YORK, Pa., Aug. 04, 2020 (GLOBE NEWSWIRE) -- Glatfelter (NYSE: GLT), a leading global supplier of engineered materials, today reported its results for the second quarter of 2020 which are summarized in the following table:
On an adjusted basis, earnings from continuing operations for the three months ended June 30, 2020 and 2019, were $9.9 million, or $0.22 per share, compared with $8.5 million, or $0.19 per share, respectively. 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 $216.2 million and $235.1 million for the three months ended June 30, 2020 and 2019, respectively. On a constant currency basis, Composite Fibers’ and Airlaid Materials’ net sales decreased by 6.3% and 7.2%, respectively.
“Glatfelter’s solid second quarter results, in the midst of a global pandemic, demonstrate the resiliency of our new business model and continued demand for our portfolio of engineered materials that are essential for producing a variety of consumer staples,” said Dante C. Parrini, Chairman and Chief Executive Officer. “Composite Fibers outperformed expectations for the quarter, due in part to strong shipments in the food and beverage category and better than expected demand for wallcover products. Profitability for this segment relative to guidance was also better than expected, driven by lower downtime and continued cost control.”
In Airlaid Materials, we saw exceptional growth in home care and health and hygiene products, although overall shipments for the segment were hampered by the pandemic’s impact on tabletop demand as restaurants around the globe were either closed or operating at dramatically reduced capacity. Despite this headwind on volumes, Airlaid Materials achieved record quarterly EBITDA with margin of 19%.”
Mr. Parrini added, “I am proud of how Glatfelter PEOPLE are responding to the challenges related to COVID-19 and are successfully continuing to operate globally while keeping our workforce safe. Glatfelter’s ongoing transformation into a more agile and cost-effective business, coupled with a portfolio of essential consumer staples, have enabled us to optimize performance in this unprecedented and volatile year. The trust and confidence of our customers have been further strengthened in these uncertain times by consistently and reliably delivering premium quality products. Due to the strength of our improved balance sheet, the Board demonstrated its commitment to a steady return of capital to shareholders by increasing the dividend in the second quarter.”
Composite Fibers’ net sales decreased $10.4 million or 7.9%, compared to the year-ago quarter driven by lower shipments of wallcover products, which were down 49%, as well as unfavorable foreign currency translation of $2.0 million.
Composite Fibers’ operating income of $11.5 million was $1.5 million lower, or approximately 12% unfavorable, compared to the second quarter of 2019. Lower shipping volumes impacted results by $2.1 million driven predominantly by lower wallcover demand. The downtime required to manage inventory levels for nonwoven wallcover products was mostly offset by improved operations, strong cost control actions and higher production to meet strong demand in our food and beverage category. A benefit of $3.1 million from lower input prices, primarily wood pulp, was partially offset by $2.0 million impact from lower selling prices. Currency unfavorably impacted results by $0.2 million compared to the year-ago quarter.
Airlaid Materials
Airlaid Materials’ net sales decreased $8.4 million in the year-over-year comparison. Shipments were lower by 2.2% due to weak demand for tabletop products as restaurants globally were closed or operated at dramatically limited capacity. This shortfall in demand was mostly offset by strong orders for home care and health and hygiene products. Selling prices were $4.6 million lower due to contractual cost pass-through arrangements, while currency translation was unfavorable by $1.1 million.
Airlaid Materials’ second quarter 2020 operating income of $12.3 million was $1.9 million favorable, or approximately 19% higher, when compared to the second quarter of 2019. Improved sales mix favorably impacted results by $0.6 million, while price declines due to contractual raw material pass-through provisions were more than offset by lower raw material and energy prices, adding net $0.5 million of profit. Efficient operations complemented by disciplined cost control favorably impacted results by $0.9 million, driven by higher demand for essential product categories and improved performance in both North American facilities compared to the year-ago quarter.
Other Financial Information
The amount of “Other and Unallocated” operating expense in the table of Segment Financial Information totaled $14.7 million in the second quarter of 2020 compared with $8.2 million in the same period a year ago. Excluding the items identified to present “adjusted earnings,” unallocated expenses for the second quarter of 2020 increased $0.3 million compared to the second quarter of 2019.
As previously reported in 2019, the Company terminated its qualified pension plan. During the second quarter of 2020, the Company recorded a $6.3 million charge for excise taxes, net of post settlement adjustments, in connection with the completion of the reversion of $55.5 million of excess pension plan assets. After transferring $14.1 million to a suspense account to fund future 401(k) contributions and accruing $8.3 million of excise taxes, approximately $33.1 million became available for general corporate purposes.
During the second quarter of 2020, the Company recorded non-cash asset impairment charges of $0.9 million related to a trade name intangible asset acquired in connection with the 2013 Dresden wallcover acquisition. The charge was due to a change in the estimated fair value of the trade name, primarily driven by lower forecasted wallcover revenues associated with economic instability in Russia and Ukraine and incremental impacts from the COVID-19 pandemic on this business.
In the second quarter of 2020, income from continuing operations totaled $0.3 million and income tax expense totaled $2.6 million. On adjusted pre-tax income of $14.5 million, income tax expense was $4.6 million in the second quarter of 2020. The comparable amounts in the same quarter of 2019 were $13.7 million and $5.2 million, respectively. The effective tax rate on adjusted earnings was 32% in the second quarter of 2020.
Balance Sheet and Other Information
Cash and cash equivalents totaled $76.6 million as of June 30, 2020, and net debt was $270.9 million compared with $233.7 million at the end of 2019. The increase in net debt primarily reflects working capital and the funding of a 401(k) suspense account in connection with the completion of the pension plan asset reversion. Net leverage on June 30, 2020 and December 31, 2019 was 2.4 times and 2.2 times, respectively. (Refer to the calculation of this measure provided in the tables at the end of this release.)
Capital expenditures during the first six months of 2020 and 2019 totaled $12.0 million and $10.6 million, respectively. Adjusted free cash flow for the six months of 2020 was a use of $12.9 million compared with a use of $29.9 million in the year earlier period. (Refer to the calculation of measure provided in the tables at the end of this release.)
About Glatfelter
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. Headquartered in York, PA, and transitioning to new headquarters in Charlotte, NC, the Company’s annualized net sales approximate $925 million with customers in over 100 countries and approximately 2,500 employees worldwide. Operations include eleven manufacturing facilities located in the United States, Canada, Germany, France, the United Kingdom and the Philippines. Additional information about Glatfelter may be found at www.glatfelter.com.
