Glatfelter Reports Third Quarter 2018 Results
"The sale of the Specialty Papers business and the acquisition of a nonwovens business in Steinfurt, Germany, support our strategic focus and further solidify our platform for long-term growth." – Dante Parrini, Chairman and CEO, Glatfelter.
Nov. 06, 2018 - Glatfelter (NYSE:GLT) a leading global supplier of engineered materials, today reported its results for the third quarter of 2018. As part of the Company's strategic transformation, Glatfelter completed the sale of its Specialty Papers business unit on October 31, 2018. Accordingly, Specialty Papers' results are classified as discontinued operations for all periods presented in this release including the recognition of a $97.5 million after-tax impairment charge in connection with the sale of the business unit.
On an adjusted basis, earnings from continuing operations for the third quarter of 2018 were a loss of $0.2 million, or $0.00 per share compared with adjusted earnings of $7.6 million, or $0.17 per diluted share, for the same period a year ago. Corporate shared services costs totaling $6.9 million and $7.2 million for the third quarter of 2018 and 2017, respectively, previously included in Specialty Papers' results are required to be included in income from continuing operations. Adjusted earnings is a non-GAAP financial measure for which a reconciliation to the nearest GAAP-based measure is provided within this release.
Consolidated net sales totaled $209.9 million and $210.1 million for the three months ended September 30, 2018 and 2017, respectively. On a constant currency basis, Composite Fibers' net sales decreased by 0.8% and Advanced Airlaid Materials' net sales increased by 4.8%.
“We made significant progress on our previously announced strategy to transform Glatfelter into a leading, global engineered materials company,” said Dante C. Parrini, Chairman and Chief Executive Officer. “We successfully completed two major transactions, both of which closed in October. The sale of the Specialty Papers business and the acquisition of a nonwovens business in Steinfurt, Germany, support our strategic focus and further solidify our platform for long-term growth. In addition, we are well positioned for growth to accelerate in our airlaid business driven by our new Fort Smith, Arkansas, facility and the Steinfurt acquisition.”
Mr. Parrini continued, “While we made progress on our transformation, we continue to face competitive market conditions and the impact of the rapid rise in raw material prices in our Composite Fibers business. We have maintained our focus on reducing costs and improving efficiency to address these challenges and we recently announced price increases for this business. We are also launching a plan to right-size our corporate cost structure now that the sale of the Specialty Papers business is complete and we expect to eliminate $14 million to $16 million of expenses by the end of 2019. The growth opportunities we see in front of us and these actions continue to give me confidence in the longer-term potential of our engineered materials businesses and the value they will deliver to our shareholders.”
THIRD QUARTER BUSINESS UNIT RESULTS
Composite Fibers' net sales decreased $3.2 million, or 2.2%, primarily due to a 5.8% decline in shipping volumes. Higher average selling prices totaling $2.2 million offset a $2.0 million impact of unfavorable currency translation.
Composite Fibers' third quarter of 2018 operating income totaled $11.9 million, a decrease of $4.5 million compared to the year-ago period. Operating results were adversely impacted by $4.7 million of higher input costs, primarily due to significantly higher woodpulp prices. Currency translation unfavorably impacted results by $1.8 million.
Advanced Airlaid Materials
Advanced Airlaid Materials' net sales increased $2.9 million primarily due to $2.0 million from higher selling prices and a 1.0% increase in shipping volumes.
Operating income for the third quarter of 2018 decreased $2.7 million compared to the year-ago period primarily due to higher raw material prices of $1.6 million, a $1.2 million increase in depreciation expense related to the investment in the Fort Smith facility and the impact of higher fixed costs from the new facility with limited shipping volume growth. Currency translation unfavorably impacted operating income by $0.8 million.
Other Financial Information
In the third quarter of 2018, the Company recorded a tax provision of $3.5 million on pre-tax income from continuing operations of $2.8 million. On adjusted pre-tax income of $2.0 million, income tax expense was $2.2 million including a $0.9 million impact to deferred taxes from a state tax law change.
On October 31, 2018, we completed the previously announced sale of our Specialty Papers business unit on a cash free and debt free basis to Pixelle Specialty Solutions LLC, an affiliate of Lindsay Goldberg (the “Purchaser”) for $360 million. Cash proceeds from the sale were approximately $323 million reflecting estimated purchase price adjustments as of the closing date and the assumption by the Purchaser of approximately $38 million of retiree healthcare liabilities. In addition, the Purchaser assumed approximately $220 million of pension liabilities relating to Specialty Papers' employees and will receive approximately $270 million of related assets from the Company's existing pension plan.
The results of operations for our Specialty Papers business unit have been classified as discontinued operations for all periods presented in the consolidated statements of income. The related assets and liabilities of this business unit have been classified as held for sale in the consolidated balance sheets for all periods presented.
During the quarter we recognized an after-tax loss from discontinued operations of $95.1 million including an after-tax impairment charge of $97.5 million in connection with the sale of the Specialty Papers business unit.
Glatfelter's full third quarter 2018 report with tables can be found on the company's website: www.glatfelter.com.
Glatfelter is a leading global supplier of engineered materials. The Company's high-quality, innovative and customizable solutions are found in tea and single-serve coffee filtration, personal hygiene and packaging products as well as home improvement and industrial applications.To learn more, please visit: www.glatfelter.com.