region.
Composite Fibers' shipping volumes and selling prices in the fourth quarter are expected to approximate the third quarter of 2015 levels. Raw material and energy prices are expected to be slightly higher than the third quarter.
Shipping volumes for Advanced Airlaid Materials in the fourth quarter of 2015 are expected to be down slightly compared with the third quarter. Average selling prices and raw material prices in the fourth quarter are expected to be in-line with the third quarter.
For Specialty Papers, the Company expects shipping volumes in the fourth quarter of 2015 to be in-line with the third quarter. Overall, selling prices are expected to decline slightly in the fourth quarter compared to the third quarter due to continued pressure on commodity products and input costs are expected to be in line with the third quarter of 2015. The Company does not expect any market downtime in Specialty Papers in the fourth quarter.
Glatfelter is a global supplier of specialty papers and fiber-based engineered materials. Headquartered in York, Pennsylvania (USA), the company 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. To learn more, please visit: www.glatfelter.com.