Glatfelter Reports Second-Quarter 2016 Earnings
"Glatfelter's second-quarter performance was in line with our expectations and reflects higher shipments in all three of our business units." – Dante Parrini, Chairman and CEO, Glatfelter.
Aug. 2, 2016 - Glatfelter (GLT) today reported second-quarter 2016 net income of $2.0 million, or $0.04 per diluted share compared with $2.8 million, or $0.06 per diluted share in the second quarter of 2015. Adjusted earnings for the second quarter of 2016 were $2.8 million, or $0.06 per diluted share compared with $1.8 million, or $0.04 per diluted share, for the same period a year ago. Adjusted earnings is a non-GAAP measure for which a reconciliation is provided within this release.
Consolidated net sales totaled $406.4 million and $410.8 million in the second quarters of 2016 and 2015, respectively. Currency translation adjustments favorably impacted the year-over-year comparison by $0.7 million.
“Glatfelter's second-quarter performance was in line with our expectations and reflects higher shipments in all three of our business units,” said Dante C. Parrini, Chairman and Chief Executive Officer. “Advanced Airlaid Materials' operating profit more than doubled driven by our continued ability to improve efficiencies to meet growing demand in key market segments. In Composite Fibers, shipments improved 3 percent, and 10 percent on a sequential quarter basis as we continued to see signs of stability in the wallcover markets. Our Specialty Papers business unit effectively executed its annual maintenance outages and continued to outperform the broader uncoated freesheet market.”
Mr. Parrini continued, “Overall, Glatfelter delivered a solid first half of 2016 with adjusted earnings increasing 25 percent. We remain focused on continuous improvement and achieving operational excellence to support our growth as a leading global engineered materials business. I am pleased with the progress towards completing the significant investment we are making in a new airlaid facility to meet growing demand in key specialty wipes and hygiene markets. The strength of our balance sheet and consistent cash flow profile provide the flexibility to make targeted investments to support the business and pursue our growth strategy.”
Composite Fibers' net sales declined $4.0 million, or 2.9 percent, primarily due to $1.6 million from lower selling prices. Shipping volumes were higher in the comparison primarily due to improved demand for wallcover.
Composite Fibers' second-quarter 2016 operating income totaled $15.3 million, a decrease of $1.4 million compared to the year-ago period. Operating results were adversely impacted by lower selling prices and a $1.0 million negative impact from currency exchange rates. Improved shipping volumes and lower raw material and energy prices benefited operating results by $1.5 million.
Advanced Airlaid Materials' net sales increased $3.3 million in the year-over-year comparison as shipping volumes increased 7.8 percent primarily due to higher shipments of hygiene products. Lower selling prices impacted the comparison by $1.8 million.
Second-quarter 2016 operating income totaled $6.8 million, more than double the same quarter a year ago. Operating income benefited by $2.3 million from lower raw material and energy costs partially offset by lower selling prices reflecting the impact of cost pass through arrangements. In addition, improved operational efficiency, largely due to lower downtime, and foreign currency translation favorably impacted the comparison by $2.2 million and $0.3 million, respectively.
Specialty Papers' net sales decreased $3.7 million, or 1.7 percent, due to a $3.7 million impact from lower selling prices.
Specialty Papers' operating loss narrowed by $4.2 million in the year-over-year comparison and totaled $5.8 million in the second quarter of 2016. Operating results for both quarters reflect the cost of annual maintenance outages at the Company's Chillicothe, OH and Spring Grove, PA facilities. The outages adversely impacted second-quarter 2016 results by $26.3 million, which was $7.1 million less than the cost of the outages in 2015. In addition, operating results were favorably impacted by $5.2 million of lower raw material and energy costs. These favorable factors were partially offset by lower average selling prices, lower pulp production and an increase in incentive compensation and other costs.
Other Financial Information
Pension expense totaled $1.6 million in the second quarter of 2016 and 2015. For 2016, full year pension expense is expected to be $5.5 million. Because the Company's qualified plan remains overfunded, a cash contribution is not expected for the foreseeable future.
The Company's effective tax rate on adjusted earnings was 14.7 percent in the second quarter of 2016. In the second quarter of 2015, the Company recorded an income tax benefit of $1.5 million on adjusted pre-tax earnings of $0.3 million, primarily reflecting the release of reserves related to the completion of tax audits.
Composite Fibers' shipping volumes in the third quarter are expected to be slightly higher than the second quarter. Selling prices and raw material and energy prices are expected to be in-line with the second quarter.
Advanced Airlaid Materials' shipping volumes are expected to increase slightly in the third quarter. Customer selling prices and raw material and energy prices are expected to be in-line with the second quarter.
For Specialty Papers, the Company expects shipping volumes in the third quarter to increase by approximately five percent compared with the second quarter. Selling prices are expected to be slightly higher while increases in raw material and energy prices are expected to slightly outpace selling price increases. The Company also expects maintenance spending to decrease by approximately $23 million reflecting normal patterns of maintenance expense.
Corporate costs are expected to be approximately $1 million to $2 million lower in the third quarter than in the second quarter.
Headquartered in York, Pennsylvania, Glatfelter is a global supplier of specialty papers and fiber-based engineered materials. To learn more, please visit: www.glatfelter.com.